Who doesn’t want to be their own boss? You call all the shots and follow your true calling. There’s never a dull moment, right?
But, when more than 20% of new businesses shut down in their first year of operation, you know it’s not all fun and games.
You need a viable business idea that you can turn into a profitable business model. Also important is a good understanding of your target market. Small businesses? Enterprises? Direct consumers?
Put these two together to validate your product/market fit.
Next comes finding the perfect location. Of course, this is considering you don’t have a fully remote team.
Now, we’ve done most of the research for you and put together this nifty list. It covers the best and worst 25 states in the U.S. to start a business. Don’t leave your startup success to chance — dive right in!
25 best states to start a business
- Massachusetts
- Colorado
- Utah
- North Dakota
- Idaho
- Washington
- Texas
- New Hampshire
- Florida
- California
- South Dakota
- Vermont
- Minnesota
- Wyoming
- North Carolina
- Virginia
- Nevada
- Maryland
- Arizona
- Montana
- Georgia
- Iowa
- Oregon
- Connecticut
- Nebraska
25 worst states to start a business
- Kansas
- Michigan
- Delaware
- New York
- Tennessee
- Alaska
- South Carolina
- Indiana
- New Jersey
- Maine
- Wisconsin
- Missouri
- Arkansas
- Pennsylvania
- Alabama
- Illinois
- Oklahoma
- Ohio
- Rhode Island
- Kentucky
- Mississippi
- Hawaii
- West Virginia
- New Mexico
- Louisiana
6 questions to ask before choosing a business location
1) Are other local businesses performing well? What do you know about local businesses and how they’re doing?
2) What can my business give residents that the competition does not? Research your competitors and look for gaps in their strategy that you and your product can fill.
3) Is it an upcoming city/town or tourist place? Consider the current and future needs of your business to ensure growth.
4) Does the location help or hinder operations? Can deliveries arrive on time? Are there enough spaces for parking?
5) Will it be costly to run, lease, rent, or own real estate? Are there affordable long-term business costs or office space options available in the area?
6) Will the cost of living affect my quality of life and business? Can you afford to live there? Is there a demand for your business offering?
Before we move on — why does location matter?
Take a look at this graph. As you make your way down the list on the graph, you’ll notice a pattern.
All the problems here are location-based related. This is huge!
Everything, from the quality of labor, to red tape, and interest rates, varies depending on where you choose to put your business. Your choice of location can make or break your business.
So, which are the best states to start a business?
25 best states to start a business (and why)
There are four essential factors we are going to look at — Education, Average Income, Venture Capital, and Sales Tax.
It’s worth it to note that Local and State Tax vary depending on local municipalities.
Please note, these are the top states listed in no particular order. The real “best or worst” state depends on which factor(s) is most important to your business.
1) Massachusetts
- Adults with a bachelor’s degree: 43.4 percent
- The average income in the state of Massachusetts is $73,246
- In 2018, the venture capital deals were 9.6 per 100,000 people
- Sales Tax: Local tax rates: 0.00% Statewide tax rate of 6.25%
2) Colorado
- Adults with a bachelor’s degree: 41.2 percent
- The average income in the state of Colorado is $59,087
- In 2018, the venture capital deals were 5.0 per 100,000 people
- Sales Tax: Local tax rates: 0.00% – 8.3% Statewide tax rate of 2.9%
3) Utah
- Adults with a bachelor’s degree: 34.6 percent
- The average income in the state of Colorado is $50,655
- In 2018, the venture capital deals were 3.4 per 100,000 people
- Sales Tax: Local tax rates: 0% – 4% Statewide tax rate of 4.7%
4) North Dakota
- Adults with a bachelor’s degree: 30.7 percent
- The average income in the state of North Dakota is $53,013
- In 2018, the venture capital deals were 0.9 per 100,000 people
- Sales Tax: Local tax rates: 0% – 3.5% Statewide tax rate of 5%
5) Idaho
- Adults with a bachelor’s degree: 26.8 percent
- The average income in the state of Idaho is $47,218
- In 2018, the venture capital deals were 1.5 per 100,000 people
- Sales Tax: Local tax rates: 0% – 3.00% Statewide tax rate of 6%
6) Washington
- Adults with a bachelor’s degree: 35.5 percent
- The average income in the state of Washington is $68,695
- In 2018, the venture capital deals were 4.9 per 100,000 people
- Sales Tax: Local tax rates: 0% – 3.9% Statewide tax rate of 6.5%
7) Texas
- Adults with a bachelor’s degree: 29.6 percent
- The average income in the Lone Star State is $58,916
- In 2018, the venture capital deals were 1.5 per 100,000 people
- Sales Tax: Local tax rates: 0.125% – 2% Statewide tax rate of 6.25%
8) New Hampshire
- Adults with a bachelor’s degree: 36.9 percent
- The average income in the state of New Hampshire is $60,206
- In 2018, the venture capital deals were 2.4 per 100,000 people
- Sales Tax: It is one of only five states without a sales tax. But, the state does levy a tax on another form of income, interest, and dividends.
9) Florida
- Adults with a bachelor’s degree: 29.7 percent
- The average income in the state of Florida is $50,043
- In 2018, the venture capital deals were 1.1 per 100,000 people
- Sales Tax: Local tax rates: 0% – 2% Statewide tax rate of 6%
10) California
- Adults with a bachelor’s degree: 33.6 percent
- The average income in the state of California is $71,967
- In 2018, the venture capital deals were 7.7 per 100,000 people
- Sales Tax: Local tax rates: 0.15% – 3% Statewide tax rate of 7.25%
11) South Dakota
- Adults with a bachelor’s degree: 28.1 percent
- The average income in the state of South Dakota is $47,876
- In 2018, the venture capital deals were 0.3 per 100,000 people
- Sales Tax: Local tax rates: 0% – 2% Statewide tax rate of 4.5%
12) Vermont
- Adults with a bachelor’s degree: 38.3 percent
- The average income in the state of Vermont is $49,458
- In 2018, the venture capital deals were 3.8 per 100,000 people
- Sales Tax: Local tax rates: 0% – 1% Statewide tax rate of 6%
13) Minnesota
- Adults with a bachelor’s degree: 36.1 percent
- The average income in the state of Minnesota is $59,768
- In 2018, the venture capital deals were 2.2 per 100,000 people
- Sales Tax: Local tax rates: 0% – .5% Statewide tax rate of 6.875%
14) Wyoming
- Adults with a bachelor’s degree: 27.6 percent
- The average income in the state of Wyoming is $52,773
- In 2018, the venture capital deals were 0.9 per 100,000 people
- Sales Tax: Local tax rates: 0% – 2% Statewide tax rate of 4.00%
15) North Carolina
- Adults with a bachelor’s degree: 31.3 percent
- The average income in the state of North Carolina is $53,844
- In 2018, the venture capital deals were 1.8 per 100,000 people
- Sales Tax: Local tax rates: 0% – 2.75% Statewide tax rate of 4.75%
16) Virginia
- Adults with a bachelor’s degree: 38.7 percent
- The average income in the state of Virginia is $62,117
- In 2018, the venture capital deals were 1.7 per 100,000 people
- Sales Tax: Local tax rates: 0% – 2.7% Statewide tax rate of 4.3%
17) Nevada
- Adults with a bachelor’s degree: 24.9 percent
- The average income in the state of Nevada is $51,785
- In 2018, the venture capital deals were: 1.3 per 100,000 people
- Sales Tax: Local tax rates: 0% – 3.665% Statewide tax rate of 4.6%
18) Maryland
- Adults with a bachelor’s degree: 39.7 percent
- The average income in the state of Maryland is $67,936
- In 2018, the venture capital deals were 2.3 per 100,000 people
- Sales Tax: Local tax rates: 0.00% Statewide tax rate of 6.00%
19) Arizona
- Adults with a bachelor’s degree: 29.4 percent
- The average income in the state of Arizona is $54,193
- In 2018, the venture capital deals were 1.3 per 100,000 people
- Sales Tax: Local tax rates: 0.15% – 3% Statewide tax rate of 7.25%
20) Montana
- Adults with a bachelor’s degree: 32.3 percent
- The average income in the state of Montana is $44,470
- In 2018, the venture capital deals were 1.1 per 100,000 people
- Sales Tax: Local tax rates: 0.00% Statewide tax rate of 0.00%
21) Georgia
- Adults with a bachelor’s degree: 30.9 percent
- The average income in the state of Georgia is $55,838
- In 2018, the venture capital deals were 1.2 per 100,000 people
- Sales Tax: Local tax rates: 0.00% Statewide tax rate of 0.00%
22) Iowa
- Adults with a bachelor’s degree: 28.9 percent
- The average income in the state of Iowa is $50,512
- In 2018, the venture capital deals were 1.1 per 100,000 people
- Sales Tax: Local tax rates: 0.36% – 8.98% Statewide tax rate of 6%
23) Oregon
- Adults with a bachelor’s degree: 33.7 percent
- The average income in the state of Oregon is $57,502
- In 2018, the venture capital deals were 12.4 per 100,000 people
- Sales Tax: Local tax rates: 0.00% Statewide tax rate of 0.00%
24) Connecticut
- Adults with a bachelor’s degree: 38.7 percent
- The average income in the state of Connecticut is $72,728
- In 2018, the venture capital deals were 2.5 per 100,000 people
- Sales Tax: Local tax rates: 0.00% Statewide tax rate of 6.35%
25) Nebraska
- Adults with a bachelor’s degree: 31.7 percent
- The average income in the state of Nebraska is $54,765
- In 2018, the venture capital deals were 1.0 per 100,000 people
- Sales Tax: Local tax rates: 0.5% – 2% Statewide tax rate of 5.5%
Now, you have the information about where to start a business, but you may not live in one of these states. You may need to relocate, which means you must become aware of which states are the worst to start a business.
25 of the Worst States to Start a Business
As of 2018, there are 30.2 million small businesses in the U.S. This accounts for 99.9% of United States businesses.
To up your chances of making it into this league, think twice about starting up in these 25 worst states.
1) Kansas
- Adults with a bachelor’s degree: 33.7 percent
- The average income in the state of Kansas is $52,466
- In 2018, the venture capital deals were 0.7 per 100,000 people
- Sales Tax: Local tax rates: 4.00% Statewide tax rate of 6.50%
2) Michigan
- Adults with a bachelor’s degree: 29.1 percent
- The average income in the state of Michigan is $56,264
- In 2018, the venture capital deals were 1.1 per 100,000 people
- Sales Tax: Local tax rates: 0.5% – 2.5% Statewide tax rate of 4.25%
3) Delaware
- Adults with a bachelor’s degree: 31.5 percent
- The average income in the state of Delaware is $60,803
- In 2018, the venture capital deals were 5.0 per 100,000 people
- Sales Tax: Local tax rates: 0% – 6.6% Statewide tax rate of 0.00%
4) New York
- Adults with a bachelor’s degree: 36.0 percent
- The average income in the state of New York is $77,084
- In 2018, the venture capital deals were 5.3 per 100,000 people
- Sales Tax: Local tax rates: 7% – 8.875% Statewide tax rate of 4%
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5) Tennessee
- Adults with a bachelor’s degree: 27.3 percent
- The average income in the state of Tennessee is $56,469
- In 2018, the venture capital deals were 1.2 per 100,000 people
- Sales Tax: Local tax rates: 2.75% Statewide tax rate of 7.0%
6) Alaska
- Adults with a bachelor’s degree: 28.8 percent
- The average income in the state of Alaska is $67,785
- In 2018, the venture capital deals were 0.4 per 100,000 people
- Sales Tax: Local tax rates: 7.5% Statewide tax rate of 0.00%
7) South Carolina
- Adults with a bachelor’s degree: 28.0 percent
- The average income in the state of South Carolina is $50,067
- In 2018, the venture capital deals were 0.8 per 100,000 people
- Sales Tax: Local tax rates: 1% Statewide tax rate of 6%
8) Indiana
- Adults with a bachelor’s degree: 26.8 percent
- The average income in the state of Indiana is $54,906
- In 2018, the venture capital deals were 1.4 per 100,000 people
- Sales Tax: Local tax rates: 0.00% Statewide tax rate of 7%
9) New Jersey
- Adults with a bachelor’s degree: 39.7 percent
- The average income in the state of New Jersey is $69,651
- In 2018, the venture capital deals were 1.0 per 100,000 people
- Sales Tax: Local tax rates: 0.00% Statewide tax rate of 6.625%
- Corporate tax rate: 9% (Phew!)
10) Maine
- Adults with a bachelor’s degree: 32.1 percent
- The average income in the state of Maine is $48,622
- In 2018, the venture capital deals were 1.8 per 100,000 people
- Sales Tax: Local tax rates: 0.00% Statewide tax rate of 5.5%
11) Wisconsin
- Adults with a bachelor’s degree: 30.4 percent
- The average income in the state of Wisconsin is $54,244
- In 2018, the venture capital deals were 1.3 per 100,000 people
- Sales Tax: Local tax rates: 0.458% – 0.60% Statewide tax rate of 5.00%
12) Missouri
- Adults with a bachelor’s degree: 29.1 percent
- The average income in the state of Missouri is $52,550
- In 2018, the venture capital deals were 1.1 per 100,000 people
- Sales Tax: Local tax rates: 6% – 7% Statewide tax rate of 4.225%
13) Arkansas
- Adults with a bachelor’s degree: 23.4 percent
- The average income in the state of Arkansas is $46,286
- In 2018, the venture capital deals were 0.9 per 100,000 people
- Sales Tax: Local tax rates: 5% Statewide tax rate of 6.5%
14) Pennsylvania
- Adults with a bachelor’s degree: 31.4 percent
- The average income in the state of Pennsylvania is $62,276
- In 2018, the venture capital deals were 2.1 per 100,000 people
- Sales Tax: Local tax rates: 2% Statewide tax rate of 6%
15) Alabama
- Adults with a bachelor’s degree: 25.5 percent
- The average income in the state of Alabama is $49,310
- In 2018, the venture capital deals were 0.5 per 100,000 people
- Sales Tax: Local tax rates: 0.00% – 7% Statewide tax rate of 4%
16) Illinois
- Adults with a bachelor’s degree: 34.4 percent
- The average income in the state of Illinois is $64,071
- In 2018, the venture capital deals were 2.0 per 100,000 people
- Sales Tax: Local tax rates: 0.00% Statewide tax rate of 6.25%
17) Oklahoma
- Adults with a bachelor’s degree: 25.5 percent
- The average income in the state of Oklahoma is $52,582
- In 2018, the venture capital deals were 0.3 per 100,000 people
- Sales Tax: Local tax rates: 3.312% Statewide tax rate of 4.50% – 6.50%
18) Ohio
- Adults with a bachelor’s degree: 28.0 percent
- The average income in the state of Ohio is $55,843
- In 2018, the venture capital deals were 1.3 per 100,000 people
- Sales Tax: Local tax rates: 1.37% – 2.25% Statewide tax rate of 5.75%
19) Rhode Island
- Adults with a bachelor’s degree: 33.5 percent
- The average income in the state of Rhode Island is $57,954
- In 2018, the venture capital deals were 2.2 per 100,000 people
- Sales Tax: Local tax rates: 0.00% Statewide tax rate of 7%
20) Kentucky
- Adults with a bachelor’s degree: 24.0 percent
- The average income in the state of Kentucky is $49,410
- In 2018, the venture capital deals were 0.9 per 100,000 people
- Sales Tax: Local tax rates: 0.00% Statewide tax rate of 6%
21) Mississippi
- Adults with a bachelor’s degree: 21.9 percent
- The average income in the state of Mississippi is $42,488
- In 2018, the venture capital deals were 0.2 per 100,000 people
- Sales Tax: Local tax rates: 0.25% Statewide tax rate of 7%
22) Hawaii
- Adults with a bachelor’s degree: 32.9 percent
- The average income in the state of Hawaii is $57,803
- In 2018, the venture capital deals were 0.4 per 100,000 people
- Sales Tax: Local tax rates: 0.25% Statewide tax rate of 4%
23) West Virginia
- Adults with a bachelor’s degree: 20.2 percent
- The average income in the state of West Virginia is $48,220
- In 2018, the venture capital deals were 0.1 per 100,000 people
- Sales Tax: Local tax rates: 1% Statewide tax rate of 6%
24) New Mexico
- Adults with a bachelor’s degree: 27.1 percent
- The average income in the state of New Mexico is $48,874
- In 2018, the venture capital deals were 0.9 per 100,000 people
- Sales Tax: Local tax rates: 4% – 5% Statewide tax rate of 5.125%
25) Louisiana
- Adults with a bachelor’s degree: 23.8 percent
- The average income in the state of Louisiana is $51,131
- In 2018, the venture capital deals were 0.2 per 100,000 people
- Sales Tax: Local tax rates: 6% Statewide tax rate of 4.45%
Conclusion
These factors aside, there are others you need to consider before starting up. For example, what type of funding do you want? Will you bootstrap or raise money?
Who’s drafting your financial plan? What’s your first hire going to be? Is telecommuting an option?
In short, it goes way past this dissection of the best states in the United States. Hopefully, this curation is a good starting point as you work out the details of your new business!
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