Starting your own business is an exciting venture.
But before you get too far along, you’ll want to figure out what type of business entity is right for you.
There are a number of business entities to choose from.
For example, you might consider forming a limited liability company (LLC), corporation, or partnership, among others. Each has various advantages and disadvantages.
One popular option for entrepreneurs and new businesses is the sole proprietorship. If you’ve decided that a sole proprietorship is a good fit for your business and are wondering how to set up a sole proprietorship in Texas, you’re in the right place.
Founding attorney Adam Curley has extensive experience helping business clients through a variety of legal matters, including business entity formation.
Use our guide below to learn more about how to start a sole proprietorship in Texas. If you have questions or are ready to move forward with the formation process, give The Curley Law Firm a call today.
Starting a Sole Proprietorship in Texas: An Overview
So, what exactly is a sole proprietorship?
Sole proprietorships are a very popular entity choice for many new business owners. In fact, sole proprietorships are the most common business entity in Texas.
A primary reason for their popularity is that they are relatively simple to form in comparison to other entity types such as LLCs and corporations.
Ready to learn more about how to start a sole proprietorship in Texas? Here’s what you need to know.
Steps to Start a Sole Proprietorship in Texas
To create certain entity types, you must formally register the business with the State of Texas. However, registering a sole proprietorship in Texas is not necessary to legally operate your business.
Rather, a single individual can engage in business activities without any formal organization. In doing so, a sole proprietorship is created.
Nevertheless, there are still certain steps you should take to ensure that your business is able to operate legally and effectively:
- Select a business name, if something other than your individual legal name;
- Check with the Texas Secretary of State to verify whether your desired business name is available;
- If available, reserve your preferred name through the Texas SOSDirect website to ensure that nobody takes it while you get everything else squared away;
- File an assumed name certificate in the appropriate county or counties within the state;
- Depending on the goods or services you intend to provide in the course of your business, make sure you get any necessary licenses or permits that you need to operate;
- While not always necessary, consider obtaining an employer identification number (EIN) from the IRS;
- Open business bank accounts; and
- Obtain business liability insurance to better protect yourself from potential lawsuits and debts in the future.
Of course, no two sole proprietorships are exactly the same. Thus, how to start a sole proprietorship in Texas may look a little different from business to business.
If you have questions about your sole proprietorship and the steps you need to take, contact The Curley Law Firm to discuss your business with an experienced business law attorney.
Pros and Cons of a Texas Sole Proprietorship
As with any business decision, there are certain pros and cons of setting your business up as a sole proprietorship.
Some advantages include:
- Ease of formation,
- No initial filing fees,
- Ability to file one single tax return for both business and personal income, and
- Sole ownership and control over the business.
While these can be great advantages, it’s important to remember that there are potential disadvantages as well.
One of the biggest cons of forming a sole proprietorship is the lack of personal liability protection.
A sole proprietorship is not considered to be a separate legal entity from the individual owner. Unlike other entity types that offer personal liability protection for business owners, as a sole proprietor you will be personally liable for any debts and liabilities of the business.
This means that in the event that your sole proprietorship is unable to pay its bills or is sued, creditors will be able to come after you and your personal assets directly.
Nevertheless, a sole proprietorship may still be a great option for your new and growing business. But if you do proceed as a sole proprietorship, make sure to obtain business liability insurance to help protect yourself.
Important Information to Know When Setting up a Sole Proprietorship in Texas
As discussed above, there is no formal document that you need to file with the State of Texas to create your sole proprietorship. However, you may still need to file some paperwork depending on your circumstances.
For example, if the business is conducted under an assumed name, also called a DBA or “doing business as,” you must file an assumed name certificate. For a sole proprietorship, an assumed name is any name other than your own.
Your assumed name certificate must be filed with the office of the county clerk in the county in which your business premise is located.
If you don’t have any business premise, you must file an assumed name certificate in all counties within the state in which you conduct business under that assumed name.
For more helpful information on what you need to know in starting a sole proprietorship in Texas, give our team a call.
Still Have Questions About How to Form a Sole Proprietorship in Texas?
Setting up a sole proprietorship in Texas may be one of the simplest ways to start a business. But that doesn’t necessarily mean that it’s easy.
At The Curley Law Firm, we’ve been helping business clients for over a decade. From entity formation to business litigation, we’ve seen just about everything.
Ready to get started on setting up your Texas sole proprietorship? Contact us today to see what we can do for you.