Starting a business in Texas is an exciting and rewarding venture, but it comes with legal responsibilities that can make or break your success. It’s important to have a Texas business lawyer work alongside you throughout the entire process. Whether you’re launching a new startup, expanding through franchising, or simply formalizing your side hustle into an official business, having a solid legal foundation is crucial.
This checklist is designed to help Texas business owners understand what they should be aware of in order to set their businesses up for long-term success.
1. Choose the Right Business Structure
Your business entity impacts everything from taxes to personal liability. The most common options include:
- Sole Proprietorship: Simple to start but offers no liability protection.
- Limited Liability Company (LLC): Provides liability protection with flexible tax options.
- Corporation (C-Corp or S-Corp): Ideal for businesses seeking investors or long-term scalability.
- Partnership: A good option if you’re starting with co-founders but require a strong operating agreement.
Each structure has its pros and cons, so it’s wise to consult with an accountant or attorney before making a final decision.
2. Register Your Business with the State of Texas
To operate legally, most businesses need to register with the Texas Secretary of State. Here’s what you need to do:
- File a Certificate of Formation (for LLCs and corporations).
- Register a DBA (Doing Business As) name if you’re operating under a different name than your legal entity.
Apply for an EIN (Employer Identification Number) from the IRS if you plan to hire employees or open a business bank account.
3. Obtain Necessary Permits & Licenses
The type of business you operate will determine the licenses and permits required. Some common examples include:
- Sales tax permit (for businesses selling tangible goods).
- Professional licenses (for industries like law, real estate, or cosmetology).
- Health permits (for food-related businesses).
- Zoning and signage permits (if you have a physical location).
Check with the Texas Department of Licensing and Regulation and your local county or city offices for specific requirements.
4. Draft Strong Business Contracts
A handshake agreement might seem fine at first, but written contracts are essential to avoid disputes. Working alongside a Texas business lawyer, business owners should have:
- Client contracts outlining services, payment terms, and responsibilities.
- Vendor and supplier agreements to ensure fair and transparent business dealings.
- Employment or independent contractor agreements for anyone working with you.
- Operating agreements or bylaws for LLCs and corporations, defining ownership and decision-making processes.
Well-drafted contracts protect your business from misunderstandings and potential legal battles.
5. Understand Business Taxes & Compliance
Texas is known for being business-friendly, with no state income tax. However, businesses still have tax obligations, including:
- Franchise tax: Certain entities, such as LLCs and corporations, may be required to file and pay this tax annually.
- Sales tax: If selling products, you must collect and remit sales tax to the Texas Comptroller.
- Payroll taxes: If you have employees, you must withhold federal and state employment taxes.
Failing to comply with tax regulations can result in penalties, so staying on top of deadlines is key.
6. Protect Your Intellectual Property
Your brand is one of your most valuable assets. Having a Texas business lawyer help you ensures it’s legally protected by:
- Registering your business name and logo with the U.S. Patent and Trademark Office (USPTO).
- Securing copyrights for original content like website copy, marketing materials, or software.
- Filing patents if you’ve developed a unique product or technology.
Taking proactive steps can prevent costly legal disputes over branding and intellectual property.
7. Prioritize Employment Law Compliance
If you have employees, you must comply with federal and Texas labor laws. Key considerations include:
- Hiring practices: Follow anti-discrimination laws and properly classify employees vs. independent contractors.
- Workplace safety: Comply with Occupational Safety and Health Administration (OSHA) standards.
- Wage and hour laws: Texas follows federal minimum wage laws, and you must track overtime pay compliance.
A strong HR policy ensures a positive work environment while minimizing legal risks.
8. Secure Business Insurance
Unexpected events can disrupt or even shut down a business. Consider the following types of insurance:
- General liability insurance to protect against lawsuits and accidents.
- Professional liability insurance for service-based businesses.
- Workers’ compensation insurance if you have employees.
- Cyber liability insurance to protect against data breaches.
Proper coverage provides peace of mind and financial security.
9. Stay Compliant with Data Privacy Laws
If your business collects customer data, you need to comply with privacy laws, including:
- Texas Identity Theft Enforcement and Protection Act (for handling sensitive customer information).
- The General Data Protection Regulation (GDPR) if you do business with European customers.
- Federal Trade Commission (FTC) guidelines for online data protection.
A clear privacy policy and secure data storage practices help build customer trust and avoid legal trouble.
10. Plan for Business Growth and Succession
Even if you’re just starting, having a long-term plan is essential. Consider:
Estate planning: If you want to pass the business down to your family, start planning early.
Scaling legally: If you plan to franchise or expand locations, ensure compliance with franchise laws.
Exit strategies: A buy-sell agreement can protect you if a business partner wants to leave.
Launching and running a business in Texas is full of opportunities, but success depends on getting the legal details right. Following this checklist will help protect your venture from unnecessary risks while ensuring you’re set up for growth.
By staying informed and proactive, Texas business owners can confidently build their businesses while minimizing legal headaches. And remember—when in doubt, seeking a Texas business lawyer can help avoid costly mistakes down the road.
Disclaimer
The information provided in this blog/article is for general informational purposes only and does not constitute legal advice. While we strive to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog/article or the information for any purpose. The content of this blog is intended to convey general information and may not reflect current legal developments, verdicts, or settlements. Any reliance you place on such information is therefore strictly at your own risk. The content is not intended to be a substitute for legal advice from a qualified attorney licensed in your state.
Your use of the information in this blog/article does not create an attorney-client relationship between you and Elena Villasenor Sullivan or Endereza Law, PLLC. Contacting us through this blog does not establish an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established. Unless otherwise stated, the attorneys listed on this blog are not certified by the Texas Board of Legal Specialization.
