best states to start a business

Every state is different when it comes to starting a business. Many are known for their business-friendly atmosphere and extremely low corporate tax rate. Not every state is as friendly towards small business as it should be. Each state stacks up in terms of laws, fees, and friendliness is enormously helpful when trying to figure out the best state to start a business. We are going to look at the basics of corporate law to help our readers better understand the best and worst places to start a business.

The Best and Worst States to Start a Business
The Best and Worst States to Start a Business

We are going to look at the basics of corporate law to help our readers better understand the best and worst places to start a business.

In order to determine the worst and best states to start a business, we compared the 50 states across three key dimensions:

  1. Business Friendliness
  2. Business Costs
  3. Corporate Tax
  4. Income Tax

Top 5 best states to start a business:

1. North Carolina

In the last 50 years or so, North Carolina has transitioned to an economy focused on engineering, energy, biotechnology, and finance sectors. According to the 2018 Forbes Best States for Business list, North Carolina ranks at #1. This high ranking can be attributed to its similarly high rankings in labor supply, environment, and growth prospects. Additionally, this state has the lowest corporate income tax rate and a 15% lower construction costs compared to the United States average. All around, NC is regarded as a successful place to start a business.

2. Texas

In Texas, you go big or go home. This state takes the second spot as one of the best states to start a business. Year after year, Texas has successfully accommodated changes in the economy and US consumption. Most analysts also expect Texas to see some serious growth in the next few years. Additionally, Texas does not have corporate and income taxes. If you’ve ever wanted to start a business, Texas is a great place to do it.

3. Utah

For more than six years, Forbes has nationally ranked Utah within the top three for best states for business. Utah’s friendly business climate and ease of starting a business are part of what gives it it’s A+ rating. Although Utah’s corporate and personal tax is 5%, their cost of doing business is 2.2% below the national average. Also, Utah ranks #5 in growth prospects and is #22 in business costs.

4. Georgia

Georgia boasts one of the fastest growing populations, and economies, in America. 15 Fortune 500 companies call Georgia home and, if taken alone, Georgia would have the 28th largest economy in the world. Tourism and culture also make up a major part of the Georgian economy, and a flat corporate income tax of 5.75% continues to attract new businesses to the state. In fact, according to the Tax Foundation, Georgia’s state and local corporate, income, and sales tax are all low enough that Georgia falls below the national average tax burden. These are the reasons as to why Georgia is one of the best states to start a business.

5. Oklahoma

Oklahoma’s farming, oil, and natural gas industries are booming. Even if your business isn’t in those industries, you can save a huge amount of money on energy costs. In this state, energy costs are 25% below the national average. According to Forbes, Oklahoma comes in at #24 of the 50 states, due to its inexpensive business costs, regulatory environment, and the overall economic climate of the state.

Top 5 worst states to start a business:

1. Hawaii

Hawaii is noted for having the highest cost of living in the United States. This dream vacation state holds a low corporate tax rate at 6.4% and has a high personal tax rate at 8.25%. While the state is slowly working its way up to a better business friendliness state ranking, it still has a ways to go.

2. New Hampshire

You may not see entrepreneurs running towards New Hampshire to start a business, as it ranks #34 on the Forbes Best States for Business list. One of the many reasons why business owners overt this state is because it also suffers from expensive energy and labor costs. As far as taxes go, New Hampshire has no sales tax or income tax reported on an individual’s reported W-2 wages. However, the state does have the second highest property tax (1.86%) in the nation.

3. Rhode Island

Did you know that Rhode Island is the smallest in the United States? It’s also, widely known for its healthcare and tourism industries. Unfortunately for business owners, Rhode Island is ranked as #43 out of 50 in the Forbes Best States for Business list. Much of this can be attributed to high business cost and tax rates in property (1.35%), personal income (5.9%), and corporate (7%).

4. Vermont

Are you starting a business in Vermont. If so, you can look forward to plenty of scenic sights, affordable healthcare, and a decent quality of life. Although this state has a few benefits, many entrepreneurs stray away because of its high personal income taxes (8.95%) and corporate taxes (8.5%), according to Tax Rate.

5. Pennsylvania

Entrepreneurs looking to start a business in Pennsylvania can expect a high quality of life. Unfortunately, this state suffers from a high corporate tax burden at a staggering rate of 9.99%.  Due to this, Pennslyvania is known for having one of the highest tax rates in the United States.



  1. Hi Cody!

    For legal reasons, we do not suggest anything about the type of entity that best suits your business.You can start here to get basic information about each type of entity.

    If you want to know the differences between an LLC and corporation check out this post and quick video.

    Once you’ve made your decision, we have representatives available to help you if you need help. You can use our live chat or call us at 877.692.6772

  2. I’m a owner operator for a moving company. What is the best option. LLC or incorporation

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