Starting a new venture requires long-term thinking and attention to detail. As an entrepreneur, you need an inspiring vision of your company’s future. You’re also responsible for finalizing your business plan, setting up tax accounts, identifying compliance obligations, and navigating federal, state, and local licensing requirements—all on a limited startup budget.
Monica Layfield—attorney and owner of Austin, Texas–based business law firm Layfield Law Practice—advises new business owners to address licensing requirements and compliance issues early on.
“Texas regulates certain industries, like health care, banking, and oil and gas. If you’re in one of those industries, you need to know the state regulations and administrative requirements that apply to your business,” she says. Understanding business requirements upfront can prevent legal complications—and costly interruptions to your business—down the road.
Here’s an overview of Texas business licensing processes and six steps to apply for the necessary licenses.
What is a business license?
A business license is a document issued by a federal, state, or local government entity authorizing a company to perform specific business activities in a particular jurisdiction. Common types include general business licenses, federal business licenses, occupational licenses, and permits.
Types of business licenses in Texas
The legal requirements for licensing in Texas depend on your business’s physical location and specific activities: Some small business owners don’t need a license, while others need federal, state, and local business licenses to operate legally.
Here’s an overview of the various business licenses and permits a Texas business might need to obtain at each level of government:
Federal licenses
The federal government requires licenses for businesses operating in specific regulated industries, like agriculture, transportation, broadcasting, alcohol, and firearm sales. If you operate in one of these areas, you likely need to apply for a license with the relevant federal agency. The US Small Business Administration provides a complete list of regulated industries and corresponding federal agencies on its website.
Statewide licenses
Texas doesn’t require all business owners to obtain a general business license. Instead, statewide licensing requirements apply to specific business activities—for instance, you need a license from a Texas government agency to provide chiropractic care, sell cars or car parts, or operate a winery. The state’s Texas Business Licenses and Permits guide contains a complete list of specific business licensing requirements and application instructions.
Texas-based businesses selling, renting, or leasing property or selling taxable goods or services in the state are also required to obtain a sales and use tax permit (also referred to as a sales tax permit or a seller’s permit) from the Texas Comptroller. This permit allows your business to generate taxable revenue and requires that you pay state taxes.
Local licenses
Some Texas county or city governments have additional licensing requirements. Your local government may require you to obtain a general license to operate, and some jurisdictions also require licensing for specific business types. For example, the City of Dallas requires business owners to get a special permit to sell precious metals or operate a billiard parlor or a dance hall.
You may also need to apply for local permits depending on your business activities. For example, you may need a building permit to begin a construction project, or a retail food establishment permit to prepare and sell food or beverages.
How to apply for business licenses and permits in Texas
- Register your business
- Obtain an employer identification number (EIN)
- Register for a sales and use tax permit
- Apply for federal licenses
- Apply for state licenses
- Apply for local licenses
Licensing requirements vary from business to business, so the first step is identifying applicable licenses. Texas attorney Monica Layfield suggests you review state resources to minimize costs.
“I frequently tell budget-conscious business owners to visit the Comptroller’s website and the Secretary of State’s website before hiring an attorney,” she says. “Researching publicly available information is one of the things you can do without incurring costs—and if you do end up hiring a lawyer, you’ll be better informed.”
You can also use third-party resources to help you understand your requirements and locate relevant state resources. Here’s how to apply for Texas business licenses in six steps:
1. Register your business
First, determine whether you need to register your business with the Texas Secretary of State. Requirements vary by business entity type:
- Sole proprietorships and general partnerships. If you’re a sole proprietor or an owner of a general partnership, you aren’t required to register your business with the state. If you want to operate under a business name other than your legal name, you can file an assumed name certificate (a “doing business as,” or DBA) with your local county clerk.
- Corporations, limited liability companies (LLCs), and limited partnerships. Corporations, LLCs, and limited partnerships are required to register with the state. You can access the necessary forms on the Texas Secretary of State website.
2. Obtain an employer identification number
An employer identification number (EIN) is a federally issued number the Internal Revenue Service (IRS) uses to identify your business for tax purposes.
You don’t need to apply for an EIN if you’re a sole proprietor and don’t plan to hire any employees. If you don’t obtain an EIN, you’ll use your Social Security number to file your business tax returns. You must obtain an EIN if you operate any other type of business structure or are a sole proprietor with employees.
You can apply for an EIN online with the IRS. Online applications are free and typically processed within minutes.
3. Register for a sales and use tax permit
Texas requires businesses selling, leasing, or renting property or selling tangible goods (like sweatshirts, sheet sets, or wheelbarrows) or taxable services (such as data processing or car repair) to obtain a sales and use tax permit.
For more information about sales and use tax permitting requirements, consult the Texas Comptroller’s FAQ page. You can apply for a sales and use tax permit online through the Texas Comptroller’s website.
4. Apply for federal licenses
Businesses operating in federally regulated industries, including agriculture, transportation, and businesses selling alcoholic beverages or firearms may need a federal license. The US Small Business Administration website provides a full list of regulated industries and instructions on how to apply.
5. Apply for state licenses
Apply for any state licenses required for your business type. The Texas Business Licenses and Permits guide is a great resource for understanding the requirements and application procedures based on your industry. Search and apply for specific licenses on the Texas Department of Licensing and Regulation website.
6. Apply for local licenses
You may also be subject to regulations at the city and county level. Consult the Texas Municipal League’s directory for a list of all Texas municipalities and links to relevant city websites. You can also contact your city clerk and county office for licensing and permitting requirements.
Texas business license FAQ
Is a business license required in Texas?
Whether you need a license (or multiple licenses) to operate a business in Texas depends on your location and business activities. Some small businesses need federal, state, and local licenses, while others don’t need any type of license.
How much is a business license in Texas?
Texas business licensing costs vary by license type. You can view application fees and instructions on the Texas Department of Licensing and Regulation website.
How do you renew a business license in Texas?
Application and renewal processes vary by license type. You can view specific requirements on the Texas Department of Licensing and Regulation website.
Do you need a business license in Texas to sell online?
Your licensing requirements depend on your physical location and specific business activities. Texas-based online and out-of-state businesses earning revenue from Texas sales may be required to register for a sales and use tax permit in the state.
