Last updated: April 30, 2026

Starting a Business in Texas: Licenses, Permits & Requirements (2026)

Three things make Texas structurally different from every other state when you start a business here. First, Texas has no state income tax – and never can without a constitutional amendment, because Article 8 Section 24 of the Texas Constitution outright prohibits a personal income tax. Second, workers’ compensation insurance is optional in Texas – Texas is the only state in the United States where private employers can choose to operate as "non-subscribers," and 24% of Texas employers did exactly that according to the 2024 Texas Department of Insurance biennial report. Third, HB 2127 (the Texas Regulatory Consistency Act) took effect September 1, 2023, broadly preempting cities from adding labor, employment, and business regulations on top of state law – which means Austin, Dallas, and San Antonio’s paid sick leave ordinances are dead, and the state minimum wage stays at the federal $7.25 floor with no city allowed to push it higher.

That combination – no state income tax, optional workers’ comp, and broad state preemption of local labor mandates – makes Texas one of the lowest-friction labor cost environments for small business operators in the country. The trade-offs are real: a $300 LLC formation fee (the highest standard LLC fee in the US), a layered franchise tax structure that requires every entity to file a Public Information Report whether it owes tax or not, and 6.25% state sales tax that taxes commercial cleaning services (an unusual rule that catches non-Texas operators off guard). This guide compiles the specific Texas agency requirements, portal links, fee amounts, and city-level variations that apply to starting a business in Texas in 2026. The source agencies referenced are the Texas Secretary of State, Texas Comptroller of Public Accounts, Texas Workforce Commission (TWC), Texas Department of Insurance Division of Workers’ Compensation, and the Texas Department of Licensing and Regulation (TDLR).

Texas Business Requirements at a Glance

Requirement	Agency / Portal	Cost	Timeline
LLC Certificate of Formation (Form 205)	Texas Secretary of State – SOSDirect	$300 (paper or online; $308 online with 2.7% convenience fee)	2-3 business days online
Assumed Name Certificate (DBA, Form 503)	Texas Secretary of State (statewide registered entities) or county clerk (sole proprietors and unregistered partnerships)	$25 with SOS; $15-$25 typical at county	Immediate
Federal EIN	IRS.gov	Free	Immediate online
Sales and Use Tax Permit	Texas Comptroller	Free; no security deposit unless required by Comptroller	2-3 weeks
Franchise Tax + Public Information Report (PIR)	Texas Comptroller	2026 no-tax-due threshold: $2,650,000 revenue; 0.375% retail/wholesale or 0.75% other above threshold	Due May 15 annually
TWC Unemployment Insurance Tax	Texas Workforce Commission	2026 new employer 2.7% on $9,000 wage base; range 0.32%-6.32%	Register before first payroll
Workers’ Compensation (optional – only state)	Texas Mutual Insurance Company or private carrier	Varies by payroll and class code; non-subscribers $0 but lose tort defenses	Optional; non-subscribers file DWC-005
New Hire Reporting	Office of the Attorney General Child Support Division	Free; $25 per missed report	Within 20 days of hire
TDLR Professional License (industry-specific)	Texas Department of Licensing and Regulation	Varies by license	Before practicing in licensed profession
Local Business License (city, if required)	City permitting office	Varies by city and industry	Before operating

How to Start a Business in Texas (Step by Step)

Step 1: Form Your Texas LLC with the Secretary of State

File Certificate of Formation Form 205 online through SOSDirect at the Texas Secretary of State. The filing fee is $300 – the highest standard LLC formation fee in the country (compared to Colorado at $50, New Mexico at $50, and the next-highest standard rate at Massachusetts at $500). Texas adds a 2.7% credit card convenience fee for online payments, bringing the effective online cost to roughly $308. Paper filings cost the same $300 but take longer to process.

Your LLC name must include "Limited Liability Company," "LLC," or "L.L.C." and must be distinguishable from existing entity names in the SOS database. Run a name search at the SOS website before filing. Series LLC filings cost the same $300 – Texas was an early adopter of the series LLC structure under Business Organizations Code Chapter 101 Subchapter M, useful for real estate investors who want each property in its own protected cell.

Registered agent: Your Texas LLC must designate a registered agent with a physical street address in Texas (no PO boxes). You can serve as your own registered agent if you have a Texas address, or hire a third-party service.

Texas does not require an annual report for LLCs – but you must still file a Public Information Report (PIR) every May 15 with the Comptroller as part of your franchise tax obligation, even if your franchise tax owed is $0. Failure to file the PIR is the most common cause of forfeiture of an LLC’s right to transact business in Texas.

Assumed Name Certificate (DBA): If you operate under a name different from your LLC’s legal name, file Form 503 with the Secretary of State for $25. Sole proprietors and general partnerships file at the county clerk’s office in each county where they transact business (typically $15-$25 per county filing).

Get your free federal EIN immediately at IRS.gov. You need it before you can register for state taxes, open a business bank account, or hire employees.

Step 2: Register for Franchise Tax and Sales Tax with the Texas Comptroller

Texas does not have a state personal or corporate income tax – Article 8 Section 24 of the Texas Constitution prohibits one without a constitutional amendment that requires both legislative supermajorities and statewide voter approval. What Texas has instead is a franchise tax (sometimes called a margin tax) administered by the Texas Comptroller of Public Accounts.

Texas Franchise Tax (2026)

• No-tax-due threshold: $2,650,000 in annual revenue (verified at comptroller.texas.gov/taxes/franchise/ for 2026). The vast majority of Texas small businesses fall below this and owe $0 in franchise tax.
• Above the threshold: 0.375% on retail and wholesale taxable margin; 0.75% on all other businesses.
• EZ Computation: 0.331% rate available on revenue up to $20 million if you choose the simplified calculation method (you forfeit other deductions but the math is much simpler).
• Public Information Report (PIR): Required annually by May 15 regardless of whether you owe tax. Below the threshold: file the No Tax Due Information Report and PIR. Skipping this is a common cause of business forfeiture.
• Sole proprietorships and most general partnerships with no formal entity registration generally are not subject to the franchise tax – so an unincorporated lawn care operator owes $0 in franchise tax and files no PIR.

Texas Sales and Use Tax

• State rate: 6.25% (Tax Code Chapter 151)
• Local add-on: Up to 2.0% (cities, counties, transit authorities, special purpose districts)
• Maximum combined rate: 8.25% – the cap is in statute, so most large Texas cities including Houston, Dallas, Austin, San Antonio, and Fort Worth charge the full 8.25%
• Sales Tax Permit: Free at comptroller.texas.gov/taxes/permit/. Required before you make a taxable sale.
• Filing frequency: Monthly, quarterly, or annually depending on your sales volume – the Comptroller assigns frequency based on prior year’s collections.

Services taxability quirk: Texas is one of the few states that taxes commercial cleaning and janitorial services at the full state-plus-local sales tax rate (Tax Code Chapter 151 taxable services list, Comptroller Publication 94-111). Residential cleaning by self-employed individuals is generally exempt, but a contracted maid service or janitorial company must collect 8.25% on every commercial job in major cities. This catches non-Texas operators off guard – in most states, cleaning services are not taxed at all.

Step 3: Decide Whether to Subscribe to Workers’ Compensation

Texas is the only state in the United States where workers’ compensation insurance is optional for private employers. Every other state requires WC coverage at some employee threshold (typically 1, 3, or 5 employees, depending on the state). Texas allows you to operate as a non-subscriber – but the choice has real consequences.

Status	What it means	Trade-offs
Subscriber	You buy a workers’ comp policy from a licensed insurer or Texas Mutual Insurance Company	Premium cost (varies by class code and payroll); statutory benefits cap your liability for workplace injuries; preserves common-law defenses
Non-subscriber	You operate without WC coverage. You must file Form DWC-005 with the Division of Workers’ Compensation reporting your status, and post the prescribed notice to employees	$0 premium – but you lose the common-law defenses of contributory negligence, assumption of risk, and the fellow servant rule. Injured employees can sue you in tort with significantly fewer defenses available. Approximately 24% of Texas employers were non-subscribers in 2024.

Texas Mutual Insurance Company is the state-chartered workers’ compensation insurer of last resort and the largest WC carrier in Texas. By statute, Texas Mutual must offer coverage to any eligible Texas employer who applies, regardless of risk profile – similar to Pinnacol Assurance in Colorado. Quotes at texasmutual.com.

The non-subscriber option is most commonly used by very small employers in low-injury-risk office work, by employers who self-insure through a non-subscriber occupational injury benefit plan (a private alternative to WC), and by larger sophisticated employers who can absorb the litigation risk in exchange for premium savings. For a typical small construction, HVAC, landscaping, cleaning, or food service operation, the math usually favors subscribing – the loss of common-law defenses combined with class codes 5537 (HVAC), 0042 (landscaping), 9014 (janitorial), or 9082 (food service) creates real tort exposure.

Step 4: Register with the Texas Workforce Commission

The Texas Workforce Commission (TWC) handles unemployment insurance, wage and hour enforcement, and child labor. Register your UI account through the TWC Unemployment Tax Services portal before your first payroll.

2026 Texas Unemployment Insurance Rates

• Taxable wage base: $9,000 per employee per year (one of the lowest in the US – compared to Massachusetts $15,000, Oregon $56,700, or Washington $72,800)
• New employer rate (2026): 2.7% (or the average rate for your NAICS code, whichever is greater)
• Range for experienced employers: 0.32% (minimum) to 6.32% (maximum)
• Rate components for 2026: General Tax Rate (experience-rated) + Replenishment Tax Rate 0.21% + Employment & Training Investment Assessment 0.10% + Interest Tax Rate 0.01%. Both the Obligation Assessment and Deficit Tax Rate are 0% for 2026.

Texas Minimum Wage and Overtime

Texas’s state minimum wage is $7.25 per hour – the federal floor, locked in under Texas Labor Code Section 62.051. The rate has not changed since July 24, 2009 (the last federal increase). Tipped employees can be paid as low as $2.13/hour as long as tips bring them to $7.25 (Section 62.052).

Texas Labor Code Section 62.0515 prohibits any city or county from adopting a higher minimum wage than the state-or-federal rate. This preemption was strengthened by HB 2127 of 2023, which extends preemption to a broad range of employment regulations including paid sick leave, scheduling, and other working condition mandates. Austin, Dallas, and San Antonio’s paid sick leave ordinances were enjoined in court before HB 2127 and are now broadly preempted by the statute. Texas has no state-mandated paid sick leave, paid family leave, or PFML, and as of 2026 cities cannot create one.

New Hire Reporting

Report all new hires to the Office of the Attorney General Child Support Division within 20 days of the date the employee starts earning wages (under Texas Family Code Sections 234.101-104 and 1 TAC Section 55.303). Penalties: $25 per missed report, $500 if you conspire with the employee to fail to report. Most payroll services file new-hire reports automatically.

Step 5: Get City and TDLR Professional Licenses

Texas has no statewide general business license. Local licensing varies city by city, and industry-specific state licensing flows through the Texas Department of Licensing and Regulation (TDLR) and a handful of other state agencies.

Texas Department of Licensing and Regulation (TDLR)

TDLR consolidates licensing for many trades that other states split across multiple agencies. A single TDLR portal at tdlr.texas.gov handles, among others:

• Air Conditioning and Refrigeration Contractors (Class A unlimited; Class B up to 25 tons cooling/1.5M BTU heating) under Texas Occupations Code Chapter 1302
• Cosmetologists, barbers, manicurists, estheticians, eyelash extension specialists (combined Barbering and Cosmetology regulation since HB 2738 of 2019) under Chapter 1602
• Electricians (master, journeyman, residential wireman, sign electrician) under Chapter 1305
• Used auto dealers, locksmiths, polygraph examiners, water well drillers, towing operators, vehicle storage, and dozens more

TDLR’s consolidated structure simplifies multi-trade businesses – a property management company that does both HVAC and electrical work files with one agency rather than two boards. Other states (Pennsylvania, North Carolina, Oregon) keep these separate.

Other State Licensing Agencies

• Texas Department of State Health Services (DSHS) – retail food establishments, food handler training. Note: HB 2844 of 2025 creates a single statewide Mobile Food Vendor license through DSHS effective July 1, 2026 (license fee capped at $150) – this preempts duplicate city/county MFV permits.
• Texas Health and Human Services Commission (HHSC) – child care licensing. Authority transferred from DFPS to HHSC in 2018; CCR (Child Care Regulation) at hhs.texas.gov/providers/child-care-regulation.
• Texas Department of Public Safety Private Security Bureau (DPS PSB) – private investigators, security companies, alarm installers under Texas Occupations Code Chapter 1702.
• Texas Department of Agriculture (TDA) – commercial pesticide applicator licensing for landscapers and lawn care under Texas Agriculture Code Chapter 76. License: $200/year + $64 per exam, 5 CEUs/year to renew.
• Texas Real Estate Commission (TREC) – real estate sales agents, brokers, inspectors.
• Texas State Board of Plumbing Examiners (TSBPE) – plumbers (separate from TDLR’s electrical and HVAC).

Major City Local Licensing

Texas has no general business license, but most large cities require local registration for regulated industries:

• Houston (Harris County): Houston Permitting Center (HPC) at houstontx.gov consolidates building, food, and most regulated business permits. Houston Health Department handles food permits separately.
• Dallas (Dallas County): Dallas City Hall Department of Code Compliance handles regulated industry licensing (including food trucks at $185/year base, plus $481 application + $562 plan review for new units).
• Austin (Travis County): Austin Center for Events handles event-based permits; Austin Public Health for food. Austin’s previous paid sick leave ordinance was enjoined in court before HB 2127 and is now broadly preempted.
• San Antonio (Bexar County): San Antonio Metropolitan Health District for food; Development Services for general permits.
• Fort Worth (Tarrant County): Code Compliance and Development Services consolidate permits.
• El Paso, Plano, Frisco, McKinney, Arlington: Each maintains its own city permitting office for local business activity.

Texas’s Distinctive Tax and Labor Environment

Four aspects of Texas’s tax and labor structure require specific planning compared to most other states:

1. No state income tax – constitutionally locked. Texas Constitution Article 8 Section 24 prohibits a personal income tax without a constitutional amendment requiring both legislative supermajorities and statewide voter approval. This is structurally different from states with statutory-only income tax bans (which a future legislature can simply repeal). Pass-through entities (LLCs, S-corps, partnerships) pass income to owners’ federal returns at federal rates with no state-level layer. Combined with Florida, Tennessee, Nevada, South Dakota, Wyoming, Washington, and Alaska, Texas is one of nine states without a personal income tax – and the only one with constitutional protection.

2. Optional workers’ compensation – unique in the US. The non-subscriber option saves premium cost but exposes the employer to common-law tort liability without the standard defenses. Roughly 24% of Texas employers operate as non-subscribers as of the 2024 DWC biennial report. The decision should weigh class-code-specific premium against expected litigation exposure, and most operators in physical-work industries (construction, HVAC, landscaping, food service, cleaning) end up subscribing.

3. HB 2127 broadly preempts local labor regulation. The Texas Regulatory Consistency Act (HB 2127) of the 88th Legislature took effect September 1, 2023, and extends the existing minimum-wage preemption (Section 62.0515) to virtually all employment terms – paid leave, scheduling, hiring practices, and other terms of employment. Austin, San Antonio, and Dallas’s paid sick leave ordinances are now formally preempted (they were already enjoined in court). Plan workforce policy at the state level – city-by-city compliance variation is largely gone in 2026.

4. Sales tax on commercial cleaning is unusual. Texas Tax Code Chapter 151 makes nonresidential building cleaning and janitorial services taxable – Comptroller Publication 94-111 governs the rule. Operators expanding from sales-tax-friendly states (Colorado, Massachusetts, Oregon) often miss this and underprice their commercial bids by 8.25%. Residential cleaning by self-employed individuals is generally exempt.

Texas Market Context: The Five Major Metros and Beyond

Texas has the second-largest state economy in the United States and one of the largest small-business populations of any state. The market context varies substantially by metro:

• Houston (Harris County and surrounding Brazoria, Fort Bend, Montgomery): Roughly 7.5 million in the metro. Energy and petrochemical sector anchors the economy, with the Texas Medical Center driving healthcare service demand. International trade through the Port of Houston creates logistics and import/export business opportunities.
• Dallas-Fort Worth (Dallas, Tarrant, Collin, Denton): Roughly 8 million in the metro – the largest metro in Texas and one of the fastest-growing in the country. Finance, technology, and corporate relocations (Toyota, JPMorgan, Liberty Mutual to Plano/Frisco) sustain demand for professional services, daycare, and HVAC. Distinct submarkets: Dallas city core; Fort Worth’s stockyards and aerospace; Plano/Frisco/McKinney tech corridor.
• Austin (Travis, Williamson, Hays): Roughly 2.5 million in the metro and consistently the fastest-growing major metro in the US over the past decade. Tech (Apple, Tesla, Oracle, Google), film and music industries, and University of Texas anchor demand. Austin’s food truck culture and event calendar drive food truck demand far above per-capita averages.
• San Antonio (Bexar, Comal, Guadalupe): Roughly 2.7 million. Military installations (Joint Base San Antonio – Lackland, Randolph, Fort Sam Houston) plus the Texas Medical Center San Antonio plus Riverwalk and Hill Country tourism create steady year-round demand for cleaning, food service, and hospitality businesses.
• El Paso (border economy): Roughly 870,000. Borderland economy with Ciudad Juarez creates distinct import/export and logistics opportunities, plus Fort Bliss military base demand.
• Permian Basin (Midland-Odessa): Energy-cycle dependent demand – boom and bust patterns affect lodging, food service, and skilled-trade demand on multi-year cycles.
• Rio Grande Valley (Brownsville, McAllen, Harlingen): Roughly 1.4 million. Cross-border retail, agriculture, and growing tech (SpaceX Starbase Boca Chica) sectors.

Texas Business Guides by Industry

Each industry has different licensing, permit, insurance, and operational requirements in Texas. Select your business type:

• How to Start a Cleaning Service in Texas – sales tax on commercial cleaning under Tax Code Chapter 151, residential exemption, NCCI 9014/9015/0917
• How to Start a Food Truck in Texas – HB 2844 statewide DSHS Mobile Food Vendor license effective July 1 2026, city overlay rules, commissary, TFER 25 TAC 228
• How to Start a Daycare in Texas – HHSC Child Care Regulation under 26 TAC Chapters 743/744/746/747, Listed/Registered/Licensed Home/Center tiers, ratios
• How to Start an HVAC Business in Texas – TDLR ACR Class A vs Class B, endorsements, A2L refrigerant transition, post-2021 grid weatherization
• How to Start a Salon in Texas – TDLR cosmetology+barber combined since 2019, 1,000-hr operator license, 320-hr eyelash extension specialist
• How to Start a Landscaping Business in Texas – TDA Commercial Pesticide Applicator $200/year, Texas 811 48-hr rule, drought-tolerant landscaping demand
• How to Start a Private Investigation Business in Texas – DPS PSB Class C company license, Penal Code 16.02 one-party consent, License to Carry for armed PI

Key Texas Business Resources

Resource	What It Covers
Texas Secretary of State	LLC formation (Form 205), corporation filings, assumed name certificates, registered agent
Texas Comptroller of Public Accounts	Franchise tax, sales and use tax permits, Public Information Report
Texas Workforce Commission (TWC)	Unemployment insurance, wage and hour, child labor, layoff notification
Texas Department of Insurance Division of Workers’ Compensation	Workers’ comp regulation, non-subscriber DWC-005 reporting, dispute resolution
Texas Mutual Insurance Company	State-chartered workers’ comp insurer of last resort (must cover any eligible TX employer)
Texas Department of Licensing and Regulation (TDLR)	HVAC, cosmetology, electricians, locksmiths, and dozens of consolidated trades
Texas DSHS Retail Food Establishments	Mobile food vendors (statewide license eff. July 1, 2026), retail food permits
Texas HHSC Child Care Regulation	Daycare licensing – Listed Family Home, Registered, Licensed Home, Licensed Center
Texas DPS Private Security Bureau	Private investigators, security companies, alarm installers under Chapter 1702
Texas Department of Agriculture	Commercial pesticide applicator, structural pest control, ag licensing
Texas Attorney General New Hire Reporting	Required new hire reporting within 20 days of hire
Texas 811 / Lone Star 811	Underground utility locate notification – 48 hours / 2 business days advance under Texas Utilities Code Chapter 251

Frequently Asked Questions

How much does it cost to start an LLC in Texas?

The Certificate of Formation (Form 205) filing fee is $300, the highest standard LLC formation fee in the United States. Online filings through SOSDirect carry a 2.7% credit card convenience fee bringing the total to roughly $308. Texas does not require an annual report for LLCs – but every Texas entity must file a Public Information Report with the Texas Comptroller every May 15, even if franchise tax owed is $0. Optional costs: $25 Assumed Name Certificate (Form 503) at the Secretary of State, plus county-clerk DBA filings ($15-$25 per county) for sole proprietors and unregistered partnerships.

Does Texas have a state income tax?

No. Texas does not have a personal or corporate income tax, and Texas Constitution Article 8 Section 24 prohibits one without a constitutional amendment that requires legislative supermajorities and statewide voter approval. Texas instead has a franchise tax (margin tax) administered by the Texas Comptroller. The 2026 no-tax-due threshold is $2,650,000 in annual revenue – most small businesses owe $0 but must still file a Public Information Report by May 15. Above the threshold, the rate is 0.375% on retail/wholesale or 0.75% on other businesses, or 0.331% under EZ Computation on revenue up to $20 million.

Is workers’ compensation insurance required in Texas?

No – Texas is the only state in the US where workers’ compensation is optional for private employers. You can choose to be a non-subscriber, but you must file Form DWC-005 with the Division of Workers’ Compensation reporting your status, and you lose key common-law tort defenses (contributory negligence, assumption of risk, fellow servant rule) if an injured employee sues. Per the 2024 Texas Department of Insurance biennial survey, 24% of Texas employers were non-subscribers and 13% of Texas employees worked for non-subscribers. Subscribers buy coverage from a private carrier or from Texas Mutual Insurance Company, the state-chartered carrier of last resort.

Does Texas have paid sick leave or paid family leave?

No. Texas has no state-mandated paid sick leave, no paid family leave, and no PFML program. Austin (2018), Dallas, and San Antonio passed local paid sick leave ordinances; Texas courts enjoined them before they took effect, and HB 2127 of 2023 (the Texas Regulatory Consistency Act, effective September 1, 2023) formally preempts city ordinances regulating paid leave, scheduling, hiring practices, and other employment terms beyond state law. Plan leave policy at the state level – city-by-city variation in Texas is largely eliminated as of 2026.

What is the Texas minimum wage in 2026?

Texas’s state minimum wage is $7.25/hour – the federal floor under Texas Labor Code Section 62.051. The rate has not changed since July 24, 2009, and Section 62.0515 prohibits any city or county from adopting a higher minimum wage. Tipped employees can be paid as low as $2.13/hour as long as tips bring them to $7.25 (Section 62.052). HB 2127 of 2023 reinforced this preemption across virtually all employment regulations.

Is commercial cleaning service taxable in Texas?

Yes. Texas is one of the few states that taxes nonresidential building cleaning and janitorial services at the full state-plus-local sales tax rate (8.25% in most major cities). The rule is in Texas Tax Code Chapter 151 with detail in Comptroller Publication 94-111. Residential cleaning by self-employed individuals is generally exempt, but a contracted maid service or janitorial company must collect tax on commercial jobs. This catches operators expanding from sales-tax-friendly states (Colorado, Massachusetts) off guard – they often underprice Texas commercial bids by 8.25%.

Does Texas have a general business license?

No. Texas has no statewide general business license. You need a sales and use tax permit from the Comptroller (free) if you sell taxable goods or services. Most cities require local registration for regulated industries – food service, food trucks, alcohol, security, vehicle storage, body art, and others. Industry-specific state licensing flows through the Texas Department of Licensing and Regulation (TDLR), the Texas Department of State Health Services (DSHS), the Texas Department of Public Safety Private Security Bureau (DPS PSB), the Texas Health and Human Services Commission (HHSC) for daycare, and the Texas Department of Agriculture (TDA) for pesticide applicators.