Founding Attorney
In many scenarios, it is likely you can run a business from your home in Texas. However, there are some caveats. Texas has no statewide zoning ban on operating a business out of your home, and a 2025 state law now bars Texas cities from prohibiting or requiring a permit for a home business that meets a four-part no-impact test. However, your city can still enforce building, health, and noise rules, and your homeowners association deed restrictions survive the new law untouched. Working with an Austin business formation attorney early can help you pick the right structure for your business, keep your home address off the wrong documents, and avoid violating a rule you did not know applied.
What the 2025 Law Changed for Texas Cities
Texas cities once decided on their own whether a business operated out of a house needed permission. A state law passed in June 2025, which its supporters call the Home-Based Business Fairness Act, limited part of that authority. Subject to a few exceptions, a municipality may no longer prohibit a no-impact home-based business, and it may not require the operator or the property owner to obtain a license, permit, or other approval to operate one.
Your business counts as no-impact only if it meets all four of these tests:
- The total number of employees, clients, and patrons on the property at any one time stays within the municipal occupancy limit for that property.
- The business does not generate on-street parking or a substantial increase in traffic through the area.
- None of the business activities are visible from a street.
- The business does not substantially increase noise in the area and does not violate a municipal noise ordinance, regulation, or rule.
Two further protections reach every home-based business, not only the no-impact kind. A city may not require the operator or the property owner to rezone the property for a non-residential use. Additionally, it may not require a fire sprinkler protection system where the residence consists only of a single-family detached residential structure or a multi-family residential structure with not more than two residential units.
That distinction matters. If you miss one of the four tests and fall outside the no-impact category, your city may impose limitations on your ability to operate a home-based business
What Your City Can Still Enforce
The limit on municipal power is narrower than the headlines suggest. Subject to the protections above, a city may still require a home-based business to comply with federal, state, and local law, including:
- Municipal fire and building codes
- Municipal regulations covering health and sanitation
- Transportation and traffic control
- Solid or hazardous waste regulations
- Pollution and noise control
A city may also require that the business remain compatible with residential use of the property and stay secondary to using the property as a home. You also are still required to obtain any licenses or permits that may be required to operate your particular business if you operated outside of your home.
Some businesses, such as home-based business that sells alcohol or illegal drugs or operates as a structured sober living home, get no shelter at all. Short-term rentals are also carved out separately, so a city may keep regulating those on its own terms.
Why Your HOA Rules Still Apply
The 2025 law restrains cities. It says nothing about your neighborhood. The statute expressly leaves untouched the enforcement of a rule or deed restriction imposed by a homeowners association or by another private agreement. If your subdivision covenants ban commercial activity, ban exterior signage, or cap the number of vehicles parked in a driveway, the new law does nothing to weaken them.
Read the covenants before you order business cards. If you rent, read the lease too. Residential leases commonly address business use of the premises, and the 2025 law was written to limit city ordinances, not private contracts. Neighborhood rules and provisions in individual lease agreements may still apply.
Selling Food Made in Your Home Kitchen
If your home-based business sells food, there are additional laws to be aware of. Texas rewrote its cottage food rules effective September 1, 2025, and the changes matter to anyone baking, canning, or roasting at home. The law flipped from a list of foods you were permitted to make into a shorter list of foods you may not. Cottage food no longer reaches:
- Meat, meat products, poultry, or poultry products
- Seafood, including fish, shellfish, and their products
- Ice or ice products, including shaved ice, ice cream, frozen custard, popsicles, and gelato
- Low-acid canned goods
- Products containing cannabidiol or tetrahydrocannabinol
- Raw milk and raw milk products
A separate set of rules covers food that requires time and temperature control for safety, such as a cream pie or a cheesecake that has to stay refrigerated. An operation that sells that kind of food to consumers has to register with the state health department, store and deliver it at an air temperature that prevents bacterial growth, add the date the food was made to the label, and provide a safe handling statement in at least 12-point font either on the label or on an invoice or receipt that goes with the food.
Three other changes reshape how a home food business can grow:
- The annual gross income threshold for cottage food sales rose to 150,000 dollars from 50,000 dollars, and the state health department adjusts that figure each year for inflation.
- A nonprofit organization exempt from federal income tax under section 501(c)(3) can now operate as a cottage food production operation, so long as the food is produced in the home of one of its directors or officers.
- You may sell at wholesale to a contracted cottage food vendor registered with the state health department, so long as the food is not on the excluded list and does not require time and temperature control for safety. That vendor may then resell your products directly to consumers at a farmers market, a farm stand, a food service establishment, or a retail store.
Labeling is where home cooks often get caught. At a minimum, the label must carry the name and address of the operation, along with a required all-capital disclosure stating that the product was produced in a private residence not subject to governmental licensing or inspection. State health department rules add further requirements on top of that floor. Because the address on the label is your house, the law now offers a way out. If you register with the state health department and print the unique identification number it issues in place of the address, you can keep your home address off the package.
Set Up the Business Before Customers Arrive
Zoning is only the first question. Founders who start selling before they decide how the business is organized tend to sign contracts in their own name, mix business money with household money, and discover the problem only when a customer, a supplier, or a neighbor raises a complaint. Choosing a structure, signing agreements in the name of that entity, and opening a separate business account are all far easier to do at launch than to repair after a claim lands. Our Austin business law attorneys help owners make those choices in the right order.
Privacy deserves the same early attention. A home business puts an address on invoices, product labels, marketing pages, and filings, and once that address circulates, it is difficult to pull back. Decide before launch which address the public will see and which one stays private.
Sales tax and franchise tax questions sit outside our practice. Bring those to a certified public accountant or a tax attorney before you start selling so nothing gets missed.
Talk With an Austin Business Attorney
Texas law gives home-based businesses more room than it did before 2025, but the rules that remain are the ones that often cost owners money. Whether you are launching from the kitchen table or already serving customers, contact the Kumar Law Firm PLLC to talk through entity choice, contracts, and how to protect the brand you are building.