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6 States to Open Your Small Business

It’s fairly easy to argue that most U.S. states offer good opportunities to run a small business. In fact, it might be fair to say that the best state is an entrepreneurial state of mind. However, if you have the option to form a startup or relocate your business, you may be interested in information about some states with particularly business-friendly climates. In some cases, positive aspects of different locations may include friendly taxes, a plentiful supply of employees, or a less-restricted regulatory climate.

Business-friendly states for SMBs

This list isn’t meant to exclude any states from consideration for small business owners. Hopefully, it will simply give you some ideas about the ways that differences in regulations, taxes and economies may make some states friendlier to specific businesses than others. This list also strived to highlight states from different regions of this large country because many small business owners would prefer to stay close to home if they can.

1. Texas

The Lone Star State is famous for its business-friendly economic climate. The relatively low cost of living in many areas and supply of workers helps companies get started. One other factor that helps Texas make many business-friendly state lists is the fact that it contains several large economic centers. In addition to Dallas and Houston, there are also plenty of smaller cities scattered through the state. It’s possible to grow a small company into a larger one without having to cross state lines.

Certainly, the state is home to many opportunities for energy, transportation, high-tech and agricultural businesses. Some of the largest companies with headquarters in Texas include Exxon, ATT&T and both American and Southwest Airlines.

According to Forbes, the state and local tax rate as a percentage of income is low in Texas, which tends to please entrepreneurs. Texas doesn’t have an individual income tax either, but some areas may have relatively high property and sales taxes to make up for that. Compared to other large states, the regulatory climate is considered relaxed and friendly to growing companies.

2. Georgia

Georgia has a relatively high startup rate density, so it often pleases entrepreneurs to enter markets where other small businesses are growing and thriving. Like Texas, Georgia also ranks well for the supply of labor that’s available, modest living costs and the relatively soft regulatory climate. The Atlanta airport ranks as the world’s busiest by passengers, and Atlanta also provides a home for such major companies as Coca-Cola, UPS and Home Depot.

Georgia was ranked third-best in the country for business-friendly taxation by The Tax Foundation. Relatively low wages in the state may be a mixed blessing, depending upon if you’re hiring or trying to court local customers.

3. North Carolina 

So far, our list started with southern states. Companies that want proximity to the Eastern U.S. and somewhat lower costs may consider locating to North Carolina. Geographically, it’s both east and south.

One positive factor is that business survival rates are ranked in the top 10 for the entire nation. This is mostly sparked by the famous business centers in Durham-Chapel Hill-Winston and Asheville. Some larger companies that call North Carolina their home include Bayer, Bank of America and Duke Energy. In this sense, the economy of North Carolina is very diverse.

The Tax Foundation ranked North Carolina fourth in overall taxes and eleventh in corporate taxes, so this may provide an incentive for small business owners to locate companies to this state. The state ranks fairly high for quality of life and labor supply, so it may be easy for startups to attract employees.

4. Utah

Some small business owners might be surprised to find that a relatively small state by population often gets featured as one of the best states in the country to start a company. Still, Utah ranks third in the United States for the density of startups, with over 93 for each 1,000 residents.

One factor that helps businesses succeed is the energy prices, which are 20 percent below average for the country. The state also ranks relatively high for average education levels and low for the percent of state and local taxes as a portion of income. Notable companies with headquarters in this state include Sinclair Oil, Smith’s Food and Drug and Skywest Airlines.

The state also ranks fifth in the country for available labor and second for pro-business regulations. Utah also can boast of one of the highest educational attainments in the United States, so this can be a plus for companies that need an educated, local labor supply.

5. Washington

Businesses that would like a location on the Pacific side of the nation might consider Washington. Some benefits that this state can provide are a high supply of available workers and high average productivity. Of course, such well-known companies as Starbucks and Amazon began there.

Drawbacks include a relatively high corporate tax rate; however, overall tax rates are a bit lower than average. Average energy costs are almost 30 percent lower than the U.S. average. Seattle is known as the home to many high-tech companies, and recently, it has made the news for drawing a lot of tech talent. One reason may be more affordable living costs in Washington.

6. Nebraska

Several Midwestern states provide good opportunities for small business growth. Nebraska ranks first for a business-friendly legal environment and ranks very well for average business costs.

Despite harsh winters, Nebraska also ranks seventh in the country for quality of life, so companies may be able to attract employees. A good quality of life and a relatively low cost of living can help keep starting wages lower.

Some notable large companies that started in Nebraska include Berkshire Hathaway, Ameritrade and Mutual of Omaha. Thus, Omaha has established itself as a notable center for finance companies. The unemployment rate is among the lowest in the country, so that may make it good for sales but tougher for local recruiting.

Where should your small business make a home?

Most small business owners will probably start their businesses near where they already work and live. They know that they can enjoy the advantages of already having prior connections and a good knowledge of their local area. Through social media and the Internet, business owners can connect to customers, suppliers, financing opportunities and whatever they need from almost anywhere. Some states might be better than others for certain industries. At the same time, there’s really not a bad place in the U.S. to grow a good company.

Certainly, some types of businesses may find they have an advantage if they choose a starting location that can offer them lower costs, a better supply of the kind of employees they need or even access to capital. Small business owners who don’t have a particular reason to stay in one city or one state might compare the advantages of different locations that may suit their own unique business requirements.

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Kabbage Team

Kabbage is here not only to provide access to the small business funding you need, but to also help you grow your business through free marketing tips, webinars, tools and more. Is there something you'd like us to cover or want to get your small business featured on our blog? Send us a note at content@kabbage.com.