Starting a Business in Texas: Requirements and Steps

Starting a business in Texas can be an exciting and rewarding experience. With the Lone Star State being one of the best places to start a business, it's no wonder why so many entrepreneurs are choosing to form their business registry in Texas. But before you get started, it's important to understand the requirements and steps necessary to start a business in Texas. The first step is to choose a business idea.

This is an important decision that will determine the success of your business. Once you have chosen your business idea, you will need to apply for any licenses and permits that may be required for your particular type of business. It's also important to choose a business location and check zoning laws to make sure that your business is allowed in the area. The next step is to decide on the best management structure for your business.

A corporation is a legal entity with limited liability, centralization of administration, perpetual duration, and ease of transfer of ownership interests. The owners of a corporation are called “shareholders” and the people who manage the business are called “directors”. However, state corporate law does provide for shareholders to enter into shareholder agreements to eliminate directors and provide for shareholder management. It's important to consult with a lawyer when making this decision. If you are considering forming an S Corporation, this is not a matter of state corporate law but rather a federal tax election.

You will need to contact the Internal Revenue Service or a competent tax advisor regarding the decision to pay taxes as an S Corporation and the requirements for filing the election. Another option is forming a Limited Liability Company (LLC). An LLC is not a partnership or a corporation, but rather a different type of entity that has the powers of both a corporation and a partnership. Depending on how it is structured, an LLC can be compared to a general partnership with limited liability, or to a limited partnership in which all owners are free to participate in management and all have limited liability, or to an S Corporation without the tax and ownership restrictions imposed by the Internal Revenue Code. Unlike corporations, where the key element is the individual, the essence of an LLC is the entity, which requires more formal requirements for its creation. LLC owners are referred to as “members” and can be an individual, partnership, corporation, trust, or any other legal or business entity.

In general, members' liability is limited to their investment and they can enjoy the transferred tax treatment provided to partners in a partnership. Once you have chosen your business structure, it's important to organize and document business processes right from the start. You should also explore avenues for finding working capital such as nonprofit lenders, Lift Fund, People Fund, BCL of Texas, several local credit unions, and alternative lenders. It's also important to search the Texas business entity's website to make sure that no other businesses in your jurisdiction are operating under the proposed business name. Companies are required to pay unemployment benefits to employees so it's important to understand these requirements. It's also recommended that individuals separate some of their personal and business financial interests.

SCORE is made up of active and retired entrepreneurs who volunteer their time to support start-ups. Providing health insurance is not required for small employers in Texas but those that do should make it available to all employees who work 30 hours or more per week throughout the year. The Small Business Handbook also recommends exploring avenues for finding working capital such as nonprofit lenders. Finally, you will need to apply for any permits that may be required for individuals who want to operate a commercial business in Texas. The Texas Department of Insurance's Workers' Compensation Division offers more information about Workers' Compensation coverage for employers. Starting a business in Texas can be an exciting opportunity but it's important to understand all of the requirements and steps necessary before getting started.

With careful planning and research, you can ensure that your new venture will be successful.