Austin: A Great Place to Start a Business

January 22, 2019

austin-great-place-to-start-business

The startup atmosphere in Austin, Texas is considered the best in the United States, according to Inc.com’s article on surge cities. The article cites the reasonable cost of living, loads of sunshine, well-educated people, the “Live Music Capital of the World” and the city’s fun streak as reasons people flock to Austin. The city is growing four times faster than most of Silicon Valley, drawing talent and startups from all over the country.

Tech giants including Google, Facebook, Amazon, and Dropbox have all established large presences. Austin-born companies include Dell, Whole Foods, HomeAway, Bazaarvoice, and Deep Eddy vodka. Formerly New York City-based athletic clothing company Outdoor Voices and San Francisco venture capital firm Mithril have relocated to Austin.

Every spring, the South by Southwest festival allows the city to show itself off to the world's startup elites. Austin boasts thriving startup scenes in food and drink, computer hardware, enterprise software, and consumer technology.

If you’re looking to start a new business, Austin might just be the right place for you. The prospect of starting a new business is thrilling, but getting a new business up and running requires time, dedication and resources. Here are some important issues you need to consider:

Structure

Determine the legal structure of your business and identify the owners of the business. The most common structures for businesses include sole proprietorships, partnerships, limited liability companies and corporations. You are responsible for filing the necessary paperwork to create the business and identifying its ownership with the Secretary of State’s Office or the County Clerk’s Office as appropriate.

Separate entity

It’s a good idea to set up a separate entity, usually an LLC or a corporation, to provide you with personal liability protection. In the event your business is sued, the plaintiff would only be able to reach the business’s assets, not your personal assets. Organizing your business as a separate entity also gives you more credibility with lenders, investors, business partners and customers. It may also be a significant factor when you sell your business.

Business name

When choosing a name for your business, be sure to check that the name is not already trademarked. You are required to file an assumed business name (d/b/a) if you operate your business under a name which differs from the business name filed with the Secretary of State’s Office. Sole proprietorships or partnerships must file assumed name certificates when the business name does not incorporate the owners’ surnames.

Location

Decide on where the business will be located. Will you be purchasing or leasing? Be sure to review any lease provisions concerning assignment and subletting so you have options if your business grows or contracts or you decide to sell your business. If you are transacting business in another state, find out whether you are required to register your business in that state.

Tax responsibilities

Identify the tax responsibilities of your business, including federal income tax, employment taxes, Texas franchise tax, sales taxes and local business taxes. Do you need to work with a CPA to help you with these matters?

Licenses and permits

Obtain the necessary licenses, permits, certifications, registrations and/or authorizations your business is required to have at the federal, state and local levels.

Employer requirements

Determine the federal and state employer requirements concerning labor, safety, access and new hire reporting. The Texas Workforce Commission is an excellent resource for these matters.

Employees and independent contractors

Correctly characterize your new hires as either employees or independent contractors. Although businesses prefer to characterize workers as independent contractors since the overhead costs of taxes, benefits, and insurance are passed on to the independent contractor, mistaken classifications can be very costly. If the IRS determines that an employee has been incorrectly characterized as an independent contractor, the business will be required to pay back wages, overtime, FICA, unemployment contributions, worker compensation, medical insurance, vacation pay, and other amounts that should have been withheld on the employee’s behalf.

Insurance

Identify what types of insurance your business needs. These may include general liability insurance, product liability insurance, professional liability insurance, commercial property insurance, vehicle insurance, workers compensation insurance, unemployment insurance and disability insurance.

Financing

Figure out how you will finance the acquisition and operation of your business. Do you have the necessary funds to invest in your business? Will you need to obtain loans? Will you have investors in your business? If so, will they receive equity in the business?

Operations

Determine how the business will be managed. You also need to determine how to identify and develop business relationships with customers, suppliers and service providers.

Written agreements

Once you are ready to conduct business, be sure to put all agreements in writing so there is no room for misunderstandings. Verbal agreements are extremely difficult to enforce and can be very costly to your business.  Document clarifications, changes, extensions to delivery deadlines or new instructions. Require written confirmation accepting the modifications from the other party.

Starting a business can be challenging. Business owners should consult with their legal and tax advisers. For more information, please contact Kathy Tremmel at Tremmel Law, PLLC at (512) 539-0317 or kathy@tremmellaw.com.

Kathy Tremmel

Tremmel Law

Kathy Tremmel has significant experience both as a business attorney and corporate executive. Her career spans both legal practice and business management and she opened her own solo law practice in January 2010. In additional to running her own practice, she also is of Counsel with Selman, Munser & Lerner, which is a business transaction law firm in Austin, Texas. Ms. Tremmel has more than 10 years’ experience as a business attorney, providing transactional legal services to a diverse client base, from start-up ventures to well established companies. She helps companies with all their contracts, including customer agreements, non-compete agreements, employment agreements, buy-sell agreements, loans, and leases, helps people set up new businesses, and represents buyers and sellers of businesses. In addition, Ms. Tremmel has 10 years of management experience working with start-up companies. As VP of Operations at Tusker Group, an international litigation support company, Ms. Tremmel led international teams, managed production and quality issues, handled price negotiations, worked closely with clients to determine the scope of their projects, provided project management services, and developed, implemented and documented best practices for processing and training. Ms. Tremmel earned a Doctor of Jurisprudence from the University of Colorado School of Law and a Bachelor of Arts from Dartmouth College. She is a Texas licensed attorney and a certified Project Management Professional.
Read more articles from Kathy Tremmel

Guide to Business Borrowing

Learn what banks are looking for when they prepare to make loans. Our guide covers what business owners need to know when they prepare to borrow.

BBoT-COVER-GeneralBorrowing

Download eBook