Starting a business in Texas: entity, EIN, franchise tax and sales tax

This guide lists the steps to start a business in Texas, in the order most owners do them. It points to the official pages for forms and current rules. It is general information, not legal or tax advice. An attorney handles legal documents. A CPA handles the tax and accounting side.

What are the steps to start a business in Texas?

Most owners follow the same order: choose a structure, file with the state, get an EIN, register for state taxes, check local rules, and set up books. Some steps do not apply to every business. A sole proprietor, for example, does not file formation papers with the state.

How do I choose an entity: sole proprietor, LLC or corporation?

Choose the structure that fits your risk, your taxes and your plans for funding. The SBA says the structure affects how much you pay in taxes, your ability to raise money, the paperwork you need to file, and your personal liability. Choose before you register with the state.

A sole proprietorship is the simplest. The SBA says it is easy to form and that you are automatically a sole proprietor if you do business activities and do not register as another kind of business. It does not separate your business assets and debts from your personal ones.

A limited liability company (LLC) is a separate entity formed under state law. An LLC can also elect to be taxed as an S corporation. That election is a tax choice, not a different kind of entity. Read S corp, LLC or sole proprietor in Texas for the tax comparison.

Ask an attorney about liability and the legal documents. Ask a CPA how each choice changes your taxes this year and in future years.

How do I file with the Texas Secretary of State?

File the form that matches your entity type. The Texas Secretary of State posts business organization forms. For an LLC, the form is the Certificate of Formation for a Limited Liability Company, listed as Form 205. The same page lists other forms for corporations, professional entities and partnerships.

Follow these steps.

1. Confirm your entity type with your attorney and CPA.
2. Pick the exact legal name you want and check that it is available on the Secretary of State’s system.
3. Complete the form that matches your entity type. Read its instructions.
4. File it and pay the filing fee shown on the form.
5. Keep the filed copy with your permanent business records.

Some professional services need a professional entity and licensing, so confirm your profession’s rules before you file.

How do I get an EIN?

Apply for an employer identification number (EIN) directly with the IRS, online, for free. The IRS says the online tool issues your EIN immediately if the application is approved. It also says you never have to pay a fee for an EIN and warns about websites that charge for one.

The IRS says you need your business entity type and the Social Security number or taxpayer ID number of the responsible party. Complete the application in one session, because it expires after 15 minutes of inactivity. Print your EIN confirmation letter for your records.

See the glossary entry for the employer identification number (EIN). You will use it for your bank account, payroll and tax returns.

What if I use a name other than my legal name?

Check whether you must file an assumed name record. A business name that differs from the legal name of the owner or entity may need a filing. Ask the county clerk in the county where you do business what that county requires, and ask your attorney which filings apply.

Banks also ask for proof of the name when you open an account. Keep your formation documents and any assumed name paperwork together.

Which Texas Comptroller accounts do I need?

Register with the Comptroller for the taxes that apply to your business. The two most common are sales tax and franchise tax. Each has its own rules and due dates. Confirm both on the Comptroller site, because amounts and dates change by year.

Sales tax. The Comptroller says to complete its permit application if you are engaged in business in Texas and sell or lease taxable items or sell taxable services. Texas imposes a 6.25 percent state sales and use tax on most retail sales of goods and taxable services. Local units can add up to 2 percent for a maximum combined rate of 8.25 percent. See sales and use tax.

Franchise tax. The Texas franchise tax is a privilege tax on entities formed or doing business in Texas. The Comptroller says the annual report is due May 15. For report years 2026 and 2027, the no tax due threshold is $2,650,000. An entity at or below the threshold may owe no tax but still files a report. Read the Texas franchise tax guide and Texas business taxes.

What about city and county rules?

Check your city’s rules for business use of the space. Many cities require a certificate of occupancy for a new tenant, a change of use or a new owner. Some cities also have their own sign, health or alcohol rules.

For a local view, read opening a business in Southlake: the steps. Other cities set their own rules, so check your city’s website or call city staff.

What if I plan to hire employees?

Plan for payroll before the first paycheck. Employers withhold and deposit payroll taxes, file payroll returns and keep employment tax records. The IRS says to keep employment tax records for at least 4 years after the tax is due or paid, whichever is later.

Ask your CPA which federal and state registrations apply and when. Read about payroll tax and see payroll services. Many owners use a payroll provider so deposits and returns are on time.

When should I start my books?

Start on day one. The IRS says to open a business checking account early and to keep it separate from your personal account. Record every sale and expense from the first day, and save receipts. Late start-up records are hard to rebuild.

Bookkeeping is easier with a routine. Read small business bookkeeping setup and a monthly routine. A CPA can help you choose software and set up your accounts.

What mistakes do new owners make?

Most start-up problems come from skipped steps or mixed records. These are the common ones to avoid.

• Forming the entity before you decide how it will be taxed. Talk to a CPA first.
• Using personal accounts for business spending. The IRS advises a separate business account.
• Waiting to register for sales tax until after the first sale.
• Forgetting that a franchise tax report is still due when no tax is owed.
• Paying a website that charges for an EIN. The IRS says you never have to pay a fee for one.
• Hiring a first employee without a payroll plan.

A short call with a CPA and an attorney before you file can avoid rework. The order of the steps matters more than speed.

Next step

Make a short list of your entity choice, your name, your owners and your first year’s plan. Take it to a CPA and an attorney before you file. For help on the tax and accounting side, see new business formation, call (877) 682-1171 or use the form at /contact.

This guide is general information, not advice for your situation. Talk to a CPA about your own situation before you act.