The 5 Most Business Friendly States

By Rebecca Lake. May 7th 2016

If you’re considering starting a business, where you plan to operate may be an important factor in your decision. Certain states have a reputation for being friendlier to both small and large businesses alike in terms of tax benefits and regulation. The most and least business-friendly states are ranked regularly by a number of organizations including the U.S. Chamber of Commerce. When researching possible locations for your business venture, these rankings can provide a helpful starting point to guide you in your decision-making.


Texasconsistently ranks highest as one of the best states for businesses to set up shop. According to Chief Executive’s annual survey of 650 CEOs,Texasranked number one overall as the most business-friendly state. This ranking is attributed primarily to the fact that businesses inTexasare subject to limited regulation and the lack of personal income tax. The Small Business & Entrepreneurship Council (SBE) rankedTexasnumber two in terms of capital gains tax, corporate income tax and state and local property taxes.

The U.S. Chamber of Commerce rankedTexassixth overall in terms of benefits to business. The state ranked in the top three according to a survey of 6,000 small business owners conducted by the Kauffman Foundation, a non-profit group dedicated to advancing entrepreneurship. According to the survey, Dallas-Fort Worth, San Antonio and Austin ranked in the top five cities nationwide as the best places to start a business.


Along withTexasandOklahoma,Idahoranked in the top most business-friendly states according to the Kauffman Foundation survey. The rankings were based on how likely small business owners were to recommend setting up a business in a particular state based on ease of starting a business, hiring costs, regulations, training programs, networking programs and current economic health. Taxation was also a key factor in determining the most business-friendly states with Idaho ranking number one overall due to its low tax rate.

South Dakota

South Dakotaconsistently ranks among the top states for business in terms of taxation. The Small Business & Entrepreneurship Council ranked South Dakota first overall largely due to the fact that there is no personal income tax, no corporate income tax, no personal property tax, no business inventory tax or inheritance tax assessed in the state. The U.S. Chamber of Commerce ranked South Dakota second in the top ten most business-friendly states based largely on the state’s low sales tax rate of 4 percent and the fact that the government recently initiated a tax refund program to encourage business building projects.

According to The Street, which also rankedSouth Dakotanumber one in terms of benefits to small business, the state is also appealing because of its low crime rate, low number of health insurance mandates and low level of government spending. Governor Dennis Daugaard has announced his plans to spur economic growth by encouraging businesses in high-tax states to relocate to South Dakota which he says would increase production and create new jobs in the state. The governor has also announced plans to budget $10 million specifically to revamp state-sponsored loan programs in order to encourage new business growth.


Indianatied for fifth place overall according to both the U.S. Chamber of Commerce and the Chief Executive survey. The legislature recently lowered taxes on corporations in an effort to bring more businesses into the state and, unlike many states, the government boasted a budget surplus of approximately $1 billion in 2011. Indiana also boasts a lower tax rate and the overall cost of living is comparatively lower. Indiana also recently became a right-to-work state which may make it more attractive to new businesses or existing businesses who are seeking a new location to expand their operations.


In keeping with popularity of the mid and southwest,Utahis widely regarded as one of the top states for business based on taxes, energy costs and overalleconomic growth. Forbes ranked Utah number one overall for 2011 based on its comparatively low corporate tax rate and the fact that business costs in the state are roughly 10 percent lower than the national average. According to Moody’s,Utah is projected to rank sixth overall in terms of job growth through 2015.

Utah ranked fourth on the Kauffman Foundation’s list and ninth according to the Chief Executive survey. The fact that the government has no plans to raise business or personal taxes led to a tenth-place ranking by the U.S. Chamber of Commerce. It has been theorized that ifUtah takes the initiative to become a right-to-work state, it could become even more appealing to business owners.

In real estate, location is everything and the same may said for small business. Both established businesses and up-and-coming companies can benefit from knowing what states feature an environment that is most conducive to success.


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