Starting a business in Houston is exciting and chaotic in roughly equal measure. The legal and tax setup you do in the first 60 days will either give you a clean foundation or a bunch of cleanup work down the road. I’ve walked dozens of new business owners through this checklist; here’s the order I run it in.
1. Pick the right entity structure
This is the foundational decision and it’s worth getting right. The four common options for Texas startups:
- Sole proprietorship / Schedule C: No formation, no liability protection. Fine for very small side businesses with no risk and no plans to grow.
- LLC (single-member): Liability protection, taxed as a Schedule C by default. Most new Houston businesses start here.
- LLC (multi-member): Liability protection, taxed as a partnership by default. Necessary anytime you have more than one owner.
- S-Corp election: A tax election available to LLCs and corporations. Saves significant self-employment tax once your business net income is over roughly $50,000-$80,000 per year.
Most service businesses I help launch in Houston start as an LLC, then make the S-corp election in year one or year two once profitability is consistent. We cover the trade-offs in detail in our S-Corp vs LLC in Texas article.
2. Form the entity in Texas
You file a Certificate of Formation with the Texas Secretary of State. Most LLCs cost about $300 in state fees and can be done online. Use a registered agent service or your own office address. I generally recommend setting up the LLC yourself or with a flat-fee attorney rather than paying $1,500 to one of the “legal subscription” services that bundle a bunch of stuff you don’t need.
3. Get an EIN
Apply for an Employer Identification Number directly at irs.gov. It’s free and takes about 10 minutes. Don’t pay any third-party service for this — the official site is straightforward and instant. You’ll need the EIN before you can open a business bank account.
4. Open a business bank account — immediately
The day your EIN is issued, open a separate business checking account and run every business dollar through it. Mixing personal and business finances is the single most damaging thing a new business owner can do. It corrupts your books, weakens your liability protection, and makes tax prep a nightmare.
5. Register for Texas franchise tax and sales tax (if applicable)
Every Texas LLC and corporation has to file a Texas franchise tax return annually, even if no tax is owed. Our Texas franchise tax guide walks through the rules. If you sell taxable goods or services, register for a Texas sales and use tax permit through the Comptroller’s website. This is free and takes about 15 minutes online.
6. Make the S-Corp election (if applicable)
If your projected income makes S-corp status worthwhile, file Form 2553 within 75 days of starting the business. Late elections are possible (Form 2553 with reasonable cause) but messier. Talk to a CPA before filing — the wrong S-corp election creates more problems than it solves.
7. Set up bookkeeping from day one
QuickBooks Online (Plus tier for most businesses) is the standard. Set it up correctly from the start — we cover the steps in our QuickBooks setup guide. Connect your business bank account and credit card to the bank feeds. Categorize transactions weekly, not annually. Reconcile monthly.
8. Set up payroll if you’ll have employees (or you take an S-corp salary)
Don’t run payroll out of your checkbook with a manual calculator. Use Gusto, ADP, or QuickBooks Payroll — they handle federal, Texas, and unemployment tax filings automatically. Skipping payroll compliance is one of the fastest ways to attract IRS and Texas Workforce Commission attention. We offer full-service payroll if you’d rather hand it off.
9. Set up retirement accounts
Once the business is generating consistent profit, a Solo 401(k) (no employees other than spouse) or SEP IRA (employees allowed) shelters significant income from tax. The plans are easy to set up at Fidelity, Schwab, or Vanguard. Even small contributions early compound dramatically.
10. Buy adequate insurance
General liability, professional liability (E&O), commercial auto if applicable, and workers’ comp once you have employees. Bundle these through a competent commercial broker, not the cheapest online quote. The cost is far less painful than an uninsured claim.
11. Plan for quarterly estimated taxes
Once the business is profitable, you’ll owe federal income tax (Texas has no state income tax). The IRS expects payment quarterly — April, June, September, January. Underpayment penalties are mechanical. Our quarterly estimated taxes guide covers the rules.
12. Build the team you’ll need by year-end
You don’t need everything on day one, but by month six you should have:
- A CPA who handles tax prep and planning
- A bookkeeper (or you commit to weekly self-bookkeeping)
- A business attorney for contracts and disputes
- A commercial insurance broker
- A banker who actually knows your business
You don’t need to spend big money to assemble this team — you just need each role filled with someone competent and reachable.
What to skip
I’ll save you some money. You don’t need:
- An expensive logo and brand identity in month one. Get to revenue first.
- An office space until you’ve outgrown your home or a coworking spot.
- A separate D-U-N-S number unless you’re going after government contracts.
- A virtual mailbox in Wyoming or Delaware. You’re a Texas business; act like one.
- A C-corp election unless you’re raising venture capital. C-corps are great for VC-backed startups and bad for almost everyone else.
The first conversation
If you’re launching a Houston business in the next 90 days, the right time to talk to a CPA is now — before you form the entity, not after. We do free 30-minute setup calls for new business owners. Call the office at (832) 983-7080 or reach out through the contact page. We’ll walk through entity selection, tax structure, and what your first 12 months look like — no pressure, no upsell.