Employ
RecruitDoing Business in Texas
-
Drew Donnelly
- Published
- April 16, 2026
Do you want to expand your business into Texas or hire employees there? Here are some key things you need to know about a Texas expansion.
- 5 ★ on G2
- Texas Services
- Hire Anywhere, Worry-Free
- Texas Economy Overview
- Texas: The “Lone Star State” with a Booming and Diverse Economy
- Overview of Texas’s Economy
- Taxes
- Business Regulation in Texas
- What Are the Benefits of Doing Business in Texas?
- What Are the Downsides of Doing Business in Texas?
- International Expansion into Texas
- Business Opportunities in Texas
- Expand into Texas with Remote People
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Texas Economy Overview
Currency
United States Dollar (USD)
Working hours
40 hours/week
Public/bank holidays
11 federal holidays, and the state also has a few unique commemorations
Capital
Austin
Languages
English (primary)
Population
Approx. 30 million (2023 estimate)
Minimum hourly salary
USD 7.25 (federal minimum; Texas has not set a higher state rate)
Tax year
1st Jan – 31st Dec
Date format
MM/DD/YYYY
Misclassification penalties
The Texas Workforce Commission (TWC) and the U.S. Department of Labor monitor worker classifications. Employers found misclassifying individuals as independent contractors face back taxes, penalties, potential civil action, and interest. Construction and trucking industries tend to receive higher scrutiny.
Fun fact
Nicknamed the “Lone Star State,” Texas was once an independent republic from 1836 to 1845. The state flag’s single star symbolizes its former status as an independent nation and its fight for independence from Mexico.
Texas is one of the most business-friendly states in the U.S., attracting companies with its low taxes, strong economy, and skilled workforce. Whether you’re a startup, a growing enterprise, or an international company looking to expand, Texas offers significant advantages, from no state income tax to a thriving industrial and tech sector. However, businesses must also navigate challenges such as regulatory compliance and industry competition.
In this guide, we’ll cover the key aspects of doing business in Texas, including tax policies, economic opportunities, and potential obstacles to help you make informed decisions.
Texas: The “Lone Star State” with a Booming and Diverse Economy
Covering more than 268,000 square miles, Texas is the second-largest U.S. state by area and population. Its economy surpasses USD 2 trillion in GDP (as of recent estimates), making it one of the most economically influential states in the nation. Major cities like Houston, Dallas-Fort Worth, Austin, and San Antonio each contribute unique industry specializations—from energy and healthcare to technology and military.
Overview of Texas’s Economy
| Sector | Contribution to Texas’s Economy |
|---|---|
| Energy (Oil & Gas) | Historically central; largest crude oil producer in the U.S. |
| Technology & Innovation | Rapidly growing, especially in Austin’s tech corridor |
| Manufacturing | Includes petrochemicals, aerospace, automotive, and electronics |
| Agriculture & Livestock | Top producer of cattle, cotton, and various crops |
| Healthcare & Medical | Major hospital systems and research institutions in large metros |
Energy (Oil & Gas)
Texas produces more oil and natural gas than any other U.S. state. This industry has shaped the state’s infrastructure, job market, and revenue base for decades.
Technology & Innovation
Cities like Austin and Dallas have emerged as major tech hubs, attracting startups, established firms, and venture capital. Semiconductors, software, and biotech are all on the rise.
Manufacturing
From chemical plants along the Gulf Coast to aerospace facilities in the Dallas-Fort Worth area, Texas has a well-rounded manufacturing portfolio. Automakers (e.g., Tesla) are increasingly prominent.
Agriculture & Livestock
Rural Texas remains vital to the state’s economy, with ranching and farming supporting significant export volumes. Cotton, beef, and poultry are key products.
Healthcare & Medical
The Texas Medical Center in Houston is one of the world’s largest, and other metro areas host comprehensive healthcare and research facilities, spurring job creation in life sciences.
Taxes
Employer Tax: 7.65% – 12.55% (Approx.)
Social Security (FICA)
6.2%
Medicare (FICA)
1.45%
Federal Unemployment Tax (FUTA)
0.6% (after credits, on first USD 7,000 of wages)
State Unemployment Insurance (SUI)
Typically 0.31% to 6.31%, based on the employer’s experience rating
Employee Tax: 7.65% + Federal Income Tax
Social Security
6.2%
Medicare (FICA)
1.45%
State Income Tax
Texas does not levy a personal state income tax, which is a major draw for workers and high earners.
Federal Income Tax
Progressive rates from 10% to 37%, depending on income brackets
Note on Business Taxes
Texas imposes a Franchise Tax (also called the Margin Tax) on many businesses operating in the state, calculated based on revenue or other margins.
Business Regulation in Texas
Texas is known for a pro-business legal environment:
Consumer Protection
Antitrust
Federal laws apply; the Texas attorney general can pursue state-level actions against anti-competitive behaviors.
Employment & Labor
No state-specific minimum wage above the federal rate; overtime rules align with federal law. Some local jurisdictions (e.g., certain city ordinances) might impose additional workplace regulations.
Environmental
The Texas Commission on Environmental Quality (TCEQ) monitors air, water, and land quality, especially crucial for oil, gas, and chemical industries.
The Texas Secretary of State handles business registrations. Various agencies (e.g., TWC, Attorney General’s Office) oversee labor, consumer, and environmental compliance.
What Are the Benefits of Doing Business in Texas?
- No Personal State Income Tax: This attracts skilled workers and entrepreneurs, potentially lowering labor costs and increasing employee satisfaction.
- Massive Consumer & Talent Market: With nearly 30 million residents, Texas provides a large, diverse labor pool and an expansive customer base.
- Pro-Business Climate: The state actively courts investment via tax incentives, grants, and a generally light regulatory framework.
- Major Transportation Infrastructure: Multiple international airports, extensive highway systems, and seaports (Houston, Galveston) facilitate global trade.
- Robust Industry Clusters: From energy to technology, Texas hosts well-established ecosystems that create synergy for new entrants and startups.
What Are the Downsides of Doing Business in Texas?
- Infrastructure Strains: Rapid population growth can stress roads, utilities, and public services, leading to congestion and maintenance issues.
- Potentially High Property Taxes: While Texas lacks a personal income tax, localities often rely heavily on property taxes, which can escalate business costs.
- Climate Challenges: Hurricanes on the Gulf Coast, extreme heat, and occasional winter storms can disrupt operations and raise insurance costs.
- Limited Public Transportation: Outside of major urban centers, public transit options are sparse, making car reliance necessary for most employees.
- Varying Local Regulations: Some cities (e.g., Austin) enact local ordinances on labor practices, creating a patchwork of rules within the state.
International Expansion into Texas
Texas Employer of Record (EOR)
Recruitment Agencies
Numerous staffing firms in cities like Houston, Dallas, and Austin specialize in energy, tech, healthcare, and more. They simplify candidate sourcing and ensure compliance with hiring regulations.
Texas Professional Employer Organization (PEO)
A PEO arrangement involves co-employment, handling HR tasks (payroll, benefits, tax reporting) while the foreign firm oversees operations. PEOs are popular among SMEs seeking a cost-efficient market entry strategy.
Subsidiary Incorporation
For larger or long-term commitments, establishing a Texas subsidiary—usually an LLC or corporation—involves registering with the Secretary of State. The company must adhere to the Texas Franchise Tax and maintain annual compliance filings.
Branch Registration
A foreign parent can extend operations by registering a branch in Texas. This offers fewer liability protections but may be quicker to set up than a subsidiary.
Business Opportunities in Texas
| Business Opportunity | Reason |
|---|---|
| Energy (Oil & Renewable) | Dominant oil & gas sector + emerging wind/solar in West Texas |
| Technology & Software | Rapidly expanding tech hubs in Austin, Dallas, and Houston |
| Advanced Manufacturing | Automotive, aerospace, electronics boosted by supply chains |
| Healthcare & Biotechnology | Large hospital systems, extensive research facilities |
| Logistics & Distribution | Central geographic location, major ports, robust highway system |
Texas’s sizeable market, business-friendly policies, and diverse economic base make it a prime destination for foreign firms expanding in the U.S. While certain challenges—such as weather extremes and infrastructure demands—require foresight, the state’s rapid growth and varied industries present compelling advantages for companies of all sizes.
Expand into Texas with Remote People
Texas presents an attractive environment for businesses looking to grow and expand. With its favorable tax policies, strong economy, and skilled workforce, companies can find numerous opportunities for success. However, navigating regulatory requirements and competition is essential for long-term sustainability. By understanding the business landscape, you can make strategic decisions to thrive in the Lone Star State.
To learn more about expansion into Texas, get in touch with Remote People’s local business expansion experts.
