10 Best and Worst States for Starting a Business

Starting your own business is exciting but terrifying. Nothing beats saying goodbye to a terrible boss, a toxic work environment, or subpar pay, but entrepreneurship isn’t all sunshine and roses. In fact, about 20% of all businesses don’t make it past the first year, according to the U.S. Bureau of Labor Statistics, and only around half make it five years. And what’s a driving factor deciding which businesses succeed? The state where a business forms — it can be make-or-break, according to a study by WalletHub.

First, the bad news:A high cost of living means overall business costs here are also among the highest in the nation, and Massachusetts ranks seventh-worst overall for them. Similarly, it has some of the highest labor costs, behind only Maryland, New Jersey, and Hawaii. If you want your startup to grow and include employees, it’s going to cost you. 

Why you’ll still want to start a business here:Although the price of doing business is high, Massachusetts ranks second-best for access to resources. You’ll have an easier time accessing capital (monetary and human) to help a new business thrive. 

Related: Top Affordable Cities for Starting a Business

First, the bad news:There are much better places to get the resources you need to get going; North Carolina ranks 21st for business costs and access to resources.

Why you’ll still want to start a business here:North Carolina ranks 10th overall for business environment, offering the possibility of steady growth and engaged workers without having to work an insane number of hours each week. 

First, the bad news:Despite a lower cost of living overall, North Dakota falls squarely at No. 25 for business costs; you’ll need a solid financial plan for a successful startup here. On top of that, if you don’t want to work many hours, you’ll be disappointed: It ranks second for longest workweek. 

Why you’ll still want to start a business here:North Dakota really shines for business environment, ranking sixth-best despite those long weeks. It is also tied for having the most accessible funding.

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First, the bad news:Colorado is an expensive place to live and do business. The average cost of office space rose 53% in the 10 years leading up to 2020. 

Why you’ll still want to start a business here:Although business costs are higher than in many other states, there are plenty of reasons to do business here — including the second-most educated population in the country, meaning you’ll have access to qualified employees to bring on. Starting a business is easier when you can connect with others in the same boat, and Colorado ranks fifth for the number of small businesses it’s growing. The state even provides a checklistof what to do to get a business running. 

First, the bad news: The cost of doing business in Utah can be steep. It is also one of the worst states for human capital. If your business needs lots of qualified employees to succeed, you might want to rethink your location. 

Why you’ll still want to start a business here: The several perks to starting a business in Utah include having the shortest overall workweek. The state has more small-business startups than any other except Idaho, and is tied with the Dakotas for first for most accessible financing. 

Related: Small Businesses You Can Start With Less Than $1,000

First, the bad news:Access to resources is a major problem, and the state ranks 41st for it. Financing, college-educated individuals, and work-age adults are scarce. 

Why you’ll still want to start a business here: Idahoans are a resourceful bunch, and there are more small-business startups here than any other state — so you’ll be able to find like-minded people to grow alongside. Some business environment factors and costs are also better than most other states. 

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First, the bad news:Florida is not exactly a standout for low business costs: It ranks 22nd.

Why you’ll still want to start a business here: Considering that its worst rating is still in the top half for the country, there isn’t too much downside to starting a business in Florida. At fifth-best in the country, business environment is one of the biggest drivers for the state’s overall ranking. There is no personal income tax and no need to file or pay business taxes for sole proprietorships, LLCs, and most S-Corps. Makes sense that Florida is seeing the nation’s fourth-highest average growth in small businesses. 

First, the bad news: California is the third-most expensive place to live in the United States and comes in 48th for business costs. You’ll need to have a highly successful business to survive.

Why you’ll still want to start a business here:California does a lot to support small-business growth. It ranks first for access to resources and third for business environment, and there is plenty of human-capital availability to scale your business. 

First, the bad news: Georgia comes in 31st for access to resources. Getting the people and money you need to build a successful business can be a challenge.

Why you’ll still want to start a business here: If you can get over the initial hurdles, you’ll enjoy an excellent business environment. The state also offers incentives such as tax credits for job creation. 

Related: Businesses That Are Thriving in the Age of Amazon

First, the bad news: Costs are higher than average for businesses in Texas, and it ranks fourth for most average number of hours in the workweek.

Why you’ll still want to start a business here: Long hours and high costs probably sound like a turnoff, but this is WalletHub’s best place in the country for starting a business. Texas ranks second overall for business environment and 12th for access to resources, and it has the fifth-highest spending percentage for incentives given to businesses to help offset some costs. 

The silver lining: Virginia’s business environment ranking is 25th — could be a lot worse. 

Biggest challenges for would-be business owners: Costs will be a hurdle, coming in 39th in WalletHub rankings. A lot of cash on hand and a steady cash flow will be key, as well as having a solid business plan before making the leap. 

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The silver lining: Access to resources ranks 10th in the nation, putting Delaware head and shoulders above even some of the best places to start a business. 

Biggest challenges for would-be business owners: Costs are extremely high here, and access to funding and resources may not be enough to bridge the gap. Delaware also has a worse business environment than most other states.

Related: Charming Small Towns Across America

The silver lining:Entrepreneurs looking for good news will have to count being just barely in the top half of all states for access to resources. 

Biggest challenges for would-be business owners:There are many challenges to face after business resources are acquired — the business environment for Pennsylvania is pretty dismal, ranking 44th. So while starting might be easier than in some places, staying in business is another story. Costs are also high, coming in 34th. 

Related: Expert Tips to Grow Your Business Without Stressing Out

The silver lining:Missouri ranks 24th for business costs — you’ll have a slightly better financial picture than average.

Biggest challenges for would-be business owners:There are plenty of jokes about “being in misery (Missouri)” among locals and visitors. You might join in after encountering a poor business environment, limited access to resources, and second-to-lowest state spending on business incentives. 

Related: Best and Worst States for Women Entrepreneurs

The silver lining: Rankings for access to resources and business environment aren’t horrible at 23rd and 27th, respectively; neither are they great. But Alaska is beautiful, so there’s that. 

Biggest challenges for would-be business owners: New businesses can struggle in a state coming in 45th for costs overall and tied in last place — with California and New York! — for most expensive office spaces. Alaska also has the longest workweek on average, so expect starting a business to be a grind. 

The silver lining:There’s no state income tax, though more business-friendly states such as Florida and Texas share this perk. 

Biggest challenges for would-be business owners: Long work hours, high expenses, and limited access to funding await entrepreneurs. The overall business environment and access to other resources are also terrible at 46th and 42nd place, respectively.

Related: Celebrity Businesses That Completely Flopped

The silver lining: Unlike most of the lowest-ranked states so far, West Virginia has a notable silver lining: It comes in third for business costs, so it’s possible to give entrepreneurship a shot without a soaring financial investment. If you can find workers, you’ll also have some of the lowest labor costs around. 

Biggest challenges for would-be business owners: Unfortunately, the state ranks dead last for business environment and second-to-last for access to resources. Not surprisingly, West Virginians start the fewest number of new small businesses. 

Related: Companies That Reinvented Themselves to Stay Relevant

The silver lining: Resources needed for a business startup are easier to come by in Rhode Island than many other states. The state is also ties for second-shortest workweek with Oregon.

Biggest challenges for would-be business owners:Overall business environment is awful in Rhode Island, coming in better than only two other states, and it’s an expensive place to start and run a business. 

The silver lining: Despite lousy stats overall, Connecticut has access to resources and to the country’s fifth-most educated population. 

Biggest challenges for would-be business owners: Having plenty of educated workers to choose from might sound wonderful, but they make for some of the highest labor costs in the country. Those student loans aren’t going to pay themselves. 

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The silver lining: New Jersey ranks 11th for access to resources, so you’ll have an easier time than many in finding workers and accessing financial support such as business loans. There’s also an abundance of college-educated workers to employ. 

Biggest challenges for would-be business owners: This is the most expensive state for starting a business, and the costs alone are enough to make many new businesses fail. The business environment isn’t great either, coming in 39th.

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