Certain types of business entities must file documents with the state of Texas to become legal entities. Once you know which business entity you want to use, filing the formation documents is a simple process. You can submit the formation documents through the Texas Secretary of State’s portal and receive a confirmation immediately with the documents arriving in the mail shortly after.
Choose the right business entity
There are many types of entities that you can choose for your business. Each type of entity comes with its own unique rules and potential tax or operational benefits. Choose from:
- Limited Liability Company (SHK): Filing as an LLC is common for small businesses in Texas. This entity gives you protection from liability while also giving you a lot of flexibility in how you handle your business taxes. Learn more about how to form an LLC in Texas. Formed by presenting a certificate of formation to the state.
- C-Corporation: A C corporation is the economic entity of choice for public companies because of its ability to divide business stock into multiple types of stock. It is not usually chosen by smaller businesses looking to start up unless the owners are raising a significant amount of capital. Formed by presenting a certificate of formation.
- S-Corporation: When most people talk about a corporation, they are likely referring to the C-corp discussed above. However, there is another type of corporation that offers tax benefits to owners. This comes from subchapter “S” of the tax code and is a tax classification that avoids double taxation. Learn more about S-corporations. An S-corp is simply a tax designation and is registered the same way as a C-corp with the state.
- Sole Proprietorship: A sole proprietorship is a business owned by one person. All obligations and finances belong to the individual. There is no formation document to submit to the state to form this business.
- General Partnership: If you decide to go into business with at least one other person, you can create a general partnership. There is no requirement to file anything with the state to form the entity. You are both responsible for the debts of the partnership.
- Limited partnership: If you and one or more other people form a business together, you can form a limited partnership after filing a certificate of formation with the state if you have at least one general partner and one limited partner. Limited partners are only liable up to their financial interest in the company, while general partners are personally liable for the company’s debts.
You may also need to file a Doing Business As, or DBA, with the state of Texas if you will be doing business under a name other than your name or the company name you created by filing your state’s formation documents. This notifies the state of who operates the business and who is responsible for it.
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Find the right business name
Before registering your business with the state, you need to make sure that the name is not being used by another business. You can do an online search to find out if your name is available at a cost of up to $1 per search. This is something you’ll want to pay for so you can avoid slowing down the application process and have the confidence that you can legally purchase your domain name or create marketing materials with your chosen name.
Apply for a business EIN
An employer identification number (EIN) is your business’s tax identification number that the federal government will use to identify your business. You can apply for an EIN online through IRS.gov. The process is simple, free and only takes a few minutes. This is required for tax purposes for certain business entities and to be able to hire employees.
Get step-by-step instructions on how to get an EIN.
Choose a registered agent
A registered agent is a person or entity that takes responsibility for obtaining important legal documents on behalf of your business. Every business that files its formation documents with the state is required to have a registered agent.
If someone files a lawsuit against your business, the registered agent can receive that document. You want your registered agent to be someone who is trustworthy and checks the mail. You can serve as the registered agent or you can hire a registered agent service to handle this responsibility on your behalf.
Apply for a Business License
Once you have officially formed your business entity in the state of Texas, you need to check which federal, state and local business licenses you need before you can operate. A wide variety of licenses are required for different industries and occupations. You should apply for these as soon as you have a registered name as it may take time to receive them. Learn more about Texas business licenses.
If your business will sell taxable products or services, you will need to apply for a sales tax permit so that you can collect sales tax in Texas.