Texas is where liberty lives.
That’s why the Lone Star State leads the nation in job creation and in population growth over the last 14 years.
As the 9th largest economy among the nations of the world and home to 50 Fortune 500 headquarters, Texas offers a business-friendly climate—with no corporate income tax and no personal income tax—along with a highly skilled workforce, easy access to global markets, robust infrastructure and predictable regulations.
That’s why Texas continually ranks as the best state for business. CEOs who relocate to Texas cite the differences as “night & day” when it comes to the improved quality of life and good schools, along with the job-ready workforce.
Lower energy costs, together with lower land costs and fewer land-use restrictions, also mean lower operating costs for businesses and a lower cost-of-living for their employees.
Those are some of the advantages that helped Texas win the Governor’s Cup for the most new and expanded corporate facility projects in the nation—for the eighth year in a row.
“Made in Texas” is a powerful label. And by unleashing the power of entrepreneurs and innovators, and securing the freedom to aspire, Texas will long remain the best state for businesses large and small.
Competitive Advantages of Texas compared to other states, such as California
All states are generally equally competitive from a federal perspective, however, at the state level, there are several important areas that can create a competitive advantage such as in the areas of:
Income tax rates
Franchise tax rates
Property tax rates
Cost of living
Texas generally has an advantage over East Coast and West Coast states such as New York and California because:
Texas has no personal income tax
Texas has no corporate income tax
Texas has a franchise tax (Texas margin tax), but this tax is zero for companies with gross revenues of less than $1 million.
California and New York have personal and corporate income tax. California has a minimum corporate franchise tax even if the company has no business.
California personal income tax rate 13%
California state corporate income tax rate 8.4%
Texas is a right-to-work state which can be more favorable to employers compared to other states such as New York and California which have more pro-worker and union protection type regulations.
The cost of living is noticeably less in Texas compared to states like California and New York, for example, the cost of wages and housing cost is typically much less compared to California.
Texas has international airports and international shipping ports and easily serves as an important, central point when going into Latin America.
Texas Local Presence Requirements
Although having a personal presence in Texas can be helpful, there is no local physical presence required when doing business in Texas. Foreign companies may engage in transactions with Texas companies and engage in business activities without having to have a Legal Representative of the company physically present in Texas.
If the company is engaging in more than pure solicitation activities in the state, then the company would be required to the register with the Texas Comptroller's Office for Texas Franchise tax purposes. And depending on the level of sales activity, the company could be required to register for sales tax purposes.
If the company needs to defend itself in the Courts in Texas, it would need to register with the Texas Secretary of State's office for authority to do business in the state.
And in this case, it is necessary to designate a company representative with an address where official notices can be delivered, but this can be accomplished by using an outsourced company that provides this specific service at a very reasonable cost.
The cost to register for tax purposes and legal purposes can vary depending on the circumstances, but is generally very reasonable in Texas, e.g. in the range of $1500 or less.
If a foreign company decides to set up a Texas corporation or Limited Liability Company, there could be additional the legal cost due to draft the desired legal documents.
Finding an investor in Texas
There are private equity investment firms in Texas, particularly in Houston and Dallas, plus there are private individual investors and families that can be located as well. But depending on the type of investor solicited and the nature of investment, there can be important state and federal investment securities and trading laws that must be complied with.
Setting up a Texas company
The cost to set up a legal entity in Texas will depend on the specific circumstances, but generally it is not expensive, particularly compared to other countries.
For example, for situations that are not complex and with simple ownership structures, one can typically set up a Texas corporation for less than $500. And a Texas corporation or limited liability company can be comfortably set up within 2-3 days.
One can do business in Texas in the form of a sole proprietorship, general partnership, limited partnership, limited liability company, or corporation. There are a number of important variables that drive the decision as to which is the best legal form to use for the company.
A non-US individual can incorporate a company in Texas and own the company. There is no local US citizen ownership requirement in the US, nor in Texas, like which you can find in other countries around the world.
But where there is foreign ownership, US companies, including Texas corporations, have important foreign ownership and foreign transaction reporting and information disclosure requirements that must be satisfied as part of the annual US corporate tax filing requirements.