While most are familiar with the belief that location means everything when starting a small business, it’s assumed this means picking the right major road, intersection, or side of town. But the concept could also be applied to the state where your business is located—and the great state of Texas has claimed a top spot in polls ranking the best states for doing business.
According to the Ewing Marion Kauffman Foundation and Thumbtack.com, Texas businesses enjoy an “A+” business environment, along with only 3 other states. Texas is also home to three of the top five cities for small businesses: Austin, Houston and San Antonio.
So what makes Texas so great for running a business?
- Reasonable tax laws. Compared to other states, Texas businesses and startups benefit from fairly low tax rates, and for small businesses, it’s even better. They sometimes pay almost no taxes at all if profits don’t exceed a certain threshold. Texas law requires businesses and startups to pay a franchise tax that is 1% of their taxable margins, with the exception of sole proprietorships. Taxable amounts for small businesses are figured differently and each business type (LLC, C Corp, S corp, etc.) is subject to certain unique rules, but the fact is that Texas tax laws are much simpler and easier to understand than the tax laws in most other states. Instead of wrapping the business owner up in loopholes and circumstantial requirements, the requirements are simple for Texas businesses, which makes setting up shop in the state much more appealing for most business owners.
- Low regulation/easy navigation. Another major benefit for Texas businesses is the low regulation, resulting from a state legislature that meets to change business laws less frequently and also supports a more easily navigated system. As businesses operating within any state must abide by state legislature rules, some businesses struggle with the paperwork and costs associated with meeting state requirements. According to a Fraser Survey, satisfaction of business owners correlated strongly with the level of burden placed on them by state regulations—i.e. entrepreneurs rated states with less burdensome systems more highly. Since Texas businesses enjoy a more relaxed environment, satisfaction rates have remained high.
- Spirit and spark. Another major attraction for business or startup owners in Texas is the general positivity and spark prevalent in Texas culture. The state is Southern in lifestyle and independent by nature. Such cultures tend to support the independent ventures of others. In this case, Texas startups and businesses tend to thrive due to a general atmosphere of pioneering and entrepreneurial nurturing. The people of Texas appreciate smart, independent adventurers, which is reflected in the regulatory environment, the tax environment, and the general success of the overall Texas business climate. According to one article in Investopedia.com, “the business climate in Texas has been so pleasant during the 21st century that the state's former governor Rick Perry, who served from 2000 until January 2015, was known for storming through less business-friendly states, such as New York and California, and giving speeches to companies about why they should relocate to Texas.”
A recent Forbes article made a good point about the state of business in our country. The author reminded readers of the predictions of Alexis de Tocqueville, an early 19th century political theorist (major works published in 1835-1840), who said that a system of “soft despotism” created by “a network of small complicated rules” could be just as dangerous as the more obvious evils of a dictatorship and economic slavery. He was reported to have written that a centralized government “excels in preventing, not doing.”
States like Texas, however, have recognized the dangers in over-regulating and over-complicating business laws. The general atmosphere of daring and independence is perfect for adventurous entrepreneurs and startup owners, while the political climate is in favor of growth for small businesses. So, if it’s a great location you’re looking for, anywhere in Texas will do just fine.
About the Author - Ashley Choate is a native of Jacksonville, FL where she lives with her son, dog, and three cats. She graduated Magna Cum Laude from Jacksonville University with a BA in English and holds an MAED in Adult Education and Training. She lives for reading and writing, learning and teaching, and figuring out the day-to-day traumas and joys of mommyhood. .
Top Photo Courtesy of H. Michael Karshis @ Flickr CC.