An Entrepreneur’s Guide to Starting a Business in Houston, Texas
One of the most critical factors that can dictate a new business’s growth is location. It is crucial to target specific consumers based on demographic analysis and efficiently recruit qualified employees. Location also plays a significant role in building and maintaining a brand.
Houston, Texas, has been hailed as the entrepreneur’s playground for quite some time now. The city is large, has a talented workforce, boasts lax tax requirements, and has affordable living costs. Since starting a business anywhere can be complicated, it’s essential to consider various factors before launching an enterprise in “H-Town.”
In 2019, Houston was named one of the best cities in which to start a business. This makes sense when you consider the many factors that make it an ideal environment for startups and other business ventures:
- A Large And Talented Workforce
Houston is the fourth-most populous city in the United States and has a median age of 33.4 years. Those between the ages of 18 and 44 make up nearly 45% of the city’s population. The city’s population is also highly-educated, with more than 33.3% of residents older than 25 in possession of a bachelor’s degree. What’s more, 49.1% of those degrees are in STEM fields, and 24.4% are in business.
- A Commerce Giant
Startups succeed by developing business relations with larger, more influential corporations and venture capitalists. Houston is home to more than 21 Fortune 500 companies and is the site of more than 39.2% of venture capitalist investments in Texas, making it an absolute standout for entrepreneurs and investors alike.
- Startup Incentives and the Competitive Cost of Doing Business
Texas is one of the select few U.S. states with no personal, state, or corporate income tax. Combined with extremely affordable living costs and the abundance of inexpensive office spaces, the low cost of doing business in Houston becomes immediately apparent. The state also incentivizes startups through initiatives like the Texas Enterprise Fund, Diversification Waivers, and the Texas Capital Fund.
How To Start a Business in Houston
Starting a business in Houston is relatively streamlined. However, if you’re not familiar with the city’s regulations and competitive landscape, there are some main points to keep in mind:
- Choose an Optimal Location:
Choose an ideal business location based on your target demographics, estimated amount of foot traffic, and costs like utilities. For example, choosing a location with the availability of clean electricity for Houston homes and businesses can drastically reduce your operational costs in the long run.
- Decide Your Business’s Legal Constitution:
You can set up your business as any one of the following:
- Sole Proprietorship
- General Partnership
- Limited Liability Company
- Limited Partnership
As a startup, register as either a sole proprietorship or an LLC. As the owner, you are not personally liable for debts incurred by an LLC, so your assets will be protected. However, a sole proprietorship, albeit easier to set up, creates unlimited liability and recourse to personal assets.
- Register Your Business With the Requisite Authority: After deciding the legal structure, you’re required to register your business with the local county clerk’s office. Operating under an assumed name also requires you to file a Doing Business As (DBA) certificate.
If you want to register your business as an LLC, LP, or corporation of any type, you will need to register and file your business name with the Texas Secretary of State. Please note that a DBA does not protect your business name, but filing with the Secretary of State does.
- Obtain Required Permits and Prerequisites:Before legally operating as a business in Houston, obtain a Texas Sales & Use Tax Permit from the Comptroller of Public Accounts office. You should also look into any other permits specific to your business, related to construction, health, safety, and other matters.
- Obtain a Federal Tax Identification Number:You need to file an Employee Identification Number (EIN) with the IRS to keep track of your employees’ tax accounts.
Houston: A Business Haven
Finding an optimal location for a startup can be a nightmare. From hunting for investors to forging business relationships with large corporations to finding a qualified workforce, there are many variables to consider. However, Houston neatly checks the boxes required to make it an appealing option for entrepreneurs, and it is no surprise that it has seen such a massive burst in its startup ecosystem.