How to Start a Business In Houston

Houston is currently the fourth-largest city in the US, and the Greater Houston Partnership estimates that the region’s GDP is $490 billion.

Additionally, there have been more than 760 expansion and relocation projects in the last two years, so Houston offers a wealth of business opportunities both inside and outside the city limits.

If you are starting a business in Houston, here is everything you need to get started:

Write Your Business Plan

A business plan serves as an evolving road map for your company.

It should describe your company’s major goals, value offerings, organizational structure, funding sources, and competitive advantages.

For creating a business plan, the U.S. Small Business Administration (SBA) has some excellent templates. Additionally, you have the option of requesting a bank loan, a microloan, or a federal loan through the SBA and other lenders (you will need a business plan for most funding opportunities).

Your choice of business location will depend on the kind of enterprise you run.

Take a look at the local zoning regulations. Examine the accessibility of your supply chain, your customers, and labor availability.

Determine Necessary Business Licenses and Permits

Considering the Federal and Texas Business Tax Responsibilities of business owners in Texas, It is challenging to locate a business in Texas that is not legally required to hold some kind of license or permit. In reality, the state government website includes 78 pages of various license kinds that people and business owners can register for and renew.

In addition, depending on where you operate and what you do, localities can have additional permit requirements.

Although licenses and permits give the government the ability to track businesses, they are also meant to safeguard consumers and the wider public.

The government treats violations of license and permit requirements extremely severely because they help to keep Texans safe. You risk financial penalties and perhaps closure if you run a business without the required licenses or permits or if you let them expire.

Professionals may occasionally be prevented from getting a future license. The importance of compliance is due to several factors.

Keeping track of all the licenses and permissions you require for your company can be difficult, and many small business owners do not realize they violate the law until it is too late and they are subject to fines from the state.

Choose Your Business Entity Structure

One should decide on the business structure after taking into account difficulties with tax, liability, management, continuity, transferability of ownership interests, and formality of operation, and ideally after consulting with an accountant. Typical entity structures are:

The entity structure you select will affect everything from your tax burden to your legal liability to even your options when it comes time to sell, expand, or dissolve the company. If you’re unsure which is the right fit for you, or have questions about tax deductions and structure, hiring a CPA to consult on this portion of business formation is a good step.

Register Your Business Entity with the Texas State

Here are the steps to register yours business entity in Houston:

• Step 1: Choose your business name. Please note that your business name should be unique.
• Step 2: Register your business with the Texas Secretary of State, and pay any filing fees.
• Step 3: Register your business with the IRS to comply with the rules of taxation.

Considering the Federal and Texas Business Tax Responsibilities of business owners in Texas, most businesses in Texas will be legally required to hold some kind of license or permit in addition to registration of your business entity. The Texas Secretary of State website includes 78 pages of various license kinds that people and business owners can register for and renew.

Although licenses and permits help determine who is operating in the state, they are also meant to safeguard consumers and the wider public, depending on where you operate and what you do, Texas cities can have additional permit requirements.

The government treats violations of license and permit requirements extremely severely. You risk financial penalties and perhaps closure if you run a business without the required licenses or permits or if you let them expire.

How To Obtain a Texas Business License

A generic business license is NOT required in the State of Texas. HOWEVER, many businesses ARE required to be licensed based on the services they offer (a good example is that a business needs a liquor license in order to sell or serve alcohol).

There is a requirement for all entities transacting business in Texas to register with the county clerk’s office or Texas Secretary of State, which is what registering your business entity with the state covers. This results in the certificate of formation that is received from the office of the Secretary of State, or the county clerk’s office provides the assumed name certificate, that satisfies the “general business license” requirement that is there within the other states of the country. You will need this certification of formation in order to obtain various business licenses.

Here’s how to get a business license in Texas:

• Step 1: Get your necessary information ready to claim a business license. This may include business name, EIN/SSN, business entity, business location, and financials.
• Step 2: Apply for your general business operating license (if applicable). Some cities may NOT require this license. 
• Step 3: Determine your business category and what licenses you will need. For example, alcoholic beverages need specialized licenses.
• Step 4: If you are selling taxable goods/services, register yourself at Texas Comptroller. It is also extremely recommended to take with Houston Tax Consultant while dealing with tax strategies. 
• Step 5: Depending upon the business category you operate in, you may need a federal license as well. 

Obtain a Texas Sales and Use Tax Permit
(if applicable)

If you fall within the category of individual, partnership, corporation, or organization, you need to register yourself for a sales tax permit in Texas.

Following are some of the steps you may need to go through to register yourself:

• Step 1: Register yourself online or download the form AP-201 and send it to the following address:
  Comptroller of Public Accounts
  111 E. 17th St.
  Austin, TX 78774-0100
• Step 2: Gather the relevant data. This may include SSN, corporation’s file number, NAICS code, and the list goes on.
• Step 3: File the Franchise Tax form if you are OTHER than the sole proprietor.
• Step 4: Wait. Once you register yourself with the relevant documents, it may take 2-4 weeks to get registered or to hear back from the relevant office. 

One thing to do while you wait is work on tax strategy. This is best done with the planning of a Houston CPA who can walk you through deductions, tax brackets, credits, and tax planning. 

Determine Business Tax Responsibilities and Develop a Tax Strategy

The Internal Revenue Service (IRS) is responsible for federal tax codes and requirements.

The Texas Comptroller of Public Accounts (CPA) is the agency responsible for tax code in Texas.

Both are updated yearly (and occasionally more frequently depending on economic developments).

When formulating your tax strategy, you’ll want to understand projected revenue, deductions, tax credits, operating costs, tax brackets, and your projected federal and state tax burden. Good tax strategies are updated at least quarterly, and are typically unique to each business. The best advice is always specific to your business and operations, so it is always recommended to talk with an experienced CPA to ensure you’re not overpaying.

You’ll also want to make sure you understand when your taxes will be due and how you will pay them.