For Entrepreneurs starting new business

10 Best States for Entrepreneurs in The U.S.

Last updated on December 19th, 2023 at 10:19 am


Starting a business isn’t something you wake up and roll out your products. It requires market research, a business plan, choosing a location rightly, and doing a background check of the state where there are favorable factors that support the growth of your business.

This article explores the best U.S. states for entrepreneurs for you to transform your ideas into something that will make an impact in your immediate environment and also that will bring you returns and rewards


In a recent Looka research, the Canadian-based logo design company examined 50 U.S. states and how they are fair for entrepreneurs by considering six factors to include:

  1. Survival rate for small businesses by state
  2. Cost of living in each state
  3. Number of businesses with less than five employees
  4. Median household income of each state
  5. Percentage of new business in each state from 2020 to 2021
  6. Annual payroll for businesses with more than five employees.

The six factors were used in numerical order from one to 50 by ranking the best state as 1 and the worst as 50. The highest number was the best, except for the cost of living.

The team of researchers at Looka also collected highly useful data from U.S. Census Bureau County Business Patterns (CBP) 2019, Kauffman’s Rate of Entrepreneurs 2020, and American Community Survey (ACS) 2020 among others.

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What are the best states in the United States for business owners?

California, Texas, New Jersey, Illinois, Georgia, and Massachusetts are the best states for entrepreneurs. On the other hand, Rhode Island, West Virginia, Delaware, South Dakota and South Carolina are the worst U.S. states for entrepreneurs.


The Golden State is one of the most expensive states to live in and there are several reports that some families are moving out of California to states the cost of living is affordable.

But the recent study found that as expensive as CA is, the state has the highest number of businesses with fewer than five employees, and the highest annual payroll for employees.

California also has the best survival rate for business owners. Apart from the analysis from the recent report, the State of California also has one of the best incentives and financial support for entrepreneurs.

The financial incentives for small businesses by category make it easy for startups to access a wide range of technical assistance and accessing financing among others, are boosters to California’s economy.

For instance, there is an income tax credit for entrepreneurs who want to come, stay, or grow in California through the California Competes Tax Credit.

No wonder the number of small businesses that start off in California is growing while investors around the world continue to explore the several investment opportunities in California


I’m not particularly surprised that Texas made the list of best U.S. states for entrepreneurs. And do you know why?

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Texas has a lot of business-support programmes for small businesses which include grants and loans e.g Capital Access Program (CAP), and Product Development and Small Business Incubator Fund (PDSBI) among others.

The State of California has similar incentives and financial support, however, the cost of living in Texas is better than what you can get in CA.

Back to the research, it comes second in high annual payroll for employees. To crown it all, Texas has no personal income tax, definitely, it is one of the reasons business innovators may prefer to set up their business in the state.

New Jersey

On number three is New Jersey. It is ranked 8th in businesses with less than 5 employees and 7th annual payroll.  If you are starting a new business, New Jersey is one of the states in the U.S. you should consider.


Ranked as the 5th state for business with less than five employees and annual payroll, Illinois is the 4th based on overall factors, though it doesn’t have sterling standing in the rate of entrepreneurs.


Georgia is ranked 7th in businesses with less than 5 employees and ranked 8th in high annual payroll. The low cost of living in Georgia is something entrepreneurs can consider beneficial for their businesses.

What are the worst states in the U.S. for entrepreneurs?

Rhode Island is the worst state in the U.S. for entrepreneurs going by the overall points of the state. It’s only comparative advantage among the six factors that were used is its median household income followed by Delaware.

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Specifically, Rhode Island occupies the 50th position. It is at the bottom of the table in terms of the rate of entrepreneurs in the smallest U.S. state by area.

Similarly, West Virginia is ranked 49 in the overall analysis of its performance. Others include Delaware, South Dakota, and South Carolina, ranking 48, 47, and 46 respectively.

RankingStateMedian Household income (rating)Cost of living (rating)Business with less than 5 employees (rating)Annual Payroll (rating)Survival Rate % (rating)Rate of entrepreneurs (rating)Total
3New Jersey24287121687
7New York1448333510113
14North Carolina39229112426131
20New Mexico465404072140
42New Hampshire73741383727187
43North Dakota192848482223188
46South Carolina412324254340196
47South Dakota312945473230214
49West Virginia491742453149233
50Rhode Island154144444650240

Final thought:

Setting up a business in the United States involves processes that must be adhered to if you must enjoy some incentives put in place by some of the states in the country.

You are most likely going to get a different overall result if different factors in ranking the best states for entrepreneurs in the U.S. are deployed

One thing that is sure is that all 50 U.S. states have different incentives to motivate new businesses from within and outside the country, but some states are more committed to drawing new investments into their state.


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