How To Start A Small Business In Texas [In Simple Steps]

Starting your own business can be overwhelming and challenging, especially if you don’t have the proper tools.

Luckily, Texas is one of the most profitable states to start a business, which is why it’s gaining popularity among entrepreneurs.

So, if you’re thinking of joining the 3.1 million business owners who are making it big in the Lone Star State, this post has you covered.

You’ll find all the information you need to guide you on how to start a small business in Texas.

How Profitable Is Owning a Small Business in Texas?

According to the US Small Business Administration, small businesses with fewer than 25 employees make up nearly 99% of businesses in Texas.

One reason could be that the cost of running a business in the southern state is 10% lower than the national average.

Therefore, lower startup costs translate to more profits going into your pocket.

According to Payscale, the average income of a small business owner is over $60,000 annually.

Alternatively, total earnings can range from $29,000 to $127,000 per year, depending on where your business is set up, the industry your business is in, and your profit margin.

What You’ll Need to Start a Business in Texas & Associated Costs

Here are a few startup costs you need to consider.

• Certificate of Formation: $300 for paper or online filings and an optional $25 for expedited processing
• Amendments to the Certificate of Formation: Around $15
• Attorney fees: The initial consultation is free and lasts about 30–60 minutes. After that, you’ll pay an hourly rate of $150–$350. Some attorneys offer a flat rate ranging between $500 and $2,000 to take care of the entire process of setting up your business.
• Name reservation within 120 days (optional): $40 for a paper form or online filing and an additional $40 for name renewal. You can also pay an optional $25 extra to expedite the filing process.
• Business licenses: Fees vary depending on the type of business, so make sure you check with the Texas Department of Licensing and Regulation (TDLR) and the Business Permit Office.
• Domain and website: A domain name can cost anywhere between $2 to $350 in annual fees. The cost of setting up the website for your business will vary based on your needs and whether you’re outsourcing the development process and web design.
• Additional costs: Rental space, labor, business plan costs, office furniture, basic office supplies and equipment, insurance fees, and marketing and promotion costs.

Do I Need a License or Certificate to Start a Business in Texas?

While you’re not required to have a general or business license in Texas, you do need a certificate of formation and your assumed name certificate.

These will act as your general business license.

You’ll also need three types of permits and licenses based on your location and industry type.

These typically need to be renewed with the Texas Health and Human Services Commission (HHSC) each year or as the state and your county require.

1. Professional and occupational licenses: Required for educated and skilled occupations like doctors, therapists, building contractors, nurses, electricians, teachers, lawyers, and counselors. Yet, before you can receive this license, you must first meet the state standards for your career.
2. Licenses and permits for specific activities: These include things like occupational, building, signage, health, alarm, and zoning permits.
3. Sales tax permit: This applies if you sell, lease, or rent taxable goods, acquire taxable goods or services from suppliers located outside Texas, or provide taxable services to your customers.

Why Should You Consider Starting a Small Business in Texas as a Side Hustle?

One of the best things about Texas is that it ranks first in economic growth and boasts the second-largest economy in the country.

It’s also the largest state in the contiguous US and has the fastest-growing metropolitan areas with the fastest-growing population.

So, it makes sense that starting a small business in Texas seems like a good choice.

Here are a few more reasons to consider.

• Diverse economy: Texas’s diverse economy is brought on by its growing population and the fact that the state proudly serves minority entrepreneurs ensures that there are plenty of business opportunities to go around.
• Low start-up costs: On average, you can expect to spend around $500 or slightly more to set up your small business in Texas.
• Significant tax benefits: Texas is run as one of the top 15 states without a corporate or individual income tax.
• A hub of innovation: Events like South by Southwest have made Texas a hub of innovation in a multitude of industries, such as media, aerospace, and advanced tech manufacturing.

How to Start a Small Business in Texas in 8 Simple Steps

Here’s an overview of the steps you’ll need to take to start your own small business in Texas.

Step 1: Create a Business Plan

For a business to succeed, it has to follow a blueprint or road map.

Known as the business plan, it’s where you can outline your business idea, target market, revenue opportunities, and advertising plans.

You’ll also have to create a financial plan that projects the profitability of your business during the first year.

This will give you a clear idea of what your budget will be and whether you’ll need investors or outside funding.

Step 2: Choose a Business Name

Before you can register with the state, you need to pick a name for your business.

We suggest writing a list and then conducting an online search to make sure it’s not taken by another business.

Once you find one that’s available, you have to register it so no one else can lay claim to it.

Step 3: Register Your Business

In Texas, most businesses need to file various documents with the State Department so that the business can become a legal entity.

Once you determine which forms you need for your type of business, you can file them online.

Then, you’ll get confirmation that your papers have been successfully uploaded, and the actual paperwork will arrive in the mail within a week or two.

Step 4: Apply for a Business EIN

An employer identification number (EIN) is the tax number that the government will use to identify your business.

The application process is quick and easy, and it’s free via the IRS website.

Step 5: Open a Business Bank Account

Setting up a business account keeps your personal finances separate.

This can reduce the risk of any problems popping up if your finances are ever audited.

Step 6: Get Business Insurance

There are different types of business insurance, including commercial property and business income insurance.

This keeps your business protected against potential miscalculations or oversights.

Also, general liability insurance helps protect you against natural disasters and accidents.

Step 7: Get Financing

Having enough money to pay your expenses is one of the vital components of a successful business.

Experts recommend setting aside expenses to last six months to a year when a business is first starting out.

Potential financing options include:

• Business loans
• Small business grants
• Raise capital
• Savings

Step 8: Brand and Promote Your Business

Your brand is the first thing customers will encounter. So, you have to create a brand that’s attractive and easy to recognize.

The next step is to showcase your operation to potential clients.

This includes creating a marketing plan, setting up a business website, and finding ways to market your business.

Things to Consider When Building a Small Business in Texas

Texas is known for its staunch support of its business community, especially small businesses.

For example, the state’s low business licensing fees are one of the state’s most lucrative features.

It also has plenty of relatively cheap real estate and is known for its lack of exasperating red tape.

Can You Run a Small Business in Texas by Yourself?

Yes, you can launch a small business in Texas on your own.

You just need to know what to pay and which forms to file.

Financing Options

Texas offers multiple different bank financing options available to small business owners.

Here are a few of the items that lenders may ask for when applying for a loan:

• Legal papers showing who owns the business
• The resumes and financial statements of business owners, officers, and managers
• A business plan
• Tax returns for the past three years
• List of the loan’s proposed uses

Filing and Submitting Forms

Forms are a necessity for any business, big or small.

It’s also important to know the cost of each form and file. This way, you can set your budget accordingly.

Choosing a Registered Agent

A registered agent is a person or entity responsible for receiving legal documents on behalf of the business.

In Texas, any business that files formation papers is required to have a registered agent.

This agent can be you or you can hire someone reliable and trustworthy.

Inspiration: Small Business in Texas Ideas

Are you excited about starting a business, but still aren’t sure which idea is right for you? Below you’ll find four of the most profitable business ideas you can start in Texas.

• Digital marketing agency: Provide digital services to other companies in the area to help promote their services or products online. You can also build and maintain their business websites.
• Fitness center: Opening a fitness center is a great solution to the widespread obesity problem facing many Texans. Plus, it doesn’t need a lot of capital to get started.
• Food truck business: If you enjoy cooking, this idea allows you to sell your food items in the busy commercial and metropolitan areas of any Texan city you choose. It’s more convenient and easy to maintain than a brick-and-mortar restaurant.
• Cleaning business: People are always on the lookout for reliable cleaning services in Texas that offer carpet, window, and general home cleaning. It also doesn’t require much capital; just skill and some cleaning supplies.

Frequently Asked Questions

Similar Businesses to Consider Starting

Here are a couple of states, including Texas, where you can find lucrative opportunities for starting your small business.

• How to Start a Business in Florida: The Sunshine State is renowned for its low corporate tax and no personal income tax. Yet, there are those hurricanes to think about.
• How to Start a Business in Texas: The US Census Bureau documented a 49% increase in new business applications, thanks to the state’s booming economy, low cost of living, and strong infrastructure.
• How to Start a Business in California: There are plenty of reasons why you should open a business in the Golden State, like its year-round sunny weather, friendly vibes, and high cost of living.

Wrapping Up

Learning how to start a small business in Texas is easy once you know what to do.

The Lone Star State tries to make launching a business fun and exciting with plenty of room to grow.

After all, this is one of the fastest-growing states in terms of population and economy.

It’s no wonder entrepreneurs are flocking to this southern state to make good on its promise.

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