To start a consulting business in Texas, you’ll choose a legal structure (most solo consultants form an LLC), file a Certificate of Formation with the Secretary of State for $300, get a federal EIN, and set yourself up to pay federal self-employment tax and, if you grow large enough, the Texas franchise tax. The state has no personal income tax and the formation process is straightforward, but a few steps — registered agent, DBA filings, quarterly estimated taxes, local zoning for home offices — trip up people who skip them.
Pick a Legal Structure
Three options cover almost every new consultant in Texas.
A sole proprietorship requires no formation filing. You just start working. The problem is exposure: your personal bank account, house, and car are all on the line if a client sues or the business runs up debt. For consulting work, where bad advice can trigger a real client loss, that risk is not academic.
A limited liability company separates your personal assets from business liabilities, keeps management flexible, and carries lighter paperwork than a corporation. It’s the default choice for most solo consultants, and for good reason.
A corporation adds officers, directors, and the ability to issue stock. Useful if you plan to bring on investors or eventually go public, but overkill for most consulting practices.
Texas does not require LLCs to have a written operating agreement, but write one anyway, even if you’re the only member. Without one, a court may have trouble distinguishing your LLC from a sole proprietorship, which erodes the liability protection you formed the LLC to get. Keep it short: ownership percentages, how profits are distributed, what happens if a member leaves, and who can sign contracts. Chapter 101 of the Texas Business Organizations Code recognizes oral or implied company agreements, but relying on anything unwritten invites a dispute you don’t want.1State of Texas. Texas Business Organizations Code Chapter 101
Clear and Register Your Business Name
Before you file anything, check that your intended name is available. The Secretary of State’s SOSDirect portal lets you search existing entities for $1 per search.2Office of the Texas Secretary of State. SOSDirect – Online Searching and Filing Your name must be distinguishable from every active entity on file. “Similar” generally passes; “nearly identical” gets rejected.
If you plan to operate under any name other than your LLC’s legal name (or your own personal name, if you’re a sole proprietor), Texas Business and Commerce Code Chapter 71 requires an assumed name certificate, commonly called a DBA. Sole proprietors and other unincorporated individuals file with the county clerk in every county where they do business. LLCs, corporations, and limited partnerships file with the Secretary of State.3State of Texas. Texas Business and Commerce Code Chapter 71 Skip this and you’ll run into problems opening a bank account or enforcing a contract under your trade name.
File the Certificate of Formation
The Certificate of Formation is what legally creates your entity. For an LLC, use Form 205 from the Secretary of State.4Office of the Texas Secretary of State. Form 205 – Instructions for Certificate of Formation – Limited Liability Company You’ll need to provide:
- The exact entity name you confirmed through SOSDirect.
- A registered agent and office. Every Texas entity must maintain a registered agent, meaning a person or authorized company in the state who can accept legal documents on your behalf. The registered office has to be a physical street address where someone is available during business hours; a P.O. box or answering service alone will not qualify.5State of Texas. Texas Business Organizations Code BUS ORG 5-201
- Management structure: member-managed (owners run operations) or manager-managed (a designated manager handles things). Solo consultants almost always choose member-managed.
- A statement of purpose. A general “any lawful business activity” line is standard and leaves room to pivot later.
- At least one organizer’s signature. Any person 18 or older works, and no notarization is needed.
File online through SOSDirect or mail paper copies to Austin. The fee is $300 either way.6Texas Secretary of State. Business Filings and Trademarks Fee Schedule Online filings generally process in two to four business days; paper takes longer. Once approved, you’ll get a stamped Certificate of Formation. Banks typically want to see this before opening a commercial account.
Get Your Federal EIN
After the state approves your formation, apply to the IRS for an Employer Identification Number. This nine-digit number is the business equivalent of a Social Security number, and you’ll need it for tax filings, hiring, and opening a bank account. The IRS recommends forming your state entity first, because applying beforehand can delay processing.7Internal Revenue Service. Get an Employer Identification Number The online application is free and usually issues the EIN immediately.
Taxes You’ll Actually Owe
Texas Franchise Tax
Texas has no personal income tax, but it does impose a franchise tax on most business entities. The good news for new consultants: for the 2026 report year, the no-tax-due threshold is $2,650,000 in annualized total revenue. If you fall at or below that, you owe nothing and are not required to file a report at all.8Texas Comptroller. Form 05-915, 2026 Franchise Tax Instructions Most new consulting firms stay well under that figure for years.
If you do cross it, the rate for most consulting firms is 0.75% of the taxable base, with reduced rates and an EZ computation available depending on your revenue and industry.9Texas Comptroller. Franchise Tax Reports are due May 15. If you owe tax or exceed the threshold and file late, the penalty is $50 even when no tax is due, and extended non-filing can lead the Comptroller to forfeit your entity’s right to do business in Texas.10Texas Comptroller. Franchise Tax Overview
Federal Income and Self-Employment Tax
No state income tax does not mean no tax. The IRS treats LLC profits as self-employment income, so you owe regular federal income tax plus self-employment tax at 15.3% (12.4% Social Security, 2.9% Medicare). The Social Security portion applies only to the first $184,500 in net earnings for 2026; income above that is subject to the 2.9% Medicare tax alone.11Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)12Social Security Administration. Contribution and Benefit Base You can deduct half of your self-employment tax when calculating adjusted gross income.
Because nobody is withholding tax from your checks, the IRS expects quarterly estimated payments. Miss them and you’ll owe an underpayment penalty plus interest. For 2026, the deadlines are April 15, June 15, September 15, and January 15, 2027. If a date falls on a weekend or federal holiday, the deadline shifts to the next business day.13Internal Revenue Service. When Are Quarterly Estimated Tax Payments Due?
The QBI Deduction
The Section 199A qualified business income deduction allows eligible pass-through owners to deduct up to 20% of qualified business income. It was originally set to expire at the end of 2025 but was made permanent by the One Big Beautiful Bill Act signed in July 2025. Consulting is treated as a “specified service trade or business,” which means the deduction phases out and eventually disappears as taxable income rises. Whether you get the full deduction, a partial one, or none depends on your income — a tax professional can tell you where you land.
Sales Tax: Usually No, Sometimes Yes
Most professional consulting services are not subject to Texas sales tax. The state taxes specific service categories like data processing, credit reporting, and debt collection, and general management, strategy, or business consulting is not on the list. The place consultants sometimes get caught is “information services,” which Texas does tax. If your work involves gathering and furnishing specialized data, selling access to research databases, or producing market reports, some of that revenue can be taxable. Even then, 20% of the charge for information services is automatically exempt.14Texas Comptroller. Taxable Services Using a computer to deliver professional advice does not convert consulting into a taxable data processing service; the Comptroller distinguishes technology used as a tool from technology sold as the service itself.
Professional Licensing and Insurance
Texas does not require a general business license to consult. Specific fields do carry their own licensing. Engineers offering consulting services must hold a license from the Texas Board of Professional Engineers and Land Surveyors; using the title “engineer” or “professional engineer” without a current license violates the Texas Engineering Practice Act.15Texas Board of Professional Engineers and Land Surveyors. Licensing Information Accountants face similar oversight from the Texas State Board of Public Accountancy. If your niche touches a regulated profession, check with the relevant state board before holding yourself out as a practitioner.
Even in unregulated fields, consider professional liability insurance, often called errors and omissions coverage. A claim of bad advice or a missed deadline can trigger a lawsuit, and your LLC structure alone won’t fully shield you if the claim targets your personal professional conduct rather than the entity. Premiums for independent consultants are typically modest relative to the exposure.
If You Hire or Work From Home
Hiring triggers both federal and state obligations. Federally, each new employee completes Form W-4 and Form I-9, and you’ll report wages on Form W-2 using the employee’s Social Security number. An Individual Taxpayer Identification Number cannot substitute for an SSN for employment.16Internal Revenue Service. Hiring Employees In Texas, you must register with the Texas Workforce Commission for unemployment insurance tax within 10 days of becoming liable. Registration is free through the TWC online portal.17Texas Workforce Commission. Unemployment Tax Registration Texas does not require private employers to carry workers’ compensation insurance, but going without it removes certain legal protections if an employee is injured on the job.
Many consultants start from home, and that can trigger local rules the state filing process never mentions. Cities and counties across Texas regulate home-based businesses through home occupation permits or zoning variances. Typical restrictions cover the percentage of the home used for business, the number of non-resident employees on site, client visit frequency, signage, and parking. Some municipalities prohibit any exterior sign that a business operates from a residential address. Requirements vary widely: what’s allowed in unincorporated Harris County may require a permit in the City of Houston and be prohibited outright in a deed-restricted subdivision. Call your city’s planning or zoning department before you assume the kitchen table is fine. Enforcement is usually mild — a notice to comply or a small fine — but it can escalate if a neighbor complains and you’ve done nothing to get into compliance.