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What Are The 5 Best US States To Start A Small Business?

small business
September 6th, 2014

So you think you have a killer idea for a new business? That’s great, but you may want to consider where you’re going to start your small business. Some states are just more receptive to small businesses than others.
 
To find out what the best states are to start a small business, a study involving more than 12,000 small business owners was conducted recently by the Ewing Marion Kauffman Foundation in partnership with Thumbtack, which is an online job marketplace.
 
They asked these owners to rate their state’s “friendliness” to small business from A+ to F. The separate categories included the ease of starting a small business and hiring a new employee, the friendliness of regulations (including health and safety regulations, employment, labor, and hiring regulations, tax code, licensing, environmental and zoning regulations). The availability of helpful networking or training programs was considered as well.
 
At the end, the below states were considered the friendliest to small business:
 
1. Utah. Small business owners gave the state a place among the top 5 spots in all categories, with the exception of training programs. The state has the second highest percentage of owners who thought they paid fair taxes. Owners here were the most optimistic about the outlook for their state economy.
 
2. Idaho. This state was in the top 5 spots for just about every category, except for the ease of hiring new workers. It had the second highest share of startups in the US, with about 19% of the respondents having been in business for less than a year. Idaho is also #1 for the highest percentage of entrepreneurs who derived their main source of income from their small business.
 
3. Texas. The state is #1 for health and safety regulations. It’s also #1 for zoning laws. Its ratings for each category improved from the 2013 survey. The exception was in the ease of hiring, but Texas is now still at #5 in that category. Texas is in fact in the top 10 in each category, and it did not earn a grade lower than an A. Texas is also #2 in terms of outlook for the state economy.
 
4. Virginia. It’s in the top 5 for ease of licensing, labor, and health and safety regulations. It’s also #3 in planning to hire more people in the next 12 months. African-American business owners were particularly satisfied, as they have reported overall friendliness scores that are 14% higher than the state average. Nonetheless, the state has never earned less than an A for overall friendliness.
 
5. Louisiana. It was rated #1 for environmental regulations and for the ease of hiring new workers. It also finished in the top 10 for seven of the 11 categories. It’s #5 now, which is a great improvement when compared to its ranking in 2013 (it was #14th!).
 
And as for the worst states for small businesses, the contenders are Rhode Island, Illinois, California, Connecticut and New Jersey.


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