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New Business Checklist

Starting a business in Texas? Answer two quick questions and get a personalized checklist with everything you need to do — from entity formation to tax registration. Track your progress as you go.

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Texas-specific requirements

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New Business Checklist

Personalized startup guide for Texas businesses

Question 1 of 250% complete

What type of business entity are you forming?

This determines your legal, tax, and compliance requirements.

Disclaimer: This checklist provides general guidance for educational purposes only. Requirements vary by industry, location, and specific circumstances. Consult with a qualified CPA or attorney for personalized advice.

Starting a Business in Texas: What You Need to Know

Texas is one of the most business-friendly states in the country — no state income tax, a large workforce, and relatively simple business formation rules. But “simple” doesn't mean “nothing to do.” There are legal, tax, and financial steps you need to take to set up your business properly from day one.

Choose the Right Entity Structure

Your entity type is the most consequential decision you'll make early on. It determines how you're taxed, whether your personal assets are protected, and how much paperwork you'll deal with:

  • Sole Proprietorship — Zero formation cost, but no liability protection. You report business income on Schedule C of your personal return.
  • LLC — $300 filing fee in Texas. Provides liability protection while keeping taxes simple (single-member LLCs are taxed like sole props by default).
  • S-Corporation — Best for businesses netting $50K-$60K+. Saves on self-employment tax but requires payroll and additional tax filings.
  • C-Corporation — Separate tax entity. Best for businesses planning to raise capital from investors.
  • Partnership — For two or more owners. Requires an operating/partnership agreement and Form 1065 filing.

Don't Forget Texas-Specific Requirements

Even without a state income tax, Texas businesses have obligations many new owners miss:

  1. Texas Franchise Tax — A margin-based tax due May 15 annually. Most small businesses fall under the “no tax due” threshold ($2.47M revenue), but you still must file.
  2. Sales Tax Permit — Required if you sell taxable goods or services. Register before making your first sale.
  3. Federal Estimated Taxes — The IRS expects quarterly payments if you'll owe $1,000+ in taxes for the year.

Common Mistakes New Business Owners Make

  • Mixing personal and business funds — This can “pierce the corporate veil” and eliminate your liability protection.
  • Not setting aside money for taxes — As a business owner, taxes aren't withheld from your income. Set aside 25-30% of net profit.
  • Waiting too long for an S-Corp election — If you're profitable, every month you delay costs you money in unnecessary SE tax.
  • Skipping bookkeeping — “I'll catch up later” turns into expensive reconstruction at tax time.

Frequently Asked Questions

What is the first thing I should do when starting a business?

Choose your entity type. This single decision affects your tax liability, personal liability protection, paperwork requirements, and ability to raise capital. Use our Entity Comparison Calculator to see the tax implications of each option.

Do I need an LLC to start a business?

No. You can operate as a sole proprietorship immediately with no formation paperwork. However, an LLC provides personal liability protection and can make your business appear more professional. The filing fee in Texas is $300.

How much does it cost to start a business in Texas?

A sole proprietorship can start for nearly $0. An LLC costs $300 (TX SOS filing fee). An S-Corp adds payroll setup ($40-$150/month) and additional tax filings ($500-$1,500/year in CPA fees). Budget $500-$3,000 for the first year depending on your entity type.

When should I switch from sole proprietor to LLC or S-Corp?

Consider an LLC when you want liability protection (any revenue level). Consider S-Corp election when net income exceeds $50,000-$60,000 — that's when the SE tax savings outweigh the additional costs. Our S-Corp Calculator shows your specific break-even point.

What tax obligations do new Texas businesses have?

Even though Texas has no state income tax, you still have federal income tax, self-employment tax (15.3%), quarterly estimated payments, Texas franchise tax (margin tax), and possibly sales tax. S-Corps also have payroll taxes and additional filings (Form 1120S).

Need help setting up your business?

Starting a business involves a lot of moving parts — entity selection, tax registration, bookkeeping setup, and more. Book a free strategy session to make sure you're doing it right from the start.

Get Your Free Tax Strategy Session

Related Calculators

Entity Comparison Calculator

Compare LLC, S-Corp, C-Corp, and sole prop tax implications

S-Corp Tax Savings Calculator

See if an S-Corp election would save you money

Quarterly Tax Estimator

Calculate your quarterly estimated tax payments

Hobby vs Business Test

Find out if the IRS considers your activity a business