A Texas Small Business Legal Guide

Key Considerations & Essentials for Long-term Success

Starting and operating a small business in Texas comes with excitement, independence, and rewarding challenges. However, navigating the legal landscape can quickly become overwhelming for entrepreneurs.

From structuring your business correctly to ensuring compliance with state and federal laws, understanding key legal essentials is critical to your long-term success.

“There are a lot of things to think about when starting a business, and it’s easy to overlook the legal aspects,” says LinkedIn’s Startup Insights. “It’s important to consult with an attorney or other legal professional to ensure that you’re aware of all the laws that apply to your business.”

While this blog outlines crucial legal considerations every Texas small business owner should keep in mind, it’s always important to consult with an attorney for advice regarding your business’s unique situation.

Choosing the Right Business Structure

Selecting the right legal structure for your business is foundational. Your choice impacts your liability, taxes, and operational flexibility.

“Almost every business owner will benefit from shielding his personal assets from the liabilities of the business via the operation of the business within a business entity that provides, via statute, such protection,” says Brittany Sloan, managing attorney of B Sloan Law. “The choice of business entity impacts upon the transfer of business interests in the event of a stakeholder’s disability, death, divorce, and exit from the business.”

In Texas, common structures include:

• Sole Proprietorship: Simplest structure, no legal distinction between owner and business.
• Partnership: Two or more individuals share ownership; liability and profits depend on partnership type (general, limited, or limited liability).
• Limited Liability Company (LLC): Offers personal liability protection and flexible taxation options.
• Corporation: Provides robust liability protection but involves more regulations and formalities.

Tip: Many Texas small businesses find LLCs the most advantageous structure due to their blend of simplicity and protection.

Advises the Texas Secretary of State Jane Nelson: “The decision regarding business structure is a decision that a person should make, in consultation with an attorney and accountant, and taking into consideration issues regarding tax, liability, management, continuity, transferability of ownership interests, and formality of operation.”

Registering Your Business

In Texas, registering your business officially is essential. Steps include:

• Selecting a Unique Business Name: Verify availability via the Texas Secretary of State's website. See Name Filings FAQs here.
• Filing Formation Documents: File necessary documents, such as Certificate of Formation for LLCs and corporations and other entities.
• Obtaining an EIN: Secure an Employer Identification Number (EIN) from the IRS, essential for banking, taxes, and hiring employees.
• Getting Required Permits and Licenses: Depending on your industry and location, secure local and state licenses and permits.

Protecting Your Intellectual Property (IP)

Protecting your intellectual property can safeguard your brand and innovation. Important types of IP include:

• Trademarks: Protect your brand name, logo, and slogans.
• Copyrights: Secure original works like content, designs, and software.
• Patents: Essential for protecting inventions or unique processes.

Texas small businesses should proactively secure IP rights to prevent costly disputes and ensure competitive advantage.

Essential Contracts and Agreements

Proper documentation is critical to protect your business relationships. Common agreements include:

• Operating Agreements: Define roles, responsibilities, and financial obligations among LLC members.
• Employment Contracts: Clearly outline roles, expectations, compensation, and termination terms.
• Non-disclosure Agreements (NDAs): Safeguard sensitive business information from unauthorized disclosure.
• Client Contracts: Clearly detail service agreements, pricing, scope of work, and dispute resolution terms.
• Opening a Bank Account: It is crucial to keep your personal and business finances separated so it’s a good idea to open a bank account for your new Texas business.

Understanding Employment Law

If you plan to hire employees, compliance with employment laws is crucial. Key considerations include:

• Worker Classification: Correctly classify employees vs. independent contractors to avoid penalties.
• Wage and Hour Laws: Comply with minimum wage and overtime regulations under the Fair Labor Standards Act (FLSA).
• Workplace Safety: Adhere to Occupational Safety and Health Administration (OSHA) standards.
• Anti-discrimination: Ensure compliance with federal and state anti-discrimination and harassment laws.

Maintaining Compliance and Good Standing

Continual compliance with state laws and regulations protects your business from fines and legal troubles. Annual requirements typically include:

• Annual Reports: Filing necessary annual reports with the Texas Secretary of State.
• Renewing Licenses and Permits: Regularly renewing applicable local and state licenses.
• Keeping Accurate Records: Maintain detailed financial and operational records to support regulatory compliance.

Remember, it’s important to understand all the laws and regulations that apply to your new business venture.

“Starting a new business is an exciting and, sometimes, nerve-wracking time. While you may be an expert in your industry, the business laws that apply to your company might be new territory for you,” says Square.

Preparing for Legal Challenges

Legal disputes are common in business, but preparation minimizes risk. Consider:

• Insurance Coverage: Obtain appropriate business insurance policies, such as general liability, professional liability, cyber insurance, and workers' compensation.
• Dispute Resolution Strategies: Develop clear dispute resolution procedures, potentially including mediation or arbitration clauses in contracts.
• Litigation Preparedness: Establish relationships with legal counsel to handle disputes effectively and efficiently.

Being in the driver’s seat in a growing business is not easy, as many challenges must be handled daily,” says River Journal Online. “Apart from operations and finance, there is another aspect that needs to be taken care of. As businesses expand, they encounter various legal issues that can restrict operations and threaten their long-term growth. 

Why Professional Legal Guidance Matters

Even with extensive self-education, the nuances of Texas business law are complex. An experienced attorney can provide invaluable advice tailored to your unique situation, reducing risk and protecting your interests.

“Hiring the right business lawyer is a crucial investment for your organization that can help bring you peace of mind and robust support,” wrote Mark Fairlie, senior analyst for business.com. “Your attorney can advise you on numerous matters that affect your company, including your business structure, taxation issues and complex legal situations. This legal professional will be there to support you through any conflicts or incidents that arise.”

Partnering with a trusted legal professional such as B Sloan Law ensures you can focus on growth and innovation with peace of mind.

Take the Next Step with B Sloan Law

Navigating business law doesn't have to be complicated or stressful. If you're launching or operating a small business in Texas, B Sloan Law is here to help. Our team provides personalized legal support, ensuring your business is compliant, protected, and positioned for lasting success.

Contact B Sloan Law today to discuss your small business legal needs and ensure your Texas entrepreneurial journey is built on a solid legal foundation.