Tuesday, January 24, 2023

How To Start A Sole Proprietorship In Texas

Select An Appropriate Business Name

How to be a Sole Proprietorship

A sole proprietor in MarylanTexas d can use his/her own given name or may opt for a trade or assumed business name. However, a tradename sounds more professional than the owners personal name. DBA name plays a pivotal part if you prefer to choose an assumed business name.

The state law requires the DBA must be distinguishable from the companies/businesses that are already on record.

Tidbit

Check the following government databases to make sure your fictitious or DBA name has not been trademarked already.

  • Texas Secretary of State
  • The United States Patent and Trademark Office

Establishing A Sole Proprietorship

If you own an unincorporated business by yourself, the simplest, most common choice for a business structure is sole proprietorship formation. Like every other business that operates in Texas, youll need the correct licenses and permits for your industry, state, and the local area.

Thats where a sole proprietorship attorney comes in. Establishing a sole proprietorship usually isnt complicated or expensive, but if youre operating under any name other than your own, its required you file an assumed name certificate with the county clerk where your business operates. Lindsey Birdsong, PC can help you locate the federal, state, and local permits necessary for running your business along with any licenses and registrations necessary to get started. We can also walk you through the process of filing your unique fictitious name, also known as a trade name, DBA, or assumed name.

The legal structure of any business is the determining factor on how it will be taxed and for what types of debt the owner can be held personally liable. Our law office can help you evaluate whether establishing a sole proprietorship is the right choice for your venture.

Select A Business Location

Unless you plan to run a remote/virtual business, you will need to find a physical location for your company. Research commercial property in your area, and take note of typical costs. For customer-facing businesses , location is very important, so take your time in selecting the right area for your business.

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Forming A Sole Proprietorship In Texas: Everything You Need To Know

Forming a sole proprietorship in Texas allows you to create the most common, basic type of small business without filing any state paperwork.3 min read

Forming a sole proprietorship in Texas allows you to create the most common, basic type of small business without filing any state paperwork. With a sole proprietorship, you can legally engage in business activity in the state but do not need to establish a formal business entity. The exception is for a sole proprietorship that uses a business name other than the person’s legal name. In this case, you must file a DBA assumed name certificate with the county clerk’s office where business is conducted.

Differences Between Llcs And Sole Proprietorships

How to Set up a Sole Proprietorship in Texas: 13 Steps

Now its time to compare the differences between LLCs and sole proprietorships. There are more differences between these business structures than similarities. Rather than just listing bullet points, well take a closer look at various categories you should evaluate. This will make it much easier for you to decide which one is right for your business.

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What Business Taxes Does Texas Have

There are several business taxes that firms in Texas may need to pay.

Any company selling taxable goods or services will be subject to the Texas sales tax .

Companies with employees will need to pay unemployment insurance tax and other employer taxes. And most firms will be subject to Franchise Tax, the states primary business tax requirement.

There may be other tax requirements. See the Texas Comptroller website for more information.

Choose A Business Structure

Registering your Texas company as a legal business entity such as an LLC, corporation, or nonprofit has two major advantages:

  • Increased credibility
  • Protection from personal liability in the event your business is sued

Find out which business structure is right for your new business in Texas.

Sole Proprietorship

A sole proprietorship is an informal business structure that isnt incorporated or separated from its owner. This means that 100% of the businesss profits go to the owner however, 100% of the financial liability should the business accrue debt or get sued falls on the owner as well.

Partnership

A partnership, like a sole proprietorship, is an informal unincorporated business structure but with multiple owners. Similarly, partnerships do not have liability protection that you find with a formal business structure.

LLCs

A limited liability company combines the personal asset protection of a corporation with the flexibility of a partnership or sole proprietorship. Most small businesses prefer the LLC structure due to its easy maintenance and favorable tax treatment. Find out if you should start an LLC for your small business.

Corporations

A corporation is a separate legal entity that is owned by its shareholders. Corporations have more formal regulations than LLCs and tend to be more attractive to investors. Most large companies like Apple fall under the corporate category.

Nonprofits

Find out more about how to file a DBA in Texas by visiting our guide.

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Can I Operate A Sole Proprietorship Without A Dba In Texas

A sole proprietorship’s legal name is the owner’s full name, so these businesses often operate under DBAs . If you are well-known in your community as a provider of a specific service or the creator of a certain product, you might not need a DBA. However, if you’re new to town, or if your personal name has nothing to do with the operation of your business, adopting a fictitious business name might be a smart move.

Many individuals start their small businesses as sole proprietorships. In a sole proprietorship, the owner and the business are legally one and the same. While this business formation is the easiest and least expensive, it also comes without any liability protection and may be more successful under a DBA, also known as an assumed name or a fictitious business name.

How Do I Dissolve An Llc Or Corporation In Texas

How to Legally Start a Handmade Business from Home (EASY 5 STEPS!) | Sole Proprietorship vs LLC

To close a Texas business, youll need to complete various steps. You will need to file voluntary dissolution paperwork with the state, obtain a tax clearance letter, file any outstanding reports, send final paychecks to your employees, and more. See this guide for more details.

Closing a TX business can be a complex process, and its important to do everything correctly. For this reason, its beneficial to work with a CPA or tax attorney.

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File Assumed Business Name

An assumed business name is considered to be a business name, which is different from its legal registered name. It is also known as a DBA or fictitious business name and is often used to file a sole proprietorship in Texas. In order to ensure legal right of using this type of business name, you will need to apply for an assumed name certificate Texas using Form-503.

The assumed name certificate is effective for a period of 10 years since the date it was first filed. Once it expires, you need to renew it within six months from the date of expiration of original certificate pursuant to Texas Business & Commerce Code § 71.151. If you are wondering how to apply for and obtain an assumed name certificate Texas or a DBA then IncParadise can assist you with the process. As one of the leading Texas registered agents, we provide Doing Business As-DBA or Assumed Name Certificate services.

Select A Business Name

Naming your company is the first concrete step to take. And its a very important step you want to find a name that is relevant to your industry, suitable for your business, and memorable for your customers. Take your time and come up with several options that you like.

Next, its time to see if the names are available. Texas requires each new business to use a business name that is unique from other names already in use in the state. You can conduct a business entity search online to confirm whether or not a name is already in use.

Texas has other business name rules, in addition to the unique name requirement. Some important rules to consider include:

  • Names for LLCs need to contain limited liability company, or select approved abbreviations such as LLC or L.L.C.
  • Names for corporations need to contain corporation, incorporated, or select approved abbreviations such as corp or inc
  • The use of certain words or phrases is restricted, and some financial terms require written permission to use
  • Check out the full Texas business name rules here, and a useful guide here

When you find the name that youd like to use and have confirmed that its available, whats next? You can either move on to the next steps in this article, or you can reserve the business name for a period of 120 days. This prevents anyone else from registering the name, giving you some time to think about it.

Texas trade names

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Ready To Start A Sole Proprietorship Business In Texas

A sole proprietorship also known as an individual entrepreneurship or sole trader is one of the simplest forms of Texas business. It is a type of unincorporated entity and you can start a sole proprietorship in Texas without having to register with the office of the Secretary of State. If you are wondering how to start a sole proprietorship in Texas then IncParadise can provide meaningful assistance by helping you in starting your sole proprietorship business in Texas.

We also offer several additional services that you may require if you plan to start a sole proprietorship in Texas like filing a DBA, and getting an EIN, among others.

To Start A Business In Texas Follow These Steps

How to Set up a Sole Proprietorship in Texas: 13 Steps

Are you ready to start your own business?

Creating a Texas business of your own can be challenging. You will need adequate funding, time, personal support, and professional support in order to move forward successfully with your entrepreneurial dreams.

To see if you’re prepared to take the leap, check out our Entrepreneurship Quiz.

Skip Ahead To:

  • Promote & Market Your Business
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    Open A Business Bank Account

    The final step to making your Texas sole proprietorship a reality is to open a business bank account. Its important to keep your business and personal transactions separate to prevent the co-mingling of funds. The easiest way to do this is to open a designated business bank account and use it only for business transactions. This will make it easier for you to complete your accounting and bookkeeping tasks.

    Once you have established your sole proprietorship, you will also want to complete these important tasks:

    • Setup Credit Card Processing:Considering that over 60% of transactions are done via debit and credit cards, its essentially a requirement to accept credit card payments. We go over how to do this in our How to Accept Credit Card Payments guide.
    • Establish an Accounting System:Youll need to determine the accounting method you will use for your business: cash basis accounting vs. accrual accounting. To learn more, check out our guide on small business accounting 101.
    • Get Business Insurance Coverage:As a sole proprietor, you lack personal liability protection, so getting adequate business insurance could be your only financial protection method. Learn more about business insurance here.

    Build Your Business Website

    After defining your brand and creating your logo the next step is to create a website for your business.

    While creating a website is an essential step, some may fear that its out of their reach because they dont have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.

    Here are the main reasons why you shouldnt delay building your website:

    • All legitimate businesses have websites – full stop. The size or industry of your business does not matter when it comes to getting your business online.
    • Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own and control.
    • Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You dont need to hire a web developer or designer to create a website that you can be proud of.

    Using our website building guides, the process will be simple and painless and shouldnt take you any longer than 2-3 hours to complete.

    Recommended: Get started today using our recommended website builder or check out our review of the Best Website Builders.

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    What Documents Are Required For Sole Proprietorship

    Documents Required For A Sole Proprietorship

    • Aadhar Card. Aadhar number is now a necessity for applying for any registration in India.
    • Bank Account. After you have got Aadhar Number and PAN, you can visit any bank for opening an account with them.
    • Registering as SME.
    • Shop and Establishment Act License.
    • GST Registration.

    Plan Your Texas Business

    Types of Business Organization in Texas – Starting a Business in Texas

    Successful businesses are built through careful planning. Before committing a significant amount of money and other resources toward your business in Texas, critically analyze your idea, and create a game plan. At a minimum, you should complete the following:

    Name Your Business

    What will you name your business? When naming a business, you’ll want to choose an available name that follows Texas naming rules and resonates with your customers. Use our Business Name Generator to find the perfect brand name and website.

    Before you reserve your business name, make sure your domain is available.

    Powered by GoDaddy.com

    Once you register a domain name, we recommend choosing a business phone system to enhance your customer service. Nextiva provides a high-quality phone service that integrates with all devices. Try Nextiva.

    Find a Business Location

    Do you know where your business will be located? Whether youre opening a brick-and-mortar establishment or starting a business from home your business location informs the type of licensing and permits youll need as well as your businesss growth potential. Doing your research on Texas popular areas such as Austin or Houston can help increase foot traffic and drive customer interest.

    Conduct Market Research

    Write a Business Plan

    Have you written a business plan? Our Business Plan Generator makes writing your business plan easier than ever just add your businesss information and youre done!

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    Is An Llc Always The Best Choice

    Life is all about making choices and choosing to form an LLC can be a very important one. Asset protection consultants routinely market to business owners stating that an LLC is always a good idea, but I do not believe this to be true. Some entities are actually better suited for a sole proprietorship as the additional costs of an LLC do not provide any significant benefits over operating as a sole proprietor.

    Also, understand that with the concept of an LLC providing liability protection against commercial acts of your business, a savvy attorney is going to try to find any loophole he can in your current setup to pierce the corporate veil and go after personal assets.

    In addition, some courts may not look favorably upon sole member LLCs, and the question comes up in legal proceedings as to whose interests are you being protected against if technically, you are the only member of the LLC.

    Business Licenses & Permits

    Even though they do not prescribe exclusive proprietors in Texas to obtain general business licenses, there might still be some additional licenses and permits to acquire for your kind of enterprise to establish it in agreement with the local rules and regulations.

    The majority of the local licenses and permits in the state are obtained at the state level since there is no general state enterprise licensing policy in Texas. You might have to inquire with the county official at the municipality where you intend to establish your enterprise which specific licenses and permits you would have to obtain to agree with their particular local licensing policies.

    You can look through the local Business Licenses & Permits Guide, where you will discover all the general information concerning the licensing policy in Texas alternatively, there is online access to the BPO, the Business Permits Office.

    Besides that, you will also do well to inquire whether you have to obtain specific licenses and permits for your enterprise at your particular location in the state.

    Austin, San Antonio, and Corpus Christi, for instance, do have their specific local licensing rules and regulations.

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    Starting A Sole Proprietorship In Texas: An Overview

    So, what exactly is a sole proprietorship?

    Sole proprietorships are a very popular entity choice for many new business owners. In fact, sole proprietorships are the most common business entity in Texas.

    A primary reason for their popularity is that they are relatively simple to form in comparison to other entity types such as LLCs and corporations.

    Ready to learn more about how to start a sole proprietorship in Texas? Heres what you need to know.

    Clarification & Compliance With Tax Requirements

    How to Set up a Sole Proprietorship in Texas: 13 Steps

    You can run your business in this format and not hire third-party employees. In this case, you do not need to obtain an EIN because your Social Security number will replace it. Of course, it would be correct to take care of your confidentiality and still use the EIN and not the SSN.

    The nature and the structure of the business activity of individual entrepreneurship determine the list of tax requirements that the state will put forward .

    The state-level taxes for your enterprise are, most probably, going to be very quick and straightforward to submit. Nevertheless, there might still be some additional local revenues that you would have to pay, such as the sales revenues, for example. You can look through the Texas Comptrollers Tax Section, where you will discover all the general information concerning the taxation policy in Texas as well as the more specific local revenues.

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