Starting a business in Texas can be an exciting and rewarding experience. But before you can get started, you need to know the steps to take to register your business. This guide will walk you through the process of registering a business in Texas, from choosing the right legal structure to filing the necessary paperwork with the state. When it comes to choosing the right legal structure for your business, there are several options available.
The most common are corporations, limited liability companies (LLCs), and “S” corporations. Each of these structures has its own advantages and disadvantages, so it’s important to do your research and consult with a lawyer before making a decision. A corporation is a legal entity with the characteristics of 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 and affairs of a corporation are called “directors.” State corporate law does provide for shareholders to enter into shareholder agreements to eliminate directors and provide for shareholder management.
Choosing the best management structure for your corporation is a decision you make with the advice of a lawyer. An “S” corporation is not a matter of state corporate law, but rather a federal tax election. A for-profit corporation chooses to be taxed as an “S” corporation when filing an election with the Internal Revenue Service. Contact the IRS or a competent tax advisor regarding the decision to pay taxes as an “S” corporation and the requirements for filing the election. A limited liability company (LLC) is not a partnership or a corporation, but is a different type of entity that has the powers of both a corporation and a partnership. Depending on how the LLC is structured, it 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 the limited liability company is the entity, which requires more formal requirements for its creation. LLC owners are referred to as “members” and can be an individual, a partnership, a corporation, a 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. As a result of federal tax classification rules, an LLC can achieve structural flexibility and favorable tax treatment. Once you have done all your due diligence in forming your name and entity, you are ready to file your application with the state. Texas Secretary of State offers an online portal for 24-hour service through SOS Direct.
You can also go to their Austin office in person. Either way, you must complete all required information including entity type, full name of legal entity, relevant address and owner information. Creating a Texas LLC is by far the easiest way to start a business and you can do that quite quickly once you have your identification and documents together. Most of the business structures discussed above fall into this category; non-responsible employers include those who hire only independent contractors rather than full-time employees, and those whose employees receive payment through a professional organization of employers. Similarly, companies do not have the liability protection found with a formal business structure. If your company's business is conducted under a false name (a name other than your last name), then you must present a false name certificate (commonly referred to as DBA) to the clerk's office in the county where your business premises are maintained. It's important to keep your personal and business accounts separate so that your personal assets (your house, car, etc.) are not at risk if your company is sued.
There are plenty of free commercial banking accounts available if you don't want to be charged high fees. An accounting system helps you track your business performance and simplifies annual tax returns. A lack of working capital is often cited as one of the biggest problems small business owners face when starting out so it's important to organize and document business processes right from the start. At least you'll want to search Texas' business entity website to make sure no other businesses in your jurisdiction are operating under your proposed business name. You must also choose what type of legal for-profit business entity you want your company to be; this depends on several factors.