How to get a business license in Texas

How to Get a Business License in Texas: The Ultimate Guide

November 15, 2022
5 minutes read

So, you’ve refined your business idea and are in the midst of setting up shop—and in Texas no less, which is a great place to start a business. One of the first things you have to find out is whether your particular venture needs a business license to operate. That’s a tricky question, but one that can be refined by defining the nature of your company and how it works. 

Is it a locally run business or a state-wide one? Is your industry regulated by the federal government? In this article, we cover all of this and more. Read on, and you will discover how to know if you need a business license, how to go about getting the right one(s), and how much this might cost you. With each point, the key factor is what kind of business you’re running. Let’s dive in together!

Do you need a business license in Texas?

The first question is this: Do you actually need a business license in Texas? From business to business, the answer will change because every business is different structurally and, of course, in terms of the goods and services it provides. In Texas, there are no general business licenses on a state level, as is the case with many states. But there are specific licenses for certain business activities.

Types of business licenses in Texas

Each license type pertains to specific business types: local, statewide, and federal. Each of them is relevant and attainable. Let’s take a look!

1. Local 

Local businesses are required to get licenses for the sale, distribution, or servicing of particular activities or substances. For instance, alcohol. There is a difference between a business that sells alcohol and one that doesn’t sell it. For example, if you give alcoholic beverages away for free, then you don’t need a permit. But it needs to be completely free. The ‘selling’ factor is what counts. Make sense?

In general, if you’re selling and distributing food or beverages across the state, then you will need a statewide license. Also, if you plan to build offices or other extensions to your place of work, you will need building permits from the local council or city planning departments. 

2. Statewide

All businesses that operate within the confines of Texas have to apply for a sales use and tax permit (also known as a seller’s permit). This is to legitimize the selling and distribution of your services and/or goods. 

This is likely mandatory if your business is selling bikes or your own brand of beer, for example. This is because these kinds of items are likely to sell on a statewide level . So yes, you need a permit for that. But there’s no need to fret, all can be sorted out! Leaf through the website for the Comptroller’s office (the government agency that oversees and validates your fiscal business activity) and get your permissive ducks in a row.

3. Federal

Small businesses are unlikely to need federal sanctions. However, many industries are regulated by the Texas authorities. Those industries require federal licenses so they can operate legally and in accordance with the Texas authorities. So make sure that if you fall into that category, you secure your federal license before you get going with business.

Regulated industries include agriculture, sales, distribution, serving of alcohol, firearms, fish/wildlife, transport, radio/TV broadcasting, nuclear energy, maritime exploration/transport, and aviation.

How to get a business license in Texas: Five easy steps

Let’s explore the nitty-gritty because this is where it gets exciting. You’ll have to make some important decisions that shouldn’t be taken lightly. These decisions are what will make your business fully operational.  And the sky's the limit. All you have to do is follow these steps:

1. Name your company and form it in Texas

2. Apply for a Texas business tax license

3. Determine other local licenses applicable to your Texas business

4. Apply for any statewide license that your Texas business requires

5. Apply for federal licenses and any necessary tax treatment

1. Name your company and form it in Texas

Regardless of where you set up your business, naming it is paramount for its success. The name must be concise, tell the story of what you’re offering your customers, and sound reputable. Take a look at your Texas-based competitors too. When you form a business in a particular place, you must offer something different or new.

Aside from a business name, you also will need to determine your business entity type (LLC, sole prop, etc.), an EIN (Employer Identification Number) or SSN (for sole proprietors), and all this must be in accordance with Texas’s rules and regulations.

2. Apply for a Texas business tax license

You may or may not require a general operating license, so be sure to check. To find out whether you need one in your particular municipality, you can turn to the TML City Officials Directory. There, you can search your location and find out which licenses are applicable to your company. Convenient, right?

3. Determine other applicable local licenses

You need to find out which local licenses you need. This goes back to what we said earlier: if you’re selling certain items you will need local licenses. Food, beverages, and gambling are three very specific examples, but there are more. This is often due to government regulation. You can apply for local licenses by getting in touch with your county and asking them directly, so hooray, that’s useful!

The essential question: is your industry regulated? Pop a note on your ‘to do’ list to find out  if your industry is regulated, and what you need to do to get the appropriate licenses if that’s the case. It might take a bit of leafing through information, but once it’s done, it’s done.  Now, all you need to do is apply for the appropriate licenses.

4. Apply for any statewide license that your Texas business requires

Which statewide licenses you need depends on what industry your business is in and what it sells. As stated earlier, it’s likely that all businesses operating in Texas will need one of these. To learn everything there is to know about Texan statewide licenses, you should turn to the Texas Department of Licensing & Regulation.

5. Apply for federal licenses and any necessary tax treatment

The Texas government requires businesses to secure permits for specific industries. For instance, if you’re selling firearms or alcohol, you will need a federal license. However, the government doesn’t need licenses for general business procedures. And as you’ve probably guessed by now, all you need to do is check which category your specific business falls into. 

Look at the Small Business Administration’s website to see a detailed list of which industries are regulated.

When do you need a business license in Texas?

In the vast majority of Texas municipalities, businesses need to get a general license in order to function. But the bullet points change for each location. For example, all Dallas businesses require an occupational tax certificate. 

What is an occupational tax certificate? It’s an official document from the Tax Collector or deputy that shows the number of delinquent taxes, penalties, and interest generated by the business in question.

The process isn’t convenient enough to make it so that each county/city has the same stipulations. They’re all different. What’s more, some places regulate particular professions and not others. Because of this, you should study the Texas Business Licenses and Permits Guide. It tells you all you need to know.

Texas business license FAQs

Now that the basics are covered, we will address some frequently asked questions, many of which will become relevant as you progress with setting up your business.

How much does a business license in Texas cost?

Budgeting is relevant to every business founder, so what is the general cost of a Texas business license? Unfortunately, there’s no single answer to this, as you might have guessed. It can be as little as $15 or as much as $1,000. In the former case, you will pay less if you need less licensing and permissions or if all you require is the general business license. 

In the latter case, if you’re selling gambling services, alcohol, or other high-risk businesses, expect higher fees.

Is a business license required in Texas if you sell online?

The short answer: yes, you do. No matter how small-scale your business is, you must hold a sales and tax permit from Texas. That’s your physical location, after all,; it's where you conduct your business. Regardless of where your clients come from, it’s required.

If you run a sole proprietorship, this is not necessary. Appropriate licensing is for LLC-level businesses and above.

How do I renew my Texas business license?

If your Texas business license lies dormant, and you’re concerned about how to renew it, fret not because the process is simple. All you have to do is find the appropriate website; enter your original Registration Number and Registration Expiration Date; review/confirm your contact details and your license information; and then pay the renewal fees. 

The standard fee is $110, plus a $20 filing fee.

Do LLCs require business licenses in Texas?

If you're launching an LLC in Texas, you probably need some level of licensing to operate. Registering your business with the state and obtaining licenses are two different things.

What is a Sales and Use Tax permit?

A Sales and Use Tax permit is for legitimizing the sales and use of your business’s services, products, or goods. It’s a mandatory permit for any business that’s selling or renting property, services, or ‘tangible goods’ in Texas. 

Tangible goods are physical products, such as materials and equipment. A company selling sewing machines is a company that sells tangible goods and would need this permit to exist in Texas.

Go get your Texas business license today

Phew, you’ve made it to the end! Give yourself a round of applause because we know this is a lot of information. But the starting point is for you to define your business strategy and answer the questions that will tell you which licenses you need: Do you sell tangible goods? Are you a sole proprietor, an LLC, or a corporation? 

These answers will put you on the right track. And just like with all other aspects of your business-founding, do your due diligence. Dot the I’s and cross the T’s. Pretty soon, your business will be functional, and you can spend more time doing what you care about: running it.

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Add your logo and brand colors
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Payroll
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Hire a bookkeeper
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By Wave Staff

The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.

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