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12 best states to start a business (and thrive)

best states to start a business

The entrepreneurial spirit is alive and thriving in the United States, with an average of 435,000 new businesses registered each month. But it begs the question: Where are these entrepreneurs choosing to establish their businesses? And more importantly, which states offer the most favorable conditions for nurturing a successful business venture?

Before you jump head-first into launching your new business website, let's take a few minutes to explore the best states to start a business and the opportunities that make each state so great for entrepreneurs.

What makes for an entrepreneur-friendly state?

Every state has its own distinct tools, requirements and regulations for new businesses. However, some states offer a unique combination of business-friendly advantages that can help propel your new venture toward success.

No matter what business structure you choose (sole proprietorship, LLC, partnership, etc.) the ideal state to start a business is the one where your vision can thrive. Here are some crucial factors to consider when evaluating the best state to start a business.

  • Business laws and regulations: Evaluate the regulations for business formation and operation, including ease of filing, administrative requirements and flexibility in operating agreements.

  • Tax policies: Look out for the presence or absence of corporate income tax, franchise tax, personal income tax and sales tax, as well as tax incentives or exemptions that may benefit your business.

  • Asset protection: Note the level of asset protection and liability limitation provided to business owners, including the strength of legal protections and the separation of personal and business assets.

  • Cost of doing business: Factors such as filing fees, annual reporting fees and ongoing compliance costs can add to your overall operational costs.

  • Business survivability: Roughly 80% of U.S. businesses survive their first year. The 10-year survival rate drops to 35%. It’s helpful to look at how businesses hold up over multiple years in each state to identify trends and determine the likelihood of long-term success.

  • Economic environment: Overall health, growth potential and diversification of the state's economy can contribute to opportunities and stability for your business.

  • Entrepreneurial support: Check the availability of resources, funding, support networks and programs designed to assist you in starting and growing your business.

  • Infrastructure: Consider the quality of infrastructure, including transportation, digital connectivity and utilities, which can impact logistics, communication and accessibility.

what makes an entrepreneur-friendly state?

While these factors can provide a sound basis for your decision, this article evaluates a few stand-out states based on tax policies, regulatory environments, resources, operational costs and markets. When determining the best state to start a business, it's always advisable to do your own research and prioritize what aspects are most important to your unique circumstances.

12 best states to start a business

01. Delaware

Delaware has gained a reputation for its favorable business laws and strong legal protections, making it a top choice for entrepreneurs.

Notably, Delaware has no sales tax and doesn’t impose corporate income taxes on businesses that operate outside the state. However, like a few other states on this list, Delaware does have a gross receipts tax (a tax imposed on a business' total revenue or gross receipts rather than on its profits).

The state also offers remarkable flexibility in business structuring and operating agreements. It’s famously home to a specialized, widely respected court system, the Court of Chancery, which focuses exclusively on resolving business disputes.

Overall, Delaware’s business-friendly laws provide a predictable and stable framework that fosters growth and innovation.

Facts and figures:

  • LLC certificate of formation fee: $90

  • State business license fee: $75 (minimum)

  • Annual franchise tax: $300 (applies to all LLCs)

  • Corporate income tax: 8.7%

  • Individual income tax: 2.2% to 6.6%

  • Gross receipts tax: .0945% to 1.9914%

  • State sales tax: none

02. Wyoming

Like Delaware, Wyoming is well-known for its business-friendly tax policies, including no state corporate income tax, franchise tax or personal income tax. Instead, Wyoming’s largest source of revenue comes from property tax and sales tax. The state’s robust privacy protections and straightforward regulatory environment are also appealing to business owners.

Wyoming offers some of the lowest filing fees in the U.S., making it cost-effective for startups and small businesses to establish their legal presence. Wyoming also keeps the annual report fees affordable, which helps minimize some of the ongoing costs of operating your business.

Facts and figures:

  • LLC articles of organization fee: $100

  • Annual report: $60

  • Corporate income tax: none

  • Individual income tax: none

  • Gross receipts tax: none

  • State sales tax: 4%

  • Local sales tax: up to 2%

03. California

In California, you'll find innovation around every corner, particularly in Silicon Valley and the San Francisco Bay area. These locations are known for attracting top talent, investors and industry leaders with a healthy entrepreneurial spirit, not to mention access to cutting-edge technology.

As a business owner in California, you’ll be exposed to invaluable mentorship and networking opportunities. The Small Business Development Center (SBDC) locations throughout the state offer free or low-cost consulting, workshops and resources to guide you in various aspects of business.

Additionally, California is home to numerous networking events, conferences and meetups specifically tailored for entrepreneurs. These gatherings enable you to connect with fellow industry experts, investors and potential customers, expanding your network and opening doors for partnerships and growth.

Despite the higher cost of living and regulatory complexities, California's thriving economy, diverse consumer market and extensive support networks make it an attractive place for businesses of all sizes. By actively seeking mentorship and engaging with relevant communities, you can position your business to thrive in this dynamic entrepreneurial landscape.

Facts and figures:

  • LLC articles of organization fee: $70

  • Annual franchise tax: $800

  • Statement of information fee: $20 (paid every other year)

  • Corporate income tax: 8.84%

  • Individual income tax: 1% to 13.3%

  • Gross receipts tax: none

  • State sales tax: 7.25%

  • Local sales tax: up to 2.5%

starting a business in California

04. Texas

There are 2.7 million small businesses in Texas, which comprises 99.8% of all businesses in the state. Texas boasts a strong economy, a pro-business environment, no personal income tax and relatively low regulatory burdens. It has a diverse economy with ample opportunities for growth and a strong entrepreneurial spirit.

Cities like Austin, Dallas and Houston have thriving startup scenes and offer access to a diverse talent pool in technology, energy, finance and more, alongside numerous networking opportunities. The Texas Enterprise Fund (TEF) and other initiatives provide financial incentives and support for businesses looking to establish or expand their operations within the state.

Furthermore, Texans benefit from a lower cost of living compared to other major cities, making it an attractive option for entrepreneurs seeking skilled talent.

Facts and figures:

  • LLC certificate of formation fee: $300

  • Annual statement fee: $35

  • Corporate income tax: none

  • Individual income tax: none

  • Gross receipts tax: .0331% to .75%

  • State sales tax: 6.25%

  • Local sales tax: up to 2%

05. North Carolina

North Carolina is home to several renowned universities, including Duke University, University of North Carolina at Chapel Hill and North Carolina State University. These institutions create a steady stream of highly educated graduates in various fields, including technology, engineering, business and healthcare. This means a broad pool of skilled talent ready to contribute to your company’s workforce.

Additionally, Research Triangle Park (RTP), located in the Raleigh-Durham-Chapel Hill area, is one of the largest research and technology parks in the U.S. It houses numerous research institutions, technology companies and startups (see our business startup checklist). RTP acts as a catalyst for innovation and provides an ecosystem that fosters collaboration, research and entrepreneurial activity.

North Carolina also has the lowest corporate income tax rate in the U.S., with a provision that it will decrease to 0% by 2030. Property tax rates are low as well, which is beneficial for businesses that need to buy a lot of real estate.

Facts and figures:

  • LLC articles of organization fee: $125

  • Annual report: $200

  • Corporate income tax: 2.5%

  • Individual income tax: 4.75%

  • Gross receipts tax: none

  • State sales tax: 4.75%

  • Local sales tax: up to 2.75%

06. Tennessee

Tennessee is home to several thriving industries that provide exciting opportunities for small businesses. The state is particularly strong in the healthcare, manufacturing, automotive, logistics, music, entertainment, tourism and agriculture sectors. Additionally, these industries provide a supportive network in which related businesses can thrive.

Tennessee has no personal income tax and combines a low cost of living with a high quality of life, especially in cities like Nashville and Memphis. Plus, its central location in the U.S. offers logistical advantages for business owners. Its excellent transportation infrastructure, including highways, railways and access to major waterways, facilitates distribution and supply chain management, allowing you to reach customers and markets easily.

Facts and figures:

  • LLC articles of organization fee: $300

  • Annual report: $300

  • Corporate income tax: 6.5%

  • Individual income tax: none

  • Gross receipts tax: .02% to .3%

  • State sales tax: 7%

  • Local sales tax: up to 2.75%

07. Georgia

Georgia, particularly the Atlanta area, has a thriving startup community—in the first half of 2021 alone, companies across the state raised $1.99 billion in venture capital. Atlanta is a major business hub with a diverse economy and a growing technology sector. The city offers a range of resources, including startup incubators, accelerators and co-working spaces, providing you with access to mentorship, networking opportunities and funding sources.

Various funding programs and initiatives are available to support your business, including the Invest Georgia Program (a long-term investment program) and the State Small Business Credit Initiative (a state lending program supporting small businesses and manufacturers). These resources provide the necessary capital to help your business get off to a strong start and grow.

Georgia's business-friendly environment, access to capital, strategic location and skilled workforce provide valuable resources to help your small businesses thrive.

Facts and figures:

  • LLC articles of organization fee: $100

  • Annual registration fee: $50

  • Corporate income tax: 5.75%

  • Individual income tax: 1% to 5.75%

  • Gross receipts tax: none

  • State sales tax: 4%

  • Local sales tax: up to 5%

starting a business in Georgia

08. Florida

The Sunshine State is commonly considered one of the best states to start a business. Its large consumer market and diverse industries include tourism, hospitality, healthcare, finance, logistics and technology. It’s also one of the most densely populated states in the U.S.— alongside Texas and California—which gives you plenty of exposure to a substantial customer base and a strong talent pool.

Florida has no state income tax and offers various incentives, such as tax credits and economic development programs to encourage business growth. Additionally, if your target market includes retirees, Florida could be an ideal state to start your business since it’s a go-to location for individuals looking to settle down in their golden years.

Facts and figures:

  • LLC articles of organization fee: $125

  • Annual report: $138.75

  • Corporate income tax: 5.5%

  • Individual income tax: none

  • Gross receipts tax: none

  • State sales tax: 6%

  • Local sales tax: up to 2%

09. Nevada

Nevada has a strong reputation as a business-friendly state, with one-year survival rates sitting at over 83% for startups. There are plenty of opportunities within the gaming (see how to start a gaming business), entertainment, hospitality and convention industries—especially if you’ll be setting up shop in Las Vegas. It’s also home to a robust entrepreneurial culture that encourages innovation and networking, with a large number of businesses regularly moving in from California.

Perhaps most famously of all, however, Nevada is known for its tax-friendly environment. The state has no corporate income tax, franchise tax or personal income tax. Despite some of the higher licensing and registration fees, the minimal taxes can result in significant savings for your business.

Facts and figures:

  • LLC registration fees: $75 for articles of organization; $200 for business license; $150 for list of managers/members

  • Annual report: $200 for business license renewal; $150 for list of managers/members

  • Corporate income tax: none

  • Individual income tax: none

  • Gross receipts tax: .051% to .331%

  • State sales tax: 6.85%

  • Local sales tax: up to 1.53%

10. Colorado

Colorado, particularly the Denver-Boulder region, has a vibrant and supportive startup scene fostering a collaborative culture, innovative spirit and strong network of entrepreneurs.

With its exceptional quality of life, including breathtaking landscapes and outdoor activities, Colorado attracts talented individuals from all over the U.S. Despite a higher combined local and state sales tax rate, you’ll enjoy incredibly low business registration costs (only $50 to form an LLC) and a nearly non-existent annual reporting fee ($10).

Colorado also provides support for entrepreneurs through organizations like the Colorado SBDC and Rockies Venture Club, as well as accelerators like Techstars and MergeLane. The state’s thriving industries in technology, aerospace, renewable energy, outdoor recreation, healthcare and cannabis are modern and exciting. So whether you're looking to start a medical supply business or a tech business startup, Colorado could be an ideal place to live and work.

Facts and figures:

  • LLC articles of organization fee: $50

  • Annual report: $10

  • Corporate income tax: 4.4%

  • Individual income tax: 4.4%

  • Gross receipts tax: none

  • State sales tax: 2.9%

  • Local sales tax: up to 8.3%

11. Utah

Utah has gained attention in recent years as a thriving home base for entrepreneurs. It brings to the table a robust economy, business-friendly regulations and a skilled, highly educated workforce. Utah also offers low energy costs, a favorable tax climate and a supportive business ecosystem, making it the total package for entrepreneurs looking to set up shop.

The state has a diverse assortment of thriving industries, including tourism, manufacturing, energy and finance, namely in the bustling Salt Lake City area. The state further boasts a strong business creation rate, ranking third in US News’ list. This accounts for the rate at which new businesses are formed in the private sector. All in all, Utah should be a top contender when considering the best states to start a business.

Facts and figures:

  • LLC certificate of organization fee: $54

  • Annual report: $18

  • Corporate income tax: 4.85%

  • Individual income tax: 4.85%

  • Gross receipts tax: none

  • State sales tax: 6.10%

  • Local sales tax: up to 2.95%

starting a business in Utah

12. Indiana

Indiana offers a relatively low cost of living compared to many other states. Housing, utilities and overall expenses are more affordable, allowing you to stretch your budget and allocate resources effectively. With a blend of urban and rural areas, the state has welcoming communities with numerous cultural attractions and recreational activities. This combination fosters a balanced and enjoyable lifestyle for you and for your employees.

Additionally, Indiana is known for its business-friendly environment, with relatively low taxes and regulations. The state has convenient access to major markets and transportation networks, which can help streamline your distribution channels and supply chain management. It’s also a hub for agriculture and manufacturing, so if you foresee a future in those industries, it’s a key location to consider.

Facts and figures:

  • LLC articles of organization fee: $95

  • Annual report: $31 (every two years)

  • Corporate income tax: 4.9%

  • Individual income tax: 3.15% (local income tax collected in some areas)

  • Gross receipts tax: none

  • State sales tax: 7%

  • Local sales tax: none

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