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How to Start a Business in Pearland Texas

Tax-friendly, business-friendly Pearland, Texas, is a bustling spot that’s the perfect setting for building your brand in the Lone Star State. Yes, the business landscape in Pearland really is your oyster! One of the largest cities in the Houston area, Pearland is a locale on the rise with a population that has seen a growth rate of 142 percent in recent years. Enjoy all the tax perks of being a Texas business owner with all the buzz of growing a brand in a fast-growing city when you discover how to start a business in Pearland Texas!

1. Research and Plan your Business

While it's possible to launch any type of online or "grounded" business from Pearland, it's important to put in the time to decide how you want to maximize all of the resources that are at your disposal in this city that represents the best of the Greater Houston area. If you don't already have a business idea fully pinned down, take some time to outline your goals regarding the type of product or service you'd like to offer. It's also important to identify your direct competitors. Here are some key decisions to make early on:

  • What is the potential market share you can grab?
  • How will your product or service provide more value than what's offered by your competitors?
  • Who is your audience/market?

Next, create a simple business plan. There's no need to worry about "perfection" with the first draft because a business plan can be amended as you move forward with establishing your business. A business plan should cover why there's an opening for your specific business right now, how you intend to make money, how you intend to promote your business and what's needed to launch your business. While a business plan is important for helping you to stay organized as you pursue milestones, it also has an added benefit. According to the Small Business Association (SBA), a business plan can help a business to obtain funding from investors or partners.

Resource: How to Write a Successful Business Plan

2. Choose a Business Structure

When establishing a business in Pearland, it's important to decide on a legal business structure. This is ultimately decided by matters like your personal tax liability, your tax status and how funding is generated. Here's a look at the options that are available for anyone starting a new business in Pearland:

  • Limited Liability Company (LLC): This is often the top choice for small business owners. An LLC legally separates you from your business. As a result, your personal assets are protected in the event that your business experiences any legal or financial troubles. LLCs notably offer something called pass-through taxation that means that you pay taxes on personal income instead of any earnings (or losses) generated by your business.
  • Corporation: Offering solid liability protection, a corporation is a separate legal entity that is owned by shareholders. The downside to this option is that corporations tend to have higher tax rates due to the fact that all profits are taxed at the corporate tax rate prior to being passed on to shareholders.
  • Sole Proprietorship: The simplest option for establishing your business, a sole proprietorship doesn't actually require you to register your business. The downside to this option is that your business is not considered to be a separate legal entity. As a result, the owner of the business takes on full personal liability risk.
  • General Partnership: This is a basic option for businesses with two or more owners. Like an LLC, a partnership enjoys pass-through taxation. However, a partnership is also similar to a sole proprietorship in the way that the owners take on unlimited personal liability.

If you're seeking more help deciding between which business structure would be best for your business, read our helpful guide on how to choose the right business structure for you.

3. Create a Business Name

For many new business owners, choosing a name is the most satisfying and creative aspect of going through the process of how to start a business in Pearland Texas! Others find it a bit daunting. When choosing a name, it's important to think of the name as the "identity" of your business. Choose a name that encapsulates the purpose and value of your brand. In addition, it's important to choose a name that's easy to remember, spell and search!

Resource: How to Come Up with a Business Name

4. Register your Business

Once you've used step 2 to choose a business structure for your new business in Pearland, it's time to actually go through the registration process. The process will look different depending on the structure you've settled on. Here's a look:

Register a Texas LLC

An LLC needs to file formation paperwork with the Texas Secretary of State known as Form 205, Certificate of Formation - Limited Liability Company. The Texas Secretary of State charges a filing fee of $300 to submit Form 205, which can be done online or by mail. You'll need to conduct a name availability search before filing the Certificate of Formation to ensure the business name you chose is available.

Resource: How to Start an LLC in Texas

Register a Texas Corporation

The formation process for a Texas Corporation is similar to that of an LLC. You'll need to file Form 201, Certificate of Formation - For-Profit Corporation with the Texas Secretary of State and pay the $300 state filing fee.

Resource: How to Form a Texas Corporation

Register as Sole Proprietorship

A sole proprietorship in Texas doesn’t require any filing with the state if you choose to use your own name. However, if you want to use a business name that doesn't include your personal name, you need to register with the county clerk to get a "doing business as name" or DBA.

Resource: How to Start a Sole Proprietorship in Texas

Register a Partnership

Partnerships are quite easy because it doesn’t require any formal filings unless you don’t plan to use the partners’ surnames in the name of the business which requires you to file an Assumed Name Certificate.

Resource: How to Start a Partnership in Texas

5. Obtain an EIN

An Employer ID Number (EIN) is used by the IRS to identify your business when you file tax returns. If you'll be hiring employees, this number is also important. While EINs are only required for corporations, partnerships and or multi-member LLCs, it's a good idea to obtain one regardless of how you register your business because it's more than likely that you'll need this type of identification for multiple business filings once your business is launched.

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

6. Complete Texas State Tax Registrations

In addition to taking care of your federal tax responsibilities, you'll also need to make sure that you're in full compliance with all state tax requirements when starting a business in Pearland. Your specific tax obligation will vary based on the types of products or services you offer. For instance, any business that sells goods will need to collect and submit sales tax. If you hire employees, you'll need to handle obligations for the Texas Workforce Commission employment taxes.

Texas State Registration Resources:

7. Apply for Pearland Business Licenses and Permits

A general Pearland Texas business license is not required when you open a business in Pearland. However, licenses are required for specific industries. An example would be professional licensing or permits needed to operate a spa. You may also need to manage things like signage permits if you'll be operating at a physical location within Pearland. Pearland businesses are subject to any federal, state or local permit requirements that apply for specific industries.

8. Open a Business Bank Account

When starting a new business, it's essential that you don't muddy the waters between your personal and business finances. With LLCs and corporations, it's actually necessary to do this because your business is a separate legal entity. However, it's still important to open a separate bank account even if you're operating a sole proprietorship or partnership to make bookkeeping much cleaner. It's actually possible to lose your limited liability if you don't keep your personal and business finances separate. Any of your personal money that is mixed in with your business funds could be considered "on the table" if your business is sued.

Resource: How to Open a Business Bank Account

9. Set up Credit Card Processing

It's time to think about how your business will accept payments! You'll need to select a secure and reliable option for credit card processing in order to accept card payments from customers.

If you have a brick-and-mortar store, you can use a simple card reader during the checkout process. It’s affordable, easy to use, and a simple process. You can also choose a point of sale transaction (POS) system that is an integrated computerized network. A POS provides inventory management, credit card processing, and transactions.

Online retail and eCommerce stores can set up accepting credit cards through the website builder such as BigCommerce, Shopify, and WordPress.

Resource: How to Accept Credit Card Payments

10. Establish an Accounting System

Decide what accounting method you want to use to manage your "books" before you begin generating revenue. An accounting system will allow you to track business expenses, keep clear tax records, optimize applicable tax deductions, manage budgets and trace cash flow. A good accounting system is also an important tool for gaining both short-term and long-term insights regarding business performance that can help you to make better business decisions. Many accounting platforms offer dynamic, AI-led features that actually track business performance in real time to generate projections regarding future performance.

Resrouce: Small Business Accounting 101 Guide

11. Get Business Insurance

Protect your business in Pearland by obtaining business insurance. The amount and type of coverage needed can vary wildly based on the type of business you own. If you'll be operating a brick-and-mortar location that's open to the public, extensive coverage will be needed to mitigate risks related to accidents and injuries. Coverage can protect you for everything ranging from property damage that occurs during a hurricane to a customer suing over an injury caused by your product. Some of the options on the table include general liability insurance, product liability insurance, professional liability insurance, commercial property insurance, home-based business insurance and a business owner’s policy.

12. Hire Employees and Set Up a Payroll

Once your business plan, business registration and financing have all been lined up, it's time to bring your business to life by bringing in the best people to help you grow your dream! You should already have an accounting system in place by the time you're ready to bring in employees. The good news is that most modern accounting software integrates payroll into the same platform. This makes it easy to keep track of cash flow and manage tax reporting as part of your larger accounting plan.