10 Best States to Start a Small Business in America in 2024

10 Best States to Start a Small Business in America

Now that you quit your job, what's next for you? Get another job? Start a small business? Become a freelancer? Or start a blog, just like me?

If you have decided to start a small business, I am proud to let you know that there are countless opportunities available to explore. Do you want to venture into service or selling physical products? There are some small business ideas you might consider.

However, the most important decision you will make is choosing the best state in the United States to start your business. I often tell people to start from your state of residence. But the state might not be favorable for small businesses.

Every state offers unique advantages and challenges. However, some are thriving for small businesses to grow, innovate and succeed.

This article explores the best states in the US to start a small business. It will assist aspiring entrepreneurs in establishing the foundation for their entrepreneurial dreams in the United States.

Established business owners will also benefit from this blog post. It will help them explore new possibilities and expand their business to other states. Let's start with some crucial facts about small businesses in the United States.

10 Facts about small businesses in the United States

  • Employment: According to the U.S. Small Business Administration (SBA), as of 2020, small businesses employed 47.1% of the private workforce in the United States. (Source: U.S. Small Business Administration, "Small Business Economic Impact Study," 2020)
  • Patents per employee: Small businesses produce 16 times more patents per employee than larger firms, according to a study by the SBA. (Source: U.S. Small Business Administration, "Small Business Innovation Research and Small Business Technology Transfer Programs: Evaluation Report," 2018)
  • Survival: Only about half of small businesses survive beyond the first five years, and the survival rates decline further as the years' progress. (Source: Bureau of Labor Statistics, "Business Employment Dynamics - March 2021," 2021)
  • Access to capital: According to the SBA, 28.5% of small businesses cited lack of access to capital as a major barrier to growth. (Source: U.S. Small Business Administration, "Small Business Access to Capital and Job Creation," 2020)
  • Contribution to GDP: According to the SBA, small businesses generate 43.5% of total U.S. economic activity in terms of GDP. (Source: U.S. Small Business Administration, "Small Business Economic Impact Study," 2020)
  • Women in business: As of 2020, women-owned businesses represented 42% of all small businesses, employing 9.4 million workers and generating $1.9 trillion in revenue. (Source: American Express, "The 2020 State of Women-Owned Businesses Report," 2020)
  • New job creation: According to the SBA, small businesses create two-thirds of net new jobs in the United States. (Source: U.S. Small Business Administration, "Small Business Economic Impact Study," 2020)
  • Contribution to export trade: As of 2020, small businesses accounted for 33.9% of U.S. merchandise exports. (Source: U.S. Small Business Administration, "Small Business Economic Impact Study," 2020)
  • Technology: A survey conducted by Visa in 2020 found that 82% of small businesses have invested in technology to adapt to changing consumer behavior and enhance their operations. (Source: Visa, "Visa Back to Business Study - Small Business Recovery Research," 2020)
  • Cybersecurity threats: According to the 2020 Verizon Data Breach Investigations Report, 43% of cyberattacks targeted small businesses. (Source: Verizon, "2020 Data Breach Investigations Report," 2020)

Criteria for Evaluating the Best States to Start a Small Business in the US

Here are some criteria for selecting the best small business-friendly states in America:
  • Business-friendly tax environment
  • Regulatory environment
  • Access to capital
  • Workforce availability
  • Cost of living and affordability
  • Market opportunity
  • Infrastructure and connectivity
  • Supportive ecosystem
  • Quality of life
  • Market competition
10 Best States to Start a Small Business in America

Top States for Starting a Small Business in the United States

Here are ten small business-friendly states in the US:

1. Texas

The first on our list is the beautiful state of Texas. Texas has a business-friendly environment. One good thing about Texas is that it has no corporate or individual income tax.

Furthermore, Texas has a diverse economy, including energy, technology, manufacturing, and aerospace industries. With its large population, there is a market for every product and service.

In addition to its business-friendly policies, Texas has a world-class infrastructure. The location makes it easy to facilitate trade and logistics. There are opportunities for businesses in the oil, gas, and renewable energy sector.

Texas offers robust startup support through incubators, accelerators, and funding options.

2. Florida

Have you ever been to Florida? How is the business environment? First and foremost, the state's pro-business policies and affordable cost of living. The tax had a no-income-tax policy, which made it attractive for entrepreneurs.

Furthermore, the state has popular cities, such as Miami and Orlando. The presence of these two cities has improved commercial activities in the state. We can't talk about Florida without its favorable regulatory climate that encourages business growth.

In the area of tourism, Florida is one of the best states for tourism in the US. The tourism industry attracts millions of visitors each year from around the world. Businesses in hospitality, entertainment, and related services are key players in the tourism industry.

In the technology sector, the state is also a growing hub for technology startups. The beneficiaries include startups in healthcare, fintech, and cybersecurity. Its proximity to the Latin American market makes it an ideal location for businesses interested in international trade.

3. North Carolina

North Carolina is known for fostering innovation and entrepreneurship. The state offers new and experienced entrepreneurs to start and grow their businesses.

Some factors that make the state a destination for small business owners are the skilled workforce, world-class universities, and attractive tax incentives.

Furthermore, the industrial sector in the state is not left out. Major industries in North Carolina include biotechnology, information technology, and advanced manufacturing.

In addition, North Carolina houses some leading research universities in the country, such as Duke University, the University of North Carolina at Chapel Hill, and North Carolina State University.

This concentration of academic institutions fosters innovation, particularly in industries such as biotechnology, pharmaceuticals, and advanced manufacturing.

4. Georgia

Georgia is a popular state in the United States. The business climate is favorable because of the low taxes and strong infrastructure. Furthermore, the large population makes it easy for small businesses to flourish.

The main driver of the economic growth in the state includes logistics, film and entertainment, agriculture, and technology. Georgia boasts transportation hubs and skilled labor. With several skilled laborers, it becomes easier to find workers when your business expands, and you can't do the work alone.

Moreover, Atlanta, Georgia's capital, is an economic hub. It has a large number of small businesses. The city has a skilled workforce, a good transportation network, and several industries.

Georgia houses several Fortune 500 companies and a growing film and entertainment industry. This provides business opportunities in production, post-production, and technology services sectors.

5. Colorado

Colorado is a crucial state in the United States. The infrastructures are top-notch, and a business-friendly environment will keep your business going.

Colorado's entrepreneurial ecosystem thrives due to an educated workforce and innovation-driven culture. The state excels in aerospace, renewable energy, technology, and outdoor recreation industries.

Furthermore, Colorado offers high quality of life, access to venture capital, and attracts top talent. The outdoor recreation industry in the state is massive. There are opportunities for businesses involved in tourism, adventure sports, and equipment manufacturing.

Colorado also benefits from access to venture capital and a high quality of life that attracts top talent. The state is committed to renewable energy and sustainability. It led to the emergence of cleantech companies and initiatives.

Colorado has a strong startup ecosystem. Organizations like Techstars and Galvanize are supporting entrepreneurial ventures.

6. Utah

What are your thoughts on Utah? Do you know someone who is doing business in the state and succeeding? Utah is on the rise. The growth in the state is driven by business-friendly policies and a skilled labor force.

Furthermore, the taxes in the state are low. The infrastructures are robust, with great support for start-ups and small businesses. Utah's major industries include technology, outdoor recreation, healthcare, and manufacturing.

The state also has an excellent transport system, including an international airport and a rail hub. In the technology sector, the state has strong technology leading to growth in software development, cybersecurity, and data analytics.

So what's stopping you from starting a small business in Utah? You have everything you need to get you started. Take advantage of the business-friendly environment and explore your entrepreneurial dreams.

7. Tennessee

This list won't be complete without Tennessee. So what makes the state attractive for small businesses? Tennessee has an affordable business environment. It has no personal income tax.

Furthermore, the state offers opportunities in healthcare, manufacturing, entertainment, and transportation.

Music and entertainment are fast growing in cities like Nashville and Memphis. The city's music scene creates business opportunities in production, publishing, and live events.

You will make it big in Tennessee if your business ideas are about music and entertainment. Tennessee also has a strong manufacturing sector. Automotive and advanced manufacturing companies play significant roles.

Lastly, the state is a desirable distribution and logistics hub due to its strategic position and robust transportation system.

8. Arizona

Have you considered Arizona yet? Arizona has a pro-business climate, low taxes, and a growing technology sector. The state is near the U.S.-Mexico border. Hence, it offers opportunities in aerospace, healthcare, advanced manufacturing, and tourism industries.

These industries contribute greatly to the economy. The state is a tourist destination due to its climate and natural landscapes. It means more opportunities for businesses in hospitality and travel.

Furthermore, Arizona is becoming a technology hub. Leading the charge for this industry in the state includes software development, cybersecurity, and aerospace. Arizona's military presence, including Air Force Bases like Luke and Davis-Monthan, drives the defense industries.

9. Virginia

Do you have plans to start a small business in Virginia? It looks like you can go on with your plan. Virginia has a strong economy driven by technology, defense, and healthcare industries.

Furthermore, the state has 5.3% sales tax rates and offers various incentives for small businesses, including grants, tax credits, and access to capital. Virginia benefits from its proximity to Washington, D.C., and its skilled workforce. Its closeness to the country's capital presents opportunities for businesses involved in government contracting, consulting, and technology services.

The state has a highly educated workforce because of its renowned universities and research institutions. Virginia has a growing healthcare sector. It has the presence of major medical centers and research facilities.

10. Washington

Washington State is one of the best places to do business in USA. It is known for its technology industry and innovation hub, particularly in Seattle. Seattle offers a supportive ecosystem for startups in the state. Small businesses can access venture capital, incubators, and top talent.

Furthermore, the technology sector is driven by companies like Microsoft, Amazon, and Boeing.

The state offers a favorable tax structure, access to venture capital, and a highly skilled workforce. Washington's economy comprises aerospace, clean energy, manufacturing, and maritime trade.

Importance of Choosing the Right small business-friendly states

It is important to choose the right state to start your small business due to the following reasons:
  • Legal and Regulatory Factors: There are different legal and regulatory frameworks for each state. Choosing a state with favorable laws streamlines business start-ups and operations. Consider business registration requirements, licenses, permits, and compliance standards.
  • Taxation: States have different tax laws. Some have lower corporate tax rates, sales tax rates, or property tax rates. These rates can impact your business's profitability. Understand the tax implications of different states and choose the best for you.
  • Funding and Incentives: Some states offer financial incentives, grants, or loans to support small businesses, such as tax credits, research funding, workforce training, and capital access. These incentives provide additional resources and support for business growth. 
  • Access to Markets: Your business location can impact your access to markets and customers. States have diverse populations, demographics, and consumer preferences. You can identify an excellent location for your business by evaluating the market size, competition, and demand across states.
  • Workforce and Talent Pool: You need a skilled workforce to succeed in your business. The labor market in each state varies in terms of skill sets, educational qualifications, and industry knowledge.
  • Cost of Living and Business Expenses: The cost of living and operating expenses differs across states. Business financial viability depends on real estate prices, utilities, wages, and insurance quotes. Therefore, choose a state with lower living costs and operational expenses.
  • Quality of Life: Start your business in a state that positively impacts your personal life and well-being. Consider climate, culture, recreational opportunities, education, and healthcare. These factors will ensure a quality life, leading to satisfaction and work-life balance.

Conclusion: 10 Best states to start a small business in the United States

There are several business ideas for entrepreneurs in the United States of America who are looking to start small businesses. Each of the states on this list has its advantages and appeal. They prioritize small business growth through robust economies, favorable tax climates, supportive communities, and resource access.

When Choosing the top states in the United States for starting a small business, you should consider insurance. Protect your business from risks through the best business insurance for small businesses in the US. You can buy property insurance, professional liability insurance, workers' compensation, etc.

This list highlights the top 10 US states for starting a small business, but you can still achieve success in various locations in the country. There are opportunities in all the states. However, what truly matters is the entrepreneurs' vision, determination, and ability to seize opportunities.
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