Becoming a Sole Proprietor in Texas

Here is an outline of the steps you should follow to get started as a sole proprietor in Texas. You should also read the general section for information applicable in any state.

1. Choose a business name for your sole proprietorship and check for availability.

• Please see our section on choosing and checking the availability of a name for your small business, as well as our section on the trademark law aspects of choosing a name.

2. Register the business name with local, state, and/or federal authorities.

• If you will be operating your sole proprietorship under a name that is different from your own name, then you will need to register it as an "assumed business name" with the county clerk in the county where your business is located.

• Although you are not required to do so, you should consider registering your business name as a federal and/or state trademark. Please see the Trademark for Business Naming section for details.

3. Obtain any required local licenses.

• Please see the general section for details.

4. Determine what tax and other regulatory obligations your sole proprietorship has, and take care of any necessary registrations.

• If you have an employee or employees, you need to apply for an Employment Identification Number (EIN) from the IRS. You can apply for an EIN online. You may apply for an EIN even if you have no employees. Doing so may make it easier to open a bank account and reduce your risk of identity theft. There is no filing fee.

• If you have an employee or employees in Texas, you are subject to Texas employment taxes. You can register online using the Texas Employer Portal. For more information on being an employer in Texas, request a copy of the Employer Handbook.

• Whenever you hire an employee in Texas, you must inform both the IRS and the State of Texas. You can find details of all the necessary steps including verifying work eligibility and withholding allowances on the Hiring Employees section of the IRS website. You can find state-level information about reporting new hires at the Texas Employer Portal.

• Texas employers can choose whether or not to provide workers' compensation coverage to their employees. The Texas Department of Insurance, Division of Workers' Compensation administers the program.

• As a small business owner or employer, there may be other informational returns that you have to file annually or semi-annually with the IRS. For more information, take a look at the IRS Guide To Information Returns.

5. Open a bank account for your business.

• It is a good idea to keep your business's finances separate from your personal accounts. A good way to do this early on is by opening a bank account for your business. The bank will probably require your Social Security Number or EIN and a copy of your business name filing, although you may not need any documentation if your business's name includes your surname. (Here is an example of what banks may require.)