How to start a small business in Texas in 2023.

1. Find the Right Business Idea

Before starting a business, you have to have a good idea that you can turn into an operating business. Develop a service or product that needs to be added to your chosen market and determine how you can fill that void. Take time to explore and research ideas for your business. At this stage, consider your interests, skills, professional experience, resources, availability, and the reasons why you want to form a business. It would be best if you also thought about the likelihood of success of your business based on the interests of your community, location, and whether your business will blossom in the area.

Here’s a list of websites that you can use to understand the market in Texas and check how your business Idea will fit in there.

Texas Economic Development Corporation: Find information on the Texas economy, key industries, and business incentives. You can also find information on the various regions of Texas and their economic strengths.

Texas Workforce Commission: Research labor market data and analysis for the state of Texas. You can find information on employment trends, wage data, and industry-specific data.

Texas Secretary of State: Find resources for starting and operating a business in Texas, including information on business entity types, registration requirements, and filing fees.

Texas Business Alliance: Find resources for small businesses in Texas, including information on funding options, networking events, and business resources.

Texas Chamber of Commerce Executives: Find information on local chambers of commerce in Texas, which can offer valuable networking opportunities and resources for businesses operating in specific regions of Texas.

2. Create a business plan

Creating the idea for your business is one of the most enjoyable parts of starting a business. To ensure your business succeeds, creating a business plan is wise. Developing a business plan and a budget will help you map out the opportunities for your business, think through financial expectations and expenses, and review what your target market looks like and how you’ll get sales. When you create a financial plan and project how profitable you expect your business to be within the first year and beyond will allow you to approach this business with dedication and clarity. This will give you a good idea of how much money you’ll need and whether you need investors or funding.

If you’re starting a business in Texas, it’s important to also consider the state-specific regulations and requirements that may impact your business plan. This can include factors such as business licenses, tax obligations, and compliance with state laws. Incorporating these considerations into your business plan can help ensure that you’re well-prepared to launch and operate your business in Texas.

3. Decide on a Legal Structure

There are multiple types of entities that you can choose from for your business. Each entity type has unique rules and potential tax or operational benefits. Some business entities must file paperwork with the state of Texas to become legal entities. Once you know which business entity you want to use, filing formation papers is simple. You can file the formation papers via the Texas Secretary of State’s portal and get a confirmation immediately, with the paperwork arriving shortly after.

The most common legal structures for a small business are:

Limited Liability Company (LLC): Registering as an LLC is common for small businesses in Texas. This entity grants you liability protection while also giving you a lot of flexibility in handling your business taxes. It is formed by filing a certificate of formation with the state.

C-Corporation: A C-corporation is the business entity of choice for public companies because of its ability to divide up the business’s stock into multiple share types. It is not typically chosen by smaller businesses looking to get started unless the owners are raising a significant amount of capital. It is formed by filing a certificate of formation.

Sole Proprietorship: A sole proprietorship is a business owned by one person. All of the liability and finances fall to the individual. No formation papers are to be filed with the state to form this business.

S-Corporation: When most people talk about a corporation, they likely refer to the C-corp discussed above. There is another type of corporation, though, that provides tax benefits to the owners. This comes from subchapter “S” of the tax code and is a tax classification that avoids double taxation. An S-corp is simply a tax designation registered in the same way as a C-corp with the state.

Limited Partnership: Suppose you and one or more other people form a business together. In that case, you can form a limited partnership after filing a certificate of formation with the state if you have at least one general partner and one limited partner. The limited partners are liable only for their financial interest in the company, while the general partners are personally liable for the company’s debts.

4. Find the business name and available domain

Before registering your business with the state, you’ll need to be sure another business is not using the name. You can conduct an online search to find out if your name is available for up to $1 per search. You’ll want to pay for this to avoid slowing down your application process and have the confidence that you can legally buy your domain name or create marketing materials with your chosen name. Small businesses need an online presence; therefore, to find an available domain, you can go to Domain.com, Godaddy.com, and other widely available domain sellers.

5.. Apply for a Business EIN

An employer identification number (EIN) is your business’s tax identification number that the federal government will use to identify your business. You can apply for an EIN online through IRS.gov. The process is simple, free, and only takes a few minutes. This is required for tax purposes for certain business entities and to be able to hire employees. If you plan to run a payroll and have at least one employee on payroll, including yourself, then you need to file for an EIN. Also, having an EIN number will be easier when you open a business bank account.

6.. Choose a Registered Agent

A registered agent is a person, business, or entity responsible for receiving important legal documents on behalf of your business. Any business that files formation papers with the state must have a registered agent. You can use Legal Zoom to register your company and select them as your registered agent.

For example, if someone files a lawsuit against your business, the registered agent can receive that document. You want your registered agent to be someone who is reliable and who checks the mail. You can serve as the registered agent, or you can hire a registered agent service to handle this responsibility on your behalf.

In Texas, a business agent is typically referred to as a Registered Agent. You can find a Registered Agent for your business in Texas by searching the Texas Secretary of State’s website, which maintains a list of registered agents. Alternatively, there are many companies that specialize in providing registered agent services in Texas that you can hire to act as your business agent.

7.. Apply for Business License

Once your business is formed in Texas, you should check on what federal, state, and local business licenses you need before you can operate. There are a wide variety of licenses required for different industries and professions. Your registered agent should be able to assist you with this. You should apply for these as soon as you have a registered name because these can take time. If your business sells taxable products or services, you must contact the State comptroller and apply for a sales tax permit to collect Texas sales tax.

8.. Open a Business Bank Account

Opening a business bank account allows you to separate your personal and business finances. If you blend business and personal funds, you may unintentionally remove the liability protection your business entity created. This also can create problems if you are audited. The business needs to keep all business expenses separate from personal. The Accounting Detective can guide you through this process.

9.. Select a Business Insurance

Business insurance provides financial protection during a natural disaster or accident. You can also get insurance to protect your business from mistakes that could cost you financially. There are many different types of business insurance and companies available in the marketplace, such as general liability, commercial property, and business income insurance. Running a business is risky enough without worrying about potential penalties; therefore, getting advice about protecting your business and purchasing business insurance specific to your industry is essential.

10..Select Accounting Software

When you’re ready to start operating your business, or as you grow, you’ll likely want to streamline many of your business processes by finding the right tools to help you run your day-to-day operations.

Here are the most common software tools for small businesses:

Accounting software: This can help you with the right financial record-keeping. This is beneficial come tax time, especially if you get audited. We recommend QuickBooks Online for small businesses to our clients, and we offer Accounting Packages for small business owners to assist them with accounting and bookkeeping.

Point-of-sale (POS) software: If you’re processing transactions from customers online or face-to-face, you’ll need a point-of-sale (POS) system.

Payroll software: If you have employees, you’ll have to pay them. It’s very difficult to figure out all the tax and filing requirements on your own, and you can be fined if you make a mistake with payroll taxes. You can read more about payroll providers for small businesses.

Customer relationship management (CRM): A customer relationship management tool can help you keep track of potential customers and where they are in the sales cycle.

Conclusion

The Accounting Detective is here to help you get the information you need to run your business clearly and efficiently. A financial controller with solid financial background and experience will be your guiding star toward managing all aspects of your business by creating custom-designed accounting services specifically developed for your business needs. Don’t hesitate to contact us for a Free Consultation to discuss how we can help you efficiently run your business with a clear financial picture in mind.