How to Start a Small Business in Texas

Texas is one of the easiest states in the country to start a service business in: no personal state income tax, no general business license, and a fast online filing system. The parts that trip up new owners are the ones Texas-specific guides rarely spell out — the sales tax permit you need before your first sale, and the annual franchise tax report that is due even when you owe nothing. Here is the actual sequence.

Step 1: Form your entity with the Texas Secretary of State

Most service-business owners form an LLC to keep personal assets separate from business risk. You file a Certificate of Formation online at SOSDirect (sos.state.tx.us), the Secretary of State filing portal. The filing fee is $300 for an LLC or corporation.

Before you file, run the free name search on the same portal — Texas rejects names too close to an existing registered entity, and a rejected filing still costs you the fee. Online filings usually process within a few business days.

If you are starting as a sole proprietor and want to operate under a name other than your own, you file an assumed name certificate (DBA) with your county clerk instead, typically for $25 to $40.

Step 2: Get your sales tax permit before your first sale

This is the step Texas startups miss most. If you sell taxable goods or services in Texas, you must hold a sales tax permit from the Texas Comptroller before you make your first taxable sale — selling without one is a violation even if you remit the tax later. The permit is free and takes minutes online at comptroller.texas.gov.

Texas charges a 6.25% state rate, and local jurisdictions add up to 2% more, so your combined rate can reach 8.25% and varies by address. Use the Comptroller rate lookup for each delivery or job location rather than guessing — collecting the wrong combined rate is a common audit finding.

Step 3: Know which trades Texas actually licenses

Texas does not license most service businesses at the state level. The trades it does regulate are licensed through:

• TDLR (Department of Licensing and Regulation): electricians, HVAC technicians, and cosmetology
• TSBPE (Texas State Board of Plumbing Examiners): plumbers
• TREC (Real Estate Commission): real estate agents and inspectors

General handyman work, pressure washing, cleaning, lawn care, and most mobile services need no state license — though some cities require contractor registration, and food businesses need local health permits.

Step 4: The filings people forget

• Franchise tax report: every Texas entity files annually with the Comptroller, even if no tax is due. Most businesses under the no-tax-due threshold (roughly $2.5 million in revenue, adjusted yearly) owe $0, but the report is mandatory and penalties apply to late filings.
• Workers compensation: optional for most private employers in Texas, but many general contractors and commercial clients will not hire you without a certificate.
• New-hire reporting and unemployment tax: register with the Texas Workforce Commission within your first payroll cycle.

What launching in Texas typically costs

• LLC filing: $300
• Sales tax permit: free
• County DBA (sole prop): $25 to $40
• General liability insurance: commonly $50 to $150 per month for a solo service business

The 30-day version

Week 1: file the LLC and get your EIN from the IRS (free, at irs.gov). Week 2: sales tax permit, business bank account, and any trade license you need. Week 3: pricing, your first estimate template, and a one-page website. Week 4: outreach to your first ten prospects.

Our 100-step course walks through this exact sequence, with the Texas steps above as your state layer — plus the invoice, estimate, and pricing tools you will use from day one. This guide is general information, not legal or tax advice; confirm current requirements on the official Texas Comptroller and Secretary of State sites.