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Whether it’s a brick-and-mortar small business or a tech company with a remote workforce, you can’t argue that it helps to be headquartered in a state with business-friendly taxes, high-quality workers, and affordable living.
To rank the best states to start a business in 2023, we analyzed a dozen data points related to taxes, small business growth, business survival odds, economic health, and workforce statistics across all 50 states, to see which ones best set businesses up for success.
Key Takeaways
- Texas is the best state to start a business: With the second-highest gross domestic product, or GDP, in 2021 and ninth in small business growth from 2021 to 2022, the Lone Star State boasts a healthy business economy with no personal income or corporate income taxes. Its low minimum wage and agile workforce make it the ideal state to start a business.
- Vermont is the worst state to start a business: A sluggish economy and a cost of living that is 21% higher than the national average, along with high taxes and virtually no new business growth since 2021 positions Vermont to be the state least likely to help businesses succeed.
- 57.4% of U.S. businesses established in 2018 were still open in 2022. That number jumped to 62.3% in Alaska, which had the highest business survival rate out of all 50 states. Missouri had the lowest, where only 49.4% of businesses established in 2018 were still operating in 2022.
- Georgia, Florida, and Delaware had the highest small businesses growth between 2021 and 2022 at 9.09%, 7.14%, and 6.40%, respectively. On the flip side, the number of small businesses in West Virginia actually decreased by 1.39% during the same period, where small business growth was the lowest in the country.
- Best workforce by state: 67% of Colorado and Massachusetts residents are of working age – the highest percentage in the nation. The most educated states – where the percentage of workers with a Bachelor’s degree is the highest – was Massachusetts at 42.39%, New Jersey at 39.79%, and Colorado at 38.81%.
Top ten best states to start a business in 2023
1. Texas
| Business Survival Rate | Income Tax | Corporate Tax |
|---|---|---|
| 57.6% | 0% | 0% |
Texas is the number one state to start a business, primarily due to having no income tax or corporate tax, as well as a larger-than-average percentage of the population that is of working age. On top of that, the Lone Star state has added 100,000 new businesses since 2021, an indicator that businesses want to be in Texas.
2. North Carolina
| Business Survival Rate | Income Tax | Corporate Tax |
|---|---|---|
| 58.2% | 4.99% | 2.5% |
Beautiful beaches aren’t the only reason to flock to North Carolina. The Tar Heel state ranks as our second-best state to start a business. With a low corporate tax rate, the state added new businesses at a rate of 3.14% – almost double the rate of states with a similar number of small businesses in 2021. Plus, 65% of people in North Carolina are of working age, and nearly one third of the workforce has a bachelor’s degree or higher.
3. Colorado
| Business Survival Rate | Income Tax | Corporate Tax |
|---|---|---|
| 55.8% | 4.55% | 4.55% |
Colorado offers outdoor enthusiasts so much to do, and as it turns out, it’s a good place to start a new business too. Colorado has relatively low taxes across the board, and its property taxes are the third lowest in the nation. It is in the top 15 for business growth since 2021 and had the 16th highest GDP in 2021. Colorado has a high-quality workforce any business owner would appreciate. Its total population has a higher percentage of working-age residents than any other state, as well as the third highest percentage of degree-level workers.
4. Tennessee
| Business Survival Rate | Income Tax | Corporate Tax |
|---|---|---|
| 58.2% | 0% | 6.5% |
Tennessee has more going for it than the Grand Ole Opry and a thriving country music scene. With no income taxes, low property taxes, and the sixth lowest cost of living, Tennessee is a great place to live and own a business. With no state minimum wage laws and 65% of the population being of working age, it’s a place that positions a wide variety of businesses to thrive.
5. Florida
| Business Survival Rate | Income Tax | Corporate Tax |
|---|---|---|
| 55.6% | 0% | 5.5% |
With sandy beaches and the fourth highest GDP per capita, Florida is a great place to live and a good choice to start a business. It boasts a 0% income tax and had the second highest small business growth between 2021 and 2022. To top it off, the Sunshine State also has a very low unemployment rate – a sign of a healthy economy and a motivated and willing workforce that new business owners need.
6. Utah
| Business Survival Rate | Income Tax | Corporate Tax |
|---|---|---|
| 56.8% | 4.95% | 4.95% |
While many flock to Utah for skiing in Salt Lake City, the state does more than accumulate an average of 500 inches of snow per year. Utah has low property taxes and the eighth highest rate of business growth – 3.58% – since 2021. Maybe it’s all the ski resorts, but the state also has the lowest unemployment rate in the country at 2.2% compared to the national average of 3.5%. Nevada has the highest unemployment rate at 5.2%.
7. Virginia
| Business Survival Rate | Income Tax | Corporate Tax |
|---|---|---|
| 62.2% | 5.75% | 6% |
Virginia has the second-highest business survival rate on our list at 62.2%, second only to Alaska. Entrepreneurs who start a business in Virginia will also benefit from a large working population, where 65.74% of the population is of working age. Its unemployment rate is 0.5% lower than the national average, and the state boasts a higher-than-average percentage of degree-level workers. This all translates into good conditions to start a new business.
8. Georgia
| Business Survival Rate | Income Tax | Corporate Tax |
|---|---|---|
| 54% | 5.75% | 5.75% |
The Peach State not only grows and sells juicy produce, it has a booming business economy. Georgia added a higher percentage of new businesses between 2021 and 2022 than any other state. Not only that, it’s in the top 10 for the lowest cost of living, and it has one of the largest populations of working-age residents. Georgia also has the eighth highest GDP, demonstrating a healthy amount of business activity and production in the state.
9. Indiana
| Business Survival Rate | Income Tax | Corporate Tax |
|---|---|---|
| 58.2% | 3.32% | 4.9% |
Taxes are a big reason the Hoosier state secured a spot in the top ten. Indiana businesses are surviving at a slightly higher rate than the national average, the cost of living is low, and the unemployment rate is under the national average – all indicators that it’s a great place to start a new business.
10. Ohio
| Business Survival Rate | Income Tax | Corporate Tax |
|---|---|---|
| 58% | 3.23% | 0% |
The Buckeye state has a lot of reasons that make it a good place to start a new business. On top of having low income taxes and no corporate tax, it also lands in the top ten states with the lowest cost of living. Ohio had the seventh highest GDP in 2021, a sign of a healthy economic environment where businesses thrive. Ohio also offers the third-largest university in the country, making it innovative, highly populated, and diverse in industry.
RANKING: THE BEST STATES TO START A BUSINESS
| RANK | STATE | BUSINESS GROWTH & SURVIVAL | ECONOMY | TAXES | WORKFORCE | TOTAL WEIGHTED SCORE | SCORE OUT OF 100 |
|---|---|---|---|---|---|---|---|
| 1 | Texas | 18 | 18 | 19 | 17 | 72.04 | 100 |
| 2 | North Carolina | 19 | 16 | 18 | 17 | 69.96 | 97 |
| 3 | Colorado | 15 | 16 | 20 | 18 | 68.43 | 95 |
| 4 | Tennessee | 18 | 15 | 17 | 15 | 65.04 | 90 |
| 5 | Florida | 17 | 19 | 17 | 11 | 63.67 | 88 |
| 6 | Utah | 17 | 9 | 18 | 19 | 63.18 | 88 |
| 7 | Virginia | 19 | 15 | 11 | 18 | 63.08 | 88 |
| 8 | Georgia | 14 | 17 | 11 | 20 | 61.88 | 86 |
| 9 | Indiana | 14 | 14 | 18 | 15 | 60.86 | 84 |
| 10 | Ohio | 15 | 18 | 18 | 9 | 59.51 | 83 |
| 11 | Alabama | 18 | 12 | 15 | 14 | 59.12 | 82 |
| 12 | Massachusetts | 16 | 15 | 8 | 17 | 56.78 | 79 |
| 13 | Michigan | 15 | 18 | 13 | 10 | 55.90 | 78 |
| 14 | Alaska | 17 | 8 | 19 | 11 | 55.73 | 77 |
| 15 | South Dakota | 14 | 10 | 20 | 10 | 54.67 | 76 |
| 16 | South Carolina | 15 | 12 | 14 | 13 | 54.51 | 76 |
| 17 | Pennsylvania | 13 | 18 | 8 | 16 | 54.51 | 76 |
| 18 | Nevada | 13 | 8 | 24 | 9 | 53.84 | 75 |
| 19 | Mississippi | 16 | 11 | 17 | 10 | 52.84 | 73 |
| 20 | Arizona | 16 | 12 | 19 | 6 | 52.80 | 73 |
| 21 | Maryland | 15 | 13 | 10 | 14 | 52.33 | 73 |
| 22 | Louisiana | 10 | 12 | 19 | 12 | 52.20 | 72 |
| 23 | Idaho | 20 | 8 | 12 | 12 | 51.98 | 72 |
| 24 | Washington | 8 | 16 | 15 | 12 | 51.43 | 71 |
| 25 | Oklahoma | 11 | 10 | 18 | 12 | 51.35 | 71 |
| 26 | Kentucky | 11 | 12 | 16 | 12 | 51.33 | 71 |
| 27 | Illinois | 13 | 19 | 6 | 12 | 49.88 | 69 |
| 28 | Minnesota | 14 | 14 | 4 | 17 | 49.61 | 69 |
| 29 | California | 14 | 16 | 5 | 13 | 48.08 | 67 |
| 30 | North Dakota | 4 | 9 | 18 | 17 | 47.20 | 66 |
| 31 | Montana | 17 | 8 | 9 | 12 | 46.29 | 64 |
| 32 | New Jersey | 9 | 16 | 5 | 15 | 45.88 | 64 |
| 33 | Wisconsin | 10 | 13 | 6 | 17 | 45.73 | 63 |
| 34 | Connecticut | 12 | 13 | 6 | 14 | 44.88 | 62 |
| 35 | Oregon | 17 | 11 | 7 | 11 | 44.71 | 62 |
| 36 | Missouri | 2 | 16 | 15 | 12 | 44.65 | 62 |
| 37 | Wyoming | 9 | 8 | 17 | 11 | 44.63 | 62 |
| 38 | New York | 5 | 18 | 8 | 12 | 43.82 | 61 |
| 39 | Hawaii | 12 | 8 | 13 | 10 | 43.63 | 61 |
| 40 | Rhode Island | 11 | 6 | 10 | 16 | 43.12 | 60 |
| 40 | New Hampshire | 3 | 12 | 7 | 22 | 43.12 | 60 |
| 42 | Iowa | 11 | 11 | 8 | 13 | 42.29 | 59 |
| 43 | Nebraska | 10 | 11 | 7 | 13 | 41.63 | 58 |
| 43 | New Mexico | 10 | 8 | 18 | 6 | 41.63 | 58 |
| 45 | Maine | 11 | 9 | 11 | 9 | 40.49 | 56 |
| 46 | Arkansas | 9 | 11 | 14 | 6 | 40.24 | 56 |
| 47 | Delaware | 13 | 11 | 9 | 7 | 39.18 | 54 |
| 48 | West Virginia | 12 | 9 | 12 | 5 | 39.00 | 54 |
| 49 | Kansas | 3 | 11 | 8 | 16 | 36.98 | 51 |
| 50 | Vermont | 4 | 8 | 3 | 17 | 31.33 | 43 |
Methodology
We ranked all 50 states across 12 data points to determine which ones are most favorable for starting a business. A rank of 1 means the state is more favorable for businesses; a rank of 50 means the state is less favorable for businesses.
Each data point we analyzed fell under one of the following categories, each worth 25% of the total score:
BUSINESS GROWTH & SURVIVAL: 25%
Using data from the Small Business Administration (SBA), we compared the number of small businesses in each state in 2021 vs. 2022 to determine where SMB growth is booming. We used data from the Bureau of Labor Statistics to determine business survival rates in each state.
- Business growth from 2021-2022 (12 points)
- Business survival rate (13 points)
ECONOMY: 25%
To measure the prices people pay for goods and services in each state, we looked at state-level personal consumption expenditures from the Bureau of Economic Analysis (BEA). We used data from Statista for Gross Domestic Product, or GDP, as a measure of business activity and economic health in each state. Cost of living data is from the Cost of Living Index, published by C2ER – The Council for Community and Economic Research.
- Per Capita Personal Expenditures (8 points)
- Gross Domestic Product per Capita (9 points)
- Cost of Living Index (8 points)
TAXES: 25%
Taxes can have a significant impact on a business’s bottom line, as taxes reduce the amount of money a business can use for reinvestment in the business or for other purposes. We compared income, corporate, and property tax rates for all 50 states using data from the Tax Foundation.
- Income Taxes (8 points)
- Corporate Taxes (10 points)
- Property Taxes (7 points)
WORKFORCE: 25%
To measure workforce size and quality for each state, we used data from the U.S. Census Bureau to calculate the total number of people between the ages of 15-64 and the percentage of degree-level workers in each state. Minimum wage data for each state is from the Department of Labor, and unemployment rates are from the Bureau of Labor Statistics.
- Percent of Population That is of Working Age (7 points)
- Percent of Degree-level Workers (7 points)
- Minimum Wage (6 points)
- Unemployment Rate (5 points)
Conclusion
Every business is unique, and location is just one piece of the puzzle. As a business owner, you must be ready to tackle all the challenges you'll inevitably face. External factors such as taxes, inflation, competitors, industry disruptors, and the local economy will all impact your small business journey.
It's important to consider all factors when starting a business to give yours the best chance possible.
Looking for more resources to help you grow your business? Explore our buying guides, or get started with these 11 essential tools for startups.