Starting a small business in Texas allows you to take advantage of the state’s many opportunities. Texas generates 9.3% of the United States’ gross domestic product, second only to California. With no state income tax and a mix of flourishing industries, Texas boasts plenty of reasons why you should choose it as your home base.

To start your business, you’ll need to make some important decisions, work through legal steps, and figure out the best way to tap into the resources Texas provides.

Here’s a practical guide to help you get started.

What’s in this article?

• Why start a business in Texas?
  
• What are the legal steps to start a business in Texas?
  
• What industries prosper in Texas?
  
• How do you access resources for Texas-based entrepreneurs?
  

Why start a business in Texas?

Here are some of the reasons why starting a business in Texas could be the right move for you.

No income tax

Texas does not have an income tax. That’s a huge win for business owners and employees. Rather than have a corporate income tax, the state levies a franchise tax, but small businesses are often exempt. Additionally, depending on your industry, there are specific tax breaks and incentives to sweeten the deal.

A flourishing economy

Texas has a diverse economy, with businesses that specialise in everything from energy and agriculture to tech, healthcare, and logistics. Its proximity to major cities such as Houston, Dallas, Austin, and San Antonio means you’ve got access to markets that are developing quickly.

A pro-business state

Texas is consistently ranked as one of the more business-friendly states in the country. There are fewer regulations and less red tape, and Texas has programmes in place to support entrepreneurs. Organisations such as the Texas Economic Development Corporation and local business groups offer resources to help you get started and grow.

Access to talent

The workforce in Texas is large, skilled, and diverse. The state’s universities and tech hubs, especially in cities such as Austin and Dallas, train that workforce. In Houston, you can find expertise in areas such as energy and healthcare. Whatever your niche, you’ll find talent to match.

Affordable operations

Texas is more affordable than states like California and New York. That lower cost of living helps attract employees and keep them happy, and operating costs won’t drain your budget.

An ideal location

Texas’s location is great for doing business across the US and beyond. Its central location makes distribution easier, and its strong infrastructure includes roads, rail, air, and ports. Its proximity to Mexico opens up additional trade opportunities.

A startup-friendly culture

Texas has a reputation for cultivating innovation. Cities such as Austin and Houston have become magnets for startups, especially in tech. There’s also easy access to funding, whether it’s through venture capitalists, angel investors, or business incubators.

Increasing population

Texas is one of the fastest-growing states. More people mean a bigger customer base, more workers, and an expanding economy.

A wide range of markets

The variety of markets in Texas allows businesses to serve a broad range of customers and tap into markets locally, nationally, and internationally.

What are the legal steps to start a business in Texas?

Here’s what you need to do to start your business in Texas.

Decide on your business structure

Will you choose a limited liability company (LLC), a sole proprietorship, a corporation, or a partnership? Each option has its benefits, such as liability protection and tax advantages. If you’re unsure which structure is right for you, get advice from a lawyer or certified public accountant (CPA).

Pick a name that works

Once you’ve settled on a structure, you’ll need a business name. Check with the Texas secretary of state to ensure the name you want is not already taken. The name also needs to meet state rules: it shouldn’t mislead people about what your business does or copy an existing name.

If you’re a sole proprietor who operates under a name that’s not your legal name (such as “Smith Plumbing” instead of “John Smith”), file a DBA (“doing business as”) with your county – a DBA is also called an “assumed name”.

Register your business

The process for registering your business depends on your structure. If your business is a limited partnership, LLC, or corporation, file a Certificate of Formation with the Texas secretary of state. You can do so online via the SOSDirect portal or by post.

Get an Employer Identification Number (EIN)

You’ll need a federal EIN from the Internal Revenue Service (IRS) if you’re forming a partnership or corporation or if you plan to hire employees. Applying online is free and takes about 10 minutes. Even if you don’t plan to hire employees, you’ll probably need an EIN to open a business bank account.

Look into licences and permits

Depending on your industry, you might need specific licences or permits. For example, you might need:

• Professional licences for fields such as property, healthcare, and contracting

• Local permits, such as zoning approvals and health department certifications

Check with your city, county, or the Business Permit Office to ensure you understand what you’re responsible for.

Register for state taxes

If you’re selling goods or services that are taxable, you’ll need a sales and use tax permit from the Texas Comptroller. Depending on what you’re doing, there might be other state taxes to consider, such as unemployment taxes if you hire employees, and franchise taxes.

Open a business bank account

Keeping your personal and business finances separate is important. To open a business account, you’ll need your EIN, your business registration documents, and, if applicable, your DBA paperwork.

Consider business insurance

Insurance is not always required but it can be a good idea to get it. Depending on your industry, you might need general liability, professional liability, or property insurance. Workers’ compensation is required for businesses that contract with the government.

Know the rules for hiring

If you’re going to hire employees, assure that you’re prepared:

• Verify that they’re eligible to work.

• Report all new employees to the New Hire Reporting programme.

• Set up unemployment insurance and payroll tax withholding.

• Follow wage laws (such as minimum wage requirements).

What industries prosper in Texas?

Texas is home to many flourishing industries thanks to its size, diverse economy, and business-friendly atmosphere. Here’s a look at some of them.

Energy (oil, gas, and renewables)

Texas is almost synonymous with oil and gas. The state produces more crude oil and natural gas than any other US state. Major companies such as Exxon Mobil and Chevron have deep roots here. In addition to traditional energy, Texas is also a leader in renewable energy.

Technology

There’s a reason that Austin’s nickname is “Silicon Hills”: it’s a hot spot for tech startups and major players. Companies such as Dell, Oracle, Tesla, and a growing number of software and AI firms call Texas home.

The tech scene isn’t limited to Austin, though. The Dallas–Fort Worth area is known for telecommunications, cybersecurity, and IT services, while Houston has a strong biotech and energy tech scene.

Healthcare and life sciences

The Texas Medical Center in Houston – home to 21 hospitals, 8 specialized institutions, and 8 academic and research institutions – is the largest medical complex in the world. Cities such as Dallas and San Antonio are also hubs for healthcare and biotech research and advancement.

Manufacturing

From aerospace components to consumer goods, Texas is a manufacturing powerhouse. Companies are drawn here because of the state’s central location, infrastructure, and skilled labour. Here are some of the key areas:

• Automotive: Tesla’s Gigafactory outside Austin and Toyota’s operations in San Antonio are prime examples.

• Aerospace: Lockheed Martin, Boeing, and SpaceX have established operations in Texas.

• Electronics: Samsung and other semiconductor companies are setting up big facilities here.

Agriculture

Texas has always been big in agriculture: it leads the nation in cattle, cotton, and hay production. The state’s size and varied climate enable a wide range of farming and ranching operations. Beyond traditional crops, Texas is making moves in agribusiness, including food processing and agricultural technology.

Transportation and logistics

Texas’s location makes it a natural hub for logistics and distribution. The state’s vast highway network, rail systems, ports, and proximity to Mexico make it a key player in moving goods across the US and internationally.

Finance

The Dallas–Fort Worth area, dubbed “Y’all Street”, has a burgeoning banking and finance sector. It’s home to companies such as Charles Schwab and regional hubs for Goldman Sachs and JPMorgan.

Entertainment and media

Texas is a major player in film, music, and gaming. Austin hosts SXSW (a huge event for music, tech, and film), and the state has competitive tax incentives for film and video game production.

How do you access resources for Texas-based entrepreneurs?

Here are local resources available for entrepreneurs in Texas.

State resources

• Texas Economic Development Corporation: This non-profit organisation provides business owners with information on funding, grants, and business incentives.

• Texas Comptroller of Public Accounts: The comptroller’s office has useful resources for working out tax obligations, getting tax permits, and staying compliant with state rules.

• Texas Workforce Commission: This state agency offers hiring support, workforce training programmes, and unemployment tax guidance.

Local resources

Local chambers of commerce can be great resources for networking, workshops, and business advocacy.

Cities such as Austin, Dallas, and Houston also have economic development offices that offer grants and city-specific programmes.

Small Business Development Centers

These centres are scattered across Texas and provide free or low-cost consulting on business planning, marketing, and financing. Find the closest one here.

Funding and grants

If you need large-scale funding, consider the Texas Enterprise Fund. Smaller startups can also consider the Product Development and Small Business Incubator Fund, which offers long-term, asset-backed loans, or PeopleFund and LiftFund, which offer microloans.

Networking and incubators

Texas is full of incubators, accelerators, and co-working spaces. Check out Capital Factory in Austin or Station Houston if you’re in tech or a startup.

Local events such as Startup Week are excellent for meeting other entrepreneurs and investors in major cities, including Austin, Dallas, and San Antonio.

Online resources

The Texas Business Licenses & Permits Guide helps you understand exactly what paperwork and approvals you need.

The governor’s Small Business Resource Portal has information on federal, state, and local resources for business owners, as well as contact information for the Small Business Assistance Team.

Industry-specific help

If you’re in energy, agriculture, or manufacturing, look into industry groups such as the Texas Renewable Energy Industries Alliance and the Texas Manufacturing Assistance Center.