By Kevin Acevedo – Ace Law | Personal Injury, Criminal Defense, Civil and Commercial Litigation, Family Law, Estate Planning and Probate.
Business: How to Start a Company in Texas
Starting a company in Texas can be a great opportunity for entrepreneurs, independent professionals, and small business owners. However, before opening your doors, selling products, offering services, or signing contracts, it is important to understand the basic legal steps involved in forming and operating a business properly.
A strong structure from the beginning can help protect your interests, reduce risks, avoid problems with taxes or permits, and provide more clarity in relationships with partners, clients, vendors, and employees.
The first step: defining the type of business
Before registering a company, it is important to decide what legal structure the business will have. Some people begin as sole proprietors, while others choose to form an LLC, corporation, partnership, or another type of legal entity.
The structure you choose can affect taxes, personal liability, management, ownership, and compliance requirements. For example, an LLC may help separate the owner’s personal assets from the obligations of the business, as long as the company is managed properly.
Not every structure is right for every business. The best option depends on the type of activity, the number of owners, the risks involved, growth plans, and the tax situation.
Choosing and reviewing the company name
The company name is an important part of the business identity, but it should also be reviewed from a legal perspective. Before using a business name, it is recommended to check whether it is available and whether it creates a conflict with another existing company.
If a business operates under a name different from its legal name, it may need to file an assumed name or DBA. This often applies when a company uses a trade name that is different from the name formally registered with the state.
It is also important to consider whether the name will be used for marketing, social media, a website, contracts, invoices, and bank accounts. Having consistency from the beginning can help avoid confusion and future problems.
Registering the company with the state
If you decide to form an LLC, corporation, or another formal entity, you will generally need to file formation documents with the State of Texas. For an LLC, this document is commonly known as a Certificate of Formation.
When forming an entity, you must also designate a registered agent and a registered address in Texas. The registered agent is the person or company authorized to receive certain legal documents on behalf of the business.
This step is important because it formally creates the entity with the state. However, registering the company does not mean the business has already met every requirement needed to operate.
Obtaining an EIN and opening business accounts
After forming the company, many businesses need to obtain an Employer Identification Number, known as an EIN. This number serves as a federal tax identification number for the business and may be necessary to open a business bank account, hire employees, file taxes, or handle certain tax obligations.
Separating personal finances from business finances is an important practice. Using a business bank account, keeping clear records, and documenting income and expenses can help protect the company’s legal structure and make tax compliance easier.
Reviewing permits, licenses, and taxes
Depending on the type of business, additional permits or licenses may be required. Some businesses need local permits, professional licenses, health permits, construction permits, sales permits, or tax-related registrations.
If the business sells products or services subject to tax in Texas, it may need a sales tax permit through the Texas Comptroller’s office. There may also be responsibilities related to franchise tax, informational reports, payroll, employees, or federal taxes.
Every business is different. A restaurant, construction company, online store, professional firm, and transportation business may all have very different requirements.
Creating clear internal agreements
One of the most common mistakes when starting a company is relying only on verbal agreements. If there is more than one owner, it is important to have internal documents explaining how decisions are made, how profits and losses are divided, what happens if a partner wants to leave, how disputes are resolved, and who has authority to sign contracts.
For an LLC, a company agreement or operating agreement can be a key tool. Even if the partners have a good relationship at the beginning, problems often arise when the business grows, disagreements happen, money comes in, debts are taken on, or one person wants to change their role.
Having clear rules from the start can help prevent costly conflicts in the future.
Preparing basic contracts and documents
In addition to forming the company, businesses need documents that protect their daily operations. Depending on the type of business, this may include service contracts, vendor agreements, employee or independent contractor agreements, terms and conditions, privacy policies, confidentiality agreements, invoices, proposals, and collection documents.
A well-prepared contract can define expectations, payment dates, scope of work, responsibilities, cancellations, warranties, limitations of liability, and what happens if one party does not comply.
Operating without clear contracts can increase the risk of misunderstandings, nonpayment, commercial disputes, or legal liability.
Keeping the company in compliance
Creating a company is only the beginning. After forming it, it is important to keep the business active and in compliance. This may include filing required reports, keeping information updated with the state, renewing permits, paying taxes, maintaining corporate records, and documenting important decisions.
It is also important to update business information if the address, registered agent, owners, management, or company structure changes.
A business that does not keep its obligations up to date may face penalties, loss of legal protection, tax problems, or difficulties obtaining financing, selling the company, or defending itself in a dispute.
Common mistakes when starting a company
Some common mistakes include mixing personal money with business money, not having written contracts, choosing a legal structure without understanding its consequences, failing to review permits, not protecting the business name, failing to document agreements between partners, and not seeking legal guidance before signing important documents.
It can also be a mistake to download generic forms without adapting them to the reality of the business. Every company has different risks, and legal documents should reflect how the business actually operates.
Why it is important to speak with an attorney
Starting a company involves important legal, tax, and business decisions. An attorney can help you choose the right structure, prepare formation documents, review contracts, create internal agreements, identify risks, and establish a stronger legal foundation for the business.
An attorney can also help if you have already started your company but need to correct documents, formalize agreements, resolve a partner dispute, or better protect your operations.
Protect your business from the beginning
A well-organized business can grow with more confidence. Taking the time to properly form the company, maintain clear records, use appropriate contracts, and comply with legal requirements can help avoid costly problems in the future.
If you are thinking about starting a company in Texas, it is important to receive guidance before making decisions that may affect your personal liability, taxes, contracts, and the future of your business.
