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So you have decided to take your creative idea or hobby to the next level and want to officially register it so that you can start making money. But there is one problem…you don’t know how to do this.
This is where I step in and give you step by step instructions on how to make your business a real entity.
*Please note that in this article I will be providing the steps for a new business with 1 owner in Texas as a Sole Proprietorship. Please be sure to check with your State & County for their specific instructions to register your business.
Step 1: Create a Name for your Business
This is extremely important. Who do you want to be known as to the public.
- Choose a name that is strong but simple, and embodies your company’s values and unique characteristics.
- Make it easy to pronounce and spell.
- Choose a name that not only appeals to you but the kind of audience that you are trying to attract.
- Avoid using puns or being a trendy copycat. (iTunes, iHeartRadio, etc)
- Claim your social media identity of the major social sites. FaceBook, Twitter, Instagram, Pinterest, YouTube are some of the major ones. Additionally this will create custom URLs that are associated with your business.
- Pick a name that is Web Ready. In order to create a website address or URL, your business name needs to be unique and available. To check whether a domain name (web address) is available use the domain name search below. Be sure to claim it right away so no one else takes it. (I know this from experience unfortunately)
*Do a search on each social site to see if your business name is already taken. If so, see if altering your business name slightly will help. For example, my business name is LiciaLee but on most of the social sites this username was taken so since my blog is a lifestyle blog I was able to get the name LiciaLee Lifestyle instead. It’s slightly different but still very familiar with my brand.
Step 2: Decide What Type of Business Structure You Have
- Sole Proprietorship – The most common and the simplest form of business is the sole proprietorship. In a sole proprietorship, a single individual engages in a business activity without necessity of formal organization
- General Partnership – A general partnership is created when two or more persons associate to carry on a business for profit. A partnership generally operates in accordance with a partnership agreement, but there is no requirement that the agreement be in writing and no state-filing requirement.
- Limited Partnership – A Texas limited partnership is a partnership formed by two or more persons and having one or more general partners and one or more limited partners. The limited partnership operates in accordance with a partnership agreement, written or oral, of the partners as to the affairs of the limited partnership and the conduct of its business.
- Registered Limited Liability Partnership – In order to limit the liability of its general partners, a general or limited partnership may opt to register as a limited liability partnership.
- Limited Liability Company – The limited liability company (LLC) is not a partnership or a corporation but rather is a distinct type of entity that has the powers of both a corporation and a partnership.
- Corporation – A corporation is a legal person with the characteristics of limited liability, centralization of management, perpetual duration, and ease of transferability of ownership interests. The owners of a corporation are called “shareholders.” The persons who manage the business and affairs of a corporation are called “directors.”
You can see more about each business structure by going to the Texas Secretary of State site here.
Step 3: Business Licenses & Permit Types
The State of Texas does not require a general “business” license; however, there are a number of regulatory agencies that have licensing and permitting requirements based on the type of service, or products associated with your business. To ensure that all permitting requirements are met, you should contact the local county and/or city government in which you plan to conduct business to determine if there are any additional requirements.
If you have chosen Sole Proprietorship as your type of business structure you will need to file the following:
- First go through the DBA online database to determine if the name you wish to use is available. It is your responsibility to fully investigate the name you wish to use.
- Then, fill out and turn in the form named ‘Assumed Name Certificate for Certain Unincorporated Persons’
- Choose ‘An Individual’ as the type of ‘registrant’.
- If you do not have a storefront just put in your home address as you will be getting mail
there as well.
Finally, turn it into your County Clerk’s office and pay the filing fee of $24.00 plus an extra $0.50 for each additional owner’s name listed after the first.
When Should a DBA be Filed?
An assumed name (“DBA” or “Doing Business As”) certificate must be filed with the County Clerk if a person:
- Is regularly conducting business or rendering professional services or is maintaining a business or professional premises in Travis County, and
- The business is a sole proprietorship, general partnership or joint venture, estate, real estate investment trust, or any other business entity not included in the list of businesses required to file with the Texas Secretary of State.
What Happens After I File?
A few days after your filing, your original will be mailed back to you. You must file a new certificate if any of the information on the original changes during the next ten years. If you are still using the business name ten years after your filing date, you must file a new certificate within six months of the expiration of the original certificate.
Business Permit – Registering for a Texas Sales and Use Tax Permit
You must obtain a sales tax permit if:
- you are an individual, partnership, corporation, or organization engaged in business in Texas; and
- you are selling tangible personal property or providing taxable services in Texas to customers in Texas; and/or
- you acquire tangible personal property or taxable services from out-of-state suppliers that do not hold a Texas permit; or
- you sell or resell telecommunications services, such as the electronic transmission of tax returns or other information, the provision of phone service for a charge to tenants or hotel guests, fax services, or paging services, or you are a telecommunications utility or a mobile service provider collecting and paying telecommunications receipts under Texas Tax Code, Chapter 151; or
- you are a telecommunications utility, a mobile service provider, or a business service user that provides local exchange access, equivalent local exchange access, wireless telecommunications connections, or intrastate long-distance service, and you are responsible for collecting emergency communications charges and/or surcharges under Texas Health and Safety Code, Chapter 771; or
- you collect tax on the retail sale of fireworks; (You are required to charge both the sales tax and the fireworks tax.) or
- you collect tax on sale of health spa memberships; or
- you sell, lease, or rent off-road, heavy duty diesel powered equipment (You are required to charge both the sales tax and the surcharge.); or
- you are an out-of-state winery direct shipping wine to consumers in Texas. (You are required to obtain an Out-of-State Winery Direct Shipper permit from the Texas Alcoholic Beverage Commission.) or
- You sell cigarette and/or tobacco products (You are required to obtain a cigarette/tobacco retailer’s permit, AP-193. Refer to Cigarette/Tobacco Products under Texas Taxes.)
If the above applies to you, then you will need to fill out the sales tax permit online by going to to Texas Online Tax Registration Application or you can fill the form out manually here and turn it in to your Comptroller of Public Accounts office.
Please allow 2-3 weeks to receive your permit.
Step 4: Business Taxes
Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Your payments of SE tax contribute to your coverage under the social security system. Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits.
Generally, you must pay SE tax quarterly throughout the year and file Schedule SE (Form 1040) if either of the following applies.
- If your net earnings from self-employment were $400 or more.
- If you work for a church or a qualified church-controlled organization (other than as a minister or member of a religious order) that elected an exemption from social security Medicare taxes, you are subject to SE tax if you receive $108.28 or more in wages from the church or organization.
Please check the IRS website for more information along with a CPA to get you pointed in the right direction as far as taxes are concerned.
And That’s It!! You are now ready to get started on the next part of your journey of world domination and getting your business officially out there.
Here are some BONUS resources to help get you started as well…
Sales Tax & Your New Business IRS – Starting a Business
Assumed Name Certificates (DBAs) IRS – Self-Employment Tax
Business Structures IRS – Small Business and Self-Employed Tax Center
Steps to Starting a Business IRS – Deducting Business Expenses