How to Start a Business in Texas

Energy and Oil/Gas remains the backbone of the Texas economy. The state produces more crude oil than any other, and Houston is the undisputed energy capital of the world.

Technology has surged, especially in Austin, which hosts Apple's $1 billion campus, Tesla's Gigafactory, and hundreds of venture-backed startups. Dallas-Fort Worth is a growing hub for enterprise tech and fintech.

Healthcare and Biomedical employs over 1.7 million Texans. The Texas Medical Center in Houston is the largest medical complex globally, creating demand for medical device suppliers, health IT, and specialized staffing firms.

Agriculture and Food Production generates more than $25 billion annually. Texas leads the nation in cattle, cotton, and hay production, and the farm-to-table movement has opened new markets for small producers.

Aerospace and Defense is anchored by NASA's Johnson Space Center, Lockheed Martin, and multiple military installations. Contract opportunities extend to small businesses through federal set-aside programs.

Construction and Real Estate continues to boom as population growth drives demand for residential, commercial, and infrastructure projects across every major metro.

Texas imposes no personal state income tax, a benefit enshrined in the state constitution. LLC and sole proprietorship owners keep 100% of their pass-through earnings at the state level, owing only federal income taxes.

The franchise tax (sometimes called the Texas margin tax) applies to entities with annualized total revenue above $2,650,000 for the 2026-2027 reporting period. The rate is 0.375% for wholesale and retail businesses or 0.75% for all other industries, calculated on the lesser of several margin computation methods.

Over 90% of Texas LLCs file a No Tax Due Report because they fall under the revenue threshold. Even so, every LLC must file a franchise tax report and Public Information Report with the Texas Comptroller by May 15 each year.

The state sales tax rate is 6.25%. Local jurisdictions can add up to 2%, bringing the combined rate to a maximum of 8.25%. Register for a free sales tax permit at the Comptroller's permit page before making your first taxable sale.

Property taxes in Texas are among the highest in the nation, with effective rates averaging around 1.6% to 1.8% of assessed value. Factor this into your budget if you plan to purchase commercial real estate.

Texas has no estate tax or inheritance tax, which benefits business succession planning. Federal quarterly estimated tax payments (Form 1040-ES) are still required for self-employed individuals.

The cost of living in Texas is approximately 8% below the national average according to the Missouri Economic Research and Information Center (MERIC). Major metros like Houston and San Antonio remain significantly more affordable than comparable cities in California or New York, though Austin has seen rapid price increases in recent years.

Median commercial rent varies widely by metro. In Houston, Class B office space averages around $22 to $28 per square foot annually, while Austin commands $35 to $50+ in prime locations. Co-working spaces start as low as $200 per month in most metros.

The state minimum wage follows the federal rate of $7.25 per hour, though most employers pay well above that to compete in a tight labor market. Average wages in tech, energy, and healthcare sectors are near or above national medians.

Utilities and energy costs are competitive, with Texas's deregulated electricity market allowing businesses to shop for the best commercial rates. Average commercial electricity rates run about 8 to 10 cents per kWh, below the national average of roughly 11 cents.

The Texas SBDC Network operates more than 60 centers across the state offering free business consulting, loan packaging assistance, and market research. In 2023, the network helped Texas small businesses secure over $1 billion in capital.

The SBA Houston District Office and the SBA Dallas-Fort Worth District Office provide access to SBA 7(a) loans, microloans, and disaster recovery funding. Texas consistently ranks among the top states for total SBA loan volume.

The Texas Enterprise Fund provides cash grants to businesses creating jobs in the state, with awards historically ranging from $2,500 to $20,000 per job created. The Governor's Office of Economic Development also administers the Texas Capital Fund and the Product Development and Small Business Incubator Fund.

Local economic development corporations in cities like Houston, Dallas, San Antonio, and El Paso offer property tax abatements, workforce training grants, and relocation incentives. Contact your city's economic development office for programs specific to your area.

In your first 30 days, open your business bank account, obtain your sales tax permit (if applicable), and set up your accounting software. File any city or county operating permits required by your local municipality before you begin serving customers.

Within 60 days, secure your general liability insurance, set up payroll if you have employees, and register with the Texas Workforce Commission for unemployment insurance. Create your Google Business Profile and basic website during this window.

By day 90, you should have your first quarterly federal estimated tax payment (Form 1040-ES) on the calendar and a system for tracking your franchise tax filing deadline of May 15. Schedule a free follow-up consultation with the Texas SBDC to review your first quarter's financials and adjust your business plan as needed.