Running a business in Texas means working through four separate systems: entity formation with the Secretary of State, activity-specific licensing, tax registration with the Comptroller, and employer obligations that trigger the moment you hire your first worker. Texas business regulations are spread across those agencies rather than consolidated into a single permit or filing, and falling out of compliance with any one of them can cost your entity its good standing or expose you personally to liability. There is no state personal income tax, but that absence is often mistaken for a lighter regulatory load than actually exists.1Texas Economic Development Corporation. Low Taxes in Texas
Form the Entity First
Your Certificate of Formation is what legally creates an LLC, corporation, or other registered entity in Texas. It must list a physical Texas address and a registered agent who maintains an office in the state and is available during business hours to accept legal documents.2Justia. Texas Business Organizations Code Title 1, Chapter 5, Subchapter E LLCs must specify member-management or manager-management and list names and addresses accordingly. Corporations must identify an initial board of directors.
You file through the SOSDirect portal or by mail. The filing fee is $300 for an LLC or corporation and $750 for a professional association or limited partnership.3Office of the Texas Secretary of State. Business Filings and Trademarks Fee Schedule If you need faster processing, the Texas Express program launched in October 2025 offers standard expedited service for $50 per document, next-day for $500, and same-day for $750, each on top of the regular filing fee. Same-day and next-day are currently limited to certain filing types such as amendments, conversions, and mergers.4Office of the Texas Secretary of State. Secretary of State Jane Nelson Announces Texas Express – New Expedited Services for Business Filings
Your business name must be distinguishable from every other name already on file with the Secretary of State, and you can check availability through SOSDirect before filing.5State of Texas. Texas Business Organizations Code 5.053 – Distinguishable Names Required If you plan to operate under a name different from your legal entity name, file an assumed name certificate with the Secretary of State for $25.6Office of the Texas Secretary of State. Form 503 – Instructions for Assumed Name Certificate
Once the state approves your formation, apply for a federal Employer Identification Number from the IRS. Partnerships, LLCs, and corporations are all required to have one, and you will need it to open a bank account, hire employees, and file federal returns.7Internal Revenue Service. Employer Identification Number The online application takes minutes.
Licenses Depend on What You Do
Texas does not issue a general business license. Your certificate of formation, or an assumed name certificate for sole proprietors and partnerships, is the baseline authorization to operate.8Texas Economic Development & Tourism Office. Business Permit Office Everything beyond that depends on your activity.
The Texas Department of Licensing and Regulation handles dozens of occupation-specific licenses covering trades such as electrical work, towing, barbering, and massage therapy. Separate professional boards regulate accountants, engineers, and medical practitioners. Businesses selling, distributing, or manufacturing alcohol need permits from the Texas Alcoholic Beverage Commission, which issues different license types depending on the role in the supply chain.9Texas Alcoholic Beverage Commission. TABC License and Permit Types
Local governments add another layer. Your city or county may require zoning approval for your location, health inspections for food service, fire clearances, or sign permits. Check with your local permitting office before you sign a lease. Operating without the right local approvals can bring daily fines or a forced shutdown.
Selling Food From Home
If you plan to sell food made in your home kitchen under the Texas Cottage Food Law, your annual gross cottage food revenue cannot exceed $150,000. Labeling rules apply, and as of September 1, 2025, if you sell foods that require time and temperature control for safety, you must register with the Texas Department of State Health Services.10Texas DSHS. Texas Cottage Food Production
Taxes You Owe the State
The Texas Comptroller of Public Accounts collects the two taxes most business owners deal with: the franchise tax and the sales and use tax.11Texas Comptroller of Public Accounts. Texas Taxes
Franchise Tax
The franchise tax applies to most entities formed or doing business in Texas and is calculated on revenue rather than profit. For the 2026 report year, retail and wholesale businesses pay 0.375% of taxable margin and other businesses pay 0.75%. An EZ computation rate of 0.331% is available to businesses with total revenue of $20 million or less. Businesses with total revenue at or below $2,650,000 owe no franchise tax for the 2026 report year, but still have to file.12Texas Comptroller of Public Accounts. Franchise Tax
The report is due May 15 every year.13Texas Comptroller of Public Accounts. Franchise Tax Overview Alongside it, every entity must file either a Public Information Report (corporations, LLCs, and limited partnerships) or an Ownership Information Report (other entity types) on the same deadline, regardless of whether tax is owed.14Texas Comptroller of Public Accounts. Texas Franchise Tax Public Information Report and Ownership Information Report Missing the filing can lead the Comptroller to forfeit your entity’s right to do business in Texas, which then requires a reinstatement process through the Secretary of State.
Penalties stack quickly. Paying 1 to 30 days late adds 5% of the amount owed. After 30 days the penalty becomes 10%. If you still have not paid after receiving a formal notice, another 10% is added, bringing the total to 20%. Interest begins on the 61st day after the report was due, and there is a flat $50 penalty for each late-filed report even when no tax is due.15Texas Comptroller of Public Accounts. Penalties for Past Due Taxes
Sales and Use Tax
If you sell or lease tangible goods or provide taxable services, you need a Sales and Use Tax Permit from the Comptroller.16Texas Comptroller of Public Accounts. Texas Online Tax Registration Application The state rate is 6.25%, and local jurisdictions can add up to 2%, so the combined rate tops out at 8.25%. You collect from customers and remit through the Comptroller’s Webfile system. Filing frequency depends on volume: higher-volume businesses file monthly, smaller ones quarterly or annually.
Rules That Kick In When You Hire
Hiring employees pulls you into a separate set of state obligations managed primarily by the Texas Workforce Commission.
Unemployment Insurance Tax
Employers who meet certain hiring or payroll thresholds must register with the TWC for state unemployment tax. The 2026 taxable wage base is $9,000 per employee per year, so you pay only on the first $9,000 of each employee’s earnings. New employers start at a default rate of 2.70%, which stays in place until the employer has completed four chargeable quarters. After that, the rate is recalculated based on actual claims experience, with fewer claims producing lower rates over time.17Texas Workforce Commission. Unemployment Insurance Tax Rates
Paying Employees
Under the Texas Payday Law (Chapter 61 of the Labor Code), nonexempt employees must be paid at least twice a month with pay periods of roughly equal length. Exempt employees must be paid at least monthly.18State of Texas. Texas Labor Code Chapter 61 – Payment of Wages If you fire an employee, you have six calendar days (not six business days) to pay all wages owed. If the employee quits, final wages are due by the next regularly scheduled payday.19State of Texas. Texas Labor Code 61.014 – Payment After Separation From Employment The TWC investigates wage claims filed by employees who believe they were underpaid.20Texas Workforce Commission. Texas Payday Law – Wage Claim
New Hire Reporting
Every new or rehired employee must be reported to the TWC within 20 calendar days of their start date. Employers reporting electronically must submit roughly twice a month, 12 to 16 days apart. The penalty for a missed report is $25 per unreported hire.21Texas Workforce Commission. New Hire Reporting
Workers’ Compensation
Texas is the only state that does not require most private employers to carry workers’ compensation insurance.22Texas Department of Insurance. Workers’ Compensation Employer Resources Employers who opt out are called non-subscribers. Going without saves premium costs, but injured employees can sue you directly for damages, and you lose several legal defenses that subscribing employers keep.
If you choose not to carry coverage, you must report that decision to the Texas Department of Insurance between February 1 and April 30 each year.23Texas Department of Insurance. Employer E-File Online Reporting You also have to post a written notice in your workplace stating whether coverage is in place.
Workers Under 18
The Texas Child Labor Law prohibits minors from working in hazardous occupations and restricts late-night hours for 14- and 15-year-olds, particularly on school nights. Violations can bring criminal charges or civil penalties.24Texas Workforce Commission. Texas Child Labor Law If you employ anyone under 18, review the specific hour and occupation restrictions before scheduling them.
Trademarking Your Name
Your Certificate of Formation reserves your legal entity name with the Secretary of State but does not provide trademark protection. To protect a brand name, logo, or slogan within Texas, register a trademark or service mark through the Secretary of State’s online Trademarks System. A state registration lasts five years and can be renewed in five-year terms.25Office of the Texas Secretary of State. Trademarks and Service Marks For protection outside Texas, you need a federal registration with the U.S. Patent and Trademark Office.
Federal Beneficial Ownership Reporting
The Corporate Transparency Act once required most small U.S. businesses to file Beneficial Ownership Information reports with FinCEN, but a March 2025 interim final rule exempted all entities created in the United States from that reporting requirement.26FinCEN.gov. FinCEN Removes Beneficial Ownership Reporting Requirements for US Companies and US Persons The obligation now applies only to foreign entities registered to do business in a U.S. state.27FinCEN.gov. Frequently Asked Questions FinCEN has said it intends to finalize the rule, so watch for any change that could reinstate domestic reporting.