Editor’s Note: Article and infographics are based on “The 10 Best and Worst Places in the U.S. to Run a Small Business”
It’s no secret startups and businesses have a high failure rate. According to the U.S. Bureau of Labor Statistics, 20 percent of small businesses don’t last a year. Of those surviving, only 50 percent celebrate year five.
Some states make it easier for small business owners to operate and profit, while others make it near impossible. Wisely choosing the state you reside in can give your budding enterprise the head start and support it needs to thrive. Read below find out the best and worst places in the U.S. to run a small business for the ultimate chance at long-term success.
Puerto Rico is preparing for an epic comeback in the wake of Hurricane Maria. There are structural reforms underway, new laws for an easier sharing economy, and a newly-designed energy grid. Coupled with astounding tax savings, Puerto Rico is easily the best place to run a small business.
While back in the states entrepreneurs in California or New York can pay up to a whopping 50 to 60 percent of their income on federal and state taxes, this U.S. territory enjoys a fixed four percent personal income tax rate. Residents also pay zero taxes on dividend income and capital gains.
Entrepreneurs in the manufacturing or export enjoy a 90 percent personal property tax exemption. Businesses in these same sectors receive a four percent income tax rate, a 100 percent tax exemption on earnings and profits distribution, and a 90 percent real property tax exemption. Some startups also qualify for a 100 percent property tax exemption during the first five years in operation.
Texas’ economy is booming, and ranks first for growth prospects and current economic climate. No corporate taxes make Texas an attractive option for a small business to launch, and business owners would be in good company since the startup activity is second in the nation, according to the Kauffman Foundation. Even better, the state has one of the highest business survival rates.
Entrepreneurs also have their pick of cities as Dallas, Houston, Austin, and San Antonio rank highly as startup-friendly cities. Rates for renting office space aren’t too bad either, ranging between $27 to $30 per square foot.
Pristine views in Utah are made all the sweeter by the state’s low corporate tax rates and a large population of college-educated residents ripe for tech and research-related businesses. It also has the highest percentage of approved small business loans in the country. Because it’s one of the best-ranked states for business costs, money stretches further than many other states.
Utah is also prized for its work-life balance. It ranks fourth on a list of best U.S. states by U.S. News, and WalletHub named Utah one of the top three happiest states. The state’s excellent economy, infrastructure, and abundant sights and outdoor recreational activities are leading reasons why.
Although the cost of living here is higher than the national average, Wyoming makes up the difference by having no corporate and state income tax and a high GDP of $58,821. With a four percent sales tax, it also has one of the best rates in the country. It’s no wonder Wyoming has the fourth-highest number of new entrepreneurs in the nation.
And those who open a company in Wyoming have the best odds of staying in business when compared to any other state. Wyoming’s ratio of companies that open to those that close is 1.61. Maybe the excellent startup success rate has something to do with the high quality of life residents experience. With median home prices being $194,800, there’s also plenty left over for fun.
Colorado has a great labor market for entrepreneurs looking to attract young talent. The state has the second-highest concentration of 25- to 34-year-olds and a robust economy that’s the second fastest-growing in the U.S. Small businesses are the backbone of Colorado’s economy—making up 97 percent all businesses. And let’s not forget the plethora of recreational opportunities Colorado offers to create an ideal work-life balance.
While sweeping views and an entrepreneurial spirit might be enough to consider running a business there, Colorado also has going for it low business startup costs, low income tax rates, and easier access to cash via the state’s microloan program. And at $25 to $30 per square foot to rent an office space, it’s a doable business expense—even if it’s not the cheapest around.
Hawaii might be a tropical paradise, but it’s paradise lost for many business owners. Its middle-of-nowhere location makes the cost of living and doing business on the island outrageous because so many of its materials and commodities are shipped in. Perhaps it also explains why Hawaii’s infrastructure is one of the worst in the nation.
To top it off, the government charges a general excise tax of up to four percent for businesses, and certain industries have burdensome governmental regulations to abide by.
Startup activity in Wisconsin is one of the worst in the nation, with a paltry 0.19 percent of adults becoming entrepreneurs each month. Onerous business regulations make it difficult for small businesses to thrive, explaining why the state has a middle of the road business climate.
Entrepreneurs’ access to financing and venture investment is also lower than many other states. And, the 7.9 percent corporate tax rate and 5.84 to 7.65 percent personal income tax rate makes it expensive to do business in the Badger State.
West Virginia has a high unemployment rate of 4.8 percent, and its workers are some of the least educated in America. Access to capital is also challenging. The state isn’t renowned for its innovation, and receives very little funding for scientific research. This adds up to startups being few and far between with an average of a mere 70 people per 1,000 setting up shop.
Infrastructure, economy, and cost of doing business rank at the bottom of the barrel for the Ocean State. Rhode Island is trying to make a comeback by using new truck tolls to fix its roadways and bridges, but economic growth has been slow, and tax and regulatory climates unfavorable. Corporate income tax rates are seven percent, and personal income tax rates are 5.99 percent.
Louisiana is one of the handfuls of states having a GDP decline in 2017. Its less-than-reliable infrastructure is a considerable issue costing commercial trucking over 2.3 billion in 2017.
Small business owners will be hard-pressed to find qualified talent as only 23.8 percent of adults have a bachelor’s degree or higher. Venture capital deals in 2018 were second-fewest in the country at 0.2 per 100,000 people.
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