Ready to start a business in Texas? See the exact steps, filing fees, and tax rules you need to know, from choosing your structure to staying compliant after you register.
Texas has the second-largest economy in the country, and small businesses make up 99.8% of all businesses in the state.[1]
With no personal income tax and one of the highest rates of small business growth nationwide, it's one of the most attractive states to start a company in, but getting your formation paperwork right from day one still matters for staying compliant down the road.
This guide walks you through every step of the Texas business formation process, from choosing your business structure to opening a bank account and staying compliant.
Texas Business Formation Requirements
Requirement | Details |
Business Structure | Sole proprietorship, LLC, corporation, or nonprofit |
State Filing | Certificate of Formation with the Texas Secretary of State |
LLC Filing Fee | $300 (one-time, paid to the Secretary of State) |
Corporation Filing Fee | $300 (one-time, paid to the Secretary of State) |
Registered Agent | Required for LLCs and corporations; must have a physical Texas address |
EIN | Required to open a business bank account, hire employees, and file taxes |
State Income Tax | None. Texas does not have a personal or corporate income tax. |
Franchise Tax | Most small businesses owe nothing (no-tax-due threshold: $2.65 million for 2026) |
Public Information Report due by May 15 each year | |
Processing Time | A few business days online through SOSDirect |
Step 1: Choose A Business Structure
Your business structure affects how you pay taxes, how much personal liability you carry, and how your company is managed. Texas offers four main business structures. Choosing the right one is one of the most important decisions you will make when starting a business in Texas.
Sole Proprietorship
This is the default structure if you start doing business without filing any paperwork with the state. You report business income on your personal tax return. The downside is that you have no personal liability protection. If the business takes on debt or faces a lawsuit, your personal assets are at risk.
Limited Liability Company (LLC)
An LLC gives you personal liability protection while keeping things flexible. Your personal assets, like your home and savings, are generally separate from business debts. Most LLC owners report business income on their personal tax returns. Smaller business owners choose to form an LLC in Texas because they are simpler to manage than corporations.
Corporation
Corporations provide personal liability protection and can issue stock to raise money from investors. They require a board of directors, corporate bylaws, and more formal recordkeeping. Small businesses may qualify for S corporation tax status, which avoids the double taxation that C corporations can face.
Nonprofit
If your business advances a social cause without expecting financial gain, you may qualify to form a nonprofit. Nonprofits can apply for tax-exempt status once they are properly formed.
If you're unsure which business structure fits your goals, compare the different business types or speak with a tax advisor or attorney for guidance.
Professional business formation services like Swyft Filings can also help you get set up correctly from the start.
Step 2: Choose A Business Name
Your business name is one of the first things customers will see, so it should be memorable and reflect what you do. Texas has a few rules to keep in mind when naming your business.
Your business name must be distinguishable from any other business already registered with the Texas Secretary of State. It cannot falsely imply a government connection or include restricted words like "bank" or "college" without prior approval. If you are forming an LLC, the name must include "Limited Liability Company" or "LLC."
Check whether your preferred name is available before you file any paperwork. You can do a Texas business name search on the Secretary of State's website or use Swyft Filings' free business name search tool. If you find a name you like but are not ready to file, you can reserve it with the Secretary of State for a $40 fee. The reservation lasts up to 120 days.
If you are a sole proprietor operating under a name other than your legal name, you will need to file a DBA (doing business as), also called an assumed name certificate. Most banks require a DBA to open a business bank account for sole proprietors.
Step 3: File Your Business Formation Documents
Filing formation documents with the Texas Secretary of State is what officially creates your business as a legal entity. The specific paperwork depends on your chosen structure.
- Sole proprietorship: No state filing is required. However, you may want to file a DBA if you plan to operate under a name other than your own.
- LLC: File a Certificate of Formation for a limited liability company (Form 205) with the Texas Secretary of State. The filing fee is $300.
- Corporation: File a Certificate of Formation for a for-profit corporation with the Texas Secretary of State. The filing fee is also $300.
- Nonprofit: File a Certificate of Formation for a nonprofit corporation. You will also need to create corporate bylaws.
You can file online through SOSDirect or by mail. Online filings are processed faster, typically within a few business days. If paying by credit card online, a 2.7% convenience fee applies on top of the filing fee.
You should also create an operating agreement if you are forming an LLC. Texas does not require you to file this document with the state, but it sets the rules for how your business operates, including ownership shares, voting rights, and profit distribution. Many banks want to see an operating agreement before opening a business account, and having one can help protect your limited liability status.
Step 4: Appoint A Registered Agent
Every LLC and corporation in Texas must appoint a registered agent. A registered agent is a person or company with a physical Texas address who receives legal notices and official mail on behalf of your business.
You name your registered agent directly on your Certificate of Formation when you file, so this is something to decide before you submit your paperwork in Step 5.
Texas law requires you to maintain a registered agent for as long as your business exists. Your registered agent can be:
- Yourself, if you have a physical street address in Texas (a P.O. Box does not qualify)
- Another individual, such as a business partner, who meets the same address requirement
- A professional registered agent service
Many business owners choose a professional service instead of listing themselves. Registered agent information becomes part of the public record, so using a service keeps your personal address off public filings. It also means legal documents, including lawsuits, are not delivered to you in front of customers or employees at your place of business.
Swyft Filings offers registered agent services, so your personal address does not need to appear on the public record.
Step 5: Get An Employer Identification Number (EIN)
An EIN is a tax identification number issued by the IRS. Think of it as a Social Security number for your business. You will need an EIN to open a business bank account, hire employees, and file federal taxes.
There is no fee from the IRS to apply for an EIN online, and the process takes about 10 minutes. However, it is a detailed process, and any mistakes on the application can create delays.
Step 6: Apply For Business Licenses And Permits
Texas does not require a single statewide general business license. However, depending on your industry and location, you may need one or more licenses or permits at the federal, state, or local level.[2]
For example, businesses in industries like healthcare, construction, real estate, and food service may need professional licenses from their respective state boards. Some cities, including Dallas, Houston, and Austin, require a Certificate of Occupancy for businesses operating from a physical location.
Check with your local county clerk and the Texas Department of Licensing and Regulation to find out what applies to your business.
Learn more about how Swyft Filings can research your licensing requirements at the federal, state, and local levels and submit applications on your behalf.
Step 7: Register For State Taxes
Texas has no personal or corporate income tax. However, the state does have a franchise tax and a sales and use tax.[3]
- Franchise tax: Most small businesses in Texas do not owe anything under the franchise tax. For 2026, businesses with annualized total revenue at or below $2.65 million owe no franchise tax. Even if you owe nothing, you are still required to file a Public Information Report (PIR) with the Texas Comptroller by May 15 each year.[4]
- Sales and use tax: If your business sells taxable goods or services, you need a sales and use tax permit from the Texas Comptroller. The state sales tax rate is 6.25%, and local jurisdictions may add up to 2%, bringing the total to a maximum of 8.25%.
If you plan to hire employees, you will also need to register with the Texas Workforce Commission for unemployment insurance and set up payroll tax withholding.
Step 8: Open A Business Bank Account
Keeping your business and personal finances separate is important for protecting your personal liability. If you mix the two, a court could decide that your business is not truly separate from you, which could put your personal assets at risk.
Most banks require the following to open a business bank account:
- Your EIN
- Your Certificate of Formation or DBA paperwork
- Your operating agreement (for LLCs)
- A valid photo ID
Opening a separate business account also makes tax filing easier. All your business income and expenses will be in one place, which simplifies recordkeeping and helps you track deductions.
Step 9: Stay Compliant After You Register
Forming your business is the first part. Staying compliant is an ongoing responsibility. Here is what Texas requires after registration:
- Public Information Report (PIR): Due by May 15 each year with the Texas Comptroller. This report updates the state on your business contact information. There is no filing fee for the PIR itself, but filing late can trigger a $50 penalty.
- Franchise tax report: Also due May 15. If your revenue is under $2.65 million, you owe no tax, but you still need to file the PIR.
- Registered agent: You must maintain a registered agent with a physical Texas address at all times. If you lose your registered agent, the state can take action against your business.
- Business licenses: Renew any required licenses and permits on schedule to avoid disruptions to your operations.
Missing any of these deadlines can result in penalties or even involuntary termination of your business by the state. Staying on top of your compliance keeps your business in good standing and protects the liability shield you set up.
How Much Does It Cost To Start A Business In Texas
The cost of starting a business in Texas varies based on your business structure. If you register as a sole proprietor, you may only need to pay for a DBA filing ($25 per filing with the Secretary of State, if applicable).
For an LLC or corporation, the Certificate of Formation filing fee is $300. Other costs can include a registered agent service, business licenses, and an EIN filing. The national average filing fee for forming an LLC is around $132, making Texas's $300 fee higher than most states.
Optional costs like a name reservation ($40), assumed name certificate ($25), and certified copies of formation documents ($15 plus $1 per page) can also apply. The IRS does not charge for an EIN application.
Swyft Filings offers formation packages starting at $0 + state filing fees that bundle the formation filing, registered agent service, and other key services together.
What Is The Best Business Structure In Texas
The right business structure depends on your goals, how many owners are involved, and how you want to handle taxes.
Most small business owners in Texas choose an LLC because it offers personal liability protection, flexible management, and pass-through taxation without the formal requirements of a corporation. If you are a solo entrepreneur or freelancer, a single-member LLC is often the simplest path.
If you plan to raise money from investors, a corporation may be a better fit because corporations can issue stock. Nonprofits are appropriate for organizations focused on a social or charitable mission.
Sole proprietorships are the easiest to start but carry the most personal risk because there is no separation between you and the business.
What Taxes Do Texas Businesses Have To Pay
Texas does not have a personal or corporate income tax, which is one of the biggest advantages of starting a business here.
The main state-level taxes that apply to businesses are the franchise tax and the sales and use tax. The franchise tax is revenue-based, not income-based. For 2026, businesses with annualized total revenue of $2.65 million or less owe nothing. Businesses above that threshold pay either 0.75% (most businesses) or 0.375% (retail and wholesale businesses) of their taxable margin.[5]
The state sales and use tax rate is 6.25%. Local jurisdictions can add up to 2% more. If you sell taxable goods or services, you must collect sales tax and remit it to the Texas Comptroller.[6]
At the federal level, how you are taxed depends on your business structure. Sole proprietors and LLC owners typically pay self-employment tax (15.3%) plus federal income tax on business profits. Corporations pay the federal corporate tax rate of 21%.
Can I Start A Business In Texas Online
Yes. Most of the steps involved in starting a business in Texas can be completed online.
You can file your Certificate of Formation through the Texas Secretary of State's SOSDirect portal. You can apply for an EIN on the IRS website. You can obtain a sales and use tax permit through the Texas Comptroller's Webfile system. Many city and county permits can also be applied for online.
Swyft Filings allows you to form an LLC, corporation, nonprofit, or DBA entirely online. The process takes just a few minutes, and we handle the paperwork and filing on your behalf.
Take Your First Steps Toward Starting A Business In Texas
Texas is one of the most business-friendly states in the country. With no personal income tax, a high franchise tax threshold that means most small businesses owe nothing, and a strong state economy, it is an excellent place to start and grow a business.
The business formation process involves several steps, from choosing a structure and filing paperwork to getting your EIN and staying compliant. Working through each step in order helps you avoid delays and costly mistakes.
Swyft Filings has helped over 600,000 businesses with formation and compliance. We handle the paperwork so you can focus on building your business. Form your LLC, corporation, or nonprofit in just a few minutes and start operating in Texas with confidence.
Bibliography
[1] U.S. Small Business Administration Office of Advocacy. 2025 Small Business Profile. Accessed on July 16, 2026.
[2] State of Texas. Texas Business Licenses & Permits. Accessed on July 16, 2026.
[3] Tax Foundation. Taxes in Texas. Accessed on July 16, 2026.
[4] Texas Comptroller. Texas Franchise Tax Report Forms for 2026. Accessed on July 16, 2026.
[5] Texas Comptroller. Franchise Tax. Accessed on July 16, 2026.
[6] Texas Comptroller. Sales and Use Tax. Accessed on July 16, 2026.
FAQs
The filing fee for an LLC or corporation in Texas is $300, paid to the Secretary of State when you submit your Certificate of Formation. The national average for LLC filing fees is around $132. Other costs may include a registered agent service, business licenses, and an EIN filing. Sole proprietors who need a DBA pay $25 per filing.
Online filings through SOSDirect are typically processed within a few business days. The timeline varies depending on the Secretary of State's current workload. The overall process, from choosing your business structure to opening a bank account, can take anywhere from one to several weeks depending on how quickly you complete each step.
Any LLC with employees or more than one member must have an EIN. Even single-member LLCs typically need one to open a business bank account. Without an EIN, you would need to use your personal Social Security number for business activities, which most business owners prefer to avoid.
Texas does not require a general statewide business license. However, you may need industry-specific licenses at the state level, a sales and use tax permit from the Texas Comptroller, and local permits from your city or county. Check with the Texas Department of Licensing and Regulation and your local government for requirements that apply to your business.
After registration, you should get an EIN from the IRS, open a business bank account, apply for any required licenses and permits, register for state taxes if applicable, and set up a system for tracking your compliance deadlines. Every Texas LLC and corporation must file a Public Information Report with the Comptroller by May 15 each year.
Texas has the second-largest state economy, no personal income tax, and a franchise tax threshold of $2.65 million that exempts most small businesses. Small businesses make up 99.8% of all businesses in the state, and the state government actively supports entrepreneurs through programs like the Texas Economic Development Corporation and local Small Business Development Centers.
Yes. You do not need to be a Texas resident to form a business in Texas. However, you are required to have a registered agent with a physical address in the state. A registered agent service like Swyft Filings can serve as your Texas registered agent so you can form and operate your business from anywhere.
