Considerations of Moving Your Business to Texas & Why You Should Choose Austin
Austin is frequently dubbed “the new Silicon Valley” and for good reason. According to the Austin Business Journal, more than 9,000 businesses moved out of California in 2015, with most of those moves to Texas. With a recent attempt by California legislature to raise the corporate tax (from 8.25 percent to 18.84 percent) it’s not surprising that many California-based business are looking for a new place to call home.
If you are thinking about moving your business to Texas, consider the advice of the RWR Legal team, who have represented and connected innovators, and their startups, since 1996.
Here are some of the top reasons to move to Austin as well as a couple of tips and tricks to consider once the choice has been made.
Top Reasons to Move Your Business to Austin:
1. Texas has Significantly Lower Corporate Taxes
In Texas, a corporation, partnership or limited liability company is each taxed on something called its “margin”, which is its gross income with limited deductions. The tax rate will vary depending upon the type of business that it operates and ranges from 0.375% to 0.75%. Entities with $1,130,000 or less of revenue are not subject to tax. Further, there is no minimum tax and its owners are not subject to any further taxes, as Texas does not have a personal income tax.
This is generally much lower than business taxes in California. In California, a corporation is taxed at a rate of 18.84% (recently increased from 8.84%) on its net income over $100,000 (with a minimum tax of $800). A partnership or limited liability company would only be required to pay the minimum $800 in taxes; however, its owners would also pay an income tax on their share of the partnership or limited liability company income.
2. Austin has a developed, highly interactive Entrepreneurial Community
Texas entrepreneurial communities are developing at a rapid pace. Austin has a very interactive ecosystem and prides itself on helping people connect with who they need to succeed. We have many co-working spaces open and ready to welcome newcomers and visitors as well as incubators and accelerators designed to bring mentorship and other resources to growing businesses.
3. Capital Opportunities
If you have a business that is looking for investment or is already in the process of raising money, look to the Austin’s well-regarding entrepreneurial and investment community for guidance. One of many options is The Central Texas Angel Network, which has invested more than $90 million since 2006 and continues to be the most active angel investment group in North America.
4. Personal Income Tax
Texas is one of the few states that does not have a state income tax, which not only puts a little extra money in your pocket at the end of the day, but also attracts strong prospective employees.
Texas has mild winters and mostly sunny days the rest of the year, Texas is a great place to move or expand your business. It does get hot in the summer (with multiple days hovering around 100 degrees), but if you don’t mind the occasional heat wave, Austin is your place.
Austin is one of the fastest-growing cities in the country. With new construction happening throughout downtown and the surrounding areas, there’s plenty of office space and apartments/homes for employees to relocate.
Top Things to Consider After You Decide to Move:
1. Transfer your LLC
Unless your company was incorporated in Texas, you will have to register as a foreign corporation. Fortunately, this isn’t as difficult as it sounds, and the U. S. Small Business Administration actually explains the options for moving the LLC to a new state. You can continue your LLC in your old state, but will have to register as a foreign LLC in your new state, which means more paperwork, involving duplicate annual reports. Luckily, all the ins and outs of transferring the LLC can be easily navigated by your legal counsel.
2. Review Agreements
Agreements drafted under a different state law may need some adjustment when you move your business to Austin. Make sure to review existing employee agreements to ensure compliance with Texas law, including non-competes and other employee restrictions that can be broader in Texas.
3. Check Permits and Licenses
When moving a business to a new state, it helps to make sure you have everything buttoned-up before you go to ensure the easiest transition possible. Depending on your business, this includes securing sales tax permits, filing annual franchise tax and public information reports, and obtaining any needed insurance, licenses and permits. If you have questions about any of these requirements in regards to your business, the RWR Legal team is here to help.
4. Incentives & Employment Details
If you have employees, you may need to register for unemployment tax account with Texas Workforce Commission. It also is beneficial to research any state tax incentives that may apply to your business.
5. Culture & Lifestyle
With an array of music festivals, food trucks, coffee shops, nightlife and beautiful hiking trails, Austin is a lively city filled with new experiences. The city features a diverse range of things-to-do, making it an appealing home for prospective employees.