Updated November 23, 2020:

What Is a Consulting Business?

Consultants help companies streamline their operations, increase overall revenue, and apply different strategic directions. Many of these consultants work for themselves and create limited liability companies (LLCs) to help other businesses and nonprofits.

Strategies to Start a Consulting Business

There are several keys to starting a successful consulting business, so consider the following when you're ready to start on your own:

  • Establish a solid reputation before starting on your own.
  • Work with another firm while increasing your business.
  • Set your services apart from others.

Starting a Consulting Business in Texas

Once you decide to open a consulting business in Texas, there are vital legal aspects to consider. You will need to:

  • Choose the best business entity.
  • Secure permits and licenses.
  • Handle pertinent tax issues.
  • Work with contracts and policy statements.
  • Address health and safety.
  • Obtain sufficient insurance.
  • Deal with employees.

Selecting the Best Business Entity

When delving into this aspect of your business, you might operate as a partnership or sole proprietorship. However, you should also consider using a legal form to protect you from any sort of personal liability. If you handle valuable information or physical property, you could risk damaging or losing these items.

Obtaining Licenses and Permits

Even if you decide to operate as a sole proprietor, you should obtain a federal tax ID number, also known as an Employer Identification Number (EIN). You can obtain it on the IRS's website.

Texas doesn't have any specific business license or permit requirements. You should check with local governments at the city and county levels to determine if you need permits or licenses for your specific type of business. You can visit the Texas Wide Open for Business website for more information.

Handling Tax Issues

Your tax situation depends upon whether you have a corporation, partnership, or LLC. Even if you operate with a sole proprietorship, you must attach Schedule C to your personal income tax return. If you have an S corporation or multi-member LLC, you need a separate tax form.

Most consultants are self-employed. Use the IRS Form 1099-MISC when you file your taxes. You may also pay federal self-employment tax, in which you pay quarterly estimated tax payments. You can find more information on the IRS Form 1040-ES.

Dealing With Health and Safety

If you work in potentially dangerous situations, including construction sites or with hazardous materials, you should look into regulations listed by the Occupational Safety and Health Administration (OSHA) and Environmental Protection Agency (EPA).

You can obtain other information about worker health and safety available in the state through Texas's Occupational Safety and Health Consultation Program (OSHCON). You can also access information about workplace safety from the Texas Department of Insurance Division of Workers' Compensation (TDI-DWC).

Securing Effective Insurance

You should have several kinds of insurance for your consulting business, especially if you work out of your own office. You should have premises liability insurance to protect you in case someone falls at your location. You should also have property coverage for your business equipment.

Working with Policy Statements and Contracts

Consulting affords you flexible business, so you need to accommodate the varying needs of your clients. It's best to get general policies in writing. You can post these policies on your website and print the documents to hand to each client. Policy information can include the following:

  • Type of consulting you offer.
  • Billing system.
  • Charges for travel time.
  • Payment process.

Service contracts spell out a range of matters usually covered in the policy, but they list specific information on each client. Under basic contract law, a legally binding contract must have the following:

  • Agreement between you and the client on what the contract is for.
  • Exchange of value, also known as consideration.

Working with Employees

If you have employees, you need to know about basic employment law and issues including workers' compensation, illegal discrimination, and the hiring process. When it comes to hiring, keep these tips in mind:

  • Form a job application that includes legal questions.
  • Check references or have other legal employment inquiries.
  • Ask useful and legally permissible questions at the interview.

If you need help with starting a consulting business in Texas, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.