Do you dream of running your own business? While it may sound like a fun adventure, being a business owner is hard work. According to WalletHub, about a fifth of startups fail before their first anniversary. And about half of startups won’t last five years.
One of the keys to a successful business is location. WalletHub analyzed the 50 states to determine which states are the best to begin a small business and Texas is near the top of the list. The rankings, published in July, were determined by economic experts and based on several factors.
• Business environment: The climate for business accounts for half of the scoring and Texas ranks high. The top criteria include the growth of business revenues, the five-year survival rate and the length of the work week.
• Access to resources: This category measures factors such as financial accessibility, the number of college educated people in the state and the number of people who are “working age” (between 16 and 64) in the state.
• Business costs: While this only accounts for about a fourth of the scoring, costs are one of the more important components to decide when starting a business. For the WalletHub study, factors included office space cost, labor cost, corporate taxes and the cost of living.
This study is not the only accolade the state received for economic development. In 2016, CNBC published an article outlining the 20 best metropolitan areas to start a business. Six Texas cities are included on the list with four of them in the top ten. Austin took the top spot with Houston ranked 6th, Dallas coming in 8th, San Antonio ranking 10th, McAllen coming in 12th, and El Paso at the 16th spot. The Lone Star state is in the top five on many other lists including ones published by Business Insider and Go Banking Rates.
What is attracting businesses to Texas? First, Texas is one of the few states without a personal income tax. Recently, the state cut franchise taxes by 25 percent. Also cut were occupational license fees.
The state is very friendly to small business. According to the information from the Texas Economic Development Council, the state has about 2.2 million small businesses. About 725,000 of them are owned by women and minorities. Small businesses in Texas employ 4.4 million people which accounts for more than 45 percent of the state’s workforce.
So, if you are convinced that Texas is the state for your business, what are some of the things you need to know to get started? The good news is, the Texas Economic Development Council has a special section on its website for those who want to start a business and to offer ongoing support to current businesses. Before you begin your business, follow this guide.
• What will you name your business? Sole proprietors often just use their name as the business name. Before deciding on the name, make sure no one else registered a business under that name.
• Before you sell your first item or provide your first service, determine what kind of business you will be. Sole proprietorship is the simplest form of business. You simply do business using your own name and you file personal income taxes. Other types of businesses include partnerships and corporations.
• File for the appropriate business licenses based on the type of business you are running.
• Don’t forget about taxes. As mentioned earlier, Texas is attractive to entrepreneurs and startups because the state does not impose a personal income tax. Make sure you know your federal and local tax obligations.
• Will you have employees? You will have certain requirements including worker’s compensation and unemployment insurance.
Do you want to know more about doing business in Texas? You can download a variety of resources here.