Managing Attorney
Starting and growing a small business in Texas is exciting—but it also comes with legal obligations. From licenses to taxes to employment laws, small business owners must comply with a range of federal, state, and local regulations. Failure to do so can result in fines, penalties, or even business closure.
At Capstone Legal Strategies, PLLC, we help Houston entrepreneurs navigate the regulatory landscape so they can focus on building their businesses. Here’s an overview of the key regulations that apply to small businesses and how to stay compliant.
Business Formation and Entity Regulations
Your first legal obligation is choosing and registering your business entity. In Texas, this could be:
- Sole proprietorship
- Limited liability company (LLC)
- Corporation (S or C Corp)
- Limited Partnership
- General Partnership
Forming a legal entity with the Texas Secretary of State helps protect personal assets and ensures your business has legal standing. You’ll also need to register for a Federal Employer Identification Number (EIN) through the IRS for tax purposes.
Licensing and Permits
Licensing requirements depend on your industry, location, and business activities. In Texas, there is no general “business license,” but many businesses require specialized permits, including:
- Sales tax permit from the Texas Comptroller (required if you sell taxable goods or services)
- Health permits for food service establishments
- Professional licenses for fields like accounting, law, real estate, or cosmetology
- Local business permits from your city or county (e.g., Houston’s commercial occupancy permit)
Some industries—such as construction, daycare, or medical practices—may require state agency oversight.
Pro Tip: Always check with your city or county clerk’s office to confirm local requirements.
Zoning and Land Use Laws
Before opening your business location, make sure the property complies with zoning ordinances. These local laws govern:
- What type of business can operate in a given area
- Parking and signage restrictions
- Environmental impact limitations
Zoning violations can lead to fines or forced relocation, so it’s important to confirm compliance before signing a lease or buying property.
Tax Obligations
Small businesses in Texas must meet several tax-related requirements:
- Federal Taxes: Including income tax, self-employment tax, and payroll taxes (if you have employees)
- State Taxes: Texas doesn’t have a state income tax, but you may owe:
- Franchise tax (for entities like LLCs and corporations with annual revenue over a certain threshold)
- Sales and use tax if your business sells taxable goods/services
- Local Taxes: Depending on your city or county, you may owe local sales tax or property taxes on business assets
Staying current with tax filings and maintaining accurate financial records is crucial to avoiding penalties and audits.
Employment and Labor Laws
If you hire employees or independent contractors, you must comply with a wide range of employment laws, including:
- Wage and hour laws (including federal minimum wage and overtime rules under the Fair Labor Standards Act)
- Workers’ compensation requirements
- Anti-discrimination laws (Title VII, ADA, ADEA, etc.)
- Occupational Safety and Health Act (OSHA) standards
- Texas Payday Law regarding timely payment of wages
You must also:
- Report new hires to the Texas Attorney General’s office
- Display required labor law posters
- Keep accurate payroll records
Hiring practices, employee classification, and workplace policies should be reviewed by a business attorney to avoid liability.
Privacy and Data Security Laws
Businesses that collect, store, or process personal information may be subject to data privacy laws, even if they don’t operate online. Depending on your industry and location, you may need to:
- Protect customer and employee data
- Notify affected parties in the event of a breach
- Comply with federal laws like HIPAA (healthcare) or GLBA (financial services)
Small e-commerce businesses must also consider laws governing online sales, such as digital sales tax collection and website privacy policies.
Advertising and Marketing Regulations
Small businesses must comply with truth-in-advertising laws enforced by the Federal Trade Commission (FTC) and the Texas Attorney General’s office. This includes:
- Honest pricing and product descriptions
- Proper use of endorsements and testimonials
- Disclosures for online ads and email marketing under the CAN-SPAM Act
Violations can lead to fines or civil lawsuits, so always review advertising strategies for legal compliance.
Get Strategic Support for Regulatory Compliance
Staying on top of small business regulations in Texas isn’t easy—but you don’t have to do it alone. At Capstone Legal Strategies, we help Houston-area businesses choose the right business entity, operate in compliance with licensing and zoning laws, and create risk management strategies.
Whether you’re just starting or scaling up, proactive legal guidance can save your business time, money, and stress. Contact Capstone Legal Strategies today to schedule a consultation and keep your small business in compliance.