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Texas Business License Basics

Texas Business License Basics

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Texas Business License Basics

Starting a small business in Texas often means registering with several federal, state, and local agencies. Let’s review common Texas business license registrations so your business starts off right.

Related: Steps to starting a business in Texas

Setting Up the Business

Before you can apply for business licenses, you should first establish the business structure. This decision impacts your legal responsibilities, taxes, and how much personal liability you might face. Here’s a brief explanation of each type of entity:

Sole proprietorship: This is the simplest form of business structure, where one person owns and runs everything. There’s no separation between the owner and the business, meaning the owner is personally responsible for all debts and legal actions against the business. Taxes are straightforward as the owner reports business income on their personal tax return.

General partnership: Similar to a sole proprietorship, but with two or more people running the business. Partners share profits and losses, and like sole proprietors, they are personally responsible for the business’s debts and legal issues. Partnerships also don’t pay taxes as a separate entity; instead, each partner includes their share of profits or losses in their personal tax filings.

Corporation: A corporation is a more complex entity that is separate from its owners, providing personal liability protection. Owners, known as shareholders, are not personally responsible for the corporation’s debts or legal problems. Corporations can raise money by selling stock and are taxed separately from their owners. This entity requires more requirements, like having board meetings and record-keeping.

Limited Liability Company (LLC): An LLC blends elements of sole proprietorships, partnerships, and corporations. Owners (members) have limited personal liability for business debts and actions. Like sole proprietorships and partnerships, an LLC can pass income directly to owners to avoid double taxation, a common issue with corporations. This structure offers flexibility in management and less strict requirements than a corporation.

What Licenses Do Texas Businesses Need?

With the business structure out of the way, we can begin looking at the different types of registrations businesses in Texas may need. There isn’t a standard business license, as requirements vary depending on where the business is located and what it does. Here is a general overview of the different registrations your business may need.

General Business License

There is no general state of Texas business license; however, many cities require businesses to be licensed in order to operate. Business license requirements vary depending on location and the business’s activities. Below are a few cities that have licensing requirements. 

  • Houston: While there isn’t a business license registration in Houston, businesses in Harris County are required to report business use of property valued at over $500.  There is a Business Personal Property Rendition form that will be filed annually. Additionally, a Certificate of Occupancy is required for businesses operating in a commercial building from the Houston Planning and Development District.
  • San Antonio: Businesses operating out of a commercial building will need to obtain a Certificate of Occupancy. Additionally, a few types of businesses, such as those selling alcohol, using coin-operated machines, or peddlers, will need a license from the city.
  • Dallas:Dallas business license is needed for several different types of businesses, such as amusement centers, businesses selling alcohol, precious metal vendors, etc. In addition, a Certificate of Occupancy is needed for the commercial use of a building in Dallas

Assumed Name Registration

While not a business license, it’s common for Sole Proprietorships and Partnerships operating under a name that is different from the full name of the owner(s) to register for an Assumed Name (also known as a Doing Business As or DBA) with the County Clerk’s Office in the county where the business is located.

Take the guesswork out of figuring out what licenses and permits are required to start your business with license research packages from Bizee and LegalZoom.

For as little as $99, you can save a lot of time and know your business is in compliance with local, state, and federal requirements. 

Building & Zoning Permits

In Texas, businesses are required to obtain various permits and follow specific regulations when it comes to building, zoning, and signage. Here’s a brief overview of what to look out for:

Building Permits: Before constructing, altering, or renovating a commercial building in Texas, businesses must obtain the necessary building permits from their local city or county government. In general, businesses need to submit detailed plans, including architectural drawings and engineering specifications, to the local building department for review and approval. The Texas Department of Licensing and Regulation (TDLR) oversees the enforcement of building codes and standards across the state, such as the Texas Accessibility Standards (TAS), for ensuring accessibility for individuals with disabilities.

Zoning Permits: Zoning regulations in Texas are primarily established and enforced by local governments (cities and counties) to control land use and development within their jurisdictions. Before establishing a business or changing the use of a property, it is crucial to obtain a zoning permit or a certificate of occupancy from the local zoning department, confirming that the intended use is allowed under the current zoning regulations.

Signage: Businesses must comply with the specific signage ordinances and guidelines set by their local city or county, which may include restrictions on the size, height, location, and content of signs.

Sales Tax Permit

Businesses engaged in selling or leasing tangible personal property or taxable services in Texas need to register for a Texas Sales Tax Permit (also called a seller’s permit) from the Texas Comptroller.

Resale Certificate

Businesses purchasing merchandise to resell will usually want to obtain a Texas Resale Certificate, as it allows businesses to avoid paying sales tax on merchandise resold to customers.

Professional License

A variety of professions in the state are regulated and need to be registered before offering certain services.  A few common professions that require licensing in Texas include; therapists, tattoo studios, salvage brokers, food establishments, and many more.   Additional information, fees, and licensing requirements for professions are available from the Texas Department of State Health Services.

In addition to professional licenses from the Texas Department of Health Services, businesses in various industries, such as daycares and salvage yards, also require licensing.

Employer Identification Number (EIN)

Many businesses will register with the Internal Revenue Service (IRS) for an EIN (also referred to as a FEIN, Federal Employer Identification Number, or Federal Tax ID Number). The EIN is the business equivalent of a Social Security Number for an individual. Texas corporations, Limited Liability Companies, partnerships, and sole proprietorships with employees will all need to register for one. Sole Proprietorships without employees can use the owner’s Social Security Number.

There is no cost for an EIN, and it only takes a few minutes to get.

Learn how to apply for an EIN

Next Steps

These are some of the most common business licenses a new business in Texas will need to register for. While it’s a good start, there are so many different licenses that may be needed, be sure to double-check with the City Clerk’s Office, Chamber of Commerce, and/or Economic Development office in your area before opening your doors.

Author

  • Greg Bouhl

    With over two decades as an entrepreneur, educator, and business advisor, Greg Bouhl has worked with over 2,000 entrepreneurs to help them start and grow their businesses. Fed up with clients finding and acting on inaccurate and outdated information online, Greg launched StartUp101.com to be a trusted resource for people starting a business.

Texas Business License Basics

Texas Business License Basics

4 Responses

  1. Hello.
    I have registered my business name with the state, and I’d like to work on receiving a business permit and a reseller’s permit. May I ask how that process is done, how much is cost to get both of those, and when can I expect to receive those credentials? Thank you and please get back to me, have a wonderful day.

    1. Hi Sterling & Aaron

      I can’t give you an answer on the cost or process on business licenses, because the licenses you need will vary by where the business is located and what it does. You will want to check with the city hall, Chamber of Commerce, or economic development office in your community to get more info.

      To get a reseller’s permit, you will need to register for a Sales Tax Permit (https://startup101.com/how-to-register-for-a-sales-tax-permit-in-texas/) first as the number will be needed to fill out the Resale Certificate (https://startup101.com/texas-resale-certificate/). There is no fee for the Sales Tax Permit or Resale Certificate. Expect 2-3 weeks to get the Sales Tax Permit and there is no time for the Resale Certificate.

      Hope this helps. Let me know if you have any other questions!
      Greg

  2. Hello, I was looking to start a nonemergency transportation service. I want to get an LLC, but I am curious as to what other permits and license that I will need to obtain.

    1. Hi Mercedes

      This will somewhat depend on where you are offering your services, but here are a few resources that should help.
      – Sales Tax Permit – https://startup101.com/how-to-register-for-a-sales-tax-permit-in-texas/
      – Commercial Drivers License – Texas Department of Public Safety -https://www.dps.texas.gov/DriverLicense/CommercialLicense.htm
      Texas Medical Transportation Program – https://www.tmhp.com/programs/mtp

      Let me know if you have any other questions!
      Greg

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