Known as the Lone Star State, Texas has a thriving economy and a huge population. With no income state tax, Texas is one of the most desirable states to start a new business, but starting a business can be complicated if you don’t know where to begin.
With this step-by-step guide, you will be well on your way to successfully starting your Texas business from scratch. You will learn how to choose a business idea, pick a name, write a business plan, and more.
Step 1: Choose Your Idea
The first step in starting your business in Texas is to come up with a good idea for your business. This idea will form the foundation of your business, and just like a building, the foundation has to be good and solid, or else your business may come tumbling down.
To come up with an idea or to tell if your idea is any good, answer the following questions:
- What are my favorite hobbies, skills, and passions?
- Can any of these hobbies, skills, and passions be turned into a profitable business?
- Is there a need for my business?
- Will I enjoy running the business?
- Do I have the skills to run a business?
- What consumer problem does my solve?
- Are there any businesses similar to mine already out there?
- How does my business differ from those?
You should also employ the help of your friends and family and bounce ideas off of them. Their insights as fellow consumers will be valuable.
Step 2: Pick a Name
Picking the name for your new business is very important as this name will be used on all your paperwork, branding, and advertising. So, before you settle on a name, you should ensure that you are happy with it. Changing the name later is not recommended, especially from a marketing standpoint.
The name you choose should be easy enough for people to pronounce and unique but still relevant to your business’s industry. In Texas, you cannot register your business with the state using a name already used by another business. To ensure you don’t accidentally apply for a business name already taken, you can conduct a Taxable Entity Search on the Texas Comptroller of Public Account’s website. You should also check that your desired domain name is available at this stage.
If you are struggling to come up with a name in the first place, there are a few different ways to get those creative gears turning.
- Use a free online name generator. These create randomized names.
- Hold a brainstorming session with friends and family.
- Create a poll on your social media, like Facebook or Instagram, to get people’s opinions.
Step 3: Write Your Business Plan
Now that you have come up with a business idea and name, you need to write a business plan. Your business plan is like the map or blueprints of your business. It will have everything a person needs to know about your business.
Your business plan should be as thorough as possible because it can also be used to apply for funding and other important business functions.
While there are no rules about what needs to be included in your business plan, you should aim to answer the following questions:
- What services will your business offer?
- Why have you started the business?
- Who is your target audience?
- How do you plan on turning your target audience into paying customers?
- What are your marketing techniques?
- What are the startup costs involved?
- Do you have the money, or will you need funding?
- How do you plan on getting funding?
- How much will you need to earn to break even?
- Any other financial details that are important to the business?
- What skills are needed to run the business?
- What roles will be available in the business, and how do you plan on filling them?
If you are still struggling to write a business plan, you can download business plan templates readily available online. You should be able to find these templates with a quick Google search.
Step 4: Get Funding
You need money to start a business in Texas, especially for expenses like paperwork, licenses and permits, equipment, and supplies. If you do not have this money to start up, you must apply for funding. This can be done through a grant, loan, or investor.
The state of Texas offers several different funding programs, from grants to loans and angel investors. In partnership with the Texas government, the U.S. Small Business Administration (SBA) provides counseling, capital, and contracting expertise. To learn more about all the programs offered and if your business qualifies, you can visit the Texas Economic Development website.
Alternatively, you can go the private route and get a loan from your local bank or even from your friends and family. However, if you choose to borrow money from someone you know, get the agreement in writing. The last thing you want is a relationship to be ruined over monetary matters.
Step 5: Choose a Business Structure
Each business structure has its features and benefits. Therefore, choosing the most suitable one for your business is very important. Here are the four business structures available in Texas to choose from:
A sole proprietorship is an informal type of business structure with no separation of assets between the business and the owner. This structure is typically used for low-risk businesses with only one owner.
A partnership is very similar to a sole proprietorship as it is also not a formal business structure with no separation of assets. The only difference between the two structures is that this business structure is used for businesses with two or more owners, all with equal shares in the company.
Limited Liability Company
The business structure known as a limited liability company, or an LLC, is commonly chosen by small businesses. This is a popular structure mainly because an LLC is a combination of two different types of business structures, offering the best of both worlds. It has the simplicity and flexibility of a sole proprietorship or partnership with the added liability protection of a corporation.
A corporation is the most formal type of business structure and is commonly used by large companies with multiple shareholders. A corporation is an entirely separate entity from the business owners. This business structure also comes with some tax benefits.
Step 6: Register the Business
Depending on your chosen business structure, you might need to register it with the state of Texas before you can begin trading.
There is no need to register this business structure with the state as a sole proprietorship is not a formal business type. You can simply set up and start trading. As the business owner, you can file a Doing Business As (DBA) name with the state if you want to use one. You can file the name on the state’s online business services portal, SOSDirect.
You will first need to register your profile on the portal to proceed.
Like a sole proprietorship, this business structure does not need to be registered with the Texas state. If you want a separate name for your company, you can file a DBA on the business portal.
In addition, it is a good idea to have all owners sign a partnership agreement in case of conflict within the business. However, this is not a requirement in Texas and does not need to be submitted to the state.
Limited Liability Company
You will need to register an LLC with the state of Texas before you can begin trading. To do this, you must fill out and submit the Certificate of Formation (Form 205) on the SOSDirect business portal. The fee to register your LLC is $300.
To register a corporation, you must complete the Certificate of Formation and submit this document on the SOSDirect portal. The fee to register your corporation is $300.
Step 7: Set Up Your Finances & Accounting
Before you open your business, you should set up all the finances. To do this, you will need to apply for a bank account for the business, a credit card, and a payment method for your customers. If you have employees, you may also want to install payroll software.
Hire an accountant to help you look after the business’s books and taxes. In addition, an accountant can help you avoid overpaying taxes and makes filing taxes much simpler.
Step 8: Get Business Insurance
Texas does not require businesses to have insurance. But, running a business without any insurance is risky as you never know when a disaster can strike and how much it will cost when it does. Having at least a general liability insurance policy is strongly recommended, as this is a broad insurance policy that will cover your business from damage or injury.
Other insurance policies you can choose from include:
- Business owners insurance
- Professional liability insurance
- Commercial property insurance
- Workers compensation insurance
- Commercial auto insurance
- Limited liability company insurance
Chat with your local insurance broker for more advice on what policies best suit your and your business’s needs.
Step 9: Obtain Any Permits or Licenses Needed
The state of Texas does not issue a state-wide general business license. However, this does not mean you won’t need any licenses or permits. To check if your business needs permits or licenses before you begin trading, read the Texas Business Licenses & Permits Guide.
All business structures in Texas also need to apply for a Sales Tax permit if they sell tangible goods. You can do this the Texas Comptroller eSystem.
Step 10: Build a Website
Every business should have its own website, as it is an excellent way of building your brand and interacting with potential clients.
Whether you are building the website yourself or you have paid someone else to do it, there are some things you need to make sure are done:
- Check that your desired domain name is still available. There are plenty of easy-to-use search engines that will assist you.
- Ensure that your business name is straightforward to find.
- Ensure all font is neat and is a good size that is easy to read.
- Avoid cluttering the website with images, graphics, videos, and GIFs, as this can slow the loading times of your webpage.
- Make sure all images are your own or are copyright-free.
- Make sure that your webpage is compatible with mobile browsers.
- Include a good call to action or a contact us button.
Step 11: Hire Employees (If Any)
If you are hiring employees, you will need to draft up a job post and post it on job boards in person and online. When you hear back from candidates, narrow them down to your top choices and invite them for interviews. After the interviews, offer the job to your preferred candidate!
You must report all your new hires to the Employer Website portal. This needs to be done within 20 calendar days from the hire date. There is no fee to report new hires.
Step 12: Market Your Business
The final step of starting a business in Texas is marketing your new business. To build anticipation and awareness, you can start doing this before opening the business. Having an official launch party or event is a great idea as well. And after your business is open, there are plenty of different ways to market your business:
- Advertise and engage with people on your business website.
- Create interest and advertise for free on social media like Facebook, Instagram, and even TikTok.
- Create a Google Business Profile and advertise on Google.
- Attend local events and business conventions.
- Hold competitions or giveaways.
- Advertise on your local radio or television stations.
- Attend local networking events.
- Give out free samples.
- Create flyers or pamphlets.
If you prefer to focus on other aspects of running a business, you can hire someone to handle the marketing for you.