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How to Start a Business in McKinney Texas

McKinney Texas is a great place to start a business. McKinney is the county seat of Collins County, Texas and is home to 199,177 people, according to the 2020 US Census. McKinney is an ideal place to start a business due to its continued population growth and high median household income of $93,354. This places McKinney as the 8th highest median household income of any city in Texas with a population of over 100,000. McKinney is also a very educated city with 47.3% of residents having some form of a college degree. All these factors make McKinney a place where any business would like to call home. In this guide we’ll go over the 12 essential steps you’ll need to complete to start a business in McKinney Texas.

Step 1. Research and Plan Your Business

The very first step before starting a business in McKinney Texas is researching and drawing a business plan. Start by researching comprehensively about your business idea. Market research entails conducting due diligence to familiarize yourself with the lay of the land, that is, your target audience, competitors, and the market gap that you intend to fill with your business. Initial research helps you draw a business plan. A business plan acts as a roadmap to refer to when building and growing your business. A business plan is a very vital business tool that no entrepreneur should skip. A study by the Harvard Business Review indicated that a business that begins by drawing a business plan has a sixteen percent higher chance of succeeding. It needs to be brief to the point. It should outline your target audience and their needs, promotion strategies, how the business will be making money, etc.

Resource: How to Write a Successful Business Plan

Step 2. Choose a Business Structure

Once you know your business and have a plan, it's time to choose your business structure. To start a business in McKinney, TX you need to choose between one of the 4 main business structures: Limited Liability Company (LLC), Partnership, Sole Proprietorship, and Corporation. Below is a brief introduction to each business structure. For a more detailed guide, you can read our article on how to choose a business structure.

Limited Liability Company (LLC)

This structure is one of the most popular among small business owners. LLCs have become a go-to choice for many small business owners as they combine the pass-through tax benefits of sole proprietorships and partnerships with the personal liability protection that corporations provide. LLCs are more simple to set up and maintain than a corporation and provide flexibility when it comes to how they are taxed. You can learn more about LLCs here.


Corporations are an older type of business structure that is recognized as separate from it's owners. Corporations provide liability protection and can more easily raise funds by allowing investors to purchase shares of the company and get a piece of the profits. While corporations provide limited liability protection for their owners, they are required to follow more strict management structure and regulations to maintain good standing. By default, corporations are also subject to "double taxation" as they must first pay corporation taxes on their profits after which their owners (known as shareholders) can receive profits that are also subject to personal income tax.

Sole Proprietorship

A sole proprietorship is one of the easiest businesses to open. These structures have only one owner, and they typically don't require a formal registration to start. However, this type of business model includes the owner and the business as a single entity. This means that if someone sues the business or you fall behind on payments, you will be held liable and may be required to pay those expenses out of your personal income and assets. You are also limited to using a business name that includes your personal name. If you wish to use a business name that does not include the owner's name you'll be required to obtain a DBA or "Doing Business As" name, which is formally referred to as an "Assumed Name" in Texas.


As the name implies, a partnership business structure is owned by 2 or more people. In this business model, owners have unlimited liability. This puts them at greater risk if something goes wrong. In a partnership, the business itself will not owe any taxes. Instead, each partner will be required to pay taxes on their personal income tax returns. Similar to a sole proprietorship, a general partnership is required to use a business name that includes the last names of the owners, unless they file for a Texas DBA.

Step 3. Choose a Business Name

One of the most important aspects of business planning is choosing a suitable name for your enterprise. It is not only important but a difficult endeavor. Once your business has been granted a name, changing it is not an easy process. Hence, this step is worth taking as much time as your business name creates your image in the market. Some of the things you need to consider if you find it hard to choose a business name include:

  • Choose a name that your business can identify with
  • Consider choosing a memorable business name
  • Use a business name that people can search online or elsewhere easily

Resource: How to Come up with a Business Name Guide

Step 4. Register your McKinney Business

Now that you have come up with the perfect name, it's time to register your business. Before you register a business in McKinney Texas, you'll need to consider the business structure you chose. Each structure will require different steps for registration.

Register a Texas LLC

To legally form an LLC in Texas you'll need to file Form 205 Certificate of Formation - Limited Liability Company with the Texas Secretary of State's office. This filing can be completed online or via mail. The state of Texas imposes a $300 filing fee to complete this filing. For a step-by-step guide, visit our 5 steps to starting an LLC in Texas article.

Register a Corporation in Texas

Forming a Corporation in Texas is done by filing Form 201 Certificate of Formation - For-Profit Corporation. The filing fee for a corporation is $300. You will also want to create a corporate bylaws document and assign a Texas Registered Agent to your business. You can learn the detailed steps needed to form a Texas Corporation by following our guide.

Register a Sole Proprietorship in Texas

Starting a sole proprietorship in Texas is cheap and easy. You won't need to file any papers with the state; however, you'll want to register your business name unless you plan on calling your business by your own name. To do this you'll need to file a Texas DBA, also referred as an "Assumed Name" with your local county clerk's office. To learn more visit our How to Get a DBA in Texas guide.

Register a Partnership in Texas

Starting a partnership in Texas is fairly simple. You are not required to file any documents or registration papers unless both partners' last names are not included in the business name. If that's the case, you will need to file an Assumed Name Certificate with the county clerk. Don't forget to draw up a business contract between your partner and yourself in case of future disputes.

Step 5. Obtain an EIN

EIN is an acronym for Employer ID Number. An EIN is crucial for employment purposes and helps your business get identified by IRS whenever you file your tax returns. Much like an individual is granted a social security number, a business's unique identification is the Employer ID Number. Entrepreneurs who choose multi-member limited liability company, corporation, or partnership business structures must acquire an EIN. However, obtaining an EIN even if you choose a sole proprietorship is advisable. It acts as a complement to your social security number when filing your business tax returns.

Resource: What is an EIN and How to Apply for One

Step 6. Complete Texas State Registration

In addition to considering your federal tax implications, it is vital to ensure that your business complies with the Texas State tax regulations. Necessary tax regulations vary depending on the type of business carried out. The most common tax regulations you need to consider are employer taxes and sales tax. If your company has hired employees, the Texas Workforce Commission employment tax is required. In contrast, if you are in the business of selling physical goods or commodities, Texas sales tax applies. If you are entitled to tax nexus in McKinney, Texas, you must collect and remit your business taxes to the Texas Comptroller of Public Accounts.

Texas State Registration Resources:

Step 7. Apply for McKinney Business Licenses and Permits

Unlike other states in the US, a general business license is not mandatory in Texas. While there is not a general-purpose business license issued at the state level in Texas, you must inquire whether specific licenses or permits are tailored to your line of business at the federal, state, and local levels. Depending on your line of business, there may be other business permits and licenses required at the county and city levels. These include professional licenses, signage permits, building permits, etc. If you want more information specific to your line of business, contact the Business Permit Office at the Texas Economic Development and Tourism.

Step 8: Open a Business Bank Account

A business bank account helps you separate your business finances from your finances, hence protecting you and organizing all your money. Mixing your finances with your business finances could lead to significant adverse issues. Some of the negative effects of failure to have a business bank account include difficulties experienced with accounting and bookkeeping, losing your liability status for those who choose the limited liability company (LLC) business structure, etc. If your enterprise is sued, it is to argue that your assets and personal finances are fair game.

Resource: How to Open a Business Bank Account

Step 9: Setup Credit Card Processing

With the teachings we have learned during 2020, physical cash transactions are slowly fading. Most modern businesses must hence accept payments via digital methods such as credit cards. It is estimated that more than sixty percent of transactions exceeding ten dollars are now being processed by card. To remain competitive in today's market, business owners must invest in processing credit card payments for their enterprises.

Step 10: Establish an Accounting System

An accounting system is vital for every business to assist you in tracking business expenditures and creating reports that give an insight into the business' performance. Future business projections are also covered in the business accounting system. It helps you create budgets easily and quickly, manage business cash flow, and generate all the required business financial reports to track the progress. Consult with accounting experts to discern whether to choose the cash basis or accrual basis accounting methods.

Resrouce: Small Business Accounting 101 Guide

Step 11: Get Business Insurance

As you register a business in McKinney Texas, it is easy for most entrepreneurs to overlook obtaining an insurance policy for your business. Proper business insurance is vital in helping you mitigate any business risk. After getting a McKinney Texas license, you must ensure that your business operations are smooth. You are assured with a business insurance policy, and your business is covered against risks such as natural disasters, fires, lawsuits, accidents, etc. You can choose from an of the six types of business insurance policies offered by insurance companies.

Resource: Read our Small Business Insurance Guide, we go over the six types of business insurance so that you can make sure you’re covered.

Step 12. Hire Employees and Set Up a Payroll

Did you know that your business growth potential is maximized when you hire the right employees? Your business employees bring a wide selection of skills and experience, which play an integral role in enhancing productivity and improving innovation. Your business will earn a competitive edge in your sector if you have an anchor of both skilled and motivated employees. After applying an effective hiring process is not enough for your business to succeed without a satisfied workforce. It would be best to create a conducive working environment to gain your employees' best skills and experience. Setting up payroll is the final step to starting a successful business in McKinney, Texas. While it is a daunting process to engage in, it is essential. You may choose to use the DIY method to ensure that all the bases are covered as you complete the process of payroll setting.

Hiring Resources:

If you are ready to get registered as a business in McKinney, Texas, the above steps should guide how to Start a Business in McKinney Texas while enjoying a seamless process.