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Best states to start a business

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    Best states to start a business

    When it comes to starting a business in the U.S., not all states are created equal. Some have a low cost of living to make it easier to attract workers, while others have tax-friendly policies that make entrepreneurship more affordable. Overall, the goal for most is to find an affordable location that will provide access to skilled workers as well as plenty of resources to get a business up and running.  

    To determine the best states to start a business, we ranked all 50 states based on a WalletHub study that looked at 25 key indicators of startup success. Three key factors were considered: business environment, access to resources and business costs. The study also looked at the number of startups per capita, five-year business survival rate and access to financing, among other influences, to make up each state's total score. 

    Some states like North Dakota have brutal winters, but are otherwise favorable spots to start a company. An island paradise like Hawaii may seem ideal, but its higher costs aren’t ideal for a new business making sure every cent counts. Read on to see how each state measures up.

    ALSO: States scammed out of the most money

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    #50. Hawaii

    Total score: 37.16

    Business environment rank: #40

    Access to resources rank: #50

    Business costs rank: #43

    Hawaii’s high cost of living and competitive real estate market make it tough to start a business. According to Zillow, home values have spiked 7.4 percent over the past year. The current median home value is $615,700.

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    #49. New Hampshire

    Total score: 38.11

    Business environment rank: #45

    Access to resources rank: #48

    Business costs rank: #40

    You might not think of New Hampshire when you think of tech startups, but the NH High Tech Council is working to make the Granite State a technology hub through incentives and funding. New Hampshire doesn’t have income tax, and its tax rate for businesses is lower than its neighbors, as well. Regardless, low access to resources keeps the state near the bottom of the list.
     

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    #48. Rhode Island

    Total score: 41.88

    Business environment rank: #49

    Access to resources rank: #11

    Business costs rank: #35

    Rhode Island may be geographically small with a tough real estate market, but the state attracts a lot of top talent, being home to Johnson & Johnson and Virgin Group. The state’s Innovation Voucher program helps companies seeking research and development by paying for a college or university medical center to conduct it. This gives it high marks in the “access to resources” category.

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    #47. Vermont

    Total score: 42.53

    Business environment rank: #46

    Access to resources rank: #49

    Business costs rank: #27

    Vermont has made strides in attracting workers to replace an aging population. Its Stay-to-Stay initiative connects new Vermonters to local employers and entrepreneurs, and a remote worker incentive grants those who relocate to Vermont up to $5,000 to help ease the transition.

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    #46. Pennsylvania

    Total score: 42.81

    Business environment rank: #47

    Access to resources rank: #22

    Business costs rank: #37

    In Pennsylvania, a high tax rate can make it difficult for entrepreneurs to get started. For example, the state levies a tax of 41.8 cents per gallon of gasoline, the fifth-highest rate in the nation.

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    #45. West Virginia

    Total score: 43.60

    Business environment rank: #50

    Access to resources rank: #38

    Business costs rank: #4

    It is relatively inexpensive to do business in West Virginia, but the state is experiencing an ongoing battle against drugs. In an effort to augment the number and scope of women-owned businesses in the state, West Virginia University operates a Women’s Business Center to assist in launching and growing small businesses.

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    #44. New Jersey

    Total score: 44.00

    Business environment rank: #23

    Access to resources rank: #9

    Business costs rank: #50

    The Garden State has lots of resources for starting a business, including training for small business owners and a micro-business credit program. Newark, for example, is seeing plenty of national chains move to their downtown area, including Gap, Nike, Starbucks, Chipotle and Whole Foods. This, in turn, has attracted more business to the area. 

     

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    #43. Connecticut

    Total score: 45.05

    Business environment rank: #42

    Access to resources rank: #4

    Business costs rank: #46

    Connecticut has plenty of financial resources for business owners, but it’s fairly expensive to do business in this state. The real estate market recently hit a five-year high.

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    #42. Maryland

    Total score: 45.85

    Business environment rank: #29

    Access to resources rank: #8

    Business costs rank: #45

    Maryland offers a lot of resources to help its entrepreneurs succeed. It ranks #1 in the U.S. for minority and women-owned businesses—for every 100,000 residents, the state has 42 minority business owners and 18 businesses led by female CEOs.

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    #41. Alabama

    Total score: 45.90

    Business environment rank: #48

    Access to resources rank: #41

    Business costs rank: #9

    Alabama is affordable for businesses small and large (Mercedes, Airbus, Hyundai and Honda all call Alabama home). The state offers resources for entrepreneurs and small business owners, like its Atlas Alabama website, but the state still remains in the bottom 10 of the list.

     

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    #40. Wisconsin

    Total score: 46.17

    Business environment rank: #36

    Access to resources rank: #44

    Business costs rank: #28

    Wisconsin is a tough place for entrepreneurs to hit the ground running. The state has a poor startup rate, especially in cities. The greater Milwaukee area recorded the second-largest decline in the number of firms of any city in the United States.

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    #39. Iowa

    Total score: 46.38

    Business environment rank: #33

    Access to resources rank: #34

    Business costs rank: #30

    Entrepreneurs in Iowa can seek funding through the Iowa Venture Capital Association (IVCA), but its rising cost of living and stagnant wages have put a strain on employees.

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    #38. Ohio

    Total score: 46.63

    Business environment rank: #39

    Access to resources rank: #43

    Business costs rank: #24

    150 of America’s Fortune 500 companies call Ohio home. Better still, Forbes recently ranked Cleveland and Columbus as cities where your paycheck goes the furthest.

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    #37. Delaware

    Total score: 47.17

    Business environment rank: #22

    Access to resources rank: #13

    Business costs rank: #42

    The state held its inaugural Delaware Entrepreneurial Summit this past July to help business owners network. The cost of living in the state is above the national average, however, in part because of lofty housing prices.

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    #36. Alaska

    Total score: 47.26

    Business environment rank: #12

    Access to resources rank: #16

    Business costs rank: #48

    Home prices in Alaska may be higher than the national average, but there are plenty of loans and funding opportunities for entrepreneurs. In addition, Alaska Startups offers networking opportunities and programs to help new companies thrive.

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    #35. Kansas

    Total score: 47.54

    Business environment rank: #41

    Access to resources rank: #37

    Business costs rank: #21

    For entrepreneurs, the Kansas City Startup Village (KCSV) is a great resource with plenty of support for new businesses. The city of Lawrence continues to draw businesses from all over. It was recently ranked the seventh-best city in the U.S. for businesses, with a 9% lower cost of living than the national average.

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    #34. Virginia

    Total score: 47.63

    Business environment rank: #19

    Access to resources rank: #31

    Business costs rank: #34

    Located in Charlottesville, Virginia, the Central Virginia Small Business Development Center is one of 29 offices across the state that provide free consulting, training and information resources to help small and mid-sized businesses. In addition, a statewide initiative called Virginia is for Entrepreneurs aims to connect startup founders with investors. Regardless, it received low rankings for higher costs and access to resources.

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    #33. Indiana

    Total score: 47.87

    Business environment rank: #25

    Access to resources rank: #47

    Business costs rank: #18

    A new law went into effect in January that makes it a lot easier to do business in Indiana. The legislation consolidates different administrative requirements for business corporations and other types of partnerships. It’s increasingly affordable to live there, even in its metro areas.

     

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    #32. New York

    Total score: 48.02

    Business environment rank: #18

    Access to resources rank: #3

    Business costs rank: #49

    The state of New York has the second-largest number of Fortune 500 companies compared to the rest of the nation. The cost of living might be high (largely on account of New York City), but the state supports its startups through initiatives like START-UP NY, which helps new and expanding businesses through tax-based incentives and academic partnerships.

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    #31. Maine

    Total score: 48.19

    Business environment rank: #30

    Access to resources rank: #40

    Business costs rank: #22

    New England winters may be cold, but Maine is nevertheless a great place to start a business. The state holds a yearly week-long conference featuring speakers from top companies like Google, Amazon, Forbes and Disney, as well as frequent pitch competitions.

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    #30. Tennessee

    Total score: 48.31

    Business environment rank: #35

    Access to resources rank: #45

    Business costs rank: #12

    Compared to other states, Tennessee has a low regulatory and tax environment which attracts and promotes small businesses. For example, sole proprietors and other entrepreneurs are not faced with a broad-based wage or income tax. The state also invests in its workers through initiatives like the "Drive to 55 Alliance," which aims to get 55 percent of Tennesseans equipped with a college degree or certificate by the year 2025.

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    #29. New Mexico

    Total score: 48.79

    Business environment rank: #43

    Access to resources rank: #18

    Business costs rank: #19

    New Mexico is a relatively inexpensive place to do business. The state has special programs to help boost the local economy: its Job Training Incentive Program (JTIP) funds classroom and on-the-job training for newly created positions in expanding or relocating businesses for up to six months.

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    #28. Illinois

    Total score: 49.04

    Business environment rank: #34

    Access to resources rank: #7

    Business costs rank: #38

    Illinois has a startup growth rate of nearly 69 percent, and Chicago itself has been consistently ranked first for venture capital returns. The cost of living in Illinois is also lower than the national average, and the state offers a range of economic perks, including tax credits and exemptions to encourage business growth.

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    #27. Minnesota

    Total score: 49.29

    Business environment rank: #21

    Access to resources rank: #10

    Business costs rank: #39

    Minnesota has lots of resources to encourage entrepreneurship. The Minnesota Emerging Entrepreneur Loan Program (ELP) supports businesses owned and operated by minorities, women, veterans and people with disabilities. The state also has a number of tax credits and loans to get new businesses up and running.

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    #26. Arkansas

    Total score: 49.47

    Business environment rank: #37

    Access to resources rank: #35

    Business costs rank: #11

    Arkansas knows how to cater to small businesses—around 99% of its companies are small entities. It’s also affordable to set up shop in the state: it only costs $50 to register an LLC. The Arkansas Small Business and Technology Development Center has seven offices around the state that provide consulting and marketing research services to residents.

     

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    #25. South Carolina

    Total score: 49.49

    Business environment rank: #31

    Access to resources rank: #39

    Business costs rank: #13

    South Carolina is a popular spot for businesses small and large—including Coca Cola, which recently opened a large sales and distribution center in the state. Rent is also lower than the national average, and a range of sales tax exemptions help reduce start-up and operating costs.

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    #24. Missouri

    Total score: 49.54

    Business environment rank: #24

    Access to resources rank: #33

    Business costs rank: #20

    Missouri is an affordable place to do business, offering helpful state tax credits and extra incentives for those starting a business in one of the state’s distressed areas. It’s also an affordable spot to live: housing is nearly 25 percent less expensive than the national average.

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    #23. Oregon

    Total score: 49.60

    Business environment rank: #13

    Access to resources rank: #27

    Business costs rank: #36

    Oregon provides tax benefits to those who start operations in low-income communities, and offers incentives for minority, veteran and female small business owners. The state also doesn’t have sales tax, which is attractive for retailers.

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    #22. Kentucky

    Total score: 49.67

    Business environment rank: #38

    Access to resources rank: #42

    Business costs rank: #5

    Kentucky provides financial support to businesses through tax credit programs—especially for those in manufacturing and agriculture. Louisville, the home of the Kentucky Derby, also remains popular for the millennial population.

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    #21. Mississippi

    Total score: 50.47

    Business environment rank: #44

    Access to resources rank: #28

    Business costs rank: #2

    The cost of living in Mississippi is the most affordable in the nation (14 percent lower than the national average), which helps to counter the state’s less-than-ideal business environment and access to resources.

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    #20. Nebraska

    Total score: 50.61

    Business environment rank: #26

    Access to resources rank: #32

    Business costs rank: #10

    Nebraska’s “Advantage Package” is an economic development incentive for businesses that are expanding or relocating. Many have credited the state’s Business Innovation Act for their increase in venture capital.

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    #19. Massachusetts

    Total score: 50.84

    Business environment rank: #16

    Access to resources rank: #5

    Business costs rank: #44

    Massachusetts has plenty of top-notch universities and a robust talent pool for new hires. The state also has a positive track record of attracting big business—it gave General Electric millions of dollars in incentives, including assistance for workers, to relocate its Connecticut headquarters to Boston.

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    #18. Louisiana

    Total score: 50.91

    Business environment rank: #27

    Access to resources rank: #23

    Business costs rank: #15

    Louisiana’s economic growth is faster than many other states—just last year, it expanded at a rate of 2.3 percent, slightly above the national average. The annual New Orleans Entrepreneur Week brings a mix of business pitch competitions, panel talks and networking events to aspiring business owners in the city.

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    #17. Wyoming

    Total score: 51.39

    Business environment rank: #17

    Access to resources rank: #26

    Business costs rank: #26

    When it comes to taxes, Wyoming’s economic climate is especially conducive to starting a business. There’s no corporate income tax, individual income tax or gross receipts tax, according to the Tax Foundation.

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    #16. South Dakota

    Total score: 51.59

    Business environment rank: #32

    Access to resources rank: #29

    Business costs rank: #6

    Move over Wall Street: South Dakota’s leadership in finance has attracted companies like Citibank and Wells Fargo. The state also has nearly $3 trillion in bank assets—more than any other state, according to the FDIC.

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    #15. Michigan

    Total score: 51.86

    Business environment rank: #28

    Access to resources rank: #36

    Business costs rank: #3

    Michigan has a couple of key factors that can help potential entrepreneurs, including a favorable business tax climate and a low cost of living. The average rent for a one-bedroom apartment in Michigan costs an average of $753, $255 under the national average.

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    #14. Idaho

    Total score: 52.19

    Business environment rank: #14

    Access to resources rank: #46

    Business costs rank: #7

    Idaho attracts plenty of entrepreneurs, especially in Coeur d’Alene, the Innovation Collective provides support for local entrepreneurs. The efforts have been successful—nine LLCs were formed out of the collective in the last several years.
     

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    #13. Washington

    Total score: 52.55

    Business environment rank: #15

    Access to resources rank: #2

    Business costs rank: #41

    With funding options, especially for small businesses, the Evergreen State is home to top tech employers (like Amazon and Microsoft) and has become a top destination for millennials.

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    #12. North Carolina

    Total score: 53.26

    Business environment rank: #20

    Access to resources rank: #17

    Business costs rank: #14

    For companies looking for young, enterprising talent, North Carolina has 53 colleges and universities producing future professionals. The state also boasts a low cost of living. Rentals in Raleigh-Durham, for example, cost 70% less than those in the Bay Area.

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    #11. Nevada

    Total score: 53.44

    Business environment rank: #9

    Access to resources rank: #30

    Business costs rank: #29

    Overall, the cost of living in Nevada is conducive to starting a business: slightly higher than the national average, but still below other major cities like Boston and San Francisco. The state is also notoriously tax-friendly. business owners pay no franchise or personal income taxes for LLCs.

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    #10. Colorado

    Total score: 55.43

    Business environment rank: #6

    Access to resources  rank: #24

    Business costs rank: #32

    Colorado knows small businesses—they make up 97 percent of all companies in the state. At rate of 4.63%, Colorado has one of the lowest income tax rates in the nation, and the state’s unemployment rate usually ranks among the lowest nationwide.

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    #9. Arizona

    Total score: 55.58

    Business environment rank: #10

    Access to resources rank: #19

    Business costs rank: #23

    Arizona has been luring business out of neighboring California with tax incentives and a much lower cost of living. The state has also trimmed taxes to support corporate growth. Legislation like the Arizona Competitiveness Package has helped the state become a desirable place to start or move a business.

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    #8. California

    Total score: 57.61

    Business environment rank: #2

    Access to resources rank: #6

    Business costs rank: #47

    It isn’t cheap to start a business in California, given its high taxes and cost of living. However, the state has lots of resources for startups and entrepreneurs, as well as easy access to top companies. In fact, California has the most Fortune 500 companies of any state.

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    #7. North Dakota

    Total score: 57.94

    Business environment rank: #4

    Access to resources rank: #20

    Business costs rank: #31

    While taxes may be high in North Dakota, the state has plenty of resources to help entrepreneurs get started. In Fargo, for example, the Emerging Prairie organization facilitates networking opportunities and events for business owners.

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    #6. Florida

    Total score: 58.09

    Business environment rank: #5

    Access to resources rank: #21

    Business costs rank: #25

    It isn’t cheap to do business in the Sunshine State, nor is it inexpensive to live there (especially in cities like Miami). However, Florida has plenty of venture capital funds and resources for business owners—plus it’s one of nine states that have no income tax.

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    #5. Oklahoma

    Total score: 58.67

    Business environment rank: #11

    Access to resources rank: #25

    Business costs rank: #1

    Oklahoma is an affordable state to live in and is generally favorable for business. On average, startups tend to be very successful when it comes to new hires. There’s been so much investment activity in the pharmaceutical industry that Oklahoma City could likely become a pharma hub.

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    #4. Montana

    Total score: 58.90

    Business environment rank: #8

    Access to resources rank: #14

    Business costs rank: #8

    New business owners would do well to save money in Montana, especially on real estate. A two-bedroom rental in Montana costs about $900, far below the national average of $1,200. The state also has zero sales tax.

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    #3. Georgia

    Total score: 60.21

    Business environment rank: #7

    Access to resources rank: #15

    Business costs rank: #17

    Business is thriving in Georgia. Between 2010 and 2016, more than 13,000 companies opened up shop—a 48 percent rise. Atlanta in particular is a hotbed for startups; more than 700 of them are located in the area, thanks to lots of resources and an educated workforce.

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    #2. Utah

    Total score: 63.41

    Business environment rank: #3

    Access to resources rank: #1

    Business costs rank: #33

    Utah’s access to capital and relatively tax-friendly climate are unmatched most other states. Many entrepreneurs and investors in the “Silicon Slopes” region have had no trouble recruiting out-of-state talent. In fact, many startups in Provo and Salt Lake City have had either successful IPOs or were acquired for more than $1 billion.

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    #1. Texas

    Total score: 64.40

    Business environment rank: #1

    Access to resources rank: #12

    Business costs rank: #16

    For entrepreneurs, there’s a lot to like about Texas. The state has the second-most Fortune 500 companies out of any state (tied with New York) but also values small businesses. There are low business licensing fees, loose regulations and plenty of relatively cheap real estate.

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