11 Best States to Start a Business
The United States is the “land of opportunity,” and everyone wants to achieve their version of the American Dream. For many people, their dream is to build a business and become self-sufficient.
Because the country is divided into 50 states with varying laws, demographics, tax policies, and more, life can differ across the nation. If you want to become an entrepreneur, it only makes sense to do so in a state that maximizes your potential.
Keep reading to see our picks of the best states to start a business and how we determined these rankings.
Considerations
As we researched states and evaluated their business environments, we saw conflicting reports from various datasets. Some outlets would rank a state as one of the best for entrepreneurs, while another would say the same state was one of the worst.
Since all businesses are unique, there can never be a conclusive list of the best states to start a business. Instead, we will provide a survey of existing rankings so you can analyze the results yourself.
Below, we will extrapolate on data from:
11 best place to open a new business
1. Texas
Year after year, media outlets consider Texas to be a top state to open a new business. With a growing population and acres of untamed land, the state has endless opportunities for new entrepreneurs.
Likewise, many large companies like Tesla and Oracle are relocating their headquarters to the Lone State State. Many Silicon Valley businesses are moving to Texas to take advantage of low taxes and a perceived more business-friendly environment. In fact, WalletHub ranked Texas as #1 when it comes to “Business Environment.”
While Texas certainly has lower taxes than California in some regards, the state still has higher than average business taxes and expanding property taxes. However, your business and your workforce will benefit from no personal income taxes and affordable real estate costs.
2. Georgia
Whether you want to build a southern headquarters for a multinational corporation or open a small bakery, Georgia is open for business. This state has seen considerable growth recently, welcoming business owners from all business backgrounds. What’s more, the percentage of entrepreneurs emerging from the state is much higher than the national average.
The Peach State is desirable for a few reasons, including a favorable business climate and ample access to resources. From major cities like Atlanta to coastal beach towns, you can find the perfect location for your business. On top of this, SeekCapital reports that $1.14 billion in venture capital funding was allotted to 112 companies in 2018. With investors standing by to help new startups grow, it is no surprise why entrepreneurs are calling Georgia home.
3. Utah
Utah is incredibly popular with small business owners and investors alike. Percentage-wise, this state approves more small business loans than any other in the US.
Financially, entrepreneurs like Utah for its relatively low corporate tax (a flat 4.95%) and large access to venture capital. While labor costs are higher than average here, consumer spending is growing, making it more affordable to invest in quality employees. The Balances reports Utah ranked 5th best nationally when it comes to startup costs.
Depending on your business model, you can benefit from Utah’s highly educated workforce. Many people hold advanced degrees in a variety of fields, making it a prime location for everything from healthcare to e-commerce.
4. North Carolina
If you are looking for a location with favorable business taxes, low living costs, and access to resources, consider opening up shop in North Carolina. SeekCapital ranks the Tarheel State as the 6th best state for starting a business, and The Balance reports it to be the best for the South Region.
The state is very hospitable to new business, with 81.2% of startups surviving after their first year. Likewise, venture capital firms allocated $2.62 billion to 173 companies in 2018, demonstrating the potential these investors see in the state. With this in mind, there is no surprise why more entrepreneurs report creating their business by choice instead of necessity in North Carolina vs. the national average.
Lastly, you will find happy, well-educated employees in North Carolina. Property taxes are relatively low, and universities are spread out across the state, making this an ideal place to hire new graduates who want to plant their roots.
5. Montana
Whether you need a large office for a telecom company or a small shop to sell tools, Montana is a very appealing place. The state consistently ranks in top 10 lists when it comes to taxes and expenses. Also, who wouldn’t like to live in the mountains and enjoy the state’s majestic scenery?
If you want to bootstrap a business, Montana gives you everything you need at reduced prices. Regarding labor costs, the state is the second most affordable place, with real labor coming in at $31.56 on average. Likewise, real estate is incredibly affordable, with some commercial spaces renting for around $20/sqft.
On top of all this, there is no sales tax so consumers do not have to think twice about the real cost of shopping in stores.
6. Wyoming
Similar to others on this list, Wyoming offers minimal taxes, a low cost of living, and favorable odds of success.
In terms of taxes, Wyoming is very hospitable, with no corporate or personal income taxes. For this reason, SeekCapital gave the state the #1 spot for Business Tax Climate. Also, sales tax caps at 5.34%, so the state is friendly to businesses and consumers.
Moreover, nearly 82% of businesses survive after their first year, and 44% stay open after five years. With consumer spending increasing and online shopping becoming more accessible than ever, these long-term success rates may increase.
7. Florida
Unlike many of the other states on this list that have low taxes and low labor costs, Florida is has a large population and has several large cities. To top things off, the Sunshine State has miles of coastline, excellent weather, and a diverse population.
The Tax Institute ranks Florida #1 in individual income taxes because that state collects none. Likewise, the organization ranks corporate taxes at #4 since these cap at 4.5%. And because Floridians pay fewer taxes, labor costs are relatively lower here than in many other states.
Florida is also growing at a fast rate, with 1,000 people moving to the state per day. Perhaps this growth and low startup costs account for the lower than average success rates of new businesses. However, don’t let these statistics discourage you. With the right plan, you can certainly find success in Florida.
8. Colorado
U.S. News and World Report ranks Colorado fourth-highest in total venture capital invested and eighth-highest in business creation. If that doesn’t sound appealing enough, maybe the favorable taxes and incredible mountains will win you over.
Colorado is known for having a high cost of living, but that is not discouraging people from moving there. The state’s working-age population is the fastest growing in the United States, expanding by 7.2% in 2020. At the same time, the state’s GDP is growing, making Colorado attractive to employers, investors, and laborers alike.
Before you commit to moving here, keep in mind that your startup costs will be high. From real estate to wages, you will need to invest more to get up and running than you would in a state like Wyoming.
9. California
Although many Silicon Valley companies are leaving the Golden State, California remains an excellent place to start a new business. WalletHub ranks it as third in Business Environment and Access to Resources. Likewise, SeekCapital places California fifth-highest on its list of best states to start a business.
California is home to countless startups, making it appealing to investors and entrepreneurs who want to find success on the West Coast. After five years, 53.2% of businesses remain open, which is 2.3% higher than the national average.
However, the state is incredibly expensive, so you will need considerable startup funds. Likewise, the taxes can be quite high, with the corporate tax rate topping at 8.84%. If your business can run effectively elsewhere, it may be worth passing up on California.
10. Oklahoma
Unlike our previous state, Oklahoma is incredibly wallet-friendly. WalletHub ranks it #1 in “Business Costs,” and SeekCapital ranks it #4 in Startup Activity. If you need to get a business off the ground for a low cost, consider opening your doors in the Sooner State.
While your property and labor costs in Oklahoma will be low, you do not get the additional tax break you see in states like Florida. At a 6% corporate income tax rate and 4.5% sales tax rate, Oklahoma is about average when compared to other states.
However, the state has the third-highest success rate of first-year startups.
11. Arizona
While certainly not the best on our list, Arizona is a good state to open a business, with sites like WalletHub ranking it #9 in “Business Environment.” The economy is growing, and the workforce is strong. Consumer spending increases year over year, showing consistent demand.
Labor is not cheap in Arizona, but you should not struggle to pay workers either. However, the state sales and corporate taxes are average, and property taxes are slightly higher than the average state.
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