Managing Attorney
Starting a business in Texas, particularly in a thriving economic hub like Houston, offers entrepreneurs significant opportunities for growth and success. However, launching a business requires careful planning, legal compliance, and strategic decision-making. At Capstone Legal Strategies, we guide Houston business owners through every step of the start-up process to ensure a strong foundation for success.
Choosing the Right Business Structure
One of the first and most crucial decisions for a new business is selecting the appropriate legal structure. In Texas, common business structures include:
- Sole Proprietorship: A simple structure with minimal paperwork, but the owner assumes personal liability for business debts.
- Partnership: A business owned by two or more individuals, either as a general partnership (GP) or a limited liability partnership (LLP).
- Limited Liability Company (LLC): Offers liability protection for owners and flexible tax treatment.
- Limited Partnership: Is made up of two classes of ownership – a general partner and limited partners. Extremely tax efficient for most situations.
- Corporation (C-Corp or S-Corp): Provides strong liability protection but requires more formal governance and tax obligations.
Choosing the right structure depends on factors like liability protection, taxation, and operational flexibility. Seeking legal counsel ensures that you select the best entity for your business goals.
Registering Your Business in Texas
Once you determine your business structure, you must register with the appropriate state and local authorities.
Business Name Registration
Your business name must be unique and comply with Texas naming rules. To check name availability, search the Texas Secretary of State’s database. If you operate under a name different from your legal entity name, you must file an Assumed Name Certificate with the county clerk in Harris County for Houston-based businesses.
Filing with the Texas Secretary of State
Businesses structured as LLCs, corporations, or LLPs must file formation documents with the Texas Secretary of State. This includes:
- Certificate of Formation for LLCs, corporations and limited partnerships
- Partnership Registration for LLPs
A filing fee applies, and processing times vary depending on the submission method (online or by mail).
Obtaining Necessary Licenses and Permits
Depending on your industry, you may need specific business licenses and permits at the state, county, or city level. Houston businesses commonly require:
- Texas Sales Tax Permit from the Texas Comptroller if selling taxable goods or services.
- Professional or Occupational Licenses for regulated industries such as healthcare, legal services, and construction.
- Local Permits and Zoning Compliance, including health permits for food service businesses and home business permits.
Failure to obtain the proper licenses can result in fines and delays, making it crucial to verify all regulatory requirements before launching operations.
Tax Requirements for Texas Start-Ups
Texas is known for its business-friendly tax environment, but compliance with state and federal tax obligations remains essential. Key tax requirements include:
- Employer Identification Number (EIN): Required for businesses hiring employees or operating as an LLC or corporation.
- Texas Franchise Tax: Applies to most businesses except sole proprietorships and certain general partnerships.
- Sales and Use Tax: Businesses selling taxable goods or services must collect and remit sales tax to the Texas Comptroller.
- Payroll Taxes: Employers must withhold federal employment taxes and report wages.
Consulting a business attorney or tax professional ensures compliance with Texas and federal tax laws.
Business Banking and Financial Setup
Separating personal and business finances is essential for legal protection and financial clarity. To establish a business bank account, most institutions require:
- EIN from the IRS
- Business formation documents
- Operating agreement (for LLCs)
Opening a dedicated business account helps streamline transactions, track expenses, and build business credit.
Employment and Labor Law Considerations
If your business hires employees, compliance with federal and Texas labor laws is crucial. Key requirements include:
- Registering with the Texas Workforce Commission (TWC) for unemployment tax purposes.
- Complying with wage and hour laws, including Texas minimum wage regulations.
- Ensuring workplace safety standards per the Occupational Safety and Health Administration (OSHA).
- Drafting employment contracts and policies to protect both the business and employees.
A well-drafted employee handbook and legal agreements can prevent disputes and support long-term business stability.
Securing Business Insurance
Protecting your business from liability and financial risks is essential. Common types of insurance for Houston businesses include:
- General Liability Insurance to cover accidents, property damage, and legal claims.
- Professional Liability Insurance for service-based businesses to protect against negligence claims.
- Workers’ Compensation Insurance, although not required in Texas, provides employee protection and can mitigate liability risks.
Insurance needs vary by industry, so consulting an insurance professional ensures adequate coverage.
Compliance and Ongoing Legal Requirements
After launching your business, maintaining compliance with Texas laws is an ongoing responsibility. Key requirements include:
- Annual franchise tax filings with the Texas Comptroller.
- Renewing necessary business licenses and permits as required.
- Updating business records with the Secretary of State if ownership or structure changes.
- Maintaining proper corporate governance for LLCs and corporations, including holding meetings and keeping minutes.
How Capstone Legal Strategies Can Help
Starting a business in Houston requires careful planning, compliance, and strategic decision-making. Capstone Legal Strategies, PLLC assists entrepreneurs with entity formation, legal documentation, regulatory compliance, and risk management to ensure a strong foundation for success.
Whether you’re launching a small business or a growing enterprise, legal guidance can make all the difference. Contact Capstone Legal Strategies today to ensure your Houston business meets all legal requirements and is positioned for long-term success.