If you’re thinking of setting up deep in the heart of Texas , you’re in good company. Nearly half of all Texas employees work for small businesses, encompassing more than 4.8 million people.1 But if you’re going to open a business in the “Lone Star State,” you want your company to shine big and bright. Whether you run a sole proprietorship, small LLC, or a large S corporation business, you need business insurance.
Giddy up, y’all, and we’ll walk (or trot) you through everything you need to know to start your own Texan business.
Step 1: Write up a comprehensive business plan
The only time you should “wing it” is on Wing Wednesdays at your local barbecue joint. With your business, on the other hand, you want a meticulous, organized, and well thought-out plan.
Here are a few staples to include in your business plan, but feel free to tailor this template to fit your needs:2
- General summary – Your vision, mission, product or service, internal structure, and potential for expansion
- Function and advantages – Your prospective customer base and how your business will meet their needs
- Market analysis – Industry research to identify similar themes, practices, and areas of improvement
- Organization – Company structure, including legal business structure and executive hierarchy, which includes information such as such general partnership or limited partnership agreements
- Description of service or product – Your offerings and how they get from your business to your customers, including any research and development (your operating agreement as well)
- Marketing strategy – How you’ll attract new customers, retain existing ones, and build your brand
- Funding pitch – Your financial needs including projected expenses, future plans, and legal terms applied to the money you receive
- Financial forecast – A sound outline that shows responsible spending, long-term financial planning, and a stable business model over the next 5+ years
This document will not only be vital in your company’s ongoing success, but also in funding meetings, loan applications, and securing potential business partners.
Step 2: Register your business
Before you can make your business official, be sure to nail down the specifics:
- Name – Decide on a unique name that hasn’t already been registered or trademarked.
- Structure – Choose between a sole proprietorship, partnership, LLC, or S corporation.
- Location – Find a thriving market with an available workforce and customer base if you’ll be opening a physical store.
The process of registering your business depends on the structure you’ve chosen:
Starting a sole proprietorship or partnership – If you’re operating your business under a different name than your own, you’ll typically have to file an assumed business name (or DBA: “Doing Business As”) with the county clerk’s office. You can also choose to trademark the name. If you’re entering a partnership, you should create and sign a partnership agreement, although it’s not legally required.3
Forming a corporation, LLC, or limited partnership – You must file a certificate of formation with the Texas Secretary of State. You can choose to submit through an online portal called SOSDirect.4
In most cases, this is all that’s technically required to create a business. However, there are other steps that need to be taken in order to operate effectively and perform most tasks and transactions—basically, to actually run your business.
Step 3: Follow federal and state tax registration protocol
As an employer, you’ll have to register for an Employer Identification Number (EIN) from the IRS. You can apply online to simplify the process.
If you need more specific ID numbers, licenses, or permits, you’ll also need to register directly with the proper Texas authorities. This could include income tax withholding, unemployment insurance tax, or seller’s permits for sales and use tax, but not all businesses will have to take this additional step. Understanding the filing fee rules, sales tax rules, and Texas franchise tax are important depending on the type of business you will be running in the state.
At this time, you’ll want to set up an accounting and payroll system for your current or eventual employees, plus open a business bank account and order company credit cards. If your business builds a line of credit, you’ll be able to apply for bigger commercial loans in the future.
Step 4: Obtain the requisite permits and licenses
Almost all businesses require one license or another—oftentimes, a combination of several.
You can submit an application or renewal request with the Texas government for any service licenses your business might need. These include every kind of business from accounting firms to youth camps.
Step 5: Secure business insurance
Even if you’ve followed all the required steps and done everything by the book, there’s plenty that can go wrong in any line of work.
Insurance protects you from these incidents, and in some cases, it’s legally required. Here are the most important mandatory and recommended business insurance types:
Workers’ compensation – Unlike other states, Texas doesn’t require private companies to purchase workers’ compensation insurance; however, it’s always a good idea to protect your business in the event of any workplace injuries or illnesses. This type of policy protects your venture from the costs incurred should one of your employees experience a workplace accident. If you don’t want to purchase workers’ compensation, consider at least, purchasing an occupational accident policy and an employers liability policy. These will also mitigate your financial risks.
General liability insurance – Also called business liability insurance, this coverage type is technically optional but practically a no-brainer for emerging businesses. General liability insurance protects you from the financial repercussions of non-employee third-party claims stemming from bodily injury, property damage, and personal and advertising injury.
Professional liability insurance – This coverage type, also called “errors and omissions,” is recommended for “white-collar” industries. If your business provides clients with professional advice or specialized tasks, professional liability insurance can provide legal defense and help cover settlement costs resulting from claims of professional negligence.
Equipment insurance – If you own equipment, you may want to consider insuring it. Otherwise, should something happen to your tools, you’ll be facing out-of-pocket expenses that might derail your meticulous business plan. Insurance for your tools and equipment is known as inland marine insurance, but at Thimble we keep it simple, Business Equipment Protection.
Depending on your business model and day-to-day activities, you might also want to consider commercial auto insurance for company-owned vehicles and commercial property insurance to protect your business’s physical location.
Step 6: Fulfill ongoing responsibilities & requirements
As your business starts to spread its wings and fly high, don’t forget about important recurring tasks to maintain proper status in Texas:5
- After five years, you’ll have to renew your business’s name with the clerk’s office in your operating county.
- As a corporation, you’ll need to file an annual report or “Statement of Information” with updated company information.
- As an LLC, you aren’t required to submit annual reports to the state, but you must instead file a tax franchise report with the CPA each year.
- Corporations also have to file another annual report with the Texas Comptroller of Public Accounts for franchise tax purposes.
Protect your business
Clearly, there’s a lot to think about when opening a business in Texas (or anywhere, for that matter). With Thimble’s convenient insurance options and 60-second application process, you can tackle one thing on that list with a little more ease.
Secure affordable monthly or on-demand coverage that suits your business’s needs, whether that’s general liability insurance, professional liability insurance, Business Equipment Protection—or all three! Just click “Get a Quote” or download the Thimble mobile app to get started.
Your Texas venture awaits
Well, partner, it seems you’re ready for the road ahead.
If you prepare well, follow all the necessary steps, and protect your assets from mishaps and accidents, your business will be the brightest star in the Lone Star State before you can holler “yeehaw.” With Thimble, the journey there will be that much easier.
Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.