Opening a Business in Texas

The moment you sell a piece of art, offer a commission, or teach a class and accept money — you are operating a business under Texas law. Whether or not you have a formal business entity, the IRS and the State of Texas consider you self-employed. The question is not whether to treat your art practice as a business — it already is one. The question is how to structure it most advantageously.

Texas offers several business structures for creative entrepreneurs. Most artists will choose between operating as a sole proprietor (with or without a DBA "doing business as" name) or forming a Limited Liability Company (LLC). Here's how they compare.

What Is a DBA?

A DBA ("Doing Business As") is a trade name registration that lets you operate under a business name different from your legal name. For example, Jane Smith could file a DBA to operate as "Lone Star Studio." In Texas, DBAs are filed with your county clerk's office — in Collin County, that's the Collin County Clerk in McKinney. Cost: approximately $25. A DBA does NOT create liability protection — it's purely a name registration.

How to Form a Texas LLC — Step by Step

1. Choose your LLC name
   Your name must be distinguishable from other Texas businesses. Search the Texas SOS database at sos.texas.gov to verify availability. Your name must include "LLC," "L.L.C.," or "Limited Liability Company."
2. Appoint a Registered Agent
   Every Texas LLC must have a registered agent — a person or company with a Texas street address (not a P.O. Box) to receive official legal mail. You can be your own agent if you have a Texas address, or hire a registered agent service ($50–$150/year).
3. File Certificate of Formation (Form 205)
   File online at sos.texas.gov/corp/forms. Filing fee: $300. Processing time: 3–5 business days online. This is the official document that creates your LLC under Texas law.
4. Create an Operating Agreement
   Texas does not legally require an Operating Agreement, but every LLC should have one. It defines how your business is managed, how profits are distributed, and what happens if you need to dissolve. Templates are available through the Texas State Law Library.
5. Get your Federal EIN (Employer Identification Number)
   Apply free at irs.gov. Takes 10 minutes online. Your EIN is like a Social Security Number for your business — required to open a business bank account, apply for grants, and file business taxes.
6. File your Texas Public Information Report (PIR) annually
   Every Texas LLC must file a PIR with the Comptroller each year (free if revenue is under $2.47M). This keeps your LLC in "good standing." Failing to file can result in the state forfeiting your LLC.

Texas requires artists who sell taxable items — which includes most physical art products — to collect and remit state sales tax. The Texas state sales tax rate is 6.25%, and local jurisdictions (like Anna) may add up to 2%, for a maximum combined rate of 8.25%.

How to Get Your Texas Sales Tax Permit

1. Apply online at the Texas Comptroller's office — it's free
   Visit comptroller.texas.gov and select "Apply for a Sales Tax Permit." You will need your EIN, business address, and business structure information. The permit is free and is typically issued within a few days.
2. Set up a sales tax collection system
   Use Square, Shopify, Etsy, or QuickBooks to automatically calculate sales tax at checkout. Configure your home location (Anna, TX) and enable automatic tax calculation. Never collect tax manually in your head at an art fair — use a point-of-sale system.
3. File and remit tax on your assigned schedule
   The Comptroller assigns your filing frequency based on your volume: monthly (over $500/month in tax), quarterly (less), or annually (very low volume). File at MyLicense Office on time — late filing incurs a 5% penalty.

The single most important financial habit for any artist-business owner is this: never mix personal and business money. Commingling funds makes bookkeeping a nightmare, weakens your LLC's liability protection ("piercing the corporate veil"), and makes tax preparation exponentially harder. Open a business account the same week you form your LLC.

Recommended Business Banking for Anna-Area Artists

Essential Financial Habits from Day One

1. Open a dedicated business checking account
   All art income goes into this account. All art expenses are paid from this account. This single habit saves dozens of hours at tax time and is required to maintain LLC liability protection.
2. Get a free bookkeeping tool
   Wave (free) or QuickBooks Simple Start ($17/mo) are ideal for artists. Connect your business bank account so transactions are automatically imported. Categorize expenses weekly — don't let months accumulate.
3. Set aside 25–30% of every payment for taxes
   As a self-employed artist, you pay both the employee and employer portion of Social Security and Medicare (self-employment tax = 15.3%) plus income tax. A separate "tax savings" account prevents the April panic.
4. Pay yourself a regular "owner's draw"
   Instead of spending business money on personal needs randomly, transfer a set amount to your personal account weekly or monthly. This disciplines your business finances and gives you a clearer picture of actual profit.