Texas Business License

Embarking on a new business venture in Texas can be confusing for many aspiring entrepreneurs, especially since there isn’t a general Texas Business License available. This creates a maze of federal, state, and local licenses that potential business owners must navigate.

With most cities and counties each enforcing their own distinct requirements — and some even necessitating specialized licenses — the journey to becoming legally operational can seem daunting.

Fortunately, we’ve designed this guide to simplify securing the necessary permits in Texas and help you understand what you need to do to legally start your business. Read on to step into the next stage of your business journey with confidence and peace of mind.

Do I Need a Business License in Texas

In Texas, business licenses are not issued as a single, general license by the state. Instead, you must obtain a combination of licenses and permits. This is based on a number of factors, such as the location of your business and the type of business you plan to launch.

Type of Business

Below, we’ve detailed common ways in which your business type can dictate the licenses you’ll be required to obtain, as well as specific examples of these:

• Sales Tax Permits: If your business plans to sell tangible goods, taxable services, or lease/rent personal property in Texas, it will require this license from the Comptroller of Public Accounts so that its sales tax can be collected
• Professional Licenses: If you’re starting a business in a regulated field like medicine, law, or accounting, you’ll need to obtain a professional license specific to that industry. One example of this is the Certified Public Accountant License, which the Texas State Board of Public Accountancy grants
• Environmental Permits: If your business’s activities could potentially impact the environment, it’ll likely need specific permits from environmental agencies in order to operate legitimately, such as the Texas Pollutant Discharge Elimination System (TPDES)

However, this is not the only factor influencing the exact combination of licenses you’ll need — the location of your business within Texas plays an important role as well.

Location

In this section, we’ve provided a succinct overview of the potential licenses and permits that your business may need due to local, state, and federal requirements:

• Local: To start your business in Texas, you’re typically required to obtain a general business operating license from your local government. However, it’s essential to check with your local county clerk as each city often has individual requirements for this license
• State: At a state-wide level, all businesses that sell tangible personal property or taxable services must obtain a Texas sales and use tax permit, which is often referred to as a seller’s permit. This is the case even if your business is located outside of the state but still provides service to customers within Texas
• Federal: While most small businesses in Texas are exempt from federal licenses or permits, businesses involved in sectors regulated by the federal government must obtain specific credentials. These sectors primarily include agriculture, alcoholic sales, and firearms, among others

Since the exact permits and licenses your business will need are entirely unique to your situation, you’ll have to conduct thorough research into your own local, state and federal regulations to smoothly launch your business.

Alternatively, many entrepreneurs opt to leverage the expertise of third-party services to handle this on their behalf.

How to Get a Business License in Texas

In order to get your business license(s) in Texas, you will need to complete the following steps:

• Form Your Business
• Obtain an Employer Identification Number (EIN)
• Apply for the Required Licenses and Permits

Let’s take a look at each step in more detail below.

Step 1: Form Your Business

Before setting out to obtain a business license in Texas, it’s pivotal that you first choose an appropriate structure for your business. Sole proprietorships, general partnerships, and corporations are all common choices, however it’s often seen as the most advantageous for small businesses in Texas to register as a Limited Liability Company (LLC). Here are a few reasons for why:

• Limited Liability: Members are protected from personal liability for business debts, safeguarding personal assets
• Tax Benefits: LLCs typically enjoy a pass-through tax treatment, avoiding the double taxation that corporations are subjected to
• Management Flexibility: LLCs allow for flexibility in management structure, either being member-managed or manager-managed based on the preferences outlined in the certificate of formation
• Ease of Formation: With the Texas Secretary of State providing forms that meet the minimum state law requirements and the option to file online, setting up an LLC is relatively straightforward

Many small business owners opt to avoid the tricky process of forming an LLC by instead leveraging the help of third-party LLC formation services.

Step 2: Obtain an EIN

The second step you’ll need to complete before applying for your business license is to obtain your EIN. This is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to businesses in the United States so that their financial transactions can be identified and tracked.

An EIN is often necessitated when applying for various permits and licenses as it allows local and state governments to ensure your business is operating within the confines of the law. You can obtain it in a number of ways:

• Online: You can apply for your EIN on the IRS’s official website by using the EIN Assistant. You should be granted your EIN shortly after completing this application
• By Fax/Mail: After completing Form SS-4, you can apply for an EIN by submitting it to the IRS via mail or fax
• By Phone: International applicants and businesses located outside US Territories are required to call the IRS at (267) 941-1099 to obtain their EIN — which they should receive during this call

Note: If you are a sole proprietor, you will be able to use your Social Security Number (SSN) instead (as long as you do not have employees).

Step 3: Apply for Licenses and Permits

After settling on the appropriate structure for your business and initiating the application for your EIN, the next step is to focus on securing the necessary licenses and permits to operate legally within your locale and industry.

• Local Licenses: It’s important to consult with your local city clerk or county recorder to determine the specific licenses or permits your business may require, as these requirements can vary greatly between different municipalities
• Statewide Licenses: Most businesses that conduct business in Texas will need a sales and use tax permit, as well as more specialized state licenses depending on the type of business. The Texas Business Licenses & Permits Guide provided by the state’s Business Permit Office is a useful resource for understanding your licensing requirements
• Federal Licenses: While the federal government doesn’t mandate licenses for general business operations, if your business falls under any government-regulated category, such as agriculture, fishing, firearms, and alcohol sales, it may be required to obtain additional federal licenses or permits

Note: For more detailed information on municipalities and their respective websites, check out the Texas Municipal League’s website.

Step 4: Renewal of Licenses and Permits

Many business licenses must be renewed every one or two years in order to keep them valid. If you’re uncertain whether you need to renew any of your business’s licenses, make sure to reach out to the agency that issued your business license for clarification.

Alternatively, due to how complicated each step of applying for and renewing business licenses is, third-party services that handle this entire process are becoming an increasingly popular option.

How Much Is a Business License in Texas

If your local municipality requires it, a standard business operating license typically costs between $15 to $30 on the low end to up to several hundred dollars at the high end. However, it’s tricky to accurately estimate the total cost of acquiring the business licenses you’ll need. As we mentioned before, licensing costs vary considerably depending on the nature of your business and the specific requirements of your local area.

As an example, if your business is categorized under the “vice” section, which includes activities like running a dance hall or amusement centers, it will often incur much higher licensing fees. Nearly $2,500 alone can go on the initial zoning survey, followed by an annual licensing fee of $500 or more.

Overall, to ascertain the exact costs, you would need to conduct detailed research into your particular business type and the region in which you plan to operate. However, many business owners opt to save both time and money by employing a third-party service to do this on their behalf.