Business Startup Costs in Texas
Business Climate in Texas
Texas is the second-largest state economy in the US and ranked #2 on CNBC's 2025 Top States for Business. The state has no personal income tax and no traditional corporate income tax, instead levying a franchise (margin) tax on gross receipts. Texas has experienced massive business migration from higher-cost states, with major corporate relocations from California (Tesla, Oracle, HP Enterprise) and other states. The diverse economy spans energy, technology, healthcare, and aerospace.
Regulatory Overview
Texas does not require a state-level general business license, though local jurisdictions may require business permits. The regulatory environment is considered very business-friendly with a strong deregulation philosophy. Business registration is handled through the Texas Secretary of State. The Texas franchise tax reporting system can be complex, but most small businesses fall below the no-tax-due threshold.
Key Facts
- No personal income tax
- No traditional corporate income tax — Texas levies a franchise (margin) tax of 0.75% (0.375% for retail/wholesale) on businesses with over $2.47 million in revenue
- State sales tax is 6.25%, with combined local rates up to 8.25%
- Ranked #2 on CNBC's 2025 Top States for Business
- More Fortune 500 companies are headquartered in Texas than any state except New York
Top Industries in Texas
Cost Factors
Texas offers highly competitive startup costs with no personal income tax, no traditional corporate income tax for most small businesses (franchise tax threshold of $2.47 million), and generally affordable commercial rent. However, Austin has become expensive, and Dallas and Houston are getting pricier. Property taxes are among the highest in the nation (averaging ~1.6% of assessed value) — this is how Texas compensates for no income tax. Insurance costs can be high due to weather risks.
Quick Facts
| LLC Filing Fee | $300 |
| Secretary of State | https://www.sos.state.tx.us/corp/ |
| Workers Comp Rate | $0.90 per $100 of payroll |
| Avg Commercial Rent | $20/sqft/year |
Secretary of State Office
Tips for New Business Owners in Texas
- Understand the Texas franchise tax: businesses with annualized total revenue under $2.47 million owe no franchise tax, though you may still need to file a report
- Register with the Texas Comptroller of Public Accounts for your sales tax permit and franchise tax account
- File your franchise tax report by May 15 each year — even if you owe no tax, a report (or Public Information Report) is typically required
- Consider cities outside of Austin and Dallas for lower costs — San Antonio, El Paso, and the Rio Grande Valley offer significantly cheaper commercial real estate
Startup Costs by Business Type in Texas
| Business Type | Permits & Licenses | Insurance/yr | Cost Index | National Avg (Mid) | |
|---|---|---|---|---|---|
| Restaurant | $4,500 | $6,000 | 0.95x | $275,000 | Full breakdown → |
| Food Truck | $3,500 | $3,800 | 0.95x | $125,000 | Full breakdown → |
| Hair Salon / Barbershop | $1,800 | $3,000 | 0.95x | $100,000 | Full breakdown → |
| Cleaning Service | $175 | $950 | 0.95x | $10,000 | Full breakdown → |
| Landscaping Business | $300 | $2,500 | 0.95x | $50,000 | Full breakdown → |
Explore Texas by Business Type
Neighboring States
Compare startup costs in states bordering Texas:
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