BOISE, Idaho — According to a recent study, Idaho was ranked No. 3 on the list of 'Best and Worst U.S. States to Start a Small Business.'
Capitol on Tap, a credit card company that focuses on small businesses, conducted the research study to determine the best and worst states for small business start-ups.
Florida takes the lead in first place as the "best" state for small businesses, with Vermont trailing every other state, rounding out the study in last place - so essentially the "worst" state to start a small business.
Top 10 Best and Worst U.S States to Start a Small Business:
1. Florida
Why: Florida was ranked the best state to start a small business due to a 5.5% corporate tax rate, which allows for more money to flow back into the business, and the third-largest amount of small business loans secured per total number of employees at $4,913. Florida provides the most jobs created by start-ups per 1,000 residents living in the state.
2. Texas
Why: Texas has a small-business-friendly tax framework. It is one of only five states that do not levy any business tax or personal income tax. In Texas, all businesses with total revenues of less than $1.08 million, or total tax liabilities of less than $1,000, owe no franchise tax. Additionally, small businesses in Texas secured the fifth-highest average loan per employee at $4,811.
3. Idaho
Why: Idaho has the eighth lowest labor cost when compared to all 50 states; a positive for a small business that may not have generated much cash flow to start. Idaho also has a 13.84% rate of new employer business actualization, meaning that for every 100 business applications, nearly 14 become employers within the first two years. Idaho's start-ups are also responsible for creating 6.1 jobs per 1,000 residents.
4. Nevada
Why: The state performs well in areas such as start-up early survival rate, with new firms having an 83.2% chance of surviving past its first year. Nevada also doesn't have a corporate income tax, only levying a gross receipts tax, making the area a tax haven and drawing many businesses to use the state for their headquarters.
5. North Carolina
Why: North Carolina has a particularly low percentage of corporate tax at a rate of 2.5%. It also has the eighth highest percentage of firms with a chance of surviving after its first year at 82.7%.
6. Colorado
Why: Colorado performs well in factors such as entrepreneurial population. The state has the sixth highest percentage of adults becoming entrepreneurs every month at 0.42%. Colorado also has a particularly low corporate tax rate at 4.55%.
7. Washington
Why: Washington has the largest start-up 'early survival rate' with 89.2% of small businesses survive one year after founding. It also comes in at No. 12 for having the lowest number of business bankruptcy filings compared to all fifty states. Washington has the fourth highest rate of new employer business actualization. 13.83% became employers within the first two years.
8. Georgia
Why: Georgia has the third highest overall rate of new entrepreneurs at 0.47% per month, this puts it in the top 20% of states to start a small business - meaning the area is filled with like-minded people looking to succeed.
9. California and Montana tie
Why: California comes in as the ninth best state to start a small business as 50% of their workforce comes from small businesses. Overall, the Golden State scored 63.8 out of 100 when combining factors used to determine the ranking. It has the highest number of new business establishments started in one year, and the ninth highest percentage of firms surviving past their first year at 82.6%. However, California has the tenth highest labor costs with an average hourly wage of $24.04.
Why: Montana comes in joint ninth and had the tenth lowest number of bankruptcy filings in the year 2022. Only 37 businesses in this state filed for bankruptcy, while it also came 11th out of 50 states for percentage of all new businesses that make a first payroll within eight months.
10. Utah
Why: Utah has a steady performance, coming in sixth for the number of jobs created by start-ups at 6 per 1,000 people. The state also experiences a very low corporate tax rate of 4.85%, nearly three times less than the residents of New Jersey.
Capitol on Tap said the study took eight factors into consideration when ranking the states, all of which are listed below. However, according to Capitol, the key factors that hold the most weight when analyzing small business success rates were new firm survival rates, corporate tax rates, and the number of entrepreneurs per state to determine the viability.
Damian Brychcy, COO at Capital on Tap, said: "Entrepreneurship is driven by the desire for independence. This includes the freedom to pursue your passion, choose your workplace and working hours, and foster personal growth."
"While starting a business entails significant risks, including financial, reputational, and scalability risks, this research provides valuable insights when it comes to the business climate in different states to help new entrepreneurs in making informed decisions, and creating a favorable environment for their business."
8 Key Factors:
• Percentage of adults becoming entrepreneurs per month
• Jobs created by start-ups per 1,000 people
• Percentage of new firms surviving one year after founding
• Number of new employer business per 1,000 people
• New employers as a percent of all employers
• Top Marginal Corporate Tax Rate (%)
• Labor costs/Median Wage
• Average SBL Per Employee
Data was found on all eight factors for all 50 states in the US. Each of the factors were then ranked using a 10-point scale, with 10 being the best. The factors were combined and then weighted against the importance of the factor to starting a small business.
Watch more Local News:
See the latest news from around the Treasure Valley and the Gem State in our YouTube playlist:
