10 Best U.S. States For Entrepreneurs

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

Methodology

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:

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.

California

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

Texas

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

Illinois

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

Georgia

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.

Ranking	State	Median 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
1	California	6	49	1	1	1	5	63
2	Texas	21	18	4	2	10	12	67
3	New Jersey	2	42	8	7	12	16	87
4	Illinois	17	21	5	5	21	36	105
5	Georgia	29	9	7	8	40	17	110
6	Massachusetts	3	46	15	10	4	33	111
7	New York	14	48	3	3	35	10	113
8	Florida	37	26	2	4	45	1	115
9	Oklahoma	43	3	26	28	18	4	122
10	Tennessee	42	6	22	20	13	19	122
11	Arizona	28	24	18	17	26	13	126
12	Ohio	36	15	10	9	16	41	127
13	Colorado	11	33	14	15	36	20	129
14	North Carolina	39	22	9	11	24	26	131
15	Pennsylvania	22	32	6	6	17	48	131
16	Minnesota	13	31	17	18	6	47	132
17	Louisiana	47	20	25	26	2	14	134
18	Missouri	38	4	16	19	44	15	136
19	Iowa	27	13	31	32	9	25	137
20	New Mexico	46	5	40	40	7	2	140
21	Idaho	34	19	37	37	5	11	143
22	Michigan	33	7	11	13	49	31	144
23	Virginia	10	30	13	12	42	45	152
24	Mississippi	50	1	36	36	8	22	153
25	Nebraska	25	14	35	35	11	34	154
26	Indiana	35	12	20	21	25	42	155
27	Wisconsin	24	25	21	22	19	46	157
28	Maryland	1	44	19	16	39	39	158
29	Connecticut	5	43	29	24	28	32	161
30	Washington	9	38	12	14	50	38	161
31	Alaska	8	45	49	46	14	3	165
32	Wyoming	20	11	47	49	34	7	168
33	Arkansas	48	2	34	34	30	21	169
34	Oregon	18	47	23	23	29	29	169
35	Kentucky	44	16	30	30	15	35	170
36	Montana	40	34	39	41	3	18	175
37	Nevada	26	36	33	31	27	24	177
38	Maine	32	40	38	39	20	9	178
39	Utah	12	27	28	29	38	44	178
40	Kansas	30	8	32	33	48	28	179
41	Alabama	45	10	27	27	33	43	185
42	New Hampshire	7	37	41	38	37	27	187
43	North Dakota	19	28	48	48	22	23	188
44	Vermont	23	39	50	50	23	6	191
45	Hawaii	4	50	43	43	47	8	195
46	South Carolina	41	23	24	25	43	40	196
47	South Dakota	31	29	45	47	32	30	214
48	Delaware	16	35	46	42	41	37	217
49	West Virginia	49	17	42	45	31	49	233
50	Rhode Island	15	41	44	44	46	50	240

Source: Looka.com

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.

References:

Featured image by Jason Goodman

Author

Opeyemi Quadri

Ope is a finance writer and researcher with 10+ years of experience in content creation. His interests cut across decentralized finance, investment, foreign exchange, government policies and politics.

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