Take These Steps to Start a Business in Texas

Setting the stage for commercial success starts with a sound business plan, access to capital funding, and above all else, a good idea for a marketable business. These early-stage essentials serve as building blocks for any startup venture, laying the groundwork for sustained growth and profitability. With a solid framework in place, addressing all your big-picture planning and finance concerns, it’s time to tackle practical Texas tactics for any small business startup.

Select a Structure for Your Texas Business

Texas entrepreneurs have a few options for establishing business structure. The best route for each owner depends upon various factors, such as the size of the venture and the relationships between the principals involved. Popular business structures for Texas small business include:

• Limited Liability Company (LLC) – A limited liability company structures an entity as a pass-through for business owners. The popular structure offers several advantages for small businesses owners, including simplified management and tax guidelines. LLCs do not require officers or directors, like corporations do, so it is easier to administer limited liability companies, without some of the red tape associated with corporations. The progressive business structure has largely supplanted Doing Business As (DBA) among small business ventures, due to the liability protection provided by LLCs, under less complex conditions than those facing corporations.
• Doing Business As (DBA) – Once known as Fictitious Business Name (FBN), Doing Business As has at times been a popular structure for small business operations, particularly among service provides without employees. The limited liability company structure has gained favor over DBA, because an LLC is actually a separate structure, insulating the owner from liability. DBA, on the other hand, isn’t really a separate entity, only a different name used by a practitioner for professional purposes.
• Corporation – Forming a corporation is the path frequently chosen by large companies and those intending to raise money from investors. The structure of a corporation includes shareholders, directors, and corporate officers. Establishing a corporation is relatively complex, compared to starting a limited liability company or simply designating a professional name for a Doing Business As approach. As a result, setting up a corporation also costs more than simpler options. An important distinction is made between regular C-Corporations and another type of company called an S-Corporation. After incorporating, a small company may elect to adopt S-Corporation status, providing the liability protection of a regular corporation, while enjoying the tax benefits of a sole proprietorship or partnership.

Establish a Name for Your Business

Failing to do due diligence can result in problems with your business name. Before settling on a moniker for your venture, it is important to takes steps ensuring a good branding choice. As you weigh the pros and cons of names on your short list, complete these tasks to help label your brand.

• Do a Web Search – A unique name is essential, particularly for businesses with a wide reach. A thorough web search identifies conflicts during the early stage of your startup, before you’ve invested money in the name. For the best results, focus on your local market first, avoiding names already trademarked, as well as those associated with businesses outside your niche. And then expand your web search nationally or internationally, if you plan to do business outside the United States.
• Avoid Confusion – Clever names make lasting impressions, but you can also undermine your brand with poor word choices. Your business name should be easy to pronounce and understandable, and may incorporate timeless themes related to your field. Confusing names that don’t fit with your product and service lines won’t help your business become a household name.
• Check With the Texas Department of State – Texas Department of State: Division of Corporations maintains a database listing business names within the state. It is a good idea to search your desired name, as well as similar names and plural spellings. The last thing you need is a startup delay caused by the state rejecting your proposed name, because it is too similar to an existing brand.
• Explore Domains – A distinctive web address can be everything to a new business venture, particularly startups emphasizing online sales and access. A domain search can help you narrow your search for a name, based upon online availability.
• Search Trademarks – Trademarked names are obviously off limits, so it is important to vet prospective business names with the United States Patent and Trade Office (USPTO). The organization provides access to a searchable database you can use to query trademarks. If you’d rather not conduct the search yourself, professional specialists offer paid trademark search services. For the best DIY results clearing a name through the Trade Office, experts suggest searching plurals, sound-alikes, misspellings, and multiple variations of the name.

Get an Employer Identification Number (EIN)

A federal tax identification number distinguishes each commercial entity for taxation and other matters. An Employer Identification Number is often likened to a business version of a Social Security number. The designation is required for Texas corporations and LLCs and optional for DBA arrangements.

If you are Doing Business As and choose not to obtain an Employer Identification Number, your Social Security number is substituted in its place. Using your Social Security number for professional purposes may increase your risk of identity theft; experts recommend separating yourself from your business by requesting an EIN. You can apply for an Employer Identification Number online with the IRS.

Register Your Business

Each state has distinct registration requirements for businesses. In order to form a limited liability company or a corporation in Texas, you must partner with a professional Registered Agent. The agent provides an address of record within the State of Texas, serving as an official contact for the business entity.

Your Registered Agent receives official documentation about the company, such as tax notices and other important paperwork. A professional Registered Agent must be available during business hours and have a physical Texas address for correspondence from the Department of State, service of process notices, and other official communications.

Texas entities Doing Business As are registered in the counties where they conduct commerce. A business name can be checked with the County Recorder – offered online in some counties. Some Texas counties require notarized DBA application materials.

Obtain Licenses and Permits

Each locality has its own permit procedures, affecting businesses of all kinds. Food ventures, in particular, may be subject to local permitting requirements. To ensure compliance and avoid launch delays, check with your municipality well before your prospective rollout date. At a minimum, your business should be registered to pay Texas taxes and licensed for business in your city or county. To avoid delays, allow time for municipal inspections and other local licensing requirements.

Establish Banking Relationships

Building banking relationships close to home is good for business. Local access to working capital and convenient business banking services are both welcomed by Texas entrepreneurs. Even if you’re a sole proprietor, choosing not to incorporate, a separate business bank account is recommended.

Utilizing commercial credit cards and other finance opportunities can actually help build a credit profile for your business, separate from your own. Once established, you can use your healthy credit rating to secure larger loans and future funding.

Texas’ healthy commercial climate draws entrepreneurs to the Lone Star State; the region boasts a business-friendly environment for diverse ventures. If you’re considering a Texas launch, following state and local startup protocols helps ensure commercial success.