The landscape of entrepreneurship in the United States is currently experiencing a profound resurgence, marked by an inspiring spike in new business formations. In 2022 alone, an impressive 5 million new businesses were created across the nation, and preliminary data suggests that 2023 is on track to surpass even this remarkable figure, with nearly 2 million new applications filed through April. This wave of entrepreneurial spirit signals a dynamic and hopeful economic future, even as businesses navigate persistent challenges such as inflation, supply chain disruptions, and labor shortages. Yet, the path to sustained success remains a rigorous one, with approximately one in five new ventures facing closure within their inaugural year, and only about half managing to reach their fifth anniversary.
Understanding the critical determinants of business longevity and prosperity, entrepreneurs must look beyond their immediate operational strategies to the broader economic and regulatory environment. State policies play an undeniable and pivotal role in either fostering or impeding small business growth. Factors like the prevailing tax climates, the complexity of regulatory environments, the ease of access to capital, the overall cost of living, and the quality of the available workforce significantly influence these disparities, creating distinct advantages in some states and formidable hurdles in others. Making an informed decision about where to establish or expand your business can truly make the difference between thriving and merely surviving.
To illuminate these crucial differences, organizations like Swyft Filings, Capital on Tap, the Pacific Research Institute, SimplifyLLC, and the Tax Foundation have undertaken comprehensive analyses. Their methodologies encompass a wide array of criteria, including the relative cost of doing business, economic health, workforce productivity, state fees and taxes, support via state grants and SBA loans, and historical business survival rates. This deep dive into state-specific conditions provides invaluable insights for small business owners, highlighting the states that excel in offering low regulatory burdens, favorable tax policies, and a supportive ecosystem designed to help new and growing enterprises flourish. Here, we present the first seven states that stand out for providing such advantageous conditions.
1. **South Dakota**South Dakota consistently emerges at the top of national rankings for small business friendliness, earning an exceptional A++ grade from Swyft Filings and being declared the best state for small businesses in 2023. A cornerstone of its appeal lies in its remarkably favorable tax environment. The state levies no individual or business income tax, a feature that significantly reduces the financial burden on entrepreneurs and allows businesses to retain more of their hard-earned profits. Capital on Tap further highlights this advantage, noting the absence of corporate income, personal income, property, or business inventory taxes, which collectively makes operating a small company exceptionally affordable.
The state’s commitment to fostering business growth extends to its robust financial support systems. South Dakota ranks second highest in the nation for the number of SBA loans granted per capita, signaling readily available capital for expansion and operational needs. Recent data indicates an impressive average of $32,477 in funding available per business through various grants and programs, underscoring a healthy investment in entrepreneurial ventures. This combination of tax advantages and accessible funding creates a compelling financial landscape for startups and established businesses alike.
Beyond financial incentives, South Dakota cultivates a truly supportive business environment. It boasts the second-best 5-year business survival rate in the U.S., reflecting a resilient ecosystem where businesses have a strong chance of thriving long-term. With a cost of living index of 0.92, which is notably lower than the national average, the state offers economic advantages for both business operations and the quality of life for employees. This blend of low expenses and minimal regulatory hurdles, as observed by Capital on Tap, significantly lowers overall business costs.
Furthermore, South Dakota benefits from a strong labor pool, with 62% of its population falling within the working-age bracket. This readily available workforce, coupled with a transparent LLC formation fee of $150, ensures that new ventures can efficiently establish and staff their operations. With a scaled score of 85 out of 100, South Dakota truly represents a balanced mix of affordability, comprehensive business support, and workforce readiness, making it an ideal choice for entrepreneurs.
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2. **Texas**Texas has firmly established itself as one of the most business-friendly states in the country, consistently earning high marks, including an A+ grade from Swyft Filings and a third-place ranking from the Pacific Research Institute for small business environments. A significant draw for entrepreneurs is its exceptional tax structure, characterized by no state income tax on either the individual or corporate level. This critical advantage allows businesses to retain a greater share of their earnings, providing substantial capital for reinvestment into growth initiatives, hiring, and innovation.
Beyond its tax advantages, Texas also offers an incredibly streamlined and cost-effective regulatory landscape. The state famously has just a $5 annual report fee for corporations, and notably, no annual report fee whatsoever for LLCs. Such minimal administrative costs and reduced regulatory red tape lower the initial and ongoing operational expenses for small businesses, making it easier for new ventures to allocate resources directly to core business activities rather than compliance overhead. SimplifyLLC highlights that while Texas does have “other charges” in place of a corporate income tax, its overall tax-friendly stance remains highly competitive.
Texas further distinguishes itself through its dynamic economic growth and robust employment figures. The Lone Star State proudly claims the second-fastest 5-year growth in business employment in the nation. This rapid expansion in the job market is a strong indicator of a thriving economy that consistently creates opportunities for businesses to grow, scale, and innovate. The availability of a rapidly expanding workforce and a supportive environment for employment growth makes Texas an attractive destination for entrepreneurs planning for long-term success and scalability.
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3. **North Dakota**North Dakota consistently garners accolades as a premier destination for starting a small business, holding the top position in 2023 and remaining the leading state for starting a business in 2024. This consistent top ranking is underscored by a perfect scaled score of 100, reflecting a comprehensive and welcoming business environment. A key advantage for entrepreneurs is the relatively low barrier to entry, exemplified by an LLC formation fee of just $135, which significantly eases initial financial commitments for new ventures.
The state is particularly distinguished by its exceptional financial accessibility for small businesses. North Dakota boasts more SBA lenders per capita than any other state in the nation, making it an ideal location for businesses looking to secure working capital, finance major equipment purchases, or execute rapid expansion strategies. This extensive network of lenders ensures that entrepreneurs have ready access to crucial funding, a vital component for both launching and scaling operations. Furthermore, the state is known for consistently low filing fees across all business types—LLCs, Corporations, and Nonprofits—and maintains some of the lowest tax rates in the nation.
North Dakota’s appeal is also rooted in its resilient business climate and robust workforce. The state maintains a healthy business survival rate of 77%, which indicates a stable and supportive environment where new businesses are more likely to thrive. Economically, North Dakota offers an appealing cost of living, with an index of 0.94, which is below the national average. This affordability, combined with a significant 64% of its population falling within the working-age bracket, provides a substantial and capable labor pool, ensuring businesses have access to the talent they need to grow and succeed.
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4. **Indiana**Indiana proudly ranks as the second most favorable state for starting a business in 2024, earning an impressive scaled score of 98 out of 100. This strong performance is largely attributed to its notably business-friendly environment, which streamlines the process for new companies. A prime example of this commitment is the modest LLC formation fee of just $100, significantly reducing the initial financial hurdles for aspiring entrepreneurs and making business formation highly accessible.
The state demonstrates a solid and nurturing environment for business growth, reflected in its commendable 77% business survival rate. This stability is further reinforced by substantial financial support for small businesses. On average, $24,502 in funding is available per small business through various programs and incentives, highlighting Indiana’s dedicated investment in fostering an entrepreneurial ecosystem. This level of financial backing provides a crucial safety net and growth accelerator for new ventures.
Indiana’s economic appeal extends beyond direct business statistics to its overall affordability. The state boasts a cost of living index of 0.91, significantly below the national average, which makes it an economically attractive location for both business owners and their employees. Such cost-effectiveness helps to lower operational expenses and enhances the quality of life for the workforce. Moreover, with 64% of its population in the working-age bracket, Indiana offers a substantial and skilled labor pool, ensuring businesses have access to the talent necessary for sustainable growth and innovation. The Pacific Research Institute also recognized Indiana as the number one best state for small businesses, further solidifying its reputation.
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5. **Ohio**Ohio stands out as the third-best state for small businesses in 2023, according to Swyft Filings, achieving a solid A grade for its supportive environment. A key factor in its high ranking is the state’s highly advantageous tax and fee structure for entrepreneurs. Small businesses in the Buckeye State benefit from notably low annual fees and taxes. Notably, Ohio is one of only four states in the nation that does not levy a corporate income tax, a significant advantage that allows businesses to reinvest more capital into their operations. Additionally, its personal income tax rate ranks as the fifth-lowest across the country, further reducing the overall tax burden on business owners.
Beyond its favorable tax climate, Ohio actively supports small businesses through robust financial mechanisms. The state ranks third nationally for the most SBA loans granted per capita, indicating widespread access to critical funding for startups and growing enterprises. This strong pipeline for small business financing is instrumental for entrepreneurs seeking to secure working capital, acquire new equipment, or expand their market reach. The low LLC formation fee of just $99 further minimizes initial setup costs, making it easier for new businesses to get off the ground.
Ohio’s business environment is also characterized by strong indicators of stability and growth. The state is among the top 15 states for business survival rates, demonstrating an ecosystem where new ventures have a high probability of succeeding long-term. Furthermore, Ohio exhibits robust 5-year growth in business employment, signaling a dynamic economy with ample opportunities for companies to expand their teams and operations. This combination of low taxes, accessible funding, and a thriving job market makes Ohio an attractive and practical choice for entrepreneurs focused on sustained development.
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6. **Washington**Washington state secures an impressive fourth place among the best states for small businesses, according to Swyft Filings, earning an A grade for its compelling advantages. A primary driver of its appeal is an exceptional tax environment that profoundly benefits businesses. The Evergreen State imposes no state income tax on either the individual or corporate level, a critical distinction that enables businesses to retain a significantly larger portion of their profits. This direct financial advantage empowers companies to reinvest more aggressively in growth initiatives, innovation, and job creation, fostering a dynamic and competitive business landscape.
Beyond its tax structure, Washington exhibits strong economic health and remarkable business resilience. The state boasts the third-highest survival rate for new businesses launched between 2021 and 2022, providing a reassuring foundation for new ventures. This high survival rate is complemented by Washington’s robust economic output, ranking sixth in the country for gross domestic product (GDP) per capita. This indicator of strong economic stability and high workforce productivity suggests a thriving market environment and a highly skilled labor force, both essential for business success.
SimplifyLLC further reinforces Washington’s position as a tax-friendly state, confirming the absence of personal or corporate taxes, which is a major draw for entrepreneurs. While the LLC formation fee is $200, the broader economic and tax benefits far outweigh this initial cost. The combination of a zero-income tax policy, high business survival rates, and a robust GDP per capita positions Washington as an incredibly attractive destination for entrepreneurs seeking to establish and grow a prosperous business in a high-performing economic ecosystem.
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7. **Arkansas**Arkansas presents a highly advantageous environment for starting a business, distinguished by its combination of low costs, supportive policies, and a ready workforce, earning it a scaled score of 93 out of 100. A standout feature for aspiring entrepreneurs is the exceptionally low LLC business formation fee of just $45. This figure represents one of the lowest in the nation, significantly easing the initial financial burden and making the entry point for new businesses remarkably accessible. Such cost-effectiveness is a crucial factor for startups where every dollar counts in the early stages of development.
The state is committed to fostering a supportive ecosystem for new enterprises, evidenced by a strong business survival rate of 78%. This figure suggests that businesses established in Arkansas benefit from an environment conducive to sustenance and growth, offering entrepreneurs a greater chance of long-term viability. Furthermore, Arkansas actively backs its small businesses with notable financial assistance. The state offers an average of $23,463 in funding through various grants and programs, reflecting a clear commitment to nurturing entrepreneurial growth and providing essential capital for development.
Arkansas’s appeal is further enhanced by its overall economic efficiency and a readily available labor force. The state boasts a cost of living index of 0.89, which is considerably lower than many other states, offering significant economic advantages for both business operations and the personal finances of employees. This affordability translates into lower overhead costs for businesses and a more attractive living environment for talent. Coupled with a workforce where 64% of the population is of working age, Arkansas provides a fertile ground for new businesses, successfully balancing affordability with access to a robust labor pool, making it a compelling choice for entrepreneurs prioritizing a cost-effective and supportive launchpad.
Having explored the foundational advantages offered by several leading states, we now turn our attention to seven more top-tier locations that continue to reshape the landscape for small business success. These states distinguish themselves through a combination of favorable regulatory climates, robust economic health, and dedicated resources designed to ensure businesses not only survive but truly flourish. Entrepreneurs seeking an optimal environment for their ventures will find invaluable insights into these states’ unique offerings, from significant support systems to appealing cost structures, all aimed at fostering sustained growth and innovation.
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8. **North Carolina**North Carolina offers a compelling blend of supportive business elements, making it a state ripe with opportunities for entrepreneurs. Its commitment to fostering new enterprises is evident in a reasonably set LLC formation fee of just $125. This cost strikes a vital balance between accessibility for new ventures and the provision of quality services, lowering the initial financial hurdle that many startups face.
A significant advantage for entrepreneurs considering North Carolina is its strong business survival rate, standing at an impressive 77%. This figure points to a nurturing and stable environment where businesses have a greater chance of sustained success and growth. It reflects a robust ecosystem that helps new companies navigate their early years, offering a degree of resilience often sought after by founders.
Financially, North Carolina is strategically positioned to aid its small businesses, providing an average funding of $22,019 through various grants and incentives. This substantial level of support underscores the state’s investment in cultivating entrepreneurial ventures, ensuring essential capital is available for development. Such financial backing can be a game-changer for businesses looking to expand or innovate.
The state’s cost of living index of 0.96 aligns closely with the national average, ensuring affordability for both business owners and their employees. This economic balance helps manage operational costs while maintaining an attractive living environment for talent. Furthermore, with 65% of its population falling within the working-age category, North Carolina provides a large and capable labor pool, crucial for businesses aiming for sustainable growth. The state’s scaled score of 84 out of 100 further solidifies its position as a practical and promising location for new businesses.
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9. **Massachusetts**Massachusetts stands out as a prime destination for small businesses, fueled by a robust economy, a highly educated workforce, and a dynamic innovation ecosystem. While its LLC formation fee is higher at $500, which can be a consideration for some, the state offers compelling advantages that often outweigh initial setup costs. It is a hub for elite universities and a thriving tech industry, attracting talent and investment.
One of the most reassuring statistics for entrepreneurs in Massachusetts is its impressive business survival rate. Nearly 82% of small businesses in the state survive their first year, a testament to the supportive environment and strong market demand. This exceptional longevity is further supported by a 64.96% three-year average and a 54.38% five-year average survival rate, indicating a resilient business climate where ventures can achieve long-term stability.
Boston, in particular, is highlighted as a growing hub for STEM jobs and a magnet for investors and potential employees, creating a fertile ground for innovation and expansion. The state also actively promotes business growth through its Economic Development Incentive Program (EDIP), which provides significant tax and property incentives to job creators. These programs are vital for businesses looking to reduce overhead and reinvest in their operations.
Massachusetts’ strong economy, coupled with a highly skilled workforce, provides an unparalleled environment for small businesses, especially those in high-growth sectors. The presence of numerous investors and a culture of innovation ensures that funding and strategic partnerships are readily available, positioning businesses for significant scale and impact.
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10. **Wisconsin**Wisconsin offers a welcoming and supportive landscape for small businesses, balancing a relatively low cost of living with robust institutional support. The state is renowned for one of the nation’s best public university systems, which translates into a consistently highly educated and skilled workforce. This access to talent is a critical asset for any growing business, ensuring a steady pipeline of qualified employees.
The state’s business-friendly government plays a pivotal role, offering an array of tax credits, low-interest loans, and grants specifically designed to support small companies. These financial incentives are crucial for reducing operational costs and enabling businesses to invest in growth, research, and development. Such proactive government support demonstrates a clear commitment to fostering a thriving entrepreneurial ecosystem.
Wisconsin further distinguishes itself with its public-private capital initiative, spearheaded by the Wisconsin Economic Development Corporation (WEDC). This program recently announced a substantial $100 million investment in the state’s startups, signaling a strong financial environment for new ventures. This type of strategic funding not only provides direct capital but also boosts investor confidence in the state’s entrepreneurial future.
In terms of business longevity, Wisconsin exhibits strong survival rates: an 81.13% one-year average, a 64.93% three-year average, and a 54.97% five-year average. These figures highlight a stable and supportive environment where businesses are more likely to thrive beyond their initial launch. The combination of an educated workforce, attractive financial incentives, and a low cost of living makes Wisconsin an ideal state for entrepreneurs seeking sustained growth.
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11. **Minnesota**Minnesota provides a highly supportive business environment, characterized by an educated workforce and a high quality of life that is surprisingly affordable. These factors contribute significantly to the impressive longevity of small businesses within the state, making it an attractive proposition for new and expanding enterprises. The state’s commitment to nurturing its businesses is truly commendable.
Nearly 81% of small businesses in Minnesota successfully survive their first year, a remarkable achievement that underscores the state’s robust support systems. This success rate is further bolstered by a 63.97% three-year average and a 53.51% five-year average survival rate, demonstrating a consistent ability for businesses to overcome initial challenges and establish long-term viability. Such statistics offer immense confidence to prospective business owners.
A key pillar of Minnesota’s entrepreneurial support system is its network of nine small business development centers spread across the state. These centers offer invaluable resources including expert consulting, mentorship programs, and crucial networking opportunities. They also provide direct access to capital, ensuring that businesses have the guidance and funding necessary to grow and adapt in a competitive market.
The relative affordability of Minnesota, combined with a high quality of life, makes it an appealing place for business owners and their employees. This balance helps reduce operational costs for companies and enhances employee satisfaction, attracting a talented workforce. Minnesota’s supportive environment and comprehensive resources position it as an excellent choice for entrepreneurs focused on long-term stability and growth.
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12. **Iowa**Iowa emerges as an increasingly attractive state for small businesses, offering a compelling combination of a high quality of life and a remarkably low cost of living. These fundamental advantages make it an ideal location for entrepreneurs looking to start and expand their companies while maintaining economic efficiency. The state fosters an environment where businesses can thrive without excessive financial strain.
One of the most significant factors contributing to Iowa’s appeal, especially for manufacturing and energy-intensive industries, is its extremely low energy and utility costs. This cost-effectiveness provides a substantial competitive edge, directly impacting a company’s bottom line and allowing for greater reinvestment in operations or innovation. Such an advantage is rare and highly sought after by businesses.
Iowa also demonstrates its commitment to small business growth through local initiatives. Many Iowa cities offer property tax incentives specifically designed for small businesses, further reducing the financial burden on new and expanding ventures. Coupled with some of the nation’s lowest workers’ compensation costs, the state actively works to minimize overheads for entrepreneurs.
The state boasts strong survival rates for its small businesses, with an 80.85% one-year average, a 63.71% three-year average, and a 53.65% five-year average. These figures reflect a stable economic climate and effective support structures that help businesses succeed. Iowa’s blend of affordability, strategic cost savings, and supportive incentives creates a robust environment for sustained entrepreneurial success.
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13. **Montana**Montana presents an appealing landscape for small businesses, particularly noted for its favorable tax environment and growing economic resilience. The state is among the five in the U.S. that boast no state-level sales tax, a significant advantage that can simplify in-state sales operations and reduce the overall tax burden for many businesses. This policy helps businesses retain more of their revenue, fostering growth and profitability.
Beyond its sales tax benefits, Montana consistently ranks well for business survival rates. Small businesses in the state have a 79.60% chance of surviving their first year, a 62.79% rate at three years, and a 53.03% rate at five years. These strong survival statistics suggest a supportive ecosystem where new ventures are more likely to establish themselves and thrive over the long term, offering confidence to aspiring entrepreneurs.
The state’s inclusion in the Tax Foundation’s 2025 top 10 for tax competitiveness further reinforces its commitment to creating a business-friendly environment. This broad measure considers individual and corporate income, sales, property, and unemployment insurance taxes, indicating that Montana’s overall tax structure is designed to be highly competitive and attractive to businesses.
Montana’s combination of direct tax advantages, solid business survival rates, and a recognized competitive tax climate makes it an attractive destination. While specific details on grants or other direct financial support are less prominent in available data, the foundational benefits of low taxes and resilient business conditions position Montana as a promising state for entrepreneurs seeking a balanced and economically viable location for their ventures.
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14. **Florida**Florida continues to attract entrepreneurs with its dynamic economy and a strong commitment to fostering a business-friendly environment. Ranked among the Pacific Research Institute’s top states for small business regulation, Florida is recognized for minimizing bureaucratic hurdles and red tape, which significantly eases the operational burden on businesses and allows them to focus on innovation and growth.
Adding to its appeal, Florida is also recognized by the Tax Foundation among its 2025 top 10 states for overall tax competitiveness. This includes favorable policies across individual and corporate income, sales, property, and unemployment insurance taxes. The absence of a state personal income tax is a particularly powerful draw, enabling business owners and employees to retain more of their earnings, enhancing both profitability and quality of life.
While some survival rate data may place Florida on lists with lower rates compared to the top performers, the state’s regulatory and tax benefits are undeniable advantages for fostering new enterprises. Its robust economic growth, coupled with an influx of new residents and businesses, creates a vibrant market ripe with opportunity. Entrepreneurs can capitalize on this energetic environment, leveraging the state’s supportive policies to navigate and thrive.
Florida’s blend of streamlined regulations, competitive tax structure, and a burgeoning economy offers a compelling proposition for entrepreneurs. The state’s active efforts to reduce regulatory friction and maintain a low-tax environment contribute to a climate where businesses can grow more efficiently, making it an excellent choice for those seeking to maximize their operational and financial advantages.
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As we’ve journeyed through these top-tier states, it’s clear that the landscape for small business success is incredibly diverse, yet unified by a common thread: proactive state policies that prioritize entrepreneurship. From the transparent regulations of South Dakota to the innovative hubs of Massachusetts, and the tax-friendly climates of Florida, each state offers a unique set of advantages designed to help businesses thrive. The burgeoning spirit of American entrepreneurship finds its strongest allies in these supportive environments, proving that with the right location and the right resources, the path to sustained growth and innovation is not just a dream, but a tangible reality waiting to be seized. Selecting the ideal state is more than a logistical decision; it’s a strategic move that can dramatically shape your venture’s destiny, setting the stage for years of prosperity and impact.
