How to Start a Sole Proprietorship in Texas in 2025

Texas is practically built for sole proprietorships. It means more freedom and fewer formalities—a business that’s built for agility. If you value independence and speed, this structure is the way to go. Here’s why entrepreneurs across the Lone Star State lean toward this lean, straightforward setup:

• No State Income Tax: Texas keeps things business-friendly by letting sole proprietors keep more of their earnings. One less tax to worry about. More money stays in your pocket.
• Low Startup Costs: There are no formation fees for sole proprietorships. Plus, no costly annual franchise tax like LLCs face—just your basic business expenses.
• Direct Control: It’s all on you. From decision-making to profits, you’re the captain here, and Texas’s regulations are easy on sole proprietors when it comes to how you run things.
• Simple Tax Reporting: Skip the corporate tax forms and keep things streamlined by reporting your business earnings on your personal tax return.

Quick Setup: With minimal paperwork and no formal state filings, starting up is straightforward. File a DBA if you’re using a business name other than your own, and you’re good to go.

Starting a sole proprietorship in Texas means embracing a state that celebrates independence and a certain go-big-or-go-home mindset. But even in Texas, “simple” doesn’t mean “zero requirements.” To keep your venture running smoothly, you’ll need to follow Texas’s unique steps to start a business. Here’s how to start a sole proprietorship in Texas in 2025:

Step 1: Naming and Registering Your Sole Proprietorship

A good name can set the tone for your business, especially in a state that values reputation as much as Texas does. Here, your business name is your first impression, and you want it to stand out. Texas requires that each business name be unique, so before you go all-in, check if the name you want is available on the Texas Secretary of State’s website.

Plan to operate under a name other than your own? You’ll need to file for a “Doing Business As” (DBA) name, also known in Texas as an “Assumed Name Certificate.” The filing is done at the county level, meaning each county has its own process and fee structure. Once filed, this DBA is your go-ahead to use that name in all business dealings. It’s an easy step but an important one for making your business official and recognized in Texas.

Step 2: Handle Permits, Licenses and Texas Taxes

Naming your business is only the start. In Texas, making your sole proprietorship legit means tackling both the required licenses and the taxes. While the specific requirements for your business will vary depending on your location and industry, here are some common ones to look out for:

• Sales Tax Permit: If you’re selling tangible products or taxable services, a sales tax permit from the Texas Comptroller is mandatory. This lets you collect and remit sales tax, which varies by county, so double-check rates based on where you operate.
• Professional and Occupational Licenses: For certain professions, like cosmetology, electrical work and general contracting, the Texas Department of Licensing and Regulation (TDLR) has specific licensing requirements. Make sure you’ve got this covered if you’re working in these regulated fields.
• Health and Safety Permits: In the food business? Texas requires strict health permits for food establishments, including food trucks and home kitchens. Contact your local health department to make sure you meet all sanitation and food handling regulations.
• Zoning and Signage Permits: If you’re setting up a storefront, zoning rules in Texas cities may restrict where you can operate. Putting up signage? Many cities require a separate signage permit, so check with your local permitting office to avoid surprise fees.
• Home-Based Business Permit: Running your business from home? Texas may require a home-based business permit, especially if you’ll have clients visiting or signage displayed. Regulations vary by city, so it’s worth a quick call to your local office.

Once your business is licensed, it’s time to deal with your Texas tax burden:

• Self-Employment Tax: As a sole proprietor, you’re responsible for the self-employment tax (covering Social Security and Medicare), typically around 15.3% of your net earnings.
• Federal Income Tax: While Texas doesn’t impose a state income tax, the IRS still expects its share. Calculate and remit estimated quarterly payments (April, June, September, and January) to avoid penalties.
• Franchise Tax (if applicable): Most sole proprietors are exempt, but if your setup involves a limited partnership or other specific business forms, double-check with the Texas Comptroller on franchise tax requirements.
• Deduct Business Expenses: Office supplies, marketing costs, travel expenses and more can be deducted, so keep records meticulously organized. When tax season arrives, you’ll thank yourself for the forethought.
• Home Office Deduction (if eligible): Running the show from home? Deduct a portion of your home expenses if you have a dedicated workspace. Just make sure it’s solely for business.

Step 3: Open a Dedicated Business Bank Account

You might be tempted to use your personal account but mixing personal and business finances is a big no. Open a dedicated business bank account to keep things clean, organized, and above board. With an account for business-only transactions, you’ll simplify tax time and protect your limited liability (yes, even as a sole proprietor, it matters). It also adds credibility to your business. Here’s what you’d traditionally need:

• Bring your DBA: If you’re operating under a trade name, show up with your DBA certificate.
• Identification: Have your Social Security number or EIN, along with a government-issued ID.
• Initial Deposit: Some banks require a minimum deposit to open a business account.

But why deal with in-person lines or paperwork piles? Online-only banks make it easy to set up a business account, fast and hassle-free. Skip the in-person visits and instead open an account from anywhere in Texas. Look for a business-friendly, streamlined solution that helps you focus on what matters: growing your venture without the banking headaches.

Step 4: Keep Your Texas Business Compliant

Texas may be business-friendly, but that doesn’t mean you get to coast once you’re up and running. Annual renewals, permit checks and keeping your tax game on point are all part of the deal. Staying compliant in Texas is simpler than in many states, but it still requires attention.

• Check for Permit Renewals: Some Texas cities require annual renewals for specific permits, like health or occupancy permits. Make it a habit to review what’s needed for your area.
• File Your Annual Sales Tax Return: If you’re registered for sales tax, file that report annually or quarterly, depending on your revenue. Texas expects timely reporting.
• Estimate Tax Payments: Keep your quarterly estimated taxes rolling. Texas might not have a state income tax, but Uncle Sam still expects his cut.

Make Your Mark in Texas

Ready to start your sole proprietorship in Texas? You’ve got all your permits and legal essentials in place. Now, Texas is your open range, filled with opportunity and that wide-open potential the state is famous for.

As a fully online bank, North One is the financial partner you need as you launch your Texas sole proprietorship. With no branches to visit, you can skip the lines and manage your finances anytime, anywhere, with seamless 24/7 access from any device. Our platform simplifies expense tracking and cash flow management, so you can stay focused on what matters most—growing your business in the Lone Star State.

You’ve got the drive and a clear vision. Now it’s time to join Texas’s dynamic business community and make your mark. Let North One help you turn your plans into reality.