Every week we talk to a new business owner in the Houston area who built something real — actual clients, actual revenue — and then called us because they realized they'd skipped a few foundational steps. The sales tax permit wasn't filed. Personal and business finances are mixed. The business name isn't registered. Everything has to be untangled while the business keeps running.
It doesn't have to happen that way. Texas is one of the best states in the country to start a business — no state income tax, a straightforward Secretary of State process, and a thriving small business ecosystem in Greater Houston. But doing it in the right order matters.
Why the Order of These Steps Matters
Most startup guides hand you a checklist without explaining why the sequence is important. The truth is that some of these steps unlock others — and doing them out of order creates real problems. You can't open a business bank account without an EIN. You can't run payroll without a proper entity. You can't claim legitimate business deductions without a clear separation between personal and business finances.
Do these seven steps in order, and you'll spend less time cleaning up messes and more time building your business.
Step 1: Choose Your Business Entity (LLC vs. Sole Prop vs. Corp)
This is the most consequential decision on the list — and the one most people make the least deliberately. Your entity type determines your personal liability exposure, how you're taxed, and whether you can make certain elections (like S-Corp status) down the road.
Here's the practical breakdown for most Houston-area small businesses:
- Sole Proprietorship: No paperwork, no registration. But also no liability protection — your personal assets are exposed if the business is sued. Good for testing an idea; not ideal for any real business.
- Single-Member LLC: Relatively simple, provides liability protection, taxed as a sole prop by default (all income on Schedule C). This is the right starting point for most solo service businesses and freelancers in Texas.
- Multi-Member LLC: Same liability protection with multiple owners. Taxed as a partnership by default, with a partnership return (Form 1065) required.
- S-Corporation: Not a starting entity — it's a tax election you layer on top of an LLC or C-Corp once your income supports the compliance costs. We cover this in depth in our S-Corp election guide.
For most solo founders in the Houston area, a single-member Texas LLC is the right default. It's simple to maintain, provides meaningful liability protection, and leaves your tax options open as you grow.
Step 2: Register With the Texas Secretary of State
Forming a Texas LLC requires filing a Certificate of Formation with the Texas Secretary of State. As of 2026, the filing fee is $300. You can file online through the SOS website, and approval typically takes 3–5 business days for standard processing.
If you plan to do business under a name different from your legal LLC name, you'll also need to file an Assumed Name Certificate (DBA) with the county clerk in each county where you operate — typically Harris, Fort Bend, or Brazoria for Houston-area businesses. The fee is nominal (around $14–$25 per county).
Step 3: Get Your EIN From the IRS
An Employer Identification Number is your business's federal tax ID — the equivalent of a Social Security Number for your entity. You need it to open a business bank account, hire employees, file business tax returns, and establish credit in your business's name.
The good news: it's free, and you can get it instantly online through the IRS website. The application takes about 10 minutes. Apply at irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online.
"Get your EIN the same week you file your Certificate of Formation. It costs nothing and takes 10 minutes — but you can't open a business bank account without it." — Darshi Kasotia, CPA
Starting a new business in the Houston area?
We walk new founders through entity selection, EIN setup, and accounting system configuration — so your foundation is right from day one, not something you have to fix later.
Step 4: Appoint a Registered Agent
Texas requires every LLC to maintain a registered agent — a person or company with a physical Texas street address who is available during business hours to receive legal documents on behalf of your business. This is not optional.
You have three choices:
- Be your own registered agent. If you have a physical Texas street address (not a P.O. box), you can list yourself. This works fine for home-based businesses, but your address becomes part of the public record.
- Use a commercial registered agent service. Services like Northwest Registered Agent or ZenBusiness charge $50–$150/year to serve as your registered agent, keeping your personal address off public filings.
- Use your CPA or attorney. Some firms offer this as part of a formation package. We can point you toward the right option for your situation.
Whatever you choose, make sure the registered agent's information is always current with the SOS. Failing to maintain a registered agent is one of the most common reasons Texas LLCs fall out of good standing.
Step 5: Open a Dedicated Business Bank Account
This is the step most new business owners delay — and it's the one that causes the most accounting headaches later. Commingling personal and business finances creates three distinct problems:
- It undermines the liability protection your LLC was designed to provide (courts sometimes "pierce the corporate veil" when owners treat business funds as personal money)
- It makes bookkeeping dramatically more time-consuming and error-prone
- It makes tax deduction documentation harder to defend in an audit
To open a business checking account, you'll need your EIN (which is why Step 3 comes first), your Certificate of Formation, and your operating agreement. Most major banks and credit unions in the Houston area — Chase, Wells Fargo, Frost Bank, Amegy — offer business accounts. Many online business banks (Relay, Mercury) have no monthly fees and excellent accounting software integrations.
Step 6: Register for Texas Sales Tax (If Required)
Texas has a state sales tax rate of 6.25%, with local jurisdictions adding up to 2% more — making the Houston area's combined rate typically 8.25%. If your business sells taxable goods or certain taxable services, you're required to collect and remit sales tax from the day your first taxable sale occurs.
Not all services are taxable in Texas. The state taxes specific services including data processing, telecommunications, and certain repair services — but most professional services (consulting, accounting, legal) are not taxable. Tangible personal property sales generally are taxable.
Register for a Texas Sales and Use Tax Permit through the Texas Comptroller's eSystems portal before your first taxable sale. Registration is free, and once registered, you'll file returns monthly, quarterly, or annually depending on your sales volume.
Step 7: Set Up Your Accounting System Before You Spend a Dollar
The final step is the one most people push off until they have to — and then regret not doing sooner. Setting up a proper accounting system from day one means every dollar in and out is categorized, tracked, and ready for tax time. Doing it retroactively after six months of transactions is painful and expensive.
For most Houston small businesses, we recommend cloud-based accounting software — either Xero or QuickBooks Online. Connect it directly to your business bank account and credit card. Set up a simple chart of accounts that mirrors how you think about your business. Run a profit and loss report monthly.
The goal isn't just tax compliance — it's knowing whether your business is actually making money, which products or services are most profitable, and whether your cash flow can support the next hire or equipment purchase.
What Most People Skip (and Regret Later)
Beyond the seven steps, there are a few things we consistently see new business owners overlook in the first year:
- An operating agreement. Texas doesn't require single-member LLCs to have one, but you should have one anyway. It documents how the business is managed and is often required by banks, investors, and commercial landlords.
- Quarterly estimated tax payments. As a self-employed business owner, you owe taxes quarterly — not just in April. Missing these deposits triggers underpayment penalties. We help clients set up the right quarterly payment amounts from the start.
- Business insurance. General liability, professional liability (E&O), and if you have employees, workers' compensation. The type and amount varies by industry, but ignoring this in year one is a real exposure.
- A CPA relationship before you need it urgently. The clients who get the most value from working with us are the ones who started the conversation when the business was young — not in March when they realize they owe $40,000 in taxes they didn't plan for.
Texas makes it genuinely easy to start a business. The state filing is straightforward, there's no income tax, and the Houston economy gives you access to clients across almost every industry. But "easy to start" and "set up correctly" are two different things. Take the time to do these seven steps in order, and you'll spend the next five years building — not untangling.
