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Best states to start a business

Best states to start a business
1/ESB Professional // Shuttestock

Best states to start a business

When it comes to starting a business in America, not all states are created equal. About one-fifth of all startups do not survive past their first year of operation, and almost half don’t make it to five years, according to U.S. Census Bureau data.

Location makes a big difference. Some states have a low cost of living and affordable housing to make it easier to attract workers, while others have tax-friendly policies to make entrepreneurship easier. Some have a shortage of available and able workers, while others have a growing, well-educated labor pool. Overall, the goal for most startups 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, Stacker ranked all 50 states based on a 2019 WalletHub study that looked at 26 key indicators of startup success. Three key factors were considered in the ranking: business environment, access to resources, and business costs. To determine these, the study looked at the number of startups per capita, the five-year business survival rate, and access to financing, among other influences. Other factors were the accessibility of financing, the length of an average workweek, insurance costs, the variety of surrounding industries, and access to higher education.

States that ranked highest tended to have low taxes, reasonable housing prices, and well-educated workers. Business-friendly Utah, for example, has high growth among its small businesses, plenty of access to financing, and a well-trained and growing workforce. The business environment in Texas is unrivaled. Real estate is reasonable, incentives abound, and small businesses tend to do well. Those at the bottom of the ranking tended to have a heavy tax burden, a high cost of living, and expensive real estate.

States successful at nurturing new business also have a broad array of creative and innovative incentives, initiatives, and financing avenues. Georgia, where hundreds of startups are flourishing, encourages new business with research alliances, incubators, accelerators, and supportive workspaces.

Read on to see how each state measures up.

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#50. Rhode Island
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#50. Rhode Island

- Total score: 35.29
- Business environment rank: #50
- Access to resources rank: #24
- Business costs rank: #36

Rhode Island ranks at the bottom of the list, based on its business environment score. That includes factors such as its number of engaged, committed workers; startups per capita; the five-year survival rate of businesses; and the variety of industries around the state. They do, however, have an Innovation Voucher program to help companies seeking research and development by underwriting studies at a university medical center.

#49. New Jersey
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#49. New Jersey

- Total score: 36.42
- Business environment rank: #44
- Access to resources rank: #15
- Business costs rank: #50

The Garden State offers a bounty of resources for starting a business, including training for small business owners and a micro-business credit program, and its population is among the most educated in the country. But dragging the state down are high business costs, from taxes and the cost of living to the affordability of office space.

#48. New Hampshire
4/Sean Pavone // Shutterstock

#48. New Hampshire

- Total score: 37.94
- Business environment rank: #46
- Access to resources rank: #46
- Business costs rank: #39

A lack of available workers and limited access to resources make starting a business difficult in New Hampshire. But the NH Tech Alliance aims to make the state a technology hub through incentives and funding. Also, New Hampshire has no income tax, and its tax rate for businesses is lower than those of its neighbors.

#47. Hawaii
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#47. Hawaii

- Total score: 38.05
- Business environment rank: #30
- Access to resources rank: #49
- Business costs rank: #41

Hawaii is a tough place to start a business, due to its low access to resources such as financing and educated workers, and its labor costs are among the highest in the country. Added to that are its expensive cost of living and housing market—according to Zillow, the median value of a home in Hawaii is $614,500.

#46. Connecticut
6/f11photo // Shutterstock

#46. Connecticut

- Total score: 39.31
- Business environment rank: #48
- Access to resources rank: #4
- Business costs rank: #48

A population that is among the most educated in the country and financial resources make Connecticut attractive to aspiring business owners. However, it scores poorly in terms of its business environment, such as its small business growth and entrepreneurship; the state is also home to some of the most expensive places to live in the country, including New Haven-Milford, Worcester, and Hartford. 

#45. Pennsylvania
7/Lee Cannon // Flickr

#45. Pennsylvania

- Total score: 40.18
- Business environment rank: #47
- Access to resources rank: #22
- Business costs rank: #37

Hampering startups in Pennsylvania is the state’s business environment, which lacks a diversity of industries and fast-growing firms. The cost of housing is among the nation’s lowest, but its taxes can be grueling: The tax of 58.7 cents per gallon of gasoline is the highest in the nation.

#44. Delaware
8/John Bilous // Shutterstock

#44. Delaware

- Total score: 40.66
- Business environment rank: #40
- Access to resources rank: #14
- Business costs rank: #44

Delaware offers promising access to resources for starting a business, and it has no state sales tax. Instead, nearly half of its revenues come from corporate taxes levied on out-of-state companies that register in Delaware. The state  imposes a gross receipts tax of up to 1.92% on the income of businesses.

#43. Vermont
9/Eric Pasqualli // Shutterstock

#43. Vermont

- Total score: 41.35
- Business environment rank: #45
- Access to resources rank: #50
- Business costs rank: #23

Vermont ranks last in terms of access to resources, including the availability of workers. It also has the second-lowest average growth in the number of small businesses, with only West Virginia faring worse. It does spend on incentives, though, including its Stay to Stay initiative to introduce would-be Vermonters to potential employers and neighbors, and remote worker incentive grants to reimburse workers who relocate to the state.

#42. New York
10/ Ryan DeBerardinis // Shutterstock

#42. New York

- Total score: 42.25
- Business environment rank: #37
- Access to resources rank: #6
- Business costs rank: #49

The state of New York nurtures businesses with initiatives such as START-UP NY, which gives new and expanding businesses an opportunity to operate tax-free for 10 years on or near university campuses with access to research, development resources, and experts. Among its bruising business costs, office space in New York is among the nation’s most expensive, its 45.6 cent tax on a gallon of gasoline is the nation’s fifth-highest, and the median home listing price of $425,000 is nearly twice the median price nationwide.

#41. West Virginia
11/Tim Kiser // Wikimedia Commons

#41. West Virginia

- Total score: 43.36
- Business environment rank: #49
- Access to resources rank: #41
- Business costs rank: #3

Having low labor costs and plenty of available workers should help make West Virginia a good place to start a business. However, the state has the nation’s lowest average growth among small businesses and a higher-than-average state sales tax rate at 6%. Its population is also one of the least educated nationwide.

#40. Maryland
12/Pixabay

#40. Maryland

- Total score: 43.42
- Business environment rank: #23
- Access to resources rank: #9
- Business costs rank: #47

Maryland is a leader among states when it comes to minority- and women-owned businesses. Holding it back in terms of starting businesses, however, is its cost of living, which ranks in the nation’s top 10 highest.

#39. Virginia
13/Taber Andrew Bain // Flickr

#39. Virginia

- Total score: 43.51
- Business environment rank: #22
- Access to resources rank: #34
- Business costs rank: #38

Virginia offers incentives, such as its Small Business Development Network, Virginia Community Capital, and Virginia Highlands Small Business Incubator, that provide consulting, training, and information resources to help small and mid-sized businesses. Regardless, it struggles with high business costs, low access to resources, and a small number of available workers.

#38. South Carolina
14/James Willamor // Flickr

#38. South Carolina

- Total score: 44.85
- Business environment rank: #41
- Access to resources rank: #48
- Business costs rank: #15

Although South Carolina has relatively poor access to the resources needed for building a business, its costs are low. Houses tend to be affordable compared with elsewhere, property taxes are low, and a range of sales tax exemptions are available to trim startup and operating costs.

#37. Iowa
15/Tim Kiser // Wikimedia Commons

#37. Iowa

- Total score: 44.86
- Business environment rank: #39
- Access to resources rank: #32
- Business costs rank: #27

Iowa scores among the best states for accessible financing, such as funding for entrepreneurs through the Iowa Venture Capital Association. Though the cost of living, especially in its cities, and stagnant wages put a strain on employees.

#36. Massachusetts
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#36. Massachusetts

- Total score: 45.11
- Business environment rank: #27
- Access to resources rank: #7
- Business costs rank: #42

Massachusetts has top-notch universities and a highly educated population. But its labor costs are high, its average work week is short, and the median list price for a house is among the nation’s highest.

#35. Illinois
17/Roman Boaed // Flickr

#35. Illinois

- Total score: 45.33
- Business environment rank: #43
- Access to resources rank: #8
- Business costs rank: #40

Illinois offers a range of economic perks, including tax credits and exemptions to encourage business growth. But with property taxes among the highest in the country, the state scores poorly in terms of business costs.

#34. Ohio
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#34. Ohio

- Total score: 46.05
- Business environment rank: #42
- Access to resources rank: #35
- Business costs rank: #16

Ohio offers affordability, incentives, and access to venture capital, and it is one of the most affordable places to buy a house. It provides an array of grants, loans, tax credits, and other resources for starting and growing a business as well.

#33. Wyoming
19/Nyttend // Wikimedia Commons

#33. Wyoming

- Total score: 46.22
- Business environment rank: #20
- Access to resources rank: #39
- Business costs rank: #31

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. It also has one of the nation’s longest average work weeks. Wyoming loses points for its weak access to resources, such as financing, human capital, and higher education.

#32. Missouri
20/Sam Valadi // Flickr

#32. Missouri

- Total score: 46.46
- Business environment rank: #35
- Access to resources rank: #25
- Business costs rank: #25

Missouri is welcoming to business, offering tax credits and incentives targeted at everything from vineyards and wine-makers to businesses that move to or expand in an economically distressed community. It also has one of the country’s highest rates of female-owned businesses, according to a 2017 Paychex study. 

#31. Arkansas
21/Nicolas Henderson // Flickr

#31. Arkansas

- Total score: 46.60
- Business environment rank: #32
- Access to resources rank: #43
- Business costs rank: #12

Arkansas treats small businesses well—the U.S. Small Business Administration reports that about 99% of its companies are small entities. One of its most famous residents was entrepreneur Sam Walton, who founded Walmart in 1962. Today, the state offers a host of resources to help startups succeed, including the Arkansas Small Business and Technology Development Center and Little Rock SCORE, which offers free mentoring, local workshops, and resources.

#30. Wisconsin
22/Pixabay

#30. Wisconsin

- Total score: 46.61
- Business environment rank: #29
- Access to resources rank: #31
- Business costs rank: #24

Wisconsin is tough on new businesses. The number of businesses that close has been higher in recent years than the number of new ones, and it has one of the lowest startup rates in the country. Its manufacturing industry and farming are under major stress, and property taxes are high.

#29. Alabama
23/MaxPixel

#29. Alabama

- Total score: 46.82
- Business environment rank: #36
- Access to resources rank: #38
- Business costs rank: #10

Alabama is affordable for businesses, with a low cost of living. It offers resources for entrepreneurs and small business owners, such as Atlas Alabama and other incentives that give businesses an edge in the competitive world of federal contracting if they are located in designated Historically Underutilized Business Zones.

#28. Alaska
24/Frank K. // Wikimedia Commons

#28. Alaska

- Total score: 47.06
- Business environment rank: #10
- Access to resources rank: #16
- Business costs rank: #45

Alaska has high labor costs and expensive office space that make it difficult to start a business. But it has plenty of human capital available and the longest average work week in the county. It also does not have a statewide sales tax, offers loans and funding opportunities for entrepreneursAlaska Startups offers ways to help new companies thrive.

#27. New Mexico
25/Ken Lund // Flickr

#27. New Mexico

- Total score: 47.69
- Business environment rank: #34
- Access to resources rank: #28
- Business costs rank: #18

New Mexico is an inexpensive place to do business, with a low state sales tax. It recently bankrolled initiatives to improve schools, train teachers, and fund public construction projects and roads to lure business and economic development. Its Job Training Incentive Program funds classroom and on-the-job training for newly created positions in expanding or relocating businesses for up to six months.

#26. Oregon
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#26. Oregon

- Total score: 47.80
- Business environment rank: #19
- Access to resources rank: #13
- Business costs rank: #33

Oregon provides tax benefits to those who start operations in low-income communities, businesses making large capital investments, and incentives to minority, veteran, and female small business owners. The state also doesn’t have sales tax, but a new tax on business gross receipts above $1 million is set to take effect in 2020. Unlike an income tax, it only allows very limited and small deductions.

#25. Nevada
27/Anthony Quintano // Flickr

#25. Nevada

- Total score: 47.85
- Business environment rank: #14
- Access to resources rank: #47
- Business costs rank: #28

The cost of living in Nevada is enticing for starting a business, and it is notoriously tax-friendly. Business owners pay no franchise or personal income taxes for LLCs. The state can boast of high growth among its small businesses, but startups are hampered by limited financing opportunities, access to resources, and spending on incentives.

#24. Indiana
28/John Shanlaub // Flickr

#24. Indiana

- Total score: 48.48
- Business environment rank: #33
- Access to resources rank: #29
- Business costs rank: #11

It became easier to do business in Indiana after a law that took effect in 2018 consolidated various administrative requirements for business corporations, nonprofits, and other partnerships. By simplifying means of starting or merging businesses, the measure aims to cut bureaucratic red tape and promote economic development. Indiana also does not have local sales taxes.

#23. Maine
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#23. Maine

- Total score: 48.56
- Business environment rank: #18
- Access to resources rank: #45
- Business costs rank: #14

Maine has some of the cheapest office space in the country and holds a yearly conference featuring top business leaders. The state also sees frequent pitch competitions, in which startups can win cash prizes. 

#22. South Dakota
30/Richie Diesterheft // Wikimedia Commons

#22. South Dakota

- Total score: 48.57
- Business environment rank: #38
- Access to resources rank: #33
- Business costs rank: #4

South Dakota is one of the leading states when it comes to accessible financing for business startups. It also has one of the nation’s lowest sales taxes and extremely affordable office space.

#21. Kentucky
31/Ken Lund // Flickr

#21. Kentucky

- Total score: 49.00
- Business environment rank: #26
- Access to resources rank: #40
- Business costs rank: #5

Labor costs are low in Kentucky, which has an extensive incentive system for businesses and entrepreneurs that are starting, relocating, or expanding. Among its initiatives are tax credits, low-interest loans, bonds, seed capital, and skills training for businesses from mining and manufacturing to innovative technology and renewable energy production.

#20. Tennessee
32/Derrick Brutel // Flickr

#20. Tennessee

- Total score: 49.11
- Business environment rank: #16
- Access to resources rank: #42
- Business costs rank: #19

In the largest jobs deal in state history, business-friendly Tennessee was selected by retail giant Amazon as the home of a new operations center. Tennessee has a low regulatory and tax environment which attracts and promotes small businesses with such initiatives as Launch Tennessee, a public-private partnership providing mentorship, accelerators, and training, and Drive to 55 Alliance, which aims to get 55% of Tennesseans equipped with a college degree or certificate by 2025.

#19. Nebraska
33/David Wilson // Flickr

#19. Nebraska

- Total score: 50.09
- Business environment rank: #25
- Access to resources rank: #21
- Business costs rank: #9

Nebraska scores high for accessibility to financing and its spending on incentives. Its “Advantage Package” is an economic development incentive for businesses that are expanding or relocating, and the state’s Business Innovation Act, signed into law in 2011, is credited with attracting venture capital and investment, supporting entrepreneurs, and helping drive up employment.

#18. Michigan
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#18. Michigan

- Total score: 50.19
- Business environment rank: #31
- Access to resources rank: #23
- Business costs rank: #6

Healthy spending on incentives, a favorable business tax climate, and a low cost of living are luring startups to Michigan. Rent in Michigan is low, as are energy expenses and health care costs.

#17. Minnesota
35/Doug Kerr // Flickr

#17. Minnesota

- Total score: 50.32
- Business environment rank: #21
- Access to resources rank: #5
- Business costs rank: #35

An abundance of resources is available in Minnesota to encourage business startups, such as the Emerging Entrepreneur Loan Program for those owned and operated by minorities, women, veterans, and people with disabilities. The state sales tax is higher than average, however, and municipal governments can levy local sales taxes, but it has a number of tax credits and loans to get new businesses up and running.

#16. Kansas
36/Kristin Nador // Flickr

#16. Kansas

- Total score: 50.33
- Business environment rank: #17
- Access to resources rank: #27
- Business costs rank: #20

Kansas supports new businesses with resources such as NetWork Kansas, its business and community finance incentives, Rural Opportunity Zones, microloans, and Beginning Farmer Loan Program. The city of Lincoln is even offering free lots in a subdivision accessible to an industrial park and medical complex to applicants willing to build their homes.

#15. Louisiana
37/Pedro Szekely // Flickr

#15. Louisiana

- Total score: 50.36
- Business environment rank: #15
- Access to resources rank: #37
- Business costs rank: #17

Louisiana has one of the nation’s longest average work weeks, making it conducive to business, but its population scores low in the education rankings. Combined state and local taxes tend to be high, although its median property tax is the lowest in the country. Every year, New Orleans Entrepreneur Week features a mix of pitch competitions, panel talks, and networking events.

#14. North Carolina
38/Michael Tracey // Flickr

#14. North Carolina

- Total score: 50.86
- Business environment rank: #24
- Access to resources rank: #10
- Business costs rank: #22

Dozens of colleges and universities make North Carolina promising for companies seeking young, educated employees. The state sales tax is low, and online business site Chief Executive ranked North Carolina among the best states for doing business in 2019.

#13. Mississippi
39/Ken Lund // Flickr

#13. Mississippi

- Total score: 51.39
- Business environment rank: #28
- Access to resources rank: #26
- Business costs rank: #2

Mississippi’s cost of living is one of the most affordable in the nation, and its average rent of $1,195 is one-third less than the national average. Its labor costs are the nation’s lowest, and it has some of the most minority women-owned businesses per capita. There are plenty of available workers, but they rank second from bottom among U.S. states in terms of education.

#12. Washington
40/Bala Sivakumar // Wikimedia Commons

#12. Washington

- Total score: 52.00
- Business environment rank: #13
- Access to resources rank: #1
- Business costs rank: #43

For attracting business and startups, Washington is the best of all 50 states in terms of its access to resources. That includes financing, an ample labor pool, well-educated employees, and a working-age population on the rise.

#11. Idaho
41/Boise Metro Chamber of Commerce // Flickr

#11. Idaho

- Total score: 52.10
- Business environment rank: #12
- Access to resources rank: #44
- Business costs rank: #7

Idaho’s Innovation Collective is a proven successful incubator for local entrepreneurs. The Coeur d’Alene-based initiative focuses on artificial intelligence and robotics, and the city became the world’s first to pass an ordinance allowing robots the same rights as humans on public property. The city has an annual robotics festival that draws experts from giants such as Facebook, Google, and Microsoft.

#10. Colorado
42/Pixabay

#10. Colorado

- Total score: 52.67
- Business environment rank: #6
- Access to resources rank: #18
- Business costs rank: #34

Colorado’s workers are among the most highly educated in the country, but there is a shortage of them. Making the state attractive to business is the nation’s lowest sales tax of just 2.9% and some of the nation’s lowest property taxes.

#9. Montana
43/USEPA Environmental Protection Agency // Flickr

#9. Montana

- Total score: 53.71
- Business environment rank: #11
- Access to resources rank: #30
- Business costs rank: #8

Housing costs and rents are low in Montana, and utilities are well below the national average. With no sales tax and low property taxes, it ranks in the top 10 when it comes to business costs.

#8. California
44/Sean Pavone // Shutterstock

#8. California

- Total score: 54.30
- Business environment rank: #3
- Access to resources rank: #3
- Business costs rank: #46

California’s high taxes and cost of living may easily dissuade business startups, as might its tight financing and expensive office space. But it has plenty of available workers, resources for startups and entrepreneurs, and easy access to top companies. California has the most Fortune 500 companies of any state.

#7. Arizona
45/Sean Pavone // Shuttestock

#7. Arizona

- Total score: 54.39
- Business environment rank: #9
- Access to resources rank: #12
- Business costs rank: #29

Arizona’s property and income taxes are below average, and its overall cost of living is relatively low compared to the rest of the United States. It has been luring businesses with tax incentives and measures such as the Arizona Competitiveness Package, which streamlined regulations and instituted programs for corporate growth and expansion.

#6. Florida
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#6. Florida

- Total score: 56.75
- Business environment rank: #4
- Access to resources rank: #20
- Business costs rank: #21

Small businesses can flourish in Florida, where there is no income tax or estate tax and the effective property tax rate is low. But a gasoline tax of 41.36 cents per gallon is the 10th-highest in the country. Many of its cities have affordable housing prices, and the state is often ranked among the most business-friendly.

#5. Oklahoma
47/Just Tulsa // Flickr

#5. Oklahoma

- Total score: 57.58
- Business environment rank: #8
- Access to resources rank: #36
- Business costs rank: #1

Oklahoma tops the nation in terms of the lowest business expenses, such as office space affordability, labor costs, insurance, taxes, and cost of living. Its rate of new entrepreneurs per capita is the nation’s highest.

#4. North Dakota
48/Unimatic1140 // Wikimedia Commons

#4. North Dakota

- Total score: 57.68
- Business environment rank: #2
- Access to resources rank: #19
- Business costs rank: #32

When it comes to its business environment scores, North Dakota ranks second only to Texas. It has the highest average growth among its small business, along with highly accessible financing. In Fargo, the Emerging Prairie organization facilitates networking opportunities and events for business owners.

#3. Georgia
49/Arashboz // Wikimedia Commons

#3. Georgia

- Total score: 58.12
- Business environment rank: #5
- Access to resources rank: #17
- Business costs rank: #13

More than 700 startups are located in and around metropolitan Atlanta. Georgia has an abundance of initiatives to encourage new businesses, including research alliances, incubators, accelerators, and supportive workspaces.

#2. Utah
50/Mrs keyser soze // Wikimedia Commons

#2. Utah

- Total score: 60.95
- Business environment rank: #7
- Access to resources rank: #2
- Business costs rank: #26

Utah enjoys a healthy growth among its small businesses. Its access to capital, educated and growing workforce, and tax-friendly climate all help it come in ahead.

#1. Texas
51/Kumar Appaiah // Flickr

#1. Texas

- Total score: 61.05
- Business environment rank: #1
- Access to resources rank: #11
- Business costs rank: #30

Texas tops the national ranking with its alluring business environment. Real estate is affordable, licensing fees are low, and regulations are loose. The state spends on incentives and workers on average put in long hours, helping small businesses to thrive.

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