To start a sole proprietorship in Texas, you can simply begin doing business — the state requires no formation filing for this structure. What you will likely need to handle: an assumed name certificate at the county level if you use a trade name, an Employer Identification Number from the IRS, a state sales tax permit if you sell taxable goods or services, any occupational or local licenses tied to your trade, and your own income and self-employment taxes going forward. The tradeoff for the simplicity is that you and the business are legally the same person, so every business debt is personally yours, and every dollar of profit is taxed as personal income.1Office of the Texas Secretary of State. Selecting a Business Structure
File a DBA if You Use a Trade Name
Texas law requires an assumed name certificate — a DBA — whenever you operate under any name other than your own legal surname. If you’ll run the business as “Jane Smith Consulting,” no filing is needed. If you’ll run it as “Bluebonnet Bookkeeping,” you file.2State of Texas. Texas Business and Commerce Code Chapter 71 – Assumed Business or Professional Name
The certificate lists your full legal name, residence address, the assumed business name, each county where you’ll do business, and how long you plan to use the name (up to ten years). Sole proprietors file with the county clerk, not the Secretary of State. You file in each county where you maintain business premises, and if you have no physical location, you file in every county where you actually conduct business.2State of Texas. Texas Business and Commerce Code Chapter 71 – Assumed Business or Professional Name
Filing methods vary by county. Most accept walk-ins with government-issued ID, mailed forms that have been notarized, and sometimes online submissions.3Dallas County. Assumed Names/DBA Procedures4Office of the Texas Secretary of State. Notary Public Educational Information5Bexar County, TX. Assumed Business Name/Doing Business As6Cameron County Clerk. Cameron County Clerk Assumed Name Certificate Confirm the current fee with your specific county before you submit.
One thing worth knowing before you print business cards: a DBA filing does not give you exclusive rights to the name. Texas doesn’t require assumed business names to be unique, and the county clerk won’t check whether someone else is already using it. Searching the records yourself before filing is smart, but the responsibility is entirely yours. If you want brand protection beyond your county filings, that’s a separate federal trademark registration through the USPTO.7United States Patent and Trademark Office. How Trademarks and Trade Names Differ
Get an EIN From the IRS
An Employer Identification Number is a nine-digit number the IRS uses to identify your business for tax filing.8Internal Revenue Service. Instructions for Form SS-4 (12/2025) A sole proprietor with no employees can technically use a Social Security number instead, but most banks won’t open a business account without an EIN, and most vendors expect one when setting up credit.
The IRS issues EINs for free through its online application, and approval is immediate. The tool runs Monday through Friday from 6:00 a.m. to 1:00 a.m. Eastern, Saturday from 6:00 a.m. to 9:00 p.m., and Sunday from 6:00 p.m. to midnight.9Internal Revenue Service. Get an Employer Identification Number You’ll need your SSN, your entity type, and a short description of what the business does. A paper Form SS-4 by mail or fax is available, but the online application gives you a downloadable confirmation the moment you finish.8Internal Revenue Service. Instructions for Form SS-4 (12/2025)
Apply for a Sales Tax Permit if You Sell Taxable Goods or Services
If any of what you sell is taxable in Texas, you have to get a sales tax permit from the Texas Comptroller before making your first sale. The permit itself is free, is issued separately for each business location, and must be displayed where customers can see it.10State of Texas. Texas Tax Code 151-201 – Sales Tax Permits
The application is Form AP-201. It asks for your EIN or SSN, your legal name, your mailing address, a NAICS code for your industry (or a description if you don’t know it), your expected sales volume, your start date, and details for each location.11Texas Comptroller. Form AP-201 – Texas Application for Sales and Use Tax Permit The Comptroller’s online portal issues a confirmation number right away, and the physical permit arrives by mail within a few weeks.
The penalties for skipping this step escalate quickly. Selling without a permit is a Class C misdemeanor on the first offense. A second conviction becomes a Class B misdemeanor with fines up to $2,000, and a third or later conviction is a Class A misdemeanor with fines up to $4,000.12State of Texas. Texas Tax Code 151-708 – Selling Without Permit
Plan for Self-Employment and Income Taxes
No employer withholds taxes from your earnings, so you handle both income tax and self-employment tax on your business profits directly. The self-employment tax rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare. It kicks in at $400 or more of net self-employment earnings.13Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) For 2026, the Social Security portion applies to the first $184,500 of combined wages and self-employment income; Medicare has no cap.14Social Security Administration. Benefits Planner – Maximum Taxable Earnings Half of the self-employment tax is deductible as an adjustment to income on your personal return.
Quarterly Estimated Payments
The IRS expects payment throughout the year, not just in April. Sole proprietors send in quarterly estimated payments covering both income tax and self-employment tax. The four deadlines:
- April 15 for income earned January through March
- June 15 for income earned April and May
- September 15 for income earned June through August
- January 15 of the following year for income earned September through December
When a deadline falls on a weekend or holiday, the payment is due the next business day.15Internal Revenue Service. When to Pay Estimated Tax – Individuals Missing these deadlines produces underpayment penalties even if you pay in full when you file your annual return. First-year sole proprietors get caught by this often.
Schedule C and Deductible Expenses
Business income and expenses go on Schedule C of your personal return. Deductible categories include vehicle costs (the 2026 standard mileage rate is 72.5 cents per mile), office supplies, business insurance, rent, utilities, legal and accounting fees, contract labor, advertising, and the business portion of your home if you keep a dedicated workspace.16Internal Revenue Service. Instructions for Schedule C (Form 1040)17Internal Revenue Service. 2026 Standard Mileage Rates Startup costs are deductible up to $5,000 in the first year, with the remainder amortized. Keep receipts and mileage logs from day one; reconstructing them at tax time is where deductions get lost.
Note also that if you pay any independent contractor $2,000 or more during the year, you’re required to file Form 1099-NEC. That threshold rose from $600 for tax years beginning after 2025 and will adjust for inflation starting in 2027.18Internal Revenue Service. 2026 Publication 1099 – General Instructions for Certain Information Returns Collect a W-9 from each contractor before you cut the first check.
You’re Exempt From the Texas Franchise Tax
A genuine advantage of sole proprietorship over an LLC in Texas: sole proprietorships are completely exempt from the state franchise tax, as long as the business isn’t organized in a way that limits your liability. That means no franchise tax owed and no annual report to file. A single-member LLC that files federally as a sole proprietor is still a taxable entity for franchise tax purposes, though most small operators fall under the $2,650,000 no-tax-due threshold and owe nothing.19Texas Comptroller. Taxable Entities – Franchise Tax Frequently Asked Questions20Texas Comptroller. 2026 Franchise Tax Instructions – Form 05-915 Worth weighing if you’re still deciding between the two structures: the LLC gives liability protection, but it comes with the franchise tax filing.
Check Your Licensing at the State and Local Level
Your trade may require a state occupational license. The Texas Department of Licensing and Regulation covers dozens of categories — electricians, cosmetologists, tow truck operators, and many more — and some licenses require background checks, insurance, or bonding before you can operate. Check TDLR for your specific occupation before opening.
Local requirements sit on top of state ones. Many Texas cities require a general business permit. Specific activities add their own: home occupation permits for home-based businesses, health department certificates for food-related work, fire safety inspections for commercial storefronts, and signage permits in regulated commercial districts. Your city’s planning or permitting office is the right place to confirm what applies. Operating without the required permits can bring cease-and-desist orders or municipal fines.
If You Plan to Hire
Adding even one employee changes what you have to do. Each new hire completes a Form I-9 to verify work eligibility.21U.S. Department of Labor. I-9 Central Federal workplace posters covering minimum wage, family and medical leave, and other laws must be displayed; the Department of Labor’s Poster Advisor tool identifies which ones apply.22U.S. Department of Labor. Workplace Posters On the tax side, you’ll withhold federal income tax and the employee’s share of Social Security and Medicare from each paycheck, match Social Security and Medicare from your own funds, and file regular payroll tax returns. This is the stage where most sole proprietors either move to payroll software or bring in an accountant, because errors in withholding compound fast.