How does a state become capable of handling the diverse needs of businesses both small and large?
In Texas, it’s a matter of paying attention to the basics. A highly skilled workforce, prime U.S. geographic positioning, low taxes, predicable regulatory environment and low cost of living are key factors for any entrepreneur looking to lay a long-term foundation. These elements have allowed for over 3.5 million small businesses to take flight in Texas, representing 99% of all businesses in the state and employing almost half of its private-sector workforce.
Texas leaders were keen to understand pitfalls faced in the state when growing a small business, leading to the establishment of the Governor’s Small Business Freedom Council in December 2024. The goal was to create a council to review and identify current government regulations that stood in the way of small business expansion. In turn, the Office of Small Business Assistance (OSBA) then makes recommendations to eliminate rules, fees and regulations that present the greatest obstacles.
“As a result of the Freedom Council, sweeping measures cut red tape by reducing reporting requirements for small business owners, eliminating duplicative taxes, modernizing outdated bureaucracy processes and more,” says OSBA. “Notably, the business personal property tax exemption was significantly increased from $2,500 to $125,000, freeing thousands of small business owners from the annual tax and allowing them to reinvest in their company.”
The Governor’s Small Business Freedom Council is made up of a mix of expertise from the National Federation for Independent Business (NFIB), the Texas Association of Business, members of the Small Business Advisory Task Force and six Texas small businesses.
Inside the Findings
In March 2025, the council submitted its latest report to Governor Greg Abbott. The Freedom Council’s public survey received feedback from 46 agencies and nearly 700 small businesses in the state, providing a clear understanding of changes these entrepreneurs are seeking. These businesses covered a variety of industries such as retail, hospitality, professional services, construction, manufacturing and technology.
The report notes that the Freedom Council found five core areas for legislative action based on public and agency input: regulatory burdens, high tax burdens, workforce opportunities, improved access to government contracts and modernizing state systems.
Regulatory Streamlining & Reducing Bureaucratic Burdens was the first area, as businesses reported delays, inconsistencies and duplicative regulations when are starting out or looking to expand. As licensing and permitting vary across the state, the Freedom Council presented four recommendations to ease this challenge. The first would be to standardize licensing and permitting process across state agencies to usher in a predictable regulatory environment, followed by these agencies reducing waiting periods for approvals and permit processing. The recommendations then move to eliminate redundant state and local permitting fees that often leave businesses paying multiple fees for the same approvals. The last point: Reduce unnecessary compliance and reporting burdens by streamlining permit renewal deadlines, removing duplicate regulatory filings required by multiple agencies.
Tax & Fee Reductions was the second area of focus. Multiple recommendations came from the concern of high tax burdens and excessive fees faced by small businesses, including increasing the business personal property tax exemption threshold; reducing or eliminating duplicative state licensing and regulatory fees; adjusting unemployment insurance tax rates for small businesses; modernizing tax reporting requirements; and exploring new solutions to reduce overall property tax burdens. At the time of the report’s release, one suggestion noted increasing the “no tax due” threshold on the Franchise Tax, which in January 2026 rose from $2.47 million to $2.65 million.
Workforce & Hiring Flexibility came up as small businesses have found trouble in hiring and retaining workers due to age restrictions, licensing barriers and hiring limitations. In order to address those concerns the Freedom Council has said expanding eligibility for childcare workers aged 16 to 17 could be a viable recommendation. Other suggestions include expanding licensing reciprocity for out-of-state professionals to come work in Texas; reducing unnecessary continuing education requirements for licensing renewals in certain industries to reduce costs and increase workforce participation; and exploring new opportunities to expand access to childcare.
The final two areas target access. Procurement & Access to Government Contracts recommendations look to increase state procurement spot-purchase threshold, which is currently $10,000, so small businesses can compete for state contracts without multiple hurdles. In addition, the Freedom Council aims to reduce bonding and insurance requirements for contractors. In terms of Technology & Digital Access, the Freedom Council seeks to allow digital alternatives to outdated regulatory requirements; expand online licensing, tax filing and permitting systems to make compliance easier; modernize state tax filing systems to simplify sales tax remittance and franchise tax filing; and digitizing compliance reporting requirements to replace paper-based submissions.
“This report confirms what many of our job creators know to be true: Texas is the best state in the union to own, operate, and grow a business. Our Governor is committed to ensuring we don’t ever take that for granted — and is instead always thinking of ways to promote greater economic opportunity for Texans,” said NFIB State Director Jeff Burdett. “I look forward to working with the Governor and the Legislature to implement these recommendations, so Texas remains a safe haven of entrepreneurialism and free market principles.”
Small businesses such as the Junk Gypsy in Round Top are among the over 1.4 million women-owned businesses in Texas.
Photo courtesy of Travel Texas
Following the release of this report, the Texas Regulatory Efficiency Office (TREO) was established in September 2025. Housed with the Office of the Governor, TREO is now responsible for reviewing state agency rules and procedures, aiming to reduce regulatory burdens, eliminate outdated rules and increase transparency for Texas taxpayers. The creation of TREO is another way the state plans to build upon the groundwork laid by the Freedom Council.
Strength in Numbers
Taking a look back from 2017 to 2022, Texas saw an influx of over 681,500 new small businesses, a 24% increase over that time period. Since then, entrepreneurial growth has found considerable stride alongside the over 300 corporate relocations to the state.
“A rising tide lifts all ships. Along with the increased relocation and expansion of major companies, in 2025 alone, Texas entrepreneurs filed more than 540,000 new business applications,” says OSBA. “In fact, more than 99% of Texas businesses are small, and actually, more than 92% of all Texas exporters are small businesses. Small businesses are the backbone of the Texas economy. “
The health of the state’s small businesses is essential to its overall economic performance, as companies with fewer than 500 employees generate 40.1% of Texas’ private non-farm Gross Domestic Product, according to a 2025 Accenture Research study. Many of these businesses began as hopeful startups, creating tangible impacts in both rural and urban regions. The state’s concentration of entrepreneurship and startup activity drew in $6.6 billion in venture capital investment in 2024, ranking Texas No. 4 in the nation.
Awareness of the challenges hindering small business growth has highlighted the need for modernization. Recommendations outlined and reviewed by the Freedom Council, OSBA and TREO will help continue to guide future legislative improvements that allow Texas businesses to plant roots and expand with ease.
“Texas is an economic juggernaut, but that success doesn’t just happen overnight. It takes time and consistency,” says OSBA. “Governor Abbott has instituted a number of successful economic development initiatives to help all businesses — both large and small — just as he established the Governor’s Small Business Freedom Council. The charge is clear: To ensure Texas keeps moving at the speed of business.”
