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How to Start a Business in Sugar Land Texas
If you’re thinking of starting a business in Texas, Sugar Land is a great choice for several reasons, including its location just 22 miles southwest of Houston, TX, a diverse population, and pro-business government support on all levels. Following are 12 steps for anyone wanting to know how to start a business in Sugar Land Texas.
12 Step Checklist to Starting a Business in Sugar Land Texas
- Research and Plan your Business
- Choose a Business Structure
- Create a Business Name
- Register Your Business
- Obtain an EIN
- Complete Texas State Registrations
- Apply for Sugar Land Business Licenses and Permits
- Open a Business Bank Account
- Set up Credit Card Processing
- Establish an Accounting System
- Get Business Insurance
- Hire Employees and Set Up a Payroll
Getting a new business started on the right foot requires careful planning. In fact, it is lack of research and planning that are major contributors to the approximately 20 percent of U.S. small businesses failing in the first year of operation, as reported by the Bureau of Labor Statistics. Your chances of success are greatly improved when you do in-depth research and prepare a business plan before launching a business.
The conventional business plan will help you learn how to start a business in Sugar Land Texas because it walks you through the requirements for success. It requires in-depth market research to make sure your product or services are needed. There are sections that include the company description, analysis of the competition, financial planning, marketing and sales plan, organization and management model and financial projections. It forces you to look at the real world where the business will be operating.
You can prepare a shorter version of the business plan, but the traditional longer one is necessary to get funding from lenders. By creating a solid business plan, you have the roadmap for business establishment, growth and sustainability. The business plan is a “living” document in that it is revised as the business grows or circumstances change.
Resource: How to Write a Successful Business Plan
The business structure chosen is a decision that must take a number of points into consideration. They include taxes, personal and business liability, business continuity, management, transferability rights of ownership and more. The business structure options are the following:
- Limited Liability Corporation (LLC) – Small businesses that operate LLCs have personal asset protection if the company has any issues, either financial or legal. Preferred pass-through means that the owner pays taxes on their individual income but not what the business earns or loses. There's more flexibility with an LLC for small business owners than some other business entities, making it a preferred choice.
- Corporation – A corporation is a formal business structure that creates a legal person separate and distinct from shareholders. The shareholders each hold one or more shares of stock representing their ownership interest. The corporation has a set of characteristics that include limited liability, management centralization, ongoing duration and ease of ownership transferability interests. Profits are taxed at the corporate rate before distribution to shareholders.
- Sole Proprietorship – Sole proprietorships are the simplest business form in which you conduct business without a formal organization. You do not need to register the business, however, you are limited to operating under a business name that includes your personal name. You can operate under a name that does not include your personal name by filing a DBA, commonly referred to as an "Assumed Name" in Teas. Sole proprietors have the downside of having unlimited personal liability.
- General Partnership – A partnership is formed by two or more people to conduct business for profit. It is not a separate legal entity, meaning the owners have unlimited liability should the business experience an issue. A general partnership has pass-through tax status, meaning taxable income is passed to the partners for taxing on personal tax returns.
For a more in-depth breakdown of each entity type to help you pick the right structure you can read this guide. In this How to Choose a Business Structure Guide you can learn the differences between formal and informal business structures along with their advantages and disadvantages.
You may have a business name in mind, but there are some things to take into consideration before making your final selection. Your business name is more than an identification for government and tax purposes. It is a critical component of your brand in the marketplace.
Some of the points to keep in mind when choosing a name include the following:
- It must be a unique name that is not difficult to spell
- The name should convey a meaning related to your business purpose
- The name should not be related to a single product or service
- The name should be easy to search online
These are just a few tips for choosing a thoughtful business name that stays relevant as your business expands.
Resource: How to Name your Business Guide
The business structure you chose determines the steps needed to register your business name. To Register a business in Sugar Land Texas, you will first follow the State of Texas requirements.
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
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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.
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
EIN is the acronym for Employer ID Number. This is the IRS-issued number for tax filing and for payroll tax purposes. A sole proprietor does not have to get an EIN, but it is required for a Corporation, multi-member LLC, and partnership. Any business can voluntarily request an EIN, and many do because it is used instead of a social security number. You can request an EIN by completing an online form at the EIN Assistant site of the IRS.
Resource: What is an EIN and How to Apply for One
There are two main types of Texas State registrations: sales and use taxes and employment taxes. If you sell physical goods, taxable services and operate in Texas, you can register online through the Texas Comptroller of Public Accounts’ eSystems website.
If you hire people, you have to pay unemployment taxes. The state calls these businesses “liable employers.” The Texas Workforce Commission (TWC) is the agency in charge of unemployment reporting and tax collections. You have 10 days to complete the registration process after you become liable for unemployment taxes. You can quickly file online through the TWC.
Texas State Registration Resources:
The State of Texas does not require getting a business license because the Certificate of Formation filed at the state level or the Assumed Name Certificate filed at the county clerk’s office are considered general business licenses. This applies to the Sugar Land Texas business license requirements. It is important to always verify business license and permit requirements at the county and local level at the time of business formation. For example, the City of Sugar Land currently does not require a business license but does require permits for a handful of businesses like food establishments, any business selling alcohol, and building construction. There are state licensing requirements for certain professions too, and many are sole proprietors, i.e. massage therapists and attorneys.
- Federal Business Licenses and Permits
- State of Texas Business Licenses and Permits
- Sugar Land Texas Business Licenses and Permits
Mixing business and personal expenses is never a good idea for several reasons. First, should a business liability issue come up, a bank account with combined expenditures could put personal money and other assets at risk. Second, not separating personal and business expenses creates unnecessary accounting work. Third, a failure to maintain a separate business bank account could lead to loss of limited liability status, if you are structured as a corporation or LLC.
It is easy to open a dedicated business bank account. The bank will require you to submit certain documents and ID numbers, like the EIN or social security number, business license or DBA certificate, and business legal documents, like a partnership agreement. If you follow the steps presented in steps 1-8, you have everything needed to open a business bank account.
Most businesses accept credit card payments, and especially if your customers can shop online or via mobile. The Global Payments Report 2021 projects digital wallets will account for 51.7 percent of global e-commerce transactions by 2024. According to Fundera, only 10 percent of consumers now make purchases with cash. Whether selling online or in a brick-and-mortar store, it is good for every business to accept credit and debit cards.
There are two types of credit card processing options. You can create a merchant account through a financial institution or use a third-party payment processor. It is important to understand your options and to learn the basic steps to ensure you make decisions good for future business growth.
Resource: How to Accept Credit Card Payments
Every business needs an accounting system for tracking business revenues and expenditures. A good accounting system will include, as a minimum, the ability to create a budget, monitor cash flow, classify revenues and expenditures and generate financial reports that provide insights into the financial status of the business.
Additional features may include producing projections on a monthly, quarterly or yearly basis and creating business analytics for decision-making. One of the first decisions you will make is whether you want to use a cash or accrual accounting system. For example, a sole proprietor may choose a cash system, while a corporation will select an accrual basis system. Staying current on accounting for your financial status is a key strategy for long-term business success.
Resrouce: Small Business Accounting 101 Guide
Business insurance is a necessity if you want to minimize your risks due to things like property damage, losses, lawsuits, errors and omissions, natural disasters and accidents. There are different kinds of business insurance policies available today with each one designed for a specific type of coverage like product liability or general liability. A good idea is to learn the types of business insurance policies available, and then select one or more policies that give you the best coverage for major risks associated with operating your particular type of business.
Resource: Guide to Small Business Insurance 101
By this step in the process detailing how to start a business in Sugar Land Texas, you are ready to do business, unless you decide you need to hire employees. If you hire employees, you need to set up a payroll system that calculates the appropriate pay, takes required deductions, cuts net payroll checks or does direct deposits and provides the information you need for figuring amounts you will remit to the federal, state and local Texas agencies, like employee and employer social security. A good system will produce wage reports and employer-paid unemployment tax amounts too that you can submit through the Texas Workforce Commission.