Company Registration in Texas
Texas’s contribution to the world of business is unprecedented, which has led this state to win the Governer’s Cup for a record-breaking 12 times. A business-friendly environment, supportive policies, ample resources, and skilled manpower are some positives of this state, making it an ideal destination for international ventures. If you wish to set up a business in Texas, securing a company registration would be your first step. Doing so can be a tad overwhelming, especially if you are a newbie. With that in mind, let’s proceed in this guide that unravels key steps for legalizing a business in this state.
Steps for Securing Company Registration in Texas
Applying for company registration in Texas involves adhering to given steps:
Step 1: Select the structure
Knowing about these structures is vital when striving for Company Registration in Texas. Texas offers a handful of legal structures to choose from. These include:
- Sole proprietorship
- General Partnership
- Limited Partnership
- Limited Liability Company
- Corporation
Note: All these structures require the approval of the Texas Secretary of State
The sole proprietorship is a popular legal structure among small businesses. It confers complete ownership to the owner but can bring unlimited liability, which can be devastating during financial mayhem. The general partnership allows more than one individual to work collectivity while the limited partnership entails a blend of a general and a limited partner wherein the latter has a limited liability and control unlike the former.
The LLC is the improved and robust version of the partnership firm, mitigating the risk of unlimited liabilities and reinforcing transparency. The corporations are primarily share-based entities wherein exist the shareholders. These are further divided into two categories viz. S Corporation and C-Corporation.
Unlike any other structures, corporations attract stringent regulations and operational requirements, such as managing the accounting book, documenting meetings, convening board meetings, etc.
Weighing each structure against your requirement and risk to withstand compliance is paramount to making an informed decision. Connect with an expert firm like Adviso if you are in two minds.
Step 2: Business Name Selection and Registration
The business name selection and registration is a paramount step in the incorporation journey. There are three ways to attempt this step. These include:
- Registering legal entity name: Selecting a distinct company name and getting it registered with the Texas Secretary of State is compulsory. But before you do so, ensure that the selected name is genuine as per the SOS database. Also, pay close attention to naming norms concerning the use of company suffixes. The selected name must reflect the business nature.
- Securing a Trademark: Applying for a trademark is a viable way to secure a company name and keep it isolated from infringers. Before filing the trademark application with the competent authority, check whether or not the selected nature is unique via the USPTO database.
- Registering Doing business As (DBA): DBA refers to a name different from a business name, which serves as a main identifier for the company. In this arrangement, you are allowed to register a DBA from the county’s clerk office. Naming norms or trademark regulations for DBA stay unimposed at the state level.
Step 3: Know the taxes
Knowing taxes becomes critical when going for the Company Registration in Texas. Texas has yet to enact an individual income tax as well as a corporate income tax. The state imposes a state gross receipts tax amounting to 6.25%. Also, it levies a combined tax boasting local and state tax of 8.20%. Texas also imposed an effective property tax rate amounting to 1.47% on owner-occupied housing value. Refer to the table below to have a clear idea about taxes in Texas.
| Tax Type | Description | Tax Rate | Who It Applies To |
| Franchise Tax | A tax on businesses that operate in Texas. Based on revenue margins. | 0.375% for retail/wholesale; 0.75% for others | Corporations, LLCs, partnerships, and professional associations |
| Sales and Use Tax | A tax on the sale, lease, or rental of most goods and taxable services. | 6.25% (state rate) + local rates up to 2% | Businesses selling taxable goods or services |
| Property Tax | A local tax on real and tangible personal property owned by businesses. | Varies by county and district | Owners of business property, real estate |
| Employment Taxes | Federal unemployment and payroll taxes. Texas does not have a state income tax for employees. | Varies (federal rates apply) | Employers paying wages to employees |
| Excise Taxes | Taxes on specific goods like fuel, alcohol, and tobacco. | Varies depending on the product | Businesses involved in manufacturing, selling, or distributing excised goods |
| Mixed Beverage Tax | Applies to businesses selling alcoholic beverages. | 6.7% of gross receipts + 8.25% sales tax | Bars, restaurants, and venues serving alcohol |
| Motor Vehicle Tax | A tax on the sale, lease, or rental of motor vehicles. | 6.25% of vehicle sales price | Dealerships, rental companies, or anyone selling/leasing vehicles |
| Hotel Occupancy Tax | A tax on the rental of rooms in hotels, motels, and similar places of accommodation. | 6% state tax + local rates | Hotels, motels, bed & breakfasts, short-term rental owners |
Step 4: Secure mandatory permits
Company Registration in Texas is not the only certificate you need to run your business legally. Depending on which industry you serve, you will come across the following registration:
- Tax registration: If you are engaged in merchandise business, securing a sale tax permit via the competent authority viz. Comptroller of Public Account aka CPA is paramount.
- Employer Identification Number EIN: EIN is mandatory for businesses with manpower. IRS i.e. Internal Revenue Services grants EIN against the prescribed application.
- Regulatory license: Businesses belonging to sectors like healthcare, construction, energy, and production are compliance incentives and require industry-specific to stay compliant. Refer to the city or county website to learn about their applicability and eligibility criteria.
Step 5: Bank Account Opening
The process of Company Registration in Texas stays incomplete without opening a corporate bank account. EIN approval eases the process of bank account opening. Corporations, LLPs, and LLCs must open corporate bank accounts as a part of compliance. It is a good idea to profoundly probe various banking options to find the best one.
Bottomline
Starting a business is undeniably a rewarding experience. However, making it work like a legal establishment or getting it registered can be overwhelming, considering compliances. Company registration is the cornerstone of any business seeking to operate legally.
With this guide at your disposal, you can expect a piece of mind as it eases each hurdle while you strive to legalize your entity. In case you need added support, feel free to connect with Adviso- a renowned agency that specializes in global incorporation and regulations. Our professionals can help you navigate legal hurdles tied to the Company Registration in Texas easily.
Read Our Article: How to Register a Company in Virginia: A 6 Steps Guide
