Heartwork Essentials: The Legal Stuff

Today Heartmade Essentials is tackling the legal stuff. Why, you ask? Because we all want to be responsible business owners. And some markets and wholesalers require you to have all your ducks in a row. And, technically, so does the state of Texas.

Step One: The DBA

A “doing business as” (DBA) name allows you or your company to do business under a different name. There are a bunch of reasons for filing for your DBA:

  • You want to use a business name and not your personal name. As a sole proprietor, your name and your business name are legally the same. For example, if you are John Smith and you have a consulting business, the name of your business is John Smith. The same is true for general partnerships. The business name is the same as the partners’ names. Filing a DBA allows you to transact business under the DBA name instead of your personal name.

  • Your bank often requires a DBA to open a business bank account so that you can write and deposit checks or get a credit card under the business name.

  • Some clients may require you to have a DBA in order to contract with you. If you’re a freelance graphic designer, for example, you bid to do work for a local corporation. 

  • Your company is entering a new business area not reflected by your current name. You may expand to a new medium or product line and having a more descriptive name could be beneficial.

  • You may have another business or website that you’d like to operate in addition to your existing one. Imagine that your company makes and sells women's skincare. You also produce a line for men. Knowing that these two lines need completely different branding and marketing, you might file a DBA and create a separate website specifically targeting this audience.

The state of Texas requires all businesses to file a DBA. This applies to sole proprietorships, partnerships, LLCs and corporations. The specific process for obtaining a DBA varies from county to county, however. If you want to file a DBA for a business operating in Houston, you will need to register your DBA in Harris County.

Visit the Harris County Clerk's Office website and access the Assumed Names Search page. Using the "Search" fields, enter the assumed name that you hope to establish (such as "Jane's Consulting Services," for example) and click "Search." You can then find out instantly if your desired business name is available. If the name is already in use, think of a different business name that you can register.

Download and fill out the appropriate DBA form. If your business is a corporation, you must fill out form 205. If you have an unincorporated business with one to three owners, use form 207. For four to 13 owners, use form 207A. If your business has 14 owners or more, use form 207B. You can find all of these forms on the Assumed Names page at the Harris County Clerk's Office website. 

Step Two: Sales and Use Tax Permit

Most states require seller's permits, which provide authorization to collect sales taxes on purchases within that jurisdiction. In Texas, this type of license is called a "sales and use tax permit" and any individual or enterprise selling or leasing tangible personal property or services within the state must have one.

The Texas' Comptroller explains who must obtain a Texas seller's permit. First, to determine whether you are “engaged in business," the state looks at whether your business:

  • Maintains a physical place of business, such as a warehouse, distribution center, sales room, etc., within the state

  • Uses a sales representative or agent who operates within the state or independent salespeople involved in direct sales of taxable items

  • Receives rental or lease income from a property located within the state

  • Promotes any event involving sales of taxable items

  • Otherwise conducts business in the state through others

While the above list is not comprehensive, it covers the most common factors considered. Notably, Texas also requires a seller's permit for those who provide taxable services, such as data processing and insurance, or even digital goods. Regarding online sales, Texas residents who “sell more than two taxable items in a 12-month period and ship or deliver those items to customers in Texas" must have Texas seller's permits. More information can be found on the comptroller’s website.

You can apply for a Texas seller's permit online through the Texas Online Tax Registration Application or by filling out the Texas Application for Sales and Use Tax Permit (Form AP-201) and mailing it to the Comptroller's office at the address listed on the form.

On the application, you must provide information about you or your business, such as name and address, as well as a tax identification number—either your Social Security number (SSN) or employer identification number (EIN). If a business doesn't yet have an EIN, the Comptroller will issue a temporary one until you receive it and issue a new permit thereafter.

Texas doesn't charge a fee to acquire a seller's permit, but you may be required to put up a security bond, the amount of which the Comptroller determines upon evaluating your application.

Once you receive your Texas seller's permit, the state expects you to display it and collect sales taxes on taxable sales. You must keep track of taxes collected and pay the appropriate amount of sales and use taxes to the state quarterly or yearly.

Those are the basics kids. You can do it yourself, but you may find that a little help is in order if your situation is more complicated. An attorney or online legal services company can help you make sure your business is in full compliance with tax laws and regulations. You can also ask your fellow makers. All of our Heartmade artists are happy to point you in the right direction if you need some advice.