Over the last decade, the Lone Star State has led the country in population growth and remains a top state for job growth. Texas, the world’s ninth largest economy, provides a unique combination of competitive business advantages that no other state can match: a business-friendly climate, a highly skilled and diverse workforce, easy access to global markets, robust infrastructure, and a reasonable regulatory environment.
Texas is one of the top states in the union for small enterprises. However, it has more to offer than just friendly regulations. Perhaps more than anywhere else, its culture, weather, and lifestyle options provide opportunities for business owners and workers to work hard, earn a livelihood, and enjoy the fruits of their labors.
Here are a few statistics that highlight the impact small businesses have on the Texas economy.
Quick Texas Small Business Statistics for Entrepreneurs
- Small businesses in Texas represent 99.8% of all private enterprises in the state.
- Small business employees account for 45.1% of the entire paid workforce in Texas.
- Between March 2019 and March 2020, 72,211 new businesses opened in Texas, while 63,872 closed, for a net gain of 8,339.
- In 2019, small businesses in the state exported goods worth $105.3 billion.
- Racial minorities make up 24.8% of workers and own 20.4% of small businesses.
- Military veterans account for 6.7% of business owners.
- The per capita disposable income in Texas is $50,355.
- Between 1994 and 2018, Texas small business employment increased by 50.7%, outpacing the national small business employment growth rate.
- Women represent 43.2% of small business ownership.
- The 2021 CNBC “Top States for Business” report ranks Texas 4th out of all 50 states.
Texas Small Business Statistics
1. What is considered a small business in Texas?
The Small Business Administration (SBA) defines a “small business” in most industries in terms of the average number of employees over the most recent 12 month period (ranging from 100 to over 1,500 persons) or average yearly receipts over time (ranging from $1 million to over $40 million).
There are currently three million small businesses in Texas that represent 99.8% of all businesses in the state.
Texas accounted for 536,301 of all new business applications submitted nationwide between January 2021 and January 2022, ranking third among states. Adjusting for population, Texas had 1,850 applications per 100,000 residents, which was more than the national average and ranked 14th among states.
When starting a business in Texas, it might be beneficial to hire an LLC (limited liability company) formation service to help you with the registration process and to function as a communication bridge between your firm and state authorities. Read my review of the best LLC services in Texas to discover more.
2. How many people are employed by small businesses in Texas?
There are 4.9 million small business employees in Texas who represent 45.1% of all employees in the state.
Texas has not raised its minimum wage since 2009, when it rose from $6.55 to $7.25. There is currently no legislation that seeks to raise the minimum wage.
There are several exceptions to the Texas state minimum wage, such as tipped employees who make more than $20 per month in tips, student workers, employees with disabilities, and workers under the age of 20 who work for an employer for fewer than 90 days. Furthermore, Texas has established particular minimum wage rates for a variety of vocations, including farmworkers, seasonal workers, newspaper deliverers, and “informal” employees, such as babysitters.
3. Texas small business statistics by industry
The professional, scientific, and technical services sectors cumulatively represent the largest single industry in terms of small business investment, with a total of 373,776 small businesses currently working in these sectors. Approximately 309,851 of these firms are nonemployer businesses, 59,299 have 1–19 employees, and 4,626 have 19–499 employees.
With just 1,543 small businesses, the management of companies and enterprises industry is the smallest in the state.
4. Texas small business ownership by ethnicity
Texas has a population of 29,527,941 people and has had yearly population growth of 1.5% over the last five years from 2019, placing it eighth out of 50 states. White/Caucasian Americans represent the largest ethnic group at 78.7% of the population. They are followed by Hispanic or Latino Americans (39.7%), Black/African Americans (12.9%), Asian Americans (5.2%), American Indian and Alaskan Natives (1%), and Native Hawaiians and Other Pacific Islanders (0.1%).
Here’s a breakdown of how small business ownership is distributed among these groups:
- White/Caucasian — 2,193,776
- Hispanic/Latino — 796,910
- Black/African American — 311,158
- Asian — 231,051
- American Indian and Alaska Native — 11,539
- Native Hawaiian and Other Pacific islander — 2,200
5. Texas small business ownership by gender
Women own a total of 1,076,697 small businesses in Texas. Approximately 992,000 of these firms are nonemployer businesses, while 84,697 have employees. Men own 1,564,944 businesses, 1,315,000 of which have no employees while 249,944 have employees on payroll.
There are also 112,844 small businesses that are owned by both men and women.
6. Business taxes in Texas
Standard LLCs are pass-through tax entities in most states, which means they do not have to pay federal or state income taxes. Instead, corporate revenue is dispersed to individual LLC members, who pay federal and state taxes on the amount given to them. In Texas, however, LLCs, including single-member LLCs, are liable to the state franchise tax. Individual members are not required to pay state taxes on any share of the company’s net revenue that they earn.
While by default LLCs are categorized as disregarded entities for federal tax purposes, you can decide to have your LLC classified as a corporation. The LLC would thereafter be liable to federal corporation income tax. This change in classification, however, would have no effect on the LLC’s franchise tax responsibilities. The Texas franchise tax rate for most businesses is 0.75% of the taxable margin. The state does not levy a corporate income tax.
Texas takes its tax regulations very seriously. Failure to report your taxes on time is punishable by law and may affect your business operations. You may, however, use a registered agent service to help you with your tax filing and send frequent alerts so you don’t miss any upcoming deadlines. Read my review of the best registered agents in Texas to learn more.
7. How COVID-19 affected small businesses in Texas
Texas has the 48th greatest economic exposure to COVID-19 (of all states in the US) based on the percentage of employees working in industries with a high or medium-high degree of exposure to COVID-19.
In Texas, 43% of all employees, or 6,537,063 people, work in industries with a high or medium-high degree of economic exposure to COVID-19. Approximately 20% of all Texas employees, or 3,027,989 people, work in industries with a low or medium-low degree of economic exposure to COVID-19.
8. Small business financing in Texas
The Community Reinvestment Act (CRA), which Congress passed in 1977, encourages depository institutions to assist in satisfying the credit requirements of the communities in which they operate. Especially in low and moderate income communities.
Large banks are required by the Community Reinvestment Act to disclose new small business loans. In 2019, reporting banks paid out $8.4 billion in loans to Texas firms with $1 million or less in earnings. Total reported new lending to firms was $9 billion for loans of $100,000 or less, and $22.9 billion for loans of $1 million or less.
9. Texas small business export statistics
In 2019, a total of 40,501 reported enterprises exported products worth $299.9 billion from Texas. Approximately 37,421 (or 92.4%) of those exporters were small businesses that shipped items valued at $105.3 billion, accounting for 35.1% of all recognized firm exports.
The Final Word
Texas brings plenty of skill to the table for entrepreneurs launching new ventures. It is one of the top states for boomer and millennial entrepreneurs to set up business, according to Forbes (California and Florida are the other two leading states). The reason is simple: Texas has a huge state population, which is made all the more desirable by its educated residents attending local colleges and universities.
The cost of living is also quite low. Texas boasts inexpensive food, rent, health care, and utility costs, and it also has its own power infrastructure, which makes electricity cheaper than in any other state.
- CNBC – Top States for Business
- Tax Foundation
- Census Bureau
- Square Up
- US Small Business Administration