The Benefits of Doing Business in Texas: An Expert's Perspective

Texas is a state that is renowned for its Fortune 500 companies, but the majority of businesses in the Lone Star State are small businesses. In fact, 99.8% of the 3 million businesses in Texas are small businesses. But what do entrepreneurs have to say about the current state of small businesses in Texas? Are they optimistic about what tomorrow holds for Texas business owners? We spoke to some of the state's businessmen to find out. One obstacle for small businesses, particularly startups, is access to capital.

Funding the launch or expansion of a business requires a good amount of money, but Texans said entrepreneurs can find it difficult to get the loan they need from local banks. Those living in rural areas have even fewer options unless they travel to the city. Venture capitalists (VC) and angel investors can be hard to come by and, if they are willing to invest, they often add conditions to the capital they offer that may not be desirable. For example, Frankel said venture capital investors often want companies to move to where the investor is based.

There are plenty of wealthy potential investors based in Texas, but money in the state generally doesn't flow to ground-level companies. Kellie Sirna and Stacy Elliston, co-founders of Studio 11 Design, said that while business has been great, it has become more difficult and expensive to fill positions. The lack of an income tax means that Texas' “tax freedom day” - the day the average Texan has earned enough to pay all of their taxes - is April 5th, which ranks as the fifth earliest in the nation. Of course, Texas still has a budget to maintain and collects most of its tax revenues through sales and franchise taxes.

The average state and local tax burden in Texas is 8.6%, making it the sixth most expensive in terms of these taxes. Many business owners told us that the Texas regulatory environment is conducive to successful business operations. Even those from more tightly regulated industries, such as Cody Yarborough, CEO of Lifecycle Biotechnologies, expressed satisfaction with the state's approach. Christopher Corso, who expanded his law firm to Texas, said easy-to-navigate state laws made the transition easier.

The lack of bureaucratic red tape gives entrepreneurs a break to strategize and expand more quickly, said Andy Albertini, owner of A2 Consulting Group. Major metropolitan areas (Dallas-Fort Worth, Austin, Houston and San Antonio) are experiencing strong growth, leading to increased economic activity. Entrepreneurs reported seeing more startups and lots of small businesses as well as new residents increasing demand for their goods and services. Corso said the same growth is happening in Houston where his defense firm has been practicing for a year and that boom has led to more startups and business opportunities.

Another benefit of doing business in Texas that entrepreneurs repeatedly mentioned was the diversity and support of business communities across the state. Many business owners said they belonged to a business organization or had sought help from a development center. Others said their areas were experiencing a boom in startups and small business growth driven by population growth. Mark del Bosque, manager of paid ads for The Digital Ring, said that amid booming growth and healthy business environment he had found support from community members and other small business owners in the area.

Sirna and Elliston have taken advantage of Dallas's thriving business environment for example. While much of their design revolves around the hotel industry they have been able to diversify and find other customers as well which has helped protect them from any future hospitality recession. To start a business in Texas you must select a business structure and submit appropriate tax and employer identification documents. Once your business has been created and applications for registration have been filed you must also determine your tax obligations under state and federal laws.

Most businesses need a license, permit or certification to operate in Texas which you can determine by consulting with the Texas Business Permit Office who will help you determine what permits and licenses you need as well as facilitate the request for materials for regulatory review. In Texas it generally takes one to three business days to process the formation of an LLC with electronic filing also available through the Texas Secretary of State's Office. Established by the state government, The Texas Economic Development Corporation aims to promote economic development throughout the Lone Star State providing resources and information for small business owners looking to launch a new company or expand an existing one. The Dallas Entrepreneur Center (DEC) network is a 501 (c) (nonprofit) organization serving entrepreneurs in Dallas providing a place where business owners can receive training, education, mentoring advocacy and access to capital to encourage and equip them with what they need to get started build and make their businesses grow.