How to Start a Business in Texas: Formation, EIN, and Permits

To start a business in Texas, pick a legal structure, file a Certificate of Formation with the Secretary of State (typically $300 for an LLC or for-profit corporation), get a federal Employer Identification Number, register with the Texas Comptroller for franchise tax and, if you sell taxable goods or services, a sales and use tax permit. Add employer registrations if you’ll hire, check for industry licenses and local zoning, and keep up with the annual franchise tax report after you launch. The steps below walk through each one in the order a new owner actually runs into them.

Step 1: Choose a Business Structure

Your structure drives your personal liability, your taxes, and how much paperwork you deal with for the life of the business. The Texas Business Organizations Code governs how each entity is formed and run.

A sole proprietorship is the simplest arrangement. You and the business are legally the same person, which means you’re personally on the hook for every debt and lawsuit. No filing with the Secretary of State is required to start operating.¹

A general partnership forms automatically when two or more people agree to run a business together for profit. No state filing is required, and each partner shares liability for the full obligations of the business. A written partnership agreement isn’t legally required, but operating without one invites trouble when disagreements arise.¹

A limited liability company (LLC) is the most common choice for small businesses in Texas. It shields your personal assets from business debts while keeping management flexible. Members can run the company themselves or appoint managers, and internal operations are governed by a company agreement. The LLC becomes its own legal person once you file a Certificate of Formation.²

A corporation is a more rigid structure owned by shareholders and managed by a board of directors that elects officers. Shareholders generally aren’t personally liable for corporate debts, and the structure makes it easier to issue stock. The tradeoff is formality: bylaws, meetings, and documented decisions.³

One boundary to flag: certain licensed professionals, including attorneys, physicians, accountants, engineers, real estate brokers, and veterinarians, cannot form a standard LLC. They must instead form a professional limited liability company (PLLC) or professional corporation. The Secretary of State publishes a guide listing which entity types each licensed occupation can use.⁴

Step 2: Pick and Clear a Name

Your entity name must be distinguishable from every other active entity on file with the Secretary of State. The rules sit in Texas Administrative Code, Title 1, Part 4, Chapter 79, Subchapter C, and the Secretary of State will reject a name too similar to an existing one unless you provide written consent from the other entity.⁵

Run a free preliminary search through the SOSDirect database before you file. If you want to hold a name while you prepare paperwork, you can reserve it for 120 days for $40.⁶

If you’ll operate under a name other than your registered legal name, you also need an Assumed Name Certificate, commonly called a DBA. Sole proprietors and general partnerships file with the county clerk in each county where they maintain a business location, or in every county where they do business if they have no office. LLCs and corporations using a name different from the one on their formation document file one too.⁷

Step 3: Appoint a Registered Agent

Every formal entity filed with the Secretary of State must designate a registered agent and a registered office under Texas Business Organizations Code Section 5.201. The agent is the person or company authorized to receive lawsuits and official government correspondence on your behalf. The agent must be a Texas resident or an organization authorized to do business in the state, and the registered office must be a physical street address in Texas. A P.O. Box alone doesn’t satisfy the requirement.⁸

You can serve as your own agent, but then your name and home address become part of the public record, and you need to be available during business hours to accept service. Many owners hire a commercial registered agent service for a modest annual fee.

Step 4: File Your Certificate of Formation

The Certificate of Formation is the document that officially creates your entity with the state. Each entity type has its own form:

Form 201 for for-profit corporations
Form 202 for nonprofit corporations
Form 203 for professional corporations
Form 205 for LLCs, including PLLCs

Every form asks for the entity name, business purpose, registered agent information, names of initial directors or managers, and the identity of the organizer who signs the document.⁹

The filing fees:

LLCs and for-profit corporations: $300
Nonprofit corporations: $25
Professional associations and limited partnerships: $750

The Secretary of State accepts American Express, Discover, MasterCard, and Visa, or payment from a pre-funded SOS account.⁶

Most filings go through the SOSDirect online portal. You’ll need an account funded with a $1 statutory access fee before you can search or file.¹⁰ You can also mail documents or deliver them in person in Austin. Mailed filings need two copies plus the fee and take considerably longer than online submissions.

Since October 2025, the Secretary of State offers tiered expedited processing. Standard expedited is $50 per document on top of the filing fee, available by mail or in person, and usually processed within two to three business days. Next-day service costs $500 per document and must be submitted in person. Same-day service costs $750 per document, is also in-person only, and documents received by noon are processed by close of business that day. Paying for expedited review doesn’t guarantee approval of the filing itself; it only speeds the review.¹¹

Once approved, the state issues a file-stamped copy of your Certificate of Formation. Keep it with your permanent business records.

Step 5: Get a Federal EIN

Almost every business needs a federal Employer Identification Number from the IRS. The nine-digit number works like a Social Security number for your business. Banks require it to open a business account, and you’ll need it to file taxes or hire employees. Apply online through the IRS website using Form SS-4 and you’ll receive your EIN immediately.¹²

Step 6: Register With the Texas Comptroller

Franchise Tax

Texas imposes a franchise tax on most entities formed or doing business in the state. It’s a privilege tax, not an income tax, and it applies to LLCs, corporations, partnerships, and other formal entities whether or not they turn a profit. You register with the Texas Comptroller of Public Accounts, and reports are due annually by May 15.¹³

For most new small businesses, the practical answer is zero. If your annualized total revenue is $2,650,000 or less, you owe no franchise tax for the 2026 report year. You still have to file the annual information report, but you won’t write a check.¹⁴

Some entities are exempt entirely, including qualifying new veteran-owned businesses during their first five years. Partnerships and trusts earning at least 90% of their gross income from passive sources such as dividends, interest, capital gains, and mineral royalties can qualify as passive entities exempt from the tax.¹⁵

Sales and Use Tax Permit

Businesses that sell or lease tangible goods or provide taxable services must obtain a Texas Sales and Use Tax Permit from the Comptroller. The state rate is 6.25%, and local jurisdictions can add up to 2% on top. There’s no charge for the permit, but you have to register before you begin collecting sales tax. Operating without one can trigger penalties.¹³

Step 7: Handle Employer Obligations if You’ll Hire

If your business will have employees, more registrations kick in quickly.

The Texas Unemployment Compensation Act requires employers to register with the Texas Workforce Commission within 10 days of becoming liable for unemployment tax. You can register online through the Unemployment Tax Registration system in about 20 minutes, and you’ll get a TWC tax account number right away. An official Employer Liability Notice follows by mail roughly two weeks later.¹⁶

Texas law also requires employers to report every newly hired or rehired employee to the Child Support Division of the Office of the Attorney General within 20 calendar days of the hire date. A practical rule: if the employee fills out a W-4, you have to report them.¹⁷

Texas is one of the few states where private employers are not required to carry workers’ compensation insurance. Employers who opt out, called non-subscribers, must report that status to the Texas Department of Insurance Division of Workers’ Compensation. Non-subscribers also lose certain legal defenses if an employee is injured on the job, which is worth weighing carefully before deciding to skip coverage.¹⁸

Step 8: Check Industry Permits and Local Zoning

Many industries need separate permits or professional licenses before you can legally operate. The Governor’s Business Permit Office publishes the Texas Business Licenses and Permits Guide, which lists state-level requirements by industry. The office doesn’t issue permits itself; it points you to the right agencies.¹⁹

Locally, check zoning with your city and county before signing a lease. Zoning rules dictate what commercial activity is allowed where, and violating them can mean fines or forced relocation. If you plan to run a business from home, most cities have home occupation permits with limits on signage, customer traffic, and on-site employees. Texas law does protect the right to operate a cottage food production business from home, even in areas with restrictive zoning.²⁰

Step 9: Stay in Good Standing

Forming the entity is just the first step. Missing annual obligations is where businesses lose good standing and where owners accidentally expose themselves to personal liability.

Every taxable entity must file an annual franchise tax report and either a Public Information Report (PIR) or an Ownership Information Report (OIR) with the Comptroller by May 15. Corporations, LLCs, limited partnerships, professional associations, and financial institutions file the PIR on Form 05-102. Other taxable entities file the OIR on Form 05-167. Even if you owe zero tax because your revenue sits below $2,650,000, the information report is still required.¹⁵

Skipping these filings can lead to forfeiture of your entity’s registration by the Secretary of State. Once forfeited, your entity loses the right to sue or defend itself in a Texas court, and every officer, director, partner, or member becomes personally liable for certain debts of the entity. That consequence strips away the liability protection that made you form an LLC or corporation in the first place.¹⁵

Late filing carries a $50 penalty per report. If tax is owed and paid one to 30 days late, a 5% penalty applies. After 30 days, the penalty jumps to 10%.¹³

Texas LLCs also have to maintain specific records at their principal U.S. office: a current list of all members and their ownership percentages, copies of federal and state tax returns for the prior six years, the certificate of formation, the company agreement, and records of each member’s contributions. Members can request these records, and the company must produce them within five business days of a written request.²¹ Corporations should keep board and shareholder meeting minutes and current bylaws. Sloppy record-keeping is one of the fastest ways to lose the legal shield your entity is supposed to provide.

What About FinCEN Beneficial Ownership Reporting?

The federal Corporate Transparency Act originally required most small businesses to file Beneficial Ownership Information (BOI) reports with the Financial Crimes Enforcement Network. An interim final rule published in March 2025 exempted all entities created in the United States from this requirement. As of 2026, only certain foreign entities registered to do business in the U.S. must file BOI reports. If you’re forming a domestic Texas entity, you currently have no FinCEN filing obligation, but this area of law has shifted repeatedly, so it’s worth checking for updates.²²

1
Office of the Texas Secretary of State. Selecting a Business Structure
2
State of Texas. Business Organizations Code
3
State of Texas. Texas Business Organizations Code Section 22.232 – Election or Appointment of Officers
4
Texas Secretary of State. Guide for Determining Permissible Entity Types for Licensed Professions
5
Legal Information Institute (LII) / Cornell Law School. 1 Tex Admin Code 79.31 – Applicability of Rules
6
Texas Secretary of State. Business Filings and Trademarks Fee Schedule
7
Texas Secretary of State. Name Filings FAQs – Section: Assumed Name Certificates
8
State of Texas. Business Organizations Code Title 1, Chapter 5
9
Office of the Texas Secretary of State. Business and Nonprofit Forms
10
Office of the Texas Secretary of State. SOSDirect – Online Searching and Filing
11
Office of the Texas Secretary of State. Introducing Texas Express Expedited Business Filings
12
Internal Revenue Service. About Form SS-4, Application for Employer Identification Number (EIN)
13
Texas Comptroller. Franchise Tax
14
Texas Comptroller. 2026 Franchise Tax Instructions
15
Texas Comptroller of Public Accounts. Texas Franchise Tax Public Information Report and Ownership Information Report
16
Texas Workforce Commission. Unemployment Tax Registration – Register a Tax Account
17
Texas Workforce Commission. New Hire Reporting
18
Texas Department of Insurance. Employer Resources
19
Office of the Texas Governor: Texas Economic Development and Tourism Office. Business Permit Office
20
State of Texas. Local Government Code Chapter 231 – County Zoning Authority
21
State of Texas. Business Organizations Code Chapter 101 – Limited Liability Companies
22
FinCEN.gov. Beneficial Ownership Information Reporting