If you’re reading this, chances are you’re in Texas. The Lone Star State is the nation’s second-biggest by population. It has approximately 29.7 million people and is the leading cattle, oil, and cotton producer.
Texas is also the birthplace of Dr. Pepper and home to many billion-dollar brands like Bumble, Yeti, and Whole Foods. Other than name-dropping, the state has a thriving entrepreneurial ecosystem.
According to the SBA 2020, there are 2.8 million small businesses in Texas, representing 99.8% of all companies in the state. By the end of 2019, Texas’s economy grew at an annual rate of 2.9% — faster than the national average of 2.1%.
Key Takeaways
- In Texas, there are several startup costs such as name reservation (optional) within 120 days, Certificate of Formation including amendments, business licenses, domain and websites, and attorneys fee.
- You’re not required to have a business license or general license in Texas, if you’re transacting with the state, your business’s certificate of formation and assumed name certificate from the county clerk act as your general business license.
- Starting a small business in Texas is relatively simple, you can do most of the registration online, incur relatively low filing fees, and you can access a wealth of resources to help you get started.
How Much Does It Cost to Start a Business in Texas?
You have big plans. But before you begin, you’ll need to make a bit of an investment. Today, you can start a business on a shoestring budget, but in Texas, there are several startup costs, like:
- Name reservation (optional) within 120 days: $40 for paper form or online filings and $40 for name renewal. A $25 fee (optional) will apply if you want expedited processing of documents you submit for filing
- Certificate of Formation: $300 for paper or online filings, plus an optional $25 for expedited processing
- Amendments to Certificate of Formation: $15
- Business licenses: The amount varies based on the type of business activity; for example, if your business relates to Food and Beverage, you’ll pay $200 while a tattoo studio pays a fee of $927 in licenses; check with the Business Permit Office and Texas Department of Licensing and Regulation (TDLR) to see the state-level permit and licensing requirements for your business
- Domain and website: A domain name costs between $2 to $350 per year while the cost of setting up a small business website will vary, depending on your needs and whether you outsource the web design and development process
- Attorney fees: Free consultation (30-60 minutes), after which you pay hourly rates of $150 to $350; some attorneys offer a flat rate that may range from $500 to $2,000 to set up your business
The small fees for business filings and trademarks are available on the Texas Secretary of State’s website. You can expect to spend about $500 or more to start a small business in Texas. Other costs may include:
- Rental space
- Office furniture and equipment
- Basic office supplies and technology
- Business plan costs
- Labor
- Insurance fees
- Advertising or promotion costs
What Licenses Do You Need?
You’re not required to have a business license or general license in Texas. If you’re transacting with the state, your business’s certificate of formation and assumed name certificate from the county clerk acts as your general business license.
Here are three types of must-have permits and licenses based on your industry and location:
- Sales tax permit: You’ll likely need sales tax permits or licenses from the TDLR before you can collect or remit taxes. This permit applies if you lease, rent, or sell taxable goods, provide taxable services, or acquire taxable goods/services from suppliers outside Texas that don’t have a Texas Sales and Use Tax Permit.
- Licenses and permits for specific activities: Alarm permit, occupational permit, building permit, signage permit, health permit, and zoning permit.
- Professional and occupational licenses: Skilled or educated occupations like lawyers, land surveyors, doctors, teachers, therapists, counselors, building contractors, cosmetologists, nurses, and electricians. You must meet state standards for your career to get this license.
After receiving your licenses and permits, you’ll have to renew annually or as the state and counties require. Here’s an example: If you intend to start a day activity and health services (DAHS) business, you need licenses to operate in the state.
You’ll complete a business license application online and submit other documents like a health authority letter and fire marshal inspection report. You’ll pay a fee of $75, which is valid for three years, then you’ll renew again with the Texas Health and Human Services Commission (HHSC).
What To Include in Your Business Plan?
It’s easy to get lost as a small business owner without a “compass” that guides you ― also known as a business plan. With your business plan, you can:
- Understand your market
- Get small business financing
- Strategize your business’s future
But how do you write one, and what will you include? Here’s a list of the essential components of a business plan:
- Executive summary: A concise explanation of the key points of your business
- Description of your business: Summarizes your business and answers questions like what you do, target customers, what sets you apart, business structure, location, and mission statement
- Market analysis: Details your market, target audience, and competitors (who they are, how many are in your part of the market, and what they do right/wrong)
- Organization and management: The structure of your business, such as sole proprietorship, Limited liability company (LLC), S corporation (S-corp), partnership, or C corporation (C-corp). This section also lists the leadership structure, so you’ll give names of the people running the business, their experience, strengths, and skills
- Products and services: Define the product or service you offer and its unique value proposition — what sets them apart from the competition or the rest of the market. You’ll mention what you’ll sell, product life cycle, the problem your product/service solves, and whether you intend to seek patents or copyrights
- Marketing and sales: You may have the best offering, but if no one knows about it, it won’t matter. In this section, explain what marketing strategies and channels you’ll use, how you’ll sell to customers, and your ideal profit margins
- Funding request: Define your funding needs so that lenders or investors know how much you’re asking for and how you plan to protect their money
- Financial projections: Outline the future finances you anticipate through sales
- Appendix: Include any additional attachments, such as credit histories, photos, business permits, and licenses, or prior financial statements to tie up any loose ends
Starting a Small Business in Texas Checklist
Registering a business is a multi-step process — but it’s not rocket science. Before you start, review our checklist, which outlines the steps you need to take, fees to pay, forms to submit, and anything else involved in starting out:
- Pick the right business idea
- Choose a business structure
- Decide on a business name
- Find a suitable location
- Perform market research to know your audience and competition
- Write your business plan
- Get funding for your business
- Register your business by submitting the name, choosing a Registered Agent, filing formation documents, and getting an Employer Identification Number (EIN) from the IRS
- Set up your business’s banking and credit accounts
- Obtain the relevant permits and licenses for your business, depending on the location and type of business you’ll operate
- Build your business website
Texas Small Business Resources
Starting a small business in Texas requires lots of research, smarts, and self-confidence. Here are some extra resources to help with your planning:
- Official eGovernment website for the State of Texas: Offers a single, secure structure to conduct business online
- Start a Business in Texas: Provides information such as business structure, licenses, permits, and tax responsibilities for a new business
- SCORE: Offers mentorship and other assistance in partnership with the United States Small Business Administration (SBA)
- Historically Underutilized Business Program: For permits and licenses
- Texas Trademark FAQs, S. Patent and Trademark Office, and U.S. Copyright Office of the Library of Congress: For patents, copyrights, and trademarks
- Texas State Securities Board or S. Securities and Exchange Commission: For securities issues
- Business Identity Theft: Offers information on business identity theft and what to do if you fall victim to it
There are many other resources for small businesses, so check with your nearest economic development department for further help. Starting a small business in Texas is relatively simple. You can do most of the registration online, incur relatively low filing fees, and you can access a wealth of resources to help you get started.
Bookmark this guide and come back whenever you have questions.
