While you can start a business anywhere, there are some states where your startup may have a better chance of success than in others. Part of this has to do with the business itself; there's not a lot of demand for scuba equipment rental in Kansas, for example. However, some states just offer a better environment for businesses in general due to low business taxes, accessible venture capital funds, and an available workforce.
When determining business favorability rankings, different organizations give different weights to these factors. As a result, the rankings do not always agree. However, the following states are either ascendent or rank consistently high.
Home to court reporters Phoenix and other intriguing business opportunities, Arizona has made great strides within the last few years to become a state receptive to new business. It has experienced an increase of 6.8% in the working-age population and a GDP increase of 3.8% within the last two years alone. Out of 50 states, Arizona ranks at number 20 for the best business tax climate.
Conventional wisdom holds that everything is bigger in Texas, and that is generally true of the opportunities available to entrepreneurs. In 2018, Texas saw investments of venture capital in excess of $2.68 billion, which was the fifth-highest amount in the nation. Working-age population growth is on the rise, as is the gross domestic product. Between 2018 and 2019, the GDP grew by 5.1%, the second-largest growth rate in the country, and Texas already had a large economy to begin with. The business tax climate in Texas is also very favorable, with a corporate income tax rate of only 1%.
Like Texas, South Dakota has no individual income tax. Unlike Texas, South Dakota also levies no corporate income tax whatsoever. As a result, South Dakota's business tax climate is second in the nation. The average amount of venture capital funds South Dakota startups received in 2018 was $7.16 million, greater than the $6.75 million that companies received on average in Texas. A significant portion of South Dakota's working-age population is either actively seeking employment or already employed. In other words, the labor participation rate is very high despite a relatively small overall population.
Wyoming shares a border with South Dakota and many of the same entrepreneurial benefits as well. Only Wyoming can claim a more favorable business tax climate than South Dakota, and it also boasts an 81.66% early survival rate. However, there has been a decline in the working-age population in Wyoming, so finding employees may be a challenge.
In many respects, Florida is an idyllic place to start a new business, and not just because of the weather. With 0.46% of the total population starting new businesses, Florida has the highest rate of startup activity in the country. Within the first year, each of those new businesses creates 6.41 new jobs on average. Florida is another state that doesn't charge individual state income tax, and the corporate income tax rate is a relatively low 5.5%.
The bad part about doing business in Delaware is that it has one of the most burdensome corporate tax rates. However, it does not require that board members reside in the state for a business to incorporate. Laws such as this that are favorable to entrepreneurship have drawn many corporate headquarters to Delaware, including two-thirds of all Fortune 500 companies.
Utah consistently ranks in the top 10, and often the top five, of the best states for business. As of 2018, the corporate income tax rate is a very reasonable 4.95%. Individual startups in Utah receive an average $11.5 million in venture capital and create a better-than-average number of jobs. Following a five-year period of growth, the working age population in Utah was approximately 2 million in 2018.
If you're looking to start a business and willing to relocate to pursue a new opportunity, these states offer favorable entrepreneurial environments and, potentially, better chances of success.
Publish Date: June 5, 2020 4:27 PM