4 Reasons Why Texas Is a Hot State for Starting a Business

Why Texas is a good state for starting a business

Texas is home to 3.2 million small businesses, making up over 99 percent of all businesses statewide, according to the U.S. Small Business Administration. Here are four reasons why the Lone Star State is so popular for new businesses.

1. Texas has an abundance of talent.

One of the keys to a successful startup is the company’s team. It takes a village of talented individuals to overcome the challenges of starting a business, including HR, engineers and more.

However, some startups make the mistake of hiring too quickly. Maybe the candidate isn’t exactly the right fit or lacks key skills necessary for the role. An emerging small business may decide to hire and onboard them anyway. After all, filling the position is a priority — and the business might have struggled to find interested, available candidates.

Texas is ranked No. 1 for workforce in CNBC’s 2024 America’s Top States for Business. The state has consistently earned top rankings for business overall and boasts a tremendous labor force — over 15 million as of 2024, the Texas Workforce Commission found. This has resulted in business owners’ interest in opening up shop there.

2. Starting a business in Texas comes with significant tax benefits.

Not too long ago, there was a time when many entrepreneurs flocked primarily to Delaware and Nevada to do business. Delaware has a reputation for being the incorporation capital of the world because of its business-friendly corporate tax laws. These laws have allowed the state to become the legal home to more than 1 million business entities. Nevada also has a reputation as a tax haven, since the state does not collect corporate or personal income tax.

But beyond Delaware and Nevada, more states have passed tax laws that benefit small businesses — including Texas. A lack of income tax, along with a thriving economy, continues to make Texas an attractive location for a startup.

Alysha Light, founder of Flight PR, experienced this benefit firsthand when she moved from California to Texas in 2017. “This is a huge financial benefit that is likely one of the primary draws for many companies,” said Light. “As a small business owner, Texas’ tax-friendly environment helps businesses reinvest more of their profits into growth and development.”

3. Texas is open to innovation.

When many people think of innovation hotbeds, they might think of the East and West Coasts — specifically Silicon Valley in California and Manhattan (or Brooklyn) in New York.

But consider events like South by Southwest (SXSW), held in Austin every year, that celebrate the changing landscape of tech and media.

More than 380 airports call Texas home, bringing in new faces every day to check out the state’s sights and sounds — including a lively music scene. You might be surprised at some of the industries thriving in Texas:

• Advanced tech and manufacturing
• Aerospace, aviation and defense
• Biotechnology and life sciences
• Energy
• Information and computer tech
• Petroleum refining

Innovation is taking place throughout Texas right now. Thanks to a large population — and one that works hard to serve minority entrepreneurs — Texas is able to put itself on the map with its diversified economy. That same economy, as the Texas Economic Development Corporation points out, allows Texas to pave the road forward in creating new jobs. Texas now leads the nation in job creation; it plans to continue the trend throughout the next decade and beyond.

4. Texas has a friendly climate for entrepreneurs.

In addition to having overall business-friendly policies, the Lone Star State has a reputation for welcoming and supporting small business owners. Texas has plenty of communities and resources for current and aspiring entrepreneurs, including Capital Factory in Austin.

“As the ‘center of gravity’ for startups in the area, Capital Factory offers invaluable networking opportunities, resources and support,” Light told business.com. “I’ve found it an excellent platform for collaboration and innovation, and it’s been instrumental in connecting me with potential clients.”

There isn’t a guarantee of success for anyone who starts a business — in Texas or elsewhere. The best way to succeed is to plan and prepare; that’s true for any business that wishes to get off the ground. [Read more about starting a business from home.]

More great states for starting a business

Here are a few competitive states that mirror Texas’s way of encouraging the survival of small businesses.

Arizona

Arizona landed at No. 6 on WalletHub’s Best & Worst States to Start a Business (2024) study, and No. 12 on CNBC’s. The Grand Canyon State is known for its strong infrastructure, low tax rates and business-friendly policies.

It’s also gained a reputation as an innovation hub, per the Arizona Commerce Authority, with industry giants like Amazon, IBM and Zillow operating in-state.

Florida

Florida is a leading state when it comes to individual income tax, with no personal income tax assessed and a corporate tax no higher than about 5.5 percent. [Learn about why small business owners should think about taxes year-round]

Keep in mind that natural disasters, specifically hurricanes, are one of the biggest downsides of companies moving to Florida.

Georgia

The Peach State ranked first in CNBC’s lineup for its infrastructure, and second overall in WalletHub’s study. Although it has a high tax rate, the state makes up for it with a low cost of living — making Georgia one of the top affordable states with helpful startup incentives.

According to the Georgia Department of Economic Development, expansion and new businesses in Georgia accounted for more than $20 billion in investments. In addition, they created nearly 27,000 private sector jobs in the last fiscal year.

North Carolina

North Carolina ranked second overall in CNBC’s study; it has made the list’s top three for the past five consecutive years.

The Old North State nabbed the No. 3 spot for business friendliness; it also garnered high marks for workforce, economy, education and access to capital. It boasts impressively low corporate and individual tax rates, topping at 2.5 percent and 4.5 percent, respectively, along with business-friendly laws and regulations.

Danielle Fallon-O’Leary ​​and Deborah Sweeney contributed to this article.