They say everything is bigger in Texas. The number of small businesses in the state is no different. The question is why Seongju is such a hotbed for small and medium-sized businesses. Quality talent, financial benefits, and tax breaks are all taken into consideration.
Here, we take a closer look at why entrepreneurs are heading to Texas to launch small businesses.
Why Texas is a great state to start a business
According to the U.S. Small Business Administration, approximately 99% of businesses in Texas are small businesses. The state ranked No. 1 in WalletHub's 2021 Best and Worst States to Start a Business report. In this report, we compared all 50 states to determine which is the best state to start a business.
The report's methodology considered conditions that enable ideal business creation, including access to capital, available workforce and affordable office space. Texas narrowly defeated Georgia with a total score of 56.92 to 57.89.
Here are four reasons why Texas is popular for new businesses.
1. Texas is rich in talent.
One of the keys to a successful startup is the company's team. In order to lead a startup to success, you need a pool of talented people, including human resources and engineers.
However, some startups make the mistake of hiring too quickly. Maybe the candidate isn't a good fit or lacks key skills needed for the role. An emerging small business may decide to hire and onboard them anyway. After all, filling the position is a top priority, and companies may be struggling to find interested and available candidates.
Texas is ranked No. 2 in terms of workforce on CNBC's 2022 America's Top States for Business. The state also consistently ranks among the top five states for doing business and boasts a large workforce, which makes business owners interested in setting up shop here.
Finding the best financing option is an essential part of starting a business. Consider saving six months to a year to cover startup costs before your business starts turning a profit.
2. Starting a business in Texas offers significant tax benefits.
There was a time, not too long ago, when many entrepreneurs flocked primarily to Delaware and Nevada to find business. Delaware is known as the corporate formation capital of the world because of its business-friendly corporate tax laws. These laws have made it possible for the state to become the legal home of more than 1 million businesses. Nevada is also known as a tax haven because it does not collect corporate or personal income taxes.
But beyond Delaware and Nevada, a growing number of states are passing tax laws favorable to small businesses, and Texas is one to watch. The Tax Foundation's 2023 State Business Tax Climate Index reveals that Texas ranks among the top 15 states with no personal or corporate income taxes. Texas continues to be an attractive location for startups due to its thriving economy and lack of income taxes.
3. Texas is open to innovation.
When you think of innovation, which states come to mind? Many people think of the East and West Coasts, especially California's Silicon Valley and New York's Manhattan (or Brooklyn).
But consider an event like South by Southwest (SXSW), held in Austin each year to celebrate the changing landscape of technology and media.
Texas is home to more than 380 airports, and new people arrive every day to check out the sights and sounds (including a vibrant music scene) around the state. You might be surprised by some of the industries that are thriving in Texas.
- Advanced technology and manufacturing
- Aerospace, aviation and defense
- Biotechnology and life sciences
- energy
- information and computer technology
- Petroleum refining
Innovation is happening across Texas right now. Texas has a large population and is known for its diversified economy thanks to its dedication to minority entrepreneurs. As the Texas Economic Development Corporation points out, that same economy can pave the way for Texas to create new jobs. Texas currently leads the nation in job creation and plans to continue this trend over the next decade and beyond.
4. Texas has a small business-friendly climate.
The U.S. Small Business Friendly Survey examines how states and cities across the country embrace small businesses. The study looked at key factors from 2012 to 2021, including each state's overall friendliness, employability, regulations, tax laws and training programs.
How friendly is the state of Texas as a whole? Texas received a B grade in 2021, marking the first year it has received a grade below an A. However, the state earned her A grade for ease of starting a business. Regulation; employment, labor, employment. tax law; and licensing – most of these factors moved up the ranking grade from 2019.
There is no guarantee of success for anyone starting a business, whether in Texas or elsewhere. The best way to succeed is to plan and prepare. This applies to any business trying to get off the ground. [Read more about starting a business from home.]
According to the U.S. Small Business Administration, approximately 43% of businesses in Texas are owned by women.
More states are great for starting a business
These states may rank lower than Texas in the WalletHub report, but still score highly in other categories. Here are some competitive states that reflect the way Texas promotes small business survival.
georgia
The Peach State was ranked No. 1 for business climate in a WalletHub study. Although tax rates are high, the state makes up for it with a low cost of living, making Georgia one of the most affordable states with lucrative startup incentives.
Last year, investment in business expansion and new businesses in Georgia accounted for more than $21 billion and created more than 51,000 jobs, according to the Georgia Department of Economic Development.
California
If you're thinking about starting a business, the Golden State is a great location. With California's year-round sunshine and friendly atmosphere, there's no question why entrepreneurs flock to the West Coast. A higher cost of living is worth it because your business is more likely to be successful in the long run.
florida
Florida is a progressive personal income tax state, with no personal income tax and a corporate tax of approximately 5.5%. Keep in mind that natural disasters, especially hurricanes, are one of the biggest downsides to starting a business in Florida.
idaho
Idaho had the highest small business growth rate in 2021 due to its convenient location and low exposure to natural disasters and climate change. Corporate and personal tax rates are high at approximately 7%. However, there are positive aspects to establishing a startup in this state, including in terms of consumer spending, survival rates, and labor costs.
Utah
WalletHub ranks Utah No. 6 in the study. Although the tax environment and business survival rates are average, the state has one of the lowest unemployment rates in the country at approximately 2%.
Additional reporting by Deborah Sweeney.
