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 incorporation documents is a simple process. You can file formation documents through the Texas Secretary of State’s gate and get confirmation immediately with documents arriving in the mail shortly thereafter.
Choose the right business entity
There are several types of entities you can choose from for your business. Each type of entity comes with its own unique rules and potential tax or operational benefits. Choose from:
- Limited Liability Company (LLC): Registering as an LLC is common for small businesses in Texas. This entity gives you liability protection while giving you great flexibility in how you manage your business taxes. Learn more about setting up an LLC in Texas. It is formed by filing a training certificate with the State.
- C-Corporation: A C corporation is the business entity of choice for public companies due to its ability to divide the company’s stock into several types of shares. It is generally not chosen by small businesses looking to get started unless the owners raise significant capital. It is formed by the filing of a training certificate.
- Scorporation: When most people refer to a corporation, they are probably referring to the C-corp discussed above. There is, however, 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 in the same manner as a C-corp with the state.
- Individual business : A sole proprietorship is a business owned by one person. All responsibility and finances rest with the individual. There are no formation documents to file with the state to set up this business.
- Global partnership: If you choose to go into business with at least one other person, you can form 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 company.
- Partnership limit: If you and one or more other people form a business together, you can form a limited partnership after filing a certificate of incorporation with the state if you have at least one general partner and one limited partner. Limited partners are liable only to the extent of their financial interest in the partnership while general partners are personally liable for the debts of the partnership.
You may also need to file a Doing Business As, or DBA, with the State of Texas if you are doing business under a name other than your own name or the name of the company you formed by filing constitution with the state. This informs the state of who is operating the business and who is responsible for it.
Find the right business name
Before registering your business with the state, you must ensure that the name is not being used by another business. You can lead a online research to find out if your name is available at a cost of up to $1 per search. This is something you will want to pay for in order to avoid slowing down your application process and to be confident that you can legally purchase your domain name or create marketing materials with your chosen name.
Apply for a Professional EIN
An Employer Identification Number (EIN) is your business tax identification number that the federal government will use to identify your business. You can apply for an EIN online via 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 obtain an EIN.
Choose a registered agent
A registered agent is a person or entity that takes responsibility for receiving important legal documents on behalf of your business. Any business that files incorporation papers with the state is required to have a registered agent.
If someone takes legal action against your business, the registered agent can receive this document. You want your registered agent to be someone reliable and checks the mail. You can serve as a registered agent or you can engage a registered agent service to handle this responsibility on your behalf.
Apply for business licenses
Once you have officially established your business entity in the state of Texas, you must verify the federal, state, and local business licenses you need before you can operate. There is a wide variety of licenses required for different industries and professions. You should apply for this as soon as you have a registered name, as it can take time to obtain. Learn more about business licensing in Texas.
If your business sells taxable goods or services, you will need to apply for a sales tax permit so you can collect Texas sales tax.