How to Start a Business in Texas: A Founder's Checklist

Texas is one of the friendliest states for new businesses: no personal state income tax, no annual report, most filings online in under an hour. Work it in order and avoid rework that costs founders weeks. Fees as of late 2026.

1. Pick your structure

Most founders choose between a sole proprietorship and an LLC. A sole proprietorship costs nothing to create, but it offers no separation between you and the business: your personal assets are on the line. An LLC creates that separation — the default for most service businesses, studios, and shops (see our full comparison).

2. Name it — and check the name

Search your name in the Secretary of State's SOSPortal first — if another Texas entity uses it, pick a different one. You can reserve a name for 120 days with Form 501, $40. Operating under a different name than your legal entity name means an assumed name: Form 503, $25, with the Secretary of State. Sole proprietors file theirs with the county clerk instead, usually $15–$25. And before you print anything, check the name as a brand too — legally available can still be a bad brand.

3. File the Certificate of Formation

File Form 205, the Certificate of Formation, with the Secretary of State — online through SOSPortal is fastest — and pay the $300 filing fee. The form asks for your LLC name, registered agent and Texas street address, management structure, and organizers. A registered agent is required — you, a partner, or a hired service — with a physical Texas address and business-hours availability. An operating agreement is not filed with the state, but write one: it decides who owns what and what happens if a partner leaves.

4. Get your EIN — it is free

An EIN is your business's federal tax ID. Apply on the IRS website — about 15 minutes, issued immediately, no fee. Beware of third-party sites that charge for it — the IRS never does. You need it for a business bank account, hiring, and federal taxes.

5. Register for Texas taxes

If you sell taxable goods or certain taxable services in Texas, you need a Sales and Use Tax Permit from the Texas Comptroller before collecting sales tax. Apply online through the Comptroller's eSystems portal or by mail with Form AP-201 — no fee, usually arrives within two to three weeks. State sales tax is 6.25%; local taxes can bring the combined rate to 8.25%. Every Texas LLC also files an annual franchise tax report and Public Information Report, due May 15. Most small businesses owe no franchise tax — for 2026 and 2027 reports, none is due at or below $2,650,000 annualized revenue — but file anyway.

6. Open a business bank account

Open a dedicated business account the week you form the LLC. Mixing personal and business money is the fastest way to lose the liability protection you just paid $300 for — and it turns bookkeeping into a mess. Bring your Certificate of Formation, EIN letter, and operating agreement — see our guide to business bank accounts for founders.

7. Licenses, permits, and insurance

Texas has no general state business license, but your city, county, and industry may require theirs. Check with your city and county clerk and the Texas Department of Licensing and Regulation — and get liability insurance before your first client, not after your first problem.

Starting a business in Texas is straightforward. The founders who struggle usually skipped a step and had to unwind it later. Keep paperwork in one place, spend your energy on customers, and when the business is formed and it is time to make it look like the company you want it to become, book a free discovery call — that is the part we do best.

This article is general information, not legal or tax advice. Confirm fees and rules with the Secretary of State, the Comptroller, and the IRS — or a licensed attorney or CPA — before you file.

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