Starting your business in Lubbock
When considering starting a business, your first step is preparation. You must clearly define your product or service, study the market, write out a plan and decide how you will finance your business.
Write a Business Plan
A plan defines more than what you want to do. It is an instrument toll that should be utilized to keep you on schedule with your goals. The allotted time span to complete goals should be realistic and carefully followed. Discipline and organization is crucial to convince clientele, suppliers, investors and creditors that your business is worthwhile.
The following link provides information on how to write a business plan: http://window.state.tx.us/tba/plan.html
The Office of the Governor Economic Development and Tourism also offers its own guide for basic considerations when starting a business. http://governor.state.tx.us/
According to the Small Business Administration (SBA), (http://www.sba.gov), there are many ways to finance your business, however, it is important to choose the method that works best for you. There are two types of financing: equity financing and debt financing. When looking for money, you must consider your company’s debt-to-equity ratio. This ratio is the relation between dollars you have borrowed and dollars you have invested in your business. The more money owners have invested in their business, the easier it is to obtain financing.
Debt Financing – Debt financing means borrowing money that must be repaid over a period of time, usually with interest. Debt financing can be either short-term, with full repayment due in less than one year, or long-term, with repayment due over a period greater than one year. The lender does not gain an ownership interest in the business, and debt obligations are typically limited to repaying the loan with interest. Loans are often secured by some or all of the assets of the company. In addition, lenders commonly require the borrower’s personal guarantee in case of default. This ensures that the borrower has a sufficient personal interest at stake in the business.
Loans can be obtained from many different sources, including banks, savings and loans, credit unions, commercial finance companies and SBA-guaranteed loans. State and local governments have many programs that encourage the growth of small businesses.
Equity Financing – Equity financing (or equity capital) is money raised by a company in exchange for a share of ownership in the business. Ownership accounts for owning shares of stock outright or having the right to convert other financial instruments into stock. Equity financing allows a business to obtain funds without incurring debt, or without having to repay a specific amount of money at a particular time. Family members, friends and former associates are all potential sources, especially when capital requirements are smaller.
Most small or growth-stage businesses use limited equity financing. Equity often comes from investors such as friends, relatives, employees, customers or industry colleagues. The most common source of equity funding comes from venture capitalists. These are institutional risk takers and may be groups of wealthy individuals, government-assisted sources or major financial institutions. Most specialize in one or a few closely related industries.
Grants – The SBA does not provide grants for starting or expanding a business. A variety of grants are available through state and local programs, as well as non-profit organizations and other groups. If a business receives a grant it, is not free money. Many grants are given to businesses with certain conditions such as requiring the recipient to match funds or combine the grant with other forms of financing such as a loan.
The SBA also maintains a database of federal grants at http://www.sba.gov/category/navigation-structure/loans-grants. For more detailed information about grants and potential opportunities for small businesses, please visit http://www.grants.gov.
Register – You must choose a name for the business and obtain an identification number. Decide on the legal form, discover which licenses or permits you may need, and what kinds of taxes you might owe. The official website of the state of Texas has a list of licenses and permits needed for business activity at www.texas.gov.
Acquire an Employer Identification Number – The Internal Revenue Service (IRS) assigns the Employer Identification Number. You can apply for the number at the IRS using Form SS4. You may need Adobe Acrobat to read the available forms online.
Check National and Industry Specific Regulations – National government standards of health and safety practices apply to some industries and private or professional associations’ guidelines extend to others. Companies are required to post certain laws in order to protect employees as well as the employer themselves. You can find more information about what needs to be posted inside your work place by visiting the Texas Workforce Commission at http://www.twc.state.tx.us/.
Federal contractors should also display rules about construction work (The Davis Bacon Act) and service contracts (The Walsh Healey Act). A complete list of rules can be found via the Department of Labor. The Occupational Safety and Health Administration (OSHA) sets standards for different industries and firms of a certain size. To learn more about OSHA standards, guidelines and what they mean to your business, visit their website at www.osha.gov.
State Employment Tax – Employers in the state of Texas must contribute to the state unemployment insurance fund. According to the Texas Workforce Commission, newly liable employers who do not acquire compensation experience from a previously liable employer begin with a predetermined tax rate set by the Texas Unemployment Compensation Act. That rate is set by the Texas Legislature and is the greater of the average rate for all employers in the North American Industry Classification System (NAICS) code to which they belong or 2.7 percent. This percentage rate may decrease over time by meeting certain specifications. To learn more about the state employment tax, please visit the Texas Workforce Commission.
State Sales Tax Information for New Businesses – Sales taxes can reach a maximum of 8.25 percent. The state levies an amount of 6.25 percent of the sale’s price on qualifying items. The state also collects sales taxes for the cities and other municipal taxing authorities, which can reach an additional 2 percent combined. Currently, 6.25 percent of taxes go to the state and the remaining 2 percent are used locally in Lubbock.
State Franchise Tax – Corporations above a certain size in assets or level of income may owe franchise tax, a general business levy. The Texas Franchise Tax is a privilege tax imposed on corporations, including banking corporations and limited liability companies, that are chartered in Texas. A 1 percent tax will be applied to all businesses, .05 percent for wholesale & retail and .575 percent for entities with $10 million or less in total revenue. The tax is also imposed on non-Texas corporations that do business in Texas. Learn more about the state franchise tax online at the state of Texas’ comptrollers office, (http://www.window.state.tx.us).
Ask Questions about State Taxes – You may speak to a representative over the phone, email a comptroller liaison or you may visit one of the state’s field offices. The following link contains reliable information that will help you get the answers you need to run your business, (http://www.window.state.tx.us).
Federal Income Tax – For special advice to small businesses about taxes, visit www.irs.gov.
Growing your Business
Lubbock Economic Development Alliance – Since the formation of LEDA, the organization has succeeded in various projects all geared toward helping local companies retain and expand their operations, while also working to recruit new business to Lubbock. In response to corporate decision makers’ and site selectors’ recommendations, in 2006 LEDA purchased 586 acres of raw farm land east of Interstate 27 (I-27) to develop the Lubbock Business Park, providing a place where businesses could locate or build new infrastructure close to the airport, I-27 and other major highways. One year later, LEDA obtained the Lubbock Rail Port, a 526-acre tract of land located just north of the Lubbock Preston Smith International Airport.
Chambers of Commerce – The Lubbock Chamber of Commerce currently serves the people and local businesses in Lubbock and the surrounding communities. As the largest business federation on the South Plains, the Chamber represents almost 2,200 members who employ approximately 73,000 workers and account for around $900 million in economic impact in Lubbock and West Texas.
Small Business Administrative Offices – The Small Business Administration (SBA) offers a variety of programs designed to help, including Service Corps of Retired Executives (SCORE) who donate their time advising new managers. The Lubbock office can be found by visiting this link.
Businesses can also expand their clientele by establishing relationships with the government. The Procurement Assistance Center can help provide sound advice and resources that will help you expand your business (http://www.aptac-us.org/new/).
Choose the Legal Entity – You may wish to operate as a sole proprietor, partnership or corporation. Consider your decision carefully. For more assistance and resources, contact a local member of SCORE. SCORE is a non-profit association dedicated to helping small businesses get off the ground and grow and achieve their goals through education and mentorship.
Texas Tech University also offers assistance as well through their Small Business Development Center. For more information, please visit them online at http://www.ttusbdc.org/lubbock/.
Federal Help – The national government encourages American companies to seek foreign markets. The Department of Commerce provides a Trade Information Guide containing a list of trade offices around the country at which people can get help as well as information about particular countries.
State Aid– The state of Texas has a variety of programs and resources for individuals that are interested in starting a business. Through the Texas Economic Development Division within the Office of the Governor, the Texas is Wide Open for Business website is a useful tool. Log on to www.texaswideopenforbusiness.com to learn more. LEDA also offers various incentives under certain specifications. Please contact our office at 806.749.4500
Lubbock Business Association – The Lubbock Business Association (LBA) is a dedicated business networking organization founded in 1979. Composed of local business owners and managers, the LBA meets every Friday morning for breakfast at the LakeRidge Country Club. Speakers are often arranged to discuss business development and growth of the Lubbock community. The primary goal of the LBA is to promote economic development between members and provide support. The year 2015 ended with millions in revenue generated between 30 – 40 active members in diverse industries including law, retail, insurance, marketing and technology. Entrepreneurs and new business owners are welcome to attend, hear speakers and learn more about joining by visiting www.lubbockbusiness.com.
The Texas Comptroller’s Office posts many economic statistics on its website and also provides extensive information about Texas’ taxes (http://www.window.state.tx.us/).
The Texas State Data Center also keeps extensive records (http://window.state.tx.us/procurement/).
The Texas Workforce Commission keeps statistics on employment (http://www.twc.state.tx.us/).
Finally, the Texas Legislature posts the Business & Commerce Code online at (http://window.state.tx.us/tba/index.html).
LEDA can be contacted directly via email at firstname.lastname@example.org.