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Why Is Texas a Good State for Starting a Business?

Entrepreneurs prefer starting a business in Texas as the state offers several advantages and state incentive programs for startups. If you want to know why you should choose Texas for business, then the answer lies in the highly charged, vibrant, and positive business climate. This is a guide for entrepreneurs and small business owners who want to start a new business in Texas. The article provides information pertaining to various advantages and benefits of choosing Texas as their incorporation or new business formation state.

Starting Business in Texas

There are several reasons for starting a business in Texas with one of the primary reasons being a balanced and robust economy. Reports by Forbes and Statista have revealed that the real Gross Domestic Product (GDP) of Texas in 2020 was $1.7 trillion. As a result, it has become the 9th largest economy in the world based on GDP. One of the salient reasons for choosing Texas for business is the fact that the state gives priority to small businesses and the state believes that they play a crucial role in defining the mission of the state as well as maintaining a dynamic, fair, business-friendly, and flourishing business climate and economy.

Why Choose Texas for Starting a business?

Texas is home to some of the top Fortune 500 companies in the world including Exxon Mobil, Texas Instruments, AT&T, Occidental Petroleum, Tenet Healthcare, American Airlines Group, ConocoPhillips, Baker Hughes, Hewlett Packard Enterprise, and Oracle among others. A pro-business climate along with good weather and access to venture capital is attracting entrepreneurs to establish their startups here. Starting a business in Texas seems to be en vogue and cities like Austin are gradually becoming mega tech hubs. This is more so due to the numerous benefits of a Texas business environment and abundance of skilled workforce.

Texas is considered as one of the fastest growing and healthiest economies in the nation and small businesses are the backbone, which ensures this economy stays strong. One of the top benefits of a Texas business is that they can leverage the diverse and extensive workforce of approximately 14 million workers. Let’s take a look at some of the statistical facts that makes the state one of the best for starting a new business:

  • Texas contributes 8 percent to the US GDP, which ranks it #2 right on the heels of California
  • One of the major benefits of Texas business is the availability of financing options for small businesses
  • The state of Texas is responsible for producing approximately 10% of total manufactured goods in the country. Some of the top companies in this sector include Excalibar Minerals, LLC, Titan Manufacturing, Inc., Brandon Industries, Inc., and Aviva Metals, Inc., among others.
  • An advantage of starting a business in Texas is that the state boasts of a robust Texas freight and logistics infrastructure and market, which provides businesses with value added services in freight transport, freight forwarding, courier express, warehousing, cold chain logistics, return logistics, and last-mile logistics among others.
  • The state has a strong exports market that witnessed annual revenues of $315.9 billion while value of manufactured products exported was $248.1 billion
  • Texas has the second-largest workforce in the nation with the workforce distribution being the highest in North Texas followed by Gulf Coast Texas and South Texas.
  • The state has an extensive network of educational institutions, which play a key role in driving workforce supply as well as innovation in Texas.
  • It has been ranked as the #1 producer of oil and natural gas in the country

Top Benefits of Starting a Business in Texas

Texas has been awarded top spot in 2021 by the Global Groundwork Index of the Site Selection Magazine for measurement of the state’s success in business infrastructure and end-user project investment. The state’s economic development policies and flexible business regulations are helping companies of different sizes to grow and expand in Texas. Entrepreneurs starting a business in Texas can enjoy several advantages right from business incentives to tax benefits and a diverse market to launch products or services. Let us take a look at some of the top benefits of a Texas business.

Tax benefits for Texas businesses

One of the advantages of starting a business in Texas is the different types of tax benefits available at the state and local level. These benefits are crucial towards driving the Texas tax climate although the fact that the state does not have any corporate or personal income tax makes it one of the few states having a low tax burden. The tax benefits of a Texas business are categorized under tax incentives or exemptions.

The state of Texas provides a variety of tax exemption programs for small and medium sized enterprises. The sales tax exemption is a big advantage of starting a business in Texas and it is especially beneficial to those in the manufacturing industry. The sales tax exemption is primarily available on manufacturing equipment and machinery as well as on software and materials for R&D (Research and Development).

Entrepreneurs and businesses can also leverage from the franchise tax exemption accessible to sellers, manufacturers, and installers of solar energy equipment or devices. Some of the other tax benefits of a Texas business include property tax abatements, Freeport exemption, personal property exemption, Research & Development tax credit, and State Sales & Use Tax Exemptions among others.

Large and diverse market

Texas boasts of a diverse, consistently growing, and constantly innovating market for new and existing businesses. Austin and Houston are fast becoming tech hubs due to availability of an educated workforce. Some of the biggest companies in the IT industry like Google, Amazon, Apple, and Facebook have made more than $1 billion in investments in the Northwestern region of Austin. An advantage of starting a business in Texas is that you can operate and achieve growth in a diverse industrial landscape, which is already home to 49 Fortune 500 companies and headquarters of more than 90 Fortune 1000 companies. The reason why Texas for business is good is the rapid growth of industries like advanced manufacturing, information technology, life sciences, energy, aerospace, aviation and defense, petroleum refining & chemical products, and biotechnology among others.

Business friendliness and supportive environment

Starting a business in Texas is a great decision because it boasts of a business friendly environment that helps in nurturing and growth of a business. There is no dearth of business support and resources in the state with government, private, and other local agencies providing the much needed financial assistance to startups. Some of the important components of the Texas business supportive environment include:

  • A highly skilled workforce
  • Central location of the state creating accessibility to domestic and foreign markets
  • State-of-the-art infrastructure
  • Extensive transportation network
  • Low cost of living
  • No corporate or personal income tax
  • A transparent regulatory structure
  • Platform for technology and innovation

One of the top benefits of a Texas business is access to startup guides, resources, and business incentive programs offered by several government agencies like the Texas Economic Development Division.

Raising capital for startups

The state of Texas is famous for its strong entrepreneurial spirit, which has been inspiring a whole generation of visionary entrepreneurs and innovative thinkers. There is a distinct advantage of starting a business in Texas as a wide variety of resources are available for startup businesses and entrepreneurs including co-working spaces, accelerators, and incubators among others. These resources are important for business growth but the one thing entrepreneurs or startup businesses require in the initial stages in raising capital and this is where venture capital (VC) funding comes into the picture.

If you have been thinking aloud “why Texas for business” then it is time to look at some facts. Apart from venture capital, various cities of Texas like Austin and Dallas have witnessed a rise in seed capital for startups. In fact, Austin is becoming popular as the “king of seed capital” as it received $1.3 billion in seed funding in 2020 while Dallas received $6.5 billion.

Are you ready to form your startup in Texas?

Open for innovation

Texas is one of the most promising innovation and technology markets in the nation with Austin, Houston, Dallas, and San Antonio topping the list for being centers of innovation. The lone star state is home to world-class innovation hubs as an eclectic mix of entrepreneurs, corporations, accelerators, investors, and universities come together to create an insatiable appetite for technology and innovation. Thanks to the innovation hubs, starting a business in Texas can be a highly rewarding experience. Some of the salient aspects of this innovation state are:

  • There are several active innovation communities in the smaller cities and counties that work as a support system for their bigger cousins
  • The innovation ecosystem in Texas is highly efficient and effective
  • There is higher media attention for Texas startups focusing on innovation
  • One of the benefits of a Texas business is that the innovation ecosystem takes startups from the concept stage to the seed stage and growth stage

Ownership transfer

An advantage of starting a business in Texas is the ease of transfer of business ownership. There are different methods through which transfer of business ownership is possible and the method you choose will depend on your business structure and need of your business. Ownership of your business can be transferred in Texas through the following ways:

  • You can sell the business through owner financing or lender financing
  • You can lease the business
  • Reapportion of ownership amongst several owners
  • Transfer of ownership using bequests, shares or gifts applicable mostly for a business corporation

Incentive and funding programs from government

One of the biggest advantages of starting a business in Texas is the incentive programs made available by the state. The incentive programs can be classified as:

Ready to Start a Business in Texas?

Texas, the rapidly growing hub of entrepreneurship and innovation is considered as one of the best states to establish your startup. The state has everything from a pro-business climate to flexible regulations, growth driven business environment, technology platform, and robust infrastructure among others. If you plan on starting a business in Texas then IncParadise can assist you with the entire process of new business formation.

IncParadise is one of the leading business incorporation service providers in Texas. We have a team of professionals who can answer your incorporation or new business queries and also assist you in fulfilling state requirements for a new business. We also offer some additional services like Registered Agent services and EIN assistance among others.

Register your startup in Texas Today!