How To Start A Business In Texas
Have you been to Texas and witnessed its promising economy and diversified market?
Even if you haven’t, you’ll quickly see that starting a business in Texas is a profitable investment. In addition to its country music scene and iconic sports culture, Texas contributes substantially to the United States economy. The Lone Star state is the second-largest economy in the US and the 9th largest economy in the world.
If you are ready to undertake an entrepreneurial venture, here’s a simple guide on how to start a business in Texas.
1. Do your research
Research is essential to give you the full picture before starting your business. With thorough research, you establish the viability of your ideas and determine if there is sufficient demand. Moreover, you can extract some basic information that would help you avoid irreversible decisions.
So, before you start your business in Texas, be sure to cross off these tasks:
- Study the market: For instance, if you plan to open a liquor store or a restaurant, you should research who your competitors are and analyze their marketing strategies. These are the information that would give you an edge as an entrepreneur who's new to the market.
- Scout out locations: Check out neighborhoods in your target market and determine where the most need for your service will be. Then, you can find a suitable place to base the physical location of your business.
- Research the laws: Knowing the law prevents you from facing fines, lawsuits, or even imprisonment. For instance, if you intend to open a hair salon in Mesquite, you must obtain a Cosmetology Salon License.
2. Draft your business plan
Now that you have the basic information you need, it's time to put your idea into writing. Jotting down a business plan can help you stay focused on your goals and clarify the strategies you need in realizing them.
Here are some key points to include in your plan.
Establish the nature of your company
State the goal of starting your business and outline what products or services you intend to provide. Explain how your business solves a problem in the market or provides value to consumers. You can also briefly introduce your leadership team and explain their experience.
Outline your marketing strategy
State how you will sell your product or service and what resources you will need to accomplish your goal. Explain what marketing channels you will use, what audiences you will target, and how many employees you need on the sales team.
Decide on a business structure
Determine whether you want to run your company alone or with partners and shareholders. The major structures your business can take are:
- Sole proprietorship
- Partnership
- Limited Liability Company
- Corporation
Plans on structure and organization highlight the best way your company can run smoothly and efficiently. Additionally, they determine the taxes you will pay as a business owner. For example, sole proprietors claim their business income on their personal income tax returns, but LLCs file taxes independently as a business.
Forecast financial targets
How much revenue do you plan to generate? How much debt will you have to repay? By forecasting your projected earnings, you can show investors you have a repayment plan and also help ensure you remain solvent.
3. Choose a unique company name
Sole proprietorships fall under your personal ownership, meaning you can do business under your personal name if you want. Otherwise, you must register a name for your business. Likewise, limited liability companies and corporations are separate entities from their owners. When forming these structures, you must choose a business name.
But keep in mind that businesses can’t have the same names. The State of Texas regulates names to protect businesses and prevent consumers from being confused.
After coming up with a name, you must file a Reservation of an Entity Name form to reserve the name for 120 days. The filing fee for this is $40. You can always renew this reservation if you fail to file after 120 days. Whenever you are ready to register your company name, register it with the US Patent and Trademark Office to protect it as yours.
4. Find business financing
You need sufficient capital to start your business. You can invest your savings, pay as you go, or obtain a loan from the bank. But if none of the options are feasible for you, consider obtaining capital from angel investors or venture capital firms.
Some angel investors in Texas are;
5. Register your business
Are you launching an LLC or corporation? Registration is the most crucial process for starting your business. Without filing the necessary documents with the Secretary of State, your company will not be recognized as a legal entity.
Registration for LLCs
To start, file the Certificate of Formation of an LLC after paying a filing fee of $300. You can either register online or by mailing this form. Keep in mind that LLCs need a registered agent to handle legal documents on behalf of the company. You can typically use an online service to handle this aspect.
Registration for Corporations
Just like LLCs, corporations need to appoint a registered agent. But for your corporation, you should file a Certificate of Formation for a For-Profit Corporation after paying a filing fee of $300. You can either register online or by mailing this form.
Registration for Sole proprietorships and Partnerships
Registration is unnecessary for sole proprietors and partnerships unless you are operating under a business name. In this case, you can contact your county government to obtain a Doing Business As Form.
6. Acquire the necessary legal documents
Let’s look at some legal documents you may need to operate your company in Texas.
Licenses and permits
Certain businesses and professions need licenses and permits to operate in Texas. For example, motor carriers need a driver’s license, while restaurants, bars, and beauty salon owners need a health permit. Visit the Business Permits Office to see which licenses and permits you need to operate in the Lone Star State.
Federal Employer Identification Number
Nearly all businesses need to obtain an Employer Identification Number. The EIN is crucial for your company since it will be required when opening a bank account, filing taxes, and paying employees. A sole proprietorship is one of the few entities that doesn’t need an EIN if you are the only employee.
7. Obtain business insurance
All investments come with risks, and starting a business is an incredibly risky venture. But with insurance, you can always protect your business from unforeseen losses that may occur in the future.
Some business insurance policies include:
- Professional liability insurance
- Worker’s compensation insurance
- Property insurance
- Vehicle insurance
- Product liability insurance
8. Promote your business online
E-commerce continues to have a tremendous impact on business sales. Even if you are extremely popular in your area, even more audiences can be reached online. Therefore, every business owner must use social media and other e-commerce platforms to drive sales.
First, set up a website so your company can have an online presence. Next, create social media accounts dedicated to promoting your business and interacting with customers. Lastly, create a Google My Business listing so customers can find you on Google Maps, see contact information, and leave reviews.
Don’t forget: You can always sell your products on online stores such as Amazon and eBay to boost revenue.
9. Keep track of your finances
Using the same bank account to manage personal and business affairs is a costly mistake made by small business owners. By not separating your finances, you risk comingling your funds and improperly managing your accounts.
So, open a separate business bank account with a reputable bank in Texas to manage all professional matters. Not only will this help keep track of your cash, but it will also make you more professional when it comes to writing checks and sending invoices. While you’re at it, you can obtain a business credit card so you can track expenses easily.
10. Find your ideal location
Despite the rise of e-commerce, people enjoy doing business in person. Make sure you connect with your target market by renting a commercial space to run your business. Research shows that most consumers shop within 20 minutes of their homes, so take this into account during this step.
Just as important, be sure your rent expenses stay under 20% of your projected revenue. Any higher than this, and you risk operating in the red once you factor in labor costs and other items.
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