With no general contractor licensing requirement, Texas has earned its reputation as an attractive state for construction businesses, but despite the easy entry, proper setup and compliance are still vital.
City-specific and specialty licenses are mandated in many areas, and each metro area has its own distinct market dynamics. Improper setup can lead to administrative headaches, or worse: a higher tax burden, regulatory penalties, and a competitive disadvantage.
In this guide, I’ll break down registration, licensing, insurance, labor laws, and costs unique to Texas.
Key Takeaways
- Texas is a relatively hands-off state when it comes to licensure and permitting for construction companies.
- City and county-level permitting requirements and funding options are often more important than state-level systems.
- Various voluntary associations can help you network and develop your construction business.
How To Start a Construction Company in Texas: A Step-by-Step Guide
Texas’s size and diversity (in terms of geography and demographics) mean starting a construction business looks very different from one region to another. Before you register your business entity, take these steps.
Understand Texas markets
Texas has 26 distinct metropolitan areas plus various geographically diverse rural counties. Each has its own unique market. The business landscape for residential, commercial, and specialty construction trades varies significantly from place to place.
According to TradeSTAR, as of 2025, the construction industry is booming. Some high-demand projects are data centers and advanced manufacturing plants. Many tech companies have relocated to Texas recently, fueling new projects, especially in the Dallas-Fort Worth area.
The Texas Energy Fund, approved by voters in 2023, is offering up to $5.38 billion in loans for new natural gas power plants. At the same time, wind and solar projects continue to expand in rural areas. Central Texas remains the state’s largest construction market.
In Houston, industrial construction dominates, while on the Gulf Coast, energy projects are front and center. As Mercator.ai, a construction intelligence platform that tracks upcoming projects, recommends, it’s best to focus business development on the demands of your particular region.
The gist? Shape your service mix to match the demand in your region and make your company far more competitive from the start.
Choose your business structure
Here are the business structures you can choose from:
| Business Structure | How It Works | Liability | Taxes | Best For |
| Sole Proprietorship | One person owns and operates the business. There’s no formal filing with the Texas Secretary of State (but if you use a name other than your own, you must register it locally as a “Doing Business As” or DBA). | There’s unlimited personal liability; your personal assets are at risk. | Income is reported on your personal tax return. | Very small operations, including 1-person shops starting out on a tight budget. |
| Partnership | Two or more people share ownership. General partnerships can form without filing, but limited partnerships (LPs) and limited liability partnerships (LLPs) require state registration. | General partners share personal liability; LPs/LLPs can limit liability. | It usually involves pass-through taxation (meaning profits/losses “pass through” to the partners’ personal returns). | Two or more owners who want flexibility. |
| LLC (Limited Liability Company) | You form an LLC by filing with the Texas Secretary of State. Owners (“members”) have flexibility in management and operations. | Members are shielded from business debts in most cases. | The default is pass-through taxation (but LLCs can elect corporate taxation if desired). | Small to midsize businesses that want liability protection without the complexity of a corporation. |
| Corporation | You create a corporation by filing a Certificate of Formation. A corporation requires bylaws, directors, shareholder meetings, and records. | There’s strong liability protection—the corporation is a legal entity that’s separate from its owners and responsible for debts and obligations. | By default, it’s taxed as a C-corp (separate corporate tax); owners can elect S-corp status if the business is eligible. | Larger businesses planning to raise capital, issue stock, or scale more formally. |
Each structure has its pros and cons. Here’s what Dawn Price of Bat City Builders LLC in Austin recommends:
“The best practice is to form an LLC, register with the Texas Secretary of State, and secure an EIN from the IRS (instead of working under your Social Security number). A common mistake I see a lot is new contractors skipping these steps and operating informally, which can cause major headaches with taxes, liability, and city compliance.”
Register your construction company in Texas
Register with the Texas Secretary of State
To register with the Secretary of State, first find a business name that hasn’t been taken (check availability using the Texas SOS database). You can file a Form 501 to reserve the name.
Then, find a registered agent. The registered agent must be a business entity authorized to do business in Texas, or a person who’s a resident of Texas. This person can be you. If it’s someone else, you’ll need their written consent.
Depending on the type of business you set up, you may need to provide information, such as the names and addresses of the managers you’ve selected to run your company.
Register with the Texas Comptroller of Public Accounts
You must register with the Texas Comptroller of Public Accounts for tax purposes. It takes about 2-3 weeks for sales and use tax permits to be granted.
Obtain a federal Employer Identification Number (EIN)
To get a federal EIN from the IRS, complete this application (which typically takes less than 10 minutes). Your EIN confirmation letter should be issued immediately online. Print the letter for your records.
Register with local authorities
Depending on your place of business, you may have to register with a city council or with county authorities. To do so, look up your city and country requirements listed in the local .gov website or contact your local government.
Secure adequate financing
While many construction companies in Texas are financed through commercial loans, grants are available. For instance, the Texas Workforce Commission offers a Skills for Small Business Grant to support companies with fewer than 100 employees. The grant funds training costs of $2,000 per new employee and $1,000 per existing employee.
The US Department of Agriculture funds the Rural Business Development Grant, which covers small construction companies in rural areas. Applicants may also search grants.gov, a federal portal with over 900 programs. The federal Small Business Administration also has various grants available.
Finally, GrantExec offers a $5,000 grant to “diverse-led” small businesses in Texas, including construction businesses. Similarly, the StartHER Grant at Texas Woman’s University supports women-owned startups.
Meet Texas construction licensing and insurance requirements
Once you’ve set up your construction company and have some funding in place, you must comply with certain requirements.
Licensing requirements
Unlike some jurisdictions, Texas doesn’t require a statewide general contractor license or a general business license. However, licenses are required for some specialties, including:
| License | Who Needs to Apply | Where to Apply |
| Electrical Contractor License | Anyone offering electrical contracting services in Texas (these businesses must employ a licensed master electrician). | Texas Department of Licensing & Regulation (TDLR) |
| HVAC Contractor License | Individuals or companies installing, repairing, or maintaining air conditioning and refrigeration systems. | TDLR |
| Roofing | No statewide roofing license in Texas. Some cities (e.g., Austin, San Antonio, Dallas) require roofing permits or local registrations. | City building permit office where the work is performed; you can also seek private certification through Roofing Contractors Association of Texas (RCAT) |
| Plumbing | Journeyman, master plumbers, and plumbing contractors performing plumbing work | Texas State Board of Plumbing Examiners (TSBPE) |
Each Texas contractor license has distinct requirements for initial licensure and renewal. For example, obtaining an HVAC contractor license requires meeting experience requirements and passing an exam, and there are additional renewal requirements (like continuing education requirements).
To remain compliant, keep up to date with mandates.
Insurance requirements
| Insurance Type | Legally Required? | Typical Requirement / Practice |
| General Liability | No | Not mandated by state law, but usually required by municipalities and clients. Standard coverage: $1M per occurrence, $2M aggregate. |
| Workers’ Compensation | No (except public projects) | Not required for private employers. Mandatory for contractors on government projects. Often required by general contractors for subs. |
| Builder’s Risk | No | Not legally required. Often required by lenders. |
| Commercial Auto | Yes | Mandatory for all company vehicles. Minimum: $30,000 bodily injury per person, $60,000 per accident, $25,000 property damage. |
*Learn more about construction insurance, including what each type of insurance covers.
Experts recommend insuring your construction company even in cases where you aren’t legally required to. Price says:
Insurance coverage is very critical. At a minimum, I carry:
- General Liability
- Pollution Liability
- Umbrella Insurance
- Errors & Omissions (Professional Liability)
- Builder’s Risk, since homeowners’ policies rarely cover large-scale remodeling
Builder’s Risk is especially important because homeowners’ insurance usually excludes major remodeling work.
Get the necessary permits
In Texas, most permitting is handled by cities and counties. Common permits include electrical, plumbing, demolition, and site development.
Because permitting is typically done at the city level, there can be significant differences between different jobs.
Houston, for instance, is well-known for not having a zoning system. The city doesn’t even mandate parking minimums. Beyond requiring that new homes in flood zones be raised 2 feet above the 500-year floodplain, construction is largely unrestricted.
Austin has stricter regulations. Any tall building that blocks views of the Texas Capitol Dome is restricted. More broadly, very few structures can be built in the city without a permit from Austin Build + Connect.
That said, the Texas Commission on Environmental Quality (TCEQ) does require permitting for large projects across the state. If your project disturbs 1 acre or more, or is part of a larger development that’ll disturb that much, you must obtain coverage under the Construction General Permit (CGP) TXR150000, issued by TCEQ. That means you must:
- Submit a Notice of Intent (NOI).
- Develop and implement a Stormwater Pollution Prevention Plan (SWP3), which outlines erosion controls and best management practices.
- Use TCEQ’s e-permitting system, STEERS, to file NOIs, notify changes, and submit Notices of Termination.
If you’re running a construction company and want to avoid fines, you must ensure you can pass inspections and remain compliant at all times.
Learn and follow Texas labor laws
As a Texas construction business, you must follow general Texas employment laws if you hire construction workers. Here are some highlights:
Wage and hour laws
- You can’t refuse to hire a worker because they choose or refuse to join a union.
- You must pay workers at least the federal minimum wage of $7.25/hour.
- Non-exempt employees must be paid 1.5x their regular rate for hours over 40 per week.
Workplace safety laws
- Texas doesn’t have its own OSHA-approved plan, so federal OSHA rules apply directly.
Hiring requirements
- Workers must be properly classified as employees or independent contractors. Misclassification carries penalties.
- Employers must complete Form I-9 for each new hire to verify work authorization.
- Texas requires new hire reporting within 20 days (or every 12–16 days if reporting electronically).
- State contractors are generally required to use E-Verify.
Did You Know?
Using a dedicated compliance solution like Connecteam can help you ensure you meet state requirements. For instance, you can use the employee time clock to track work hours, including overtime, and pay them accurately. You can also use digital checklists and employee task tracking to assign safety tasks and ensure workers follow safety requirements.
Start growing your Texas construction business through networking and bids
With your permitting and funding secure, you should take advantage of every resource at your disposal, including professional connections.
In Texas, a number of voluntary associations bring construction professionals together. These include the Texas Associated General Contractors and the Chamber of Commerce. Check the association directory to see where your local or regional association meets.
Also, the Texas Historically Underutilized Business (HUB) program provides resources and networking opportunities to minority, women, and veteran-owned construction contractors.
In addition to formal networks, we recommend building relationships with real estate developers and municipalities. These relationships are often the key to developing a consistent pipeline of new projects.
If you want to bid on Texas state projects, register for the State of Texas Centralized Master Bidders List (CMBL). The annual registration fee is $70. Municipalities will typically have “Purchasing” or “Bids” sections where you can bid on upcoming projects.
How Much Does It Cost To Start a Construction Business in Texas?
The estimated upfront costs for a construction business in Texas vary depending on your business size and estimated payroll. However, getting started with a small team should set you back at least about $2,250. Here’s the breakdown of your likely start-up costs:
| Item | Approx. cost |
| LLC formation | $300 filing fee |
| Licensing for trades | $36–$950 depending on specialty |
| General liability insurance | $1,230 (industry estimate) |
| Workers’ compensation insurance | Varies significantly by payroll; the Texas Department of Insurance sets rates at a few percentage points of payroll. |
| Construction management software | Businesses with less than 10 users can use Connecteam for free. |
Tips for Starting a Construction Business in Texas
Beyond the above, here are some tips for your construction business:
- Most Texas entities (LLCs, corporations, LLPs) are subject to the state franchise tax, something many new contractors forget. Build it into your budget and file on time.
- Counties outside city limits often don’t enforce building codes. This may sound like freedom, but it leaves you fully liable if something fails. Insurers and clients may hold you to higher standards anyway, so sticking to International Building Code / International Residential Code (IBC / IRC) standards is the best practice.
- Expect to show certificates of insurance and sign strict indemnity clauses even for small jobs, especially if you’re working under a general contractor (who’ll likely push risk down the chain onto subcontractors). Review these clauses carefully.
- Hurricanes, hail, and 110° summers can wreck schedules and gear. Factor in downtime and consider builder’s risk coverage that includes extreme-weather riders.
- Some Texas cities and counties offer tax abatements, training funds, or small business grants for construction firms that hire locally. Tapping these programs can offset startup costs in a way many newcomers overlook.
FAQs
No general contractor’s license is required in Texas. However, certain subcontractors (including electricians, plumbers, and HVAC technicians) must hold state-issued licenses.
To start your business in Texas, choose a company name that hasn’t been taken yet and register with the Texas Secretary of State. Then, register with the Texas Comptroller of Public Accounts, obtain a federal Employer Identification Number, and register with local authorities (if necessary). Secure funding for expenses, and follow licensing, permitting, insurance, and labor law requirements.
Texas doesn’t issue a statewide general contractor license, but you can operate as a general contractor by forming a business entity, registering with the Secretary of State and Comptroller, meeting local permitting rules, and securing insurance.
Disclaimer
This guide is provided for general informational purposes only and does not constitute legal, tax, or professional advice. Construction licensing, labor laws, permitting requirements, and tax rules in Texas are subject to change and may vary by city, county, or project type. Compliance obligations also depend on the specific facts and circumstances of your business. Before taking action, consult with a qualified attorney, accountant, or the appropriate state or local authority to ensure you meet all legal and regulatory requirements.