The Lone Star State shines bright for the business. Texas’s 2.4 million small businesses employ nearly half the state’s workforce. Plus, Texas takes pride in its incentives, taxation, skilled workforce, geography, cost of living, and regulation that make up the state’s business-friendly climate. If you want to let, your inner entrepreneur roams free, learning how to start a Texas business is a great way to go.
Benefits of Opening a Business in Texas
Corporate taxes? Personal income tax? Not in Texas. As one of the country’s largest state economies, Texas is also seeing a boom in startups. From the third quarter of 2019 to the third quarter of 2020, the state’s business applications skyrocketed from 75,858 to 139,476.
Texas also attracts investment, including for small business owners. In 2014 alone, the state’s lenders backed 421,254 in loans under $100,000, totaling $6.2 billion. The state also has low costs for startups and a wealth of new business incentives, making it one of the best states in the U.S. to start a business.
1. Create a Business Plan
When starting a business, it also helps to know what you think your business will do:
- What problem will your business solve?
- Who are your local or global competitors?
- What products or services will you offer?
- How will you use SMART goals to track your business’s progress?
Writing a business plan, even for a home-based business, can help you better understand your business and its path to profitability.
Some areas offer free business classes, such as Austin’s BizAid Business Orientation. BizAid can help budding entrepreneurs understand resources, navigate regulations, and know which government agencies they need to communicate with.
Not only can your business plan help you identify and troubleshoot potential problems, but you can use it to analyze who your target customer is and how you can market to them.
As part of your planning, look at how you’ll fund your business, such as SBA loans, bank loans, bootstrapping, or even small business grants. Other funding programs include:
- BCL of Texas
- Texas Bankers Association
- Independent Bankers Association of Texas
- Cornerstone Credit Union League
- Texas Department of Banking
- Texas Product Development and Small Business Incubator Fund
- Capital for Texas C4T
2. Choose Your Texas Business Entity
Business owners can choose from a variety of business structures. In Texas, two common choices are the limited liability company (LLC) and the sole proprietorship (or sole prop).
For sole proprietors, you’re looking at a low-cost, low-barrier way to start your business. They’re simple to set up, have one owner, hire employees, and are exempt from Texas’s franchise tax. Down the road, you can also change entities, such as to a C or S corporation.
However, a sole prop owner’s assets cannot be separated or shielded from legal or financial troubles in the business. In the event of a lawsuit or debt collection, the owner’s assets may be lost.
On the other hand, in exchange for a little expense and work upfront, starting an LLC can shield your personal property from business problems. An LLC can have one or multiple owners known as members, and these members can take advantage of potentially lower taxation.
Texas LLCs pay the state’s franchise tax, and you’ll need to file for certification of formation from the Texas Secretary of State. Your LLC will also need a registered agent, plus you may also need to file an assumed name, or DBA, with the state.
3. Determine Your Texas Business Startup Costs
In Bexar County, home of San Antonio, businesses have to pay business taxes based on the tangible property used to generate revenue. In Austin, the Travis County Appraisal District (TCAD) manages property taxes.
These are just two examples of some of the many costs you’ll need to factor into your planning. Doing business in Texas can be straightforward, but it comes with costs, including:
- Payroll and payroll taxes
- Fees to independent contractors
- Office, technical, and industrial equipment
- Business insurance (the Texas Department of Insurance can walk you through different types of coverage)
Location matters, too. As you develop your business idea, evaluate your local area and other parts of Texas to find the right balance of opportunity, zoning laws, incentives (such as the Texas Enterprise Fund), and other considerations. The Texas Department of Licensing and Regulation can also walk you through what regulations your operation will have to comply with, plus business licenses you need to apply for and maintain.
Also, keep in mind how you’ll market the business, such as your company website, social network posting, advertising (such as online, print, and broadcast), and industry events.
4: Create a Business Name
Whether you use your name or a DBA focused on your brand and market, your business needs a name. As the first impression, you’ll make with customers; a business name also can explain your services.
Your name also needs to be available. Businesses, especially in the same industry, need unique names. And there can be legal consequences if you try to do business under a name another company already uses.
In Texas, check county records and the Secretary of State for whether or not your preferred business name is available. If an assumed name is no longer being used, you may reserve it for your entity by completing and notarizing the required paperwork.
You’ll typically need to renew your assumed name every ten years but verify requirements in your area, so you don’t miss any filing deadlines.
Once you’ve settled on a business name, see what domain names (for your website and company email) are available. If social media is part of your marketing plan, see what handles or accounts you can reserve on the networks you’ll use.
5. Register Your Texas Business, Open Financial Accounts, and Secure Insurance
Starting your business on a solid foundation means fulfilling any required business registrations, DBA applications, licensing, permits, and zoning. For example, McAllen’s Building Permits and Inspections Department specifies that even a home-based business needs a “home occupation permit” from the city to operate legally.
You can also apply to the IRS for an employer identification number (EIN). This taxpayer ID will come in handy in everything from paying state taxes to opening bank accounts.
Speaking of taxes, the Comptroller of Public Accounts is in charge of state franchise taxes. For details about local taxes, check with your county office or assessor.
If you are hiring employees, review the state’s employer requirements.
Once you’ve worked out what coverage is right for your business, secure your business insurance, such as commercial property, commercial automobile, and small employer health insurance.
With your business name registered and EIN secured, you can also set up business bank accounts, such as checking accounts and business credit cards. Not only will you be better able to track finances, but you can also build the company’s credit and be better prepared to manage cash flow.
6. Market Your Texas Business
It’s one thing to open your doors, but what will get customers to come through them?
For example, advertise online via Google or Facebook, in print publications such as newspapers, or TV and radio stations.
Also, optimize your company’s profile on Google My Business, so people searching for your services are more likely to find you. If social media is part of your marketing, regularly post content, and engage with people on networks like Twitter, Facebook, or Instagram.
Print assets remain powerful, too. Business cards, brochures, and postcards can get your brand at the top of someone’s attention.
Partnering with a Texas marketing firm can smooth your path to success.
Examples of Good Businesses to Start in Texas
In such a big state, there’s room for all sorts of new businesses in Texas. Here are some trending ideas you may consider:
- Home improvement contractor
- Restaurant or food truck
- Real estate agent
- Custodial services
- Beauty salons
- Grocery store
- Contract painter
The Lone Star State Shines Bright for Business
With one of the largest economies in the United States, Texas is a beacon for entrepreneurs looking to start and grow businesses. With resources and incentives available to help people become business owners, rural and urban areas want to attract innovation and new companies. With the right idea, planning, funding, and determination, your business could become one that shines bright in the Lone Star State.
Texas Start a Business FAQs
What is the best city to start a business in Texas?
Austin, Dallas/Fort Worth, San Antonio, and Houston can be great cities for starting a new Texas business.
How much does it cost to open an LLC in Texas?
To open your Texas LLC, you’ll need to pay various fees, which may include:
* Name reservation application fee, $40
* DBA filing fee, $25
* Certificate of Formation fee, $300
Is there someone who can give me advice about starting a business in Texas?
Mentors from the Service Corp of Retired Executives (SCORE) are available to review business plans, help you refine your business ideas, and advise budding entrepreneurs. Locations, workshops, and mentorships are available statewide. Other resources include:
* Texas Manufacturing Assistance Center (TMAC)
* SBA Office of Women’s Business Ownership
* North Texas Small Business Development Center Network
* Dallas Black Chamber of Commerce
* Greater Dallas Hispanic Chamber of Commerce
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