Setting Up a Sole Proprietorship in Texas

By Heather Frances J.D.

One of the first decisions you must make when starting your own business is to choose which business form you want to use. Many business forms are available for new businesses in Texas, including corporations, limited liability companies, partnerships and sole proprietorships. Each has unique formation and maintenance requirements, which are handled by the Texas Office of the Secretary of State.

One of the first decisions you must make when starting your own business is to choose which business form you want to use. Many business forms are available for new businesses in Texas, including corporations, limited liability companies, partnerships and sole proprietorships. Each has unique formation and maintenance requirements, which are handled by the Texas Office of the Secretary of State.

Registration

There is no legal distinction between the sole proprietor as an individual and his business. Thus, Texas does not require sole proprietorships to register with the Secretary of State, although other business entities must register. Depending on the type of entity, different registration forms are required. If you begin your business as a sole proprietorship but then wish to change it to another business form, you must register with the state.

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Licensing

Though registration is not required, a license may be necessary for certain businesses. State licenses may be required for certain professions or occupations. For example, a lawyer or doctor must pass state licensing requirements and maintain his license regardless of his business form. City or county licenses may also be required based on the business location and type of business involved.

Tax Registration

If your business is required to collect sales taxes, you will need to register with the Texas Comptroller of Public Accounts and receive a permit to collect the tax. If you hire employees, you must collect and pay employment taxes, such as Social Security and unemployment insurance payments. In Texas, unemployment taxes are handled by the Texas Workforce Commission. You may also be required to register your business’s equipment, inventory and machinery with your county appraisal district.

Business Name

If you operate your business under your own name, you do not have to register your business name, but if you choose another name – called an assumed name – you must register this name with your county clerk’s office. To register, you must file an Assumed Name Certificate listing your personal information along with the business’s name, address, type and expected period of operation. You cannot use a business name that is the same or similar to another business.

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References

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A sole proprietorship is a common business entity because it is relatively simple to set up and allows for a great deal of flexibility in how the business is managed. As a sole proprietor, you have complete control over the management of the business, take all the profits and avoid corporate income taxation. Although there are no registration requirements to initially form a sole proprietorship in Georgia, depending on the type of business, the Georgia Secretary of State recommends professional, local and tax registration.

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