Starting a Business in Texas

Starting a business in the Lone Star state? Here’s everything you need to take your business from “bright idea” to bustling business.

Essential Steps When Starting a Small Business

Creating a successful small business requires equal parts inspiration and perspiration. Once you’ve decided on the type of business you want to start, it requires some paperwork to make your dreams a reality. Understanding Texas’s requirements for small businesses will help ensure you don’t miss a thing.

First Steps

Filing a Business Entity

In order to make your business official in the eyes of Texas, you need to form your business as an entity. The Texas Secretary of State can help you navigate common questions and concerns around filing, and they make it easy to file a certificate of formation online.

Get more help selecting your business structure
File online through SOSDirect
For minority-owned businesses: If you would like your business official certified as a “historically underutilized business,” call the Texas Comptroller of Public Accounts at (888)863-5881 or (512)463-5872.

If you have more questions regarding filing a business entity, visit the Texas Secretary of State’s FAQ page.

Tax Registration

Employer Identification Number (EIN)

All employers who have employees must be assigned an EIN (or Employer Tax ID) from the Internal Revenue Service.

Apply Online

Texas Tax Registration

Businesses operating in Texas must register for additional identification numbers, licenses, or permits for tax purposes, outlined in the Texas Comptroller’s General Tax Information and Forms.

Apply Online

Business Licenses & Permits

General Business Licenses

You’ll need to determine and apply for the required licenses and permits for your specific business. Businesses that sell/rent goods or provide taxable services will need a Sales Tax Permit. Because permit requirements vary so widely by industry, the Texas Business Permit Office has put together a guide outlining the requirements for each industry—from 1-900 numbers to construction to bingo parlors (and everything in between).

Sales Tax Permit/Use Tax Permit: Most businesses that plan to operate in Texas will need a Sales Tax Permit. This can be obtained by visiting the website for the Comptroller of Public Accounts. You can also call (512)463-4600 or (800)252-5555.
Permits by Industry: View the guide for your business’s requirements.

Local Permits

The permits required in your local government area may vary. You’ll want to check with your local city, county, and/or municipality for any additional required permits. Some of the most common required permits include:

Business License and/or Tax Permit
Building Permit
Health Permit
Occupational Permit
Zoning Permit
Signage Permit
Alarm Permit

Hiring Laws in Texas

In addition to the national laws barring discrimination, Texas has 2 additional anti-discrimination statutes.

Texas Labor Code, Chapter 21

Protects against discrimination based on race, color, gender, national origin, religion, age, and disability for employers with more than 15 employees.

Learn More

Texas Workers’ Compensation Act

Protects against discrimination based on workers’ compensation claim history, applies to employees and not applicants.

Learn More

Two People at table going over a contract

Employer Requirements

You’re almost there! The final step in setting up your business is to determine the federal and state employer requirements.

Federal Requirements

Tax withholdings: View the IRS Employer’s Tax Guide for full requirements.
Tax records: The IRS requires businesses to retain records of employment taxes for at least 4 years. Learn more about the types of records small businesses are required to keep.
Employee Eligibility Verification (Form I-9): Federal law requires employers to verify the employment eligibility for all employees hired after November 6, 1986. You can download Form I-9 and learn more about the process in the Instructions for Completing the I-9; Handbook for Employers. Proof of an employee’s eligibility to work must be obtained within 3 days of hire. This must be completed for citizens and non-citizens. For help navigating the I-9 form for non-citizens, you can consult the Small Business Guide to Immigration Regulations.
Federal Income Tax Withholding (Form W-4): The W-4 form, which outlines tax withholdings, must be completed by every employee prior to or on their start dates. As the employer, you are responsible for submitting the W-4 to the IRS for verification.
Federal Wage and Tax Statement (Form W-2): Employers are required to report annual tax withholdings for each employee to the IRS. This is done using the W-2 form, which must be completed annually for each employee by January 31 for the preceding year. Copy A must be sent to the Social Security Administration (SSA). For full instructions on what you need to do, you can view the SSA’s Employer W-2 Filing Instructions and Information.
Form W-9: If you do business with a freelancer or independent third party, you must obtain a W-9. This is used for third parties who are responsible for filing their own taxes with the IRS.

State Requirements for Texas

New Hire Reporting Program: Employers must declare all newly hired and re-hired employees within 20 days of hiring.
Insurance Requirements: Consult the Texas Department of Insurance – Business page for the specific insurance requirements based on your business type.
Workers’ Compensation Insurance: Visit The Texas Department of Insurance – Workers’ Compensation Division for full requirements.

Not Required in Texas

Disability Insurance

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