How To Start a Business in Texas in 2026

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Texas is calling entrepreneurs—and for good reason. Starting a business in Texas offers a large market and a favorable tax environment. 

“Texas doesn’t collect personal or business income taxes, and that’s one of the big advantages here for businesses,” says Steve Lawrence, associate dean of the University of Houston’s Bauer College of Business and executive director of the University of Houston Texas Gulf Coast Small Business Development Center Network.

The state is home to 3.5 million small businesses, which account for 99.8% of all Texas businesses. Its economy is valued at an estimated $2.9 trillion, making Texas the world’s eighth-largest economy, ahead of countries such as Canada, Russia, and Italy.

This guide explains how to start a business in Texas, step by step. It covers registering your business, meeting tax and licensing requirements, setting up your finances, and preparing to launch.

12 steps to start a business in Texas

Use this quick-start checklist to launch your Texas business:

1. Develop a viable business idea.
2. Choose and verify an available business name in Texas.
3. Write a business plan with goals and financial projections.
4. Select the legal structure that fits your business.
5. Appoint a registered agent and file with the Texas Secretary of State.
6. Apply for an employer identification number through the IRS.
7. Register for applicable taxes with the Texas Comptroller.
8. Obtain the licenses and permits your business requires.
9. Choose business insurance that matches your operational risks.
10. Set up business banking, bookkeeping, and payment systems.
11. Secure funding to cover launch and operating costs.
12. Create a marketing plan to attract your first customers.

The sections below explain how to complete each step.

1. Develop a business idea

Start by testing whether your business idea solves a real customer need and can generate a profit. Evaluate it against these criteria:

• A clear product or service
• An ideal customer profile
• A workable pricing strategy
• Sustainable production costs
• A customer acquisition plan

Factor location into your pricing and operations, and if you sell taxable products or services, factor sales tax into your pricing. Texas charges a 6.25% state sales tax, but local jurisdictions like Houston or Austin can raise the combined rate to 8.25%.

2. Name your business

Choose a name that is clear, available, and consistent with Texas naming rules:

• Generate and compare possible names.
• Search Texas business records online for existing businesses.
• Check the United States Patent and Trademark Office (USPTO) trademark database.
• Confirm that a matching domain is available.
• Search online to identify businesses using similar names.

Texas business entities must use the required designator for their structure, such as “Corporation,” “Company,” or “Limited,” or an accepted abbreviation. The name must be distinguishable from other entity names on file with the Texas Secretary of State. Certain words, including “bank,” “trust,” “veteran,” and “college,” may require additional approval.

You can reserve an available name through SOSDirect for 120 days. The filing fee is $40.

A business can also operate under an assumed name, commonly called a DBA (“doing business as”). Texas assumed name certificates expire after a maximum term of 10 years and must specify an expiration date. 

Sole proprietorships, general partnerships, and certain other businesses file assumed name certificates with the appropriate county clerk instead. Check the county clerk’s office for its filing requirements and fees. The Texas Secretary of State fee schedule covers filings submitted to the state.

3. Create a business plan

Texas does not require a business plan, but lenders and investors may ask for one. Create a plan that explains how the business will operate, attract customers, and generate revenue.

Cover these areas:

• Company description
• Market analysis
• Management structure
• Products or services
• Target customers
• Marketing strategy
• Operations plan
• Financial projections

Steve recommends building a long-term road map rather than focusing only on launch. 

“Write a business plan that includes the total business framework, marketing, operations, and the finances,” he says. “Lay it out in two segments: years one to two, and years three to five. Do not use family or friends for review, because they’re not going to give you an unvarnished, honest opinion.”

Devise an operating plan that reflects how and where you will sell. For example:

• Online-only. Plan for ecommerce software, order fulfillment, shipping, and returns.
• Home-based. Account for local zoning rules, storage space, and customer access.
• Retail. Budget for rent, store equipment, staffing, and in-person payments.
• Mobile. Plan your service area, transportation costs, and mobile payment setup.
• Pop-up. Account for short-term space, temporary permits, and portable equipment.
• Mixed channels. Decide how you will manage inventory and orders across online and in-person sales.

If you sell through multiple channels, a unified commerce solution supports your operations. Shopify POS connects in-person sales with your online store. It can help businesses manage payments, orders, and inventory across physical and digital channels.

Use a business plan template and review relevant business plan examples before finalizing your document.

4. Choose a business structure

The right structure depends on liability, taxes, ownership, funding, and administrative requirements. TheTexas Secretary of State recommends consulting an attorney and accountant when comparing these factors.

Common Texas business structures include:

• Sole proprietorship. Owned by one person and not legally separate from its owner. Texas does not require a certificate of formation for this structure.
• Limited liability company (LLC). A separate legal entity whose owners, called members, generally have liability limited to their investment. 
• Corporation. A separate legal entity owned by shareholders and generally managed by directors.

The IRS determines how an LLC is treated for federal tax purposes. A single-member LLC is generally treated as part of its owner’s tax return, and a multimember LLC is generally treated as a partnership unless it elects corporate tax treatment.

The Texas Comptroller states that corporations and LLCs are taxable entities under the franchise tax. Sole proprietorships are generally excluded unless the small business is organized as a single-member LLC.

Review each option with a qualified attorney or tax adviser before filing. They can assess how the structure affects your liability, ownership, funding plans, and taxes.

5. Get an EIN

An employer identification number (EIN) is a federal tax ID used to identify a business. The IRS requires an EIN when a business:

• Hires employees
• Operates as a partnership or corporation
• Pays employment or excise taxes
• Withholds certain taxes for a nonresident alien
• Administers certain trusts, estates, or retirement plans

A sole proprietor without employees may not need an EIN for federal tax purposes. However, they can request one for banking or state tax purposes.

After forming your business with the Texas Secretary of State (if applicable), apply for an EIN. You can: 

• Apply online through the IRS at no cost
• Submit Form SS-4 by fax or mail if you cannot apply online
• Provide the responsible party’s Social Security number or individual taxpayer identification number

Telephone applications are limited to businesses with a principal place of business outside the United States.

6. Get a registered agent and register your business

Texas requires each filing entity to maintain a registered agent and registered office in the state. The agent receives legal notices and service of process on behalf of the business.

A registered agent may be:

• An individual who resides in Texas
• An organization authorized to do business in Texas
• An owner, officer, or employee who meets the requirements

The business entity cannot serve as its own registered agent. The agent must consent to the appointment, and the registered office must be a physical Texas street address where legal documents can be delivered during normal business hours. Review the Texas Secretary of State’s registered agent FAQs for additional requirements.

To form an LLC, corporation, or nonprofit corporation, file the appropriate certificate of formation with the Texas Secretary of State. The exact information depends on the structure, but formation documents generally request:

• The business name and entity type
• The registered agent and office
• The business’s governing authority
• The initial mailing address
• The organizer’s name and address

You can file electronically through SOSDirect or download the appropriate document from the Texas business and nonprofit forms page.

The certificate of formation costs $300 for an LLC, for-profit corporation, or professional corporation, and $25 for a nonprofit corporation.

7. Pay state taxes

Texas does not impose a corporate income tax. However, businesses may still owe franchise tax or must collect sales and use tax. Getting an EIN doesn’t automatically register your business for these state tax obligations; you’ll also need to register with the Texas Comptroller, if applicable.

Franchise tax

Texas imposes a franchise tax on taxable entities formed or doing business in the state. For reports due in 2026 and 2027, the No Tax Due Threshold is $2.65 million in annualized total revenue. Entities at or below the threshold don’t owe franchise tax or file a No Tax Due Report, but they may still have to submit a Public Information Report or Ownership Information Report.

Sales and use tax

Businesses that sell taxable products or services must obtain a Texas sales and use tax permit before collecting tax. The state rate is 6.25%, while local taxing authorities may add up to 2%, creating a maximum combined rate of 8.25%.

Remote seller tax

An out-of-state seller must obtain a Texas permit and collect Texas use tax when they reach $500,000 in Texas revenue during the preceding 12 calendar months. The Texas Comptroller’s local tax guide explains how remote sellers determine the local rate for orders delivered within the state.

Regardless of the taxes that apply, businesses are legally responsible for registering when required, collecting the correct tax, filing returns, and remitting taxes on time. Confirm your obligations with the Texas Comptroller or a qualified tax professional.

Once you’ve registered for sales tax, you can configure Shopify Tax to calculate tax on eligible Shopify orders. Shopify tax reports organize sales and tax data for filing. Your business remains responsible for the accuracy of its returns and making timely payments unless it enrolls in an eligible automated filing service.

8. Obtain business licenses and permits

Texas doesn’t require a general business license, but you’ll need specific licenses and permits depending on your industry and location. For example, selling alcohol requires a license from the Texas Alcoholic Beverage Commission. Many professional occupations, including contractors, health care providers, and cosmetologists, also require state-issued occupational licenses before offering services.

Local requirements vary by city and county, especially in cities like Houston, Austin, and Dallas. They may regulate business types, signage, parking, occupancy, and building usage.

Before you set up shop:

• Check zoning permits with your county clerk before leasing or buying property
• Look into home-based business permits if you’ll operate from your residence (some activities like manufacturing aren’t allowed in residential areas)
• Find industry-specific requirements in the Texas Business Licenses & Permits Guide, or visit the Texas Economic Development & Tourism’s Business Permit Office. 

9. Examine business insurance options

Review your insurance needs based on your operations, employees, property, and industry requirements. The Texas Department of Insurance provides guidance for business owners on the following options:

• General liability. Covers claims involving bodily injury, property damage, or advertising injury.
• Professional liability. Covers claims tied to errors or omissions in professional services. Some Texas professions require this coverage for licensing, such as plumbers, HVAC contractors, and real estate inspectors.
• Workers’ compensation. Covers medical care and lost income after a work-related injury or illness.

Most private Texas employers can choose whether to carry workers’ compensation insurance. However, employers working on government contracts must provide coverage for employees assigned to those projects. Employers without coverage must notify employees and file the required notices with the Texas Division of Workers’ Compensation.

Businesses that use vehicles must also meet Texas financial responsibility requirements. The state’s minimum auto liability limits are $30,000 per injured person, $60,000 per accident, and $25,000 for property damage. Businesses that use vehicles for work may need a commercial auto policy because personal policies often exclude business use.

10. Open a business bank account and set up your finances

After forming your business, open a dedicated business bank account. Banks may request different formation documents depending on whether you operate as a sole proprietorship, LLC, or corporation. 

Open the account before you begin accepting payments or paying expenses, and use it only for business transactions. 

Separating business and personal finances makes bookkeeping, cash flow tracking, and tax preparation easier. For LLCs and corporations, it demonstrates that the business operates independently from its owners.

Set up the following financial tools:

• Open a business checking account.
• Apply for a business credit card.
• Establish a bookkeeping process.
• Work with an accountant when needed.

Build a working relationship with your bank rather than using it only to hold funds. Lawrence recommends treating your bank as more than a place to store money.

“Just having a checking account is not a relationship,” Lawrence says. “Get to know your local branch manager and small business advisers.”

11. Secure funding

Starting a business with no money is possible, but most businesses need some startup capital to buy inventory, build an online store, lease equipment or cover operating expenses. 

“The two most significant challenges for small businesses in Texas right now are a tight labor market and accessing capital,” says Lawrence.

Your funding options include:

• Personal savings
• Business loans from a bank
• Small Business Administration (SBA) loans
• Angel investors
• Venture capital

Texas state funding opportunities include:

• Texas Enterprise Fund (TEF). Performance-based grants for job creation and investment.
• Skills Development Fund (SDF). Workforce training grants through community college partnerships.
• Texas Product Development and Small Business Incubator Fund (PDSBI). Asset-backed loans for innovative startups.
• Governor’s Small Business Assistance Program. Tax benefits and abatements for capital-intensive projects.

12. Market your business

Start with a clear value proposition that explains why customers would choose your business. “Your product or service has to be faster, bigger, or better than the others—it has to be differentiated in some way,” says Lawrence.

Customer acquisition can be difficult during the first year. In a 2025 Shopify survey,* 37% of store owners named marketing as a top Year 1 challenge, while 36% named finding customers.

Create a launch plan around three areas:

• Create your brand. Develop a logo, color palette, fonts, and brand voice you’ll use consistently across every customer touchpoint. A logo maker, slogan maker, or an app such as Fontify can help produce the required assets.
• Launch your website. Use Shopify to publish your product or service information, contact details, and sales pages without developing a site from scratch.
• Plan your promotion. Define your target customer, marketing channels, goals, and budget. Track results so you can direct spending toward the channels that generate sales.

Review marketing plan examples to see how other businesses organize these decisions.

Tips for starting a business in Texas

Starting a business in Texas isn’t just paperwork. Use local market research and risk planning to decide where to operate, how to sell, and what resources the business will require.

Here’s expert advice from Steve to help your Texas business succeed:

Know your market inside and out

Research the Texas market where you plan to operate. Compare local demand, competitors, pricing, operating costs, and location options before committing funds. 

Texas Small Business Development Center (SBDC) clients can access market research resources and business advising at no cost.

Plan for the unexpected

Identify issues that could delay your launch or increase costs:

• Permits. Confirm city and county requirements before signing a lease or beginning operations.
• Sales channels. Plan how orders, inventory, and returns will work across each channel.
• Hiring. Budget for recruiting, payroll, training, and required workplace notices.
• Insurance. Match coverage to your location, employees, vehicles, and services.
• Funding. Keep enough capital available for startup costs and early operating expenses.

Following a business startup checklist helps reduce your risk of setbacks.

Balance passion with strategy

Use customer demand and financial projections to test your assumptions. Personal interest can guide the business idea, but market evidence should guide pricing, spending, and growth decisions.

*Based on a 2025 survey of 500 Shopify merchants conducted in English across Australia, Canada, the United Kingdom, Ireland, New Zealand, and the United States. Respondents were established merchants with two or more years on the platform. Results reflect the experiences of this specific sample and may not be representative of all merchants.