How to Register a Business in Texas

by Jennifer Kiesewetter in
time lapse photography of cars on road during night time

TLDR

  • Texas is home to 2.6 million small businesses, making up 99.8 percent of all companies in the state, with 1.1 million being minority-owned. 
  • Before you register your startup in Texas, you must first determine its legal entity structure.
  • In addition to choosing your startup’s structure, you'll also have to choose a name and a registered agent. When picking a name for an LLC, corporation, or limited partnership, you’ll need to distinguish it from any other business names already registered with the state of Texas.
  • After you complete the above steps, it's time to submit your formation forms to the Texas Secretary of State. For new or converting entities, the State of Texas provides sample forms for your use or review. You can use the state's official forms, or you may use your own document, as long as it meets all the rules specified by law.
  • Depending upon your chosen entity for your startup, you will have to pay your initial filing fee payment, any additional annual filings, and any taxes.
  • If you founded a startup in a state other than Texas, but you’d like to conduct business in Texas, you’ll have to register your business as a foreign entity.

Introduction

Everything’s bigger in Texas. When it comes to starting businesses in the Lone Star State, that saying holds water. Texas comes in at number three to have the most Fortune 500 companies headquartered within its borders, following New York and California. Some of these top companies include Houston-based Sysco, Irving-based ExxonMobil, and Dallas-based AT&T.

Further, Texas is home to 2.6 million small businesses, making up 99.8 percent of all businesses in the state, with 1.1 million being minority-owned. Additionally, these small businesses employ 4.6 million people. And, for the past several years, Austin has adorned the top of the list for one of the best cities for “technology, startups, and innovation,” offering a “better work-life balance and a fast-emerging creative scene.”

As you’re launching your startup and you’re exploring where to locate it, this article will explore registering your business in Texas.

When Do You Need to Register a Business in Texas?

When you register a business in Texas, you'll need to satisfy several requirements that will allow you to establish your startup legally and compliantly. Before registering, though, it’s a good idea to map out your business, including your location, your ideal customer, and your marketing and sales approach, to name a few topics. You can do this by drafting a business plan.   

To help guide you in drafting your business plan, you can check in with the U.S. Small Business Administration or SCORE, which focuses specifically on small businesses and startups. The State of Texas also supplies numerous guides and resources for founders.

Once you’ve identified some of the basics about your business’s operation, it is then time to register your startup. Below, we've broken the Texas requirements down into an easy step-by-step process.

Determine Your Business’s Entity Structure

Before you register your startup in Florida, you must first determine its legal entity structure. When deciding upon your start-up’s structure, it’s a good idea to discuss your options with your accountant or attorney, as they can advise you in detail about the ownership, management, and tax benefits and drawbacks of each structure.

Further, your chosen business entity determines the next steps in registering your startup. For example, in Texas, you can choose to register as a corporation, a limited liability company (LLC), a limited liability partnership (LLP), a limited partnership (LP), a general partnership (GP), or a sole proprietorship. To learn more about Texas’ permissible entity types, you can visit the Texas Secretary of State, which gives you additional information on the above entity types as well as the registration rules applying to each.

For example, in Texas, a sole proprietorship is “the most common and the simplest form of business.” Essentially, this type of business entity is when “a single individual engages in a business activity without necessity of formal organization,” meaning that you do not have to register a sole proprietorship in Texas. However, suppose you conduct your business under an assumed name, meaning that you choose a name for your business other than your own. In that case, you must file an “assumed name certificate” with the county clerk in the county where your startup will operate. When you file your certificate, you’ll also pay a $25 filing fee.

On the other hand, if you choose to register your startup as a corporation, limited liability company, or partnership, you must follow specific steps. For example, you may choose a limited liability company as your startup’s structure. An LLC “is not a partnership or a corporation but rather is a distinct type of entity that has the powers of both a corporation and a partnership.”

If you structure your startup as an LLC, you’ll need to file a Certificate of Formation (Form 205) with the Texas Secretary of State. You can file this form online through SOSDirect or through U.S. mail.

Choose Your Business’s Name

In addition to choosing your startup’s structure, you'll also have to choose a name. When picking a name for an LLC, corporation, or limited partnership, you’ll need to distinguish it from any other business names already registered with the state. Additionally, you’ll need to follow Texas’ rules on naming a business, such as using proper designations such as “LLC” or “Limited Liability Company,” as applicable, in your startup’s name. You can check for available names by visiting Texas’ business entity name database.  

Suppose you’re not ready to register your business in Texas, but you want to preserve your startup's name. In that case, you may reserve your startup's name for up to one hundred twenty (120) days after filing a name reservation form with the Secretary of State’s office. The filing fee is $40, and your reserved name may be used for your startup, whether you choose an LLC, a corporation, or a partnership structure. Note that a name reservation does not permit you to conduct business in Texas; it simply preserves your startup’s name for future use.

Identify Your Registered Agent

After you choose your startup’s name, you need to identify a registered agent. The Texas Business Organization Code (BOC) requires that every company doing business in Texas must maintain a registered agent with an office in Texas.  A registered agent is a person or entity that can accept public service of any court documents on behalf of your startup.

Further, a “registered office” is “the business office address of the registered agent and maybe the same as the entity’s place of business. It cannot, however, be a post office box that is part of a commercial mail or message service unless that commercial enterprise is the registered agent.”

In Texas, unlike in other states, the registered agent must consent to your designation. To demonstrate this consent, you’ll need to make sure the Acceptance of Appointment and Consent to Serve as Registered Agent has been filed with the Secretary of State’s office.

Submit Your Formation Forms

Finally, after you complete the above steps, it's time to submit your formation forms to the Texas Secretary of State. For new or converting entities, the State of Texas provides sample forms for your use or review. You can use the state's official forms, or you may use your own document, as long as it meets all the rules specified by law.

Let's look at a specific example. If you choose to register your startup as a for-profit corporation, you will file a Certificate of Formation with the Texas Secretary of State to create your startup. Only one organizer is required to file the certificate. In addition to your formation forms, you’ll also want to check to see if any additional forms are needed at the city, county, or state level, such as an application for a business license.

How Much Does It Cost to Register a Business in Texas?

Depending on the chosen entity for your startup, you will have your initial filing fee payment, any additional annual filings, and any taxes due. For example, you must pay a $300 filing fee for registering a corporation or an LLC. You can check the Texas Secretary of State’s website for more information on filing fees.

Additionally, in Texas, most business entities must file an annual report, accompanied by another filing fee. For example, limited liability partnerships, limited partnerships, and non-profit corporations must file an annual report with the Secretary of State. Partnerships must pay $200 per partner annually.

For corporations, LLCs, and limited partnerships subject to Texas franchise taxes, those entities don’t have to file an annual report; they must file an annual franchise tax return Texas Comptroller of Public Accounts.  Most Texas entities must file annual franchise taxes, which are due annually on May 15; however, sole proprietorships and general partnerships are excluded. To understand how much you’ll owe, you should consult with a qualified accountant familiar with Texas’ tax laws.

How to Register a Business in Texas that Started in Another State?

If you founded a startup in a state other than Texas, but you’d like to conduct business in Texas, you’ll have to register your business as a foreign entity. Whether a business is a domestic or foreign entity depends upon where the startup was formed and which state governs its management and operation. For example, a startup that is registered in Texas is a “domestic” startup. A startup that is registered in Delaware, but conducts business in Texas, would be considered a “foreign” startup.

if your startup is a corporation and you wish to register it as a foreign entity in Texas then you’d file an Application for Registration of a Foreign For-Profit Corporation with a filing fee of $750. If your startup is an LLC, then you’d file an Application for Registration of a Foreign Limited Liability Company, also with a filing fee of $750. In addition to applying for registration, a foreign entity must also file an assumed (or fictitious) name application.

If you fail to register your foreign startup before conducting business in Texas, the state will penalize you. For example, penalties can include receiving an injunction from transacting business in the state, civil monetary penalties, and late fees. For example, a for-profit corporation “that has been transacting business in Texas since June 1, 2007, would owe $3,000 in late filing fees if registering on December 1, 2010. The total fees due with the application for registration would therefore be $3,750.”

Benefits of Registering a Business in Texas

Registering a company in Texas offers the following benefits:

Limitations of Registering a Business in Texas

There aren’t that many limitations associated with registering your startup in Texas. However, here are a couple to keep in mind:

  • Texas has a tight labor market, making it challenging to find needed talent.
  • It’s more costly to register a business in Texas than in other states.

We can help!

At AbstractOps, we help early-stage founders streamline and automate regulatory and legal ops, HR, and finance so you can focus on what matters most — your business.

If you're looking for help registering your Texas startup, we can get your documentation ready, overall shepherding this process to ensure it's done right. Sign up for early access to get started.

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