What Texas expects from a new trade business

Do you need a license?

Texas has no statewide license for general contractors, remodelers or handymen. The state licenses the trades that can kill somebody: electricians and air conditioning & refrigeration contractors (through TDLR) and plumbers (through the Texas State Board of Plumbing Examiners). If you do that work, you need the license. A helper working under a licensed person needs to be registered too.

Cities are a different story. Many require you to register as a contractor before you can pull a permit. Check with the city before you bid, not after you win.

Who to call: an attorney near you

Workers’ comp is optional here. Should you skip it?

Texas is the only state where a private employer can choose not to carry workers’ comp. Those companies are called nonsubscribers. If you go that way, you have to tell your employees in writing and file a yearly notice with the state’s workers’ comp division.

The catch: a nonsubscriber who gets sued over an injury loses most of the usual defenses. One bad fall can take the business and more. Many general contractors also won’t let you on their jobs without coverage, and government work requires it for everyone on site.

This is a conversation for an insurance agent who writes contractors every day. Ask about workers’ comp, occupational accident coverage, and what the GCs you want to work for require.

Who to call: an insurance agent near you

Getting paid: Texas lien rules

If you don’t get paid, a mechanic’s lien is your leverage. Texas rewrote its lien law for original contracts signed on or after January 1, 2022, and the deadlines are counted from the month, not the day. If the 15th falls on a weekend or legal holiday, the deadline moves to the next business day.

• “Residential” is narrower than it sounds. The residential deadlines cover a house, duplex, triplex, fourplex, or condo or co-op unit that’s owned by one or more people, where an owner lives or plans to live. A rental or a house owned by an LLC doesn’t appear to meet that test, so the commercial deadlines would apply. If you’re not sure, ask.
• Subs and suppliers send a notice to the owner and the original contractor by the 15th day of the 2nd month (residential) or 3rd month (commercial) after each month with unpaid work. If you contracted directly with the owner, you don’t send this notice.
• The lien affidavit is filed with the county clerk by the 15th day of the 3rd month (residential) or 4th month (commercial). If you contracted with the owner, count from the month your work was completed, terminated or abandoned. Subs and suppliers count from the month they last provided labor or materials. Retainage has its own deadlines.
• Homesteads (generally the owner’s primary home) need a written contract, signed before the work starts, by both spouses if they’re married, and filed with the county clerk. Without these, your lien may not hold.
• Owners generally have to hold back 10% of the contract price or value of the work during the job and for 30 days after it’s finished, to cover unpaid subs and suppliers.

Miss a deadline by a day and the lien can be gone. Have a Texas construction attorney check your situation before you rely on this, and have them set up your contract and notice forms once, so you never have to guess.

Checked against Texas Property Code Chapter 53 on November 2, 2026. Education, not legal advice.

Who to call: an attorney near you

Sales tax on your materials

In Texas, how you write the contract decides who pays the tax on materials:

• Lump-sum contract (one price for everything): you’re treated as the end user of the materials. You pay sales tax when you buy them and build it into your price.
• Separated contract (materials listed apart from labor): you can buy the materials tax-free with a resale certificate and charge the customer tax on the materials amount.

Labor is different too. Repair and remodeling labor on homes isn’t taxed. Repair and remodeling labor on commercial buildings is. New residential construction isn’t taxed. Get this wrong for a few years and an audit will find it. A CPA who works with contractors can tell you which way to write your contracts.

Who to call: a CPA or tax pro near you

LLC, sole proprietor, or S-corp?

You can form an LLC with the Texas Secretary of State in an afternoon. There’s no state income tax, but Texas has a franchise tax. Small businesses under the revenue threshold ($2.65 million for 2026 and 2027 reports) owe nothing, but the LLC still has to file its yearly report. Forget, and the state can forfeit your company.

When to elect S-corp status (and pay yourself a salary) is a numbers question. The answer depends on what your business clears after your floor rate is covered. Bring your numbers to a CPA and ask them to run it.

Who to call: a CPA or tax pro near you