The US consistently ranks among the best countries in the world to conduct business. However, it’s a vast nation, made up of 50 states that can each seem like a different country. And rightly so—virtually every state operates within its own set of laws, which can make running a business in, say, Georgia a pretty different experience from setting up shop in Utah.
Some states offer a better business environment than others, which makes deciding your business’s home base (or market entry) an important consideration. This article highlights the most business-friendly states, and how they earned their titles.
10 most business-friendly states
Year to year, media outlets designate select states as the top states for business; these ratings tend to fluctuate over time. In order to come up with these rankings, analysts look at various factors—from labor costs to tax treatments—and, in many cases, weighing certain factors over others. These 10 states are among those most frequently cited as the best places to do business in America.
1. Colorado
- $50 startup cost
- 4.55% income tax rate for corporate entities
- No. 2 most-educated state
- 2.9% sales tax
- 691,230 small businesses (99.5% of Colorado businesses)
- 1.2 million small business employees
Colorado boasts one of the lowest setup costs for small businesses in the country—just $50 to set up an LLC or corporation. Some new businesses here can even engage in fields that are widely restricted elsewhere in the country, such as the cannabis industry.
Colorado businesses have a high survival rate, in part thanks to the state’s highly educated workforce (Colorado is the second-most-educated state in the country), which keeps it competitive, and a favorable tax climate (4.55% income tax rate for corporate entities).
If you’re operating a physical business of any kind, be it a retail store, warehouses, or offices, Colorado is also a great place to be because of its low energy costs and quality of life.
2. Delaware
- 8.7% corporate tax rate
- 0% sales tax
- $90 business filing fee
- $75 business license fee
- 313,650 new businesses in 2022
- 1.9 million businesses
- 68.2% of Fortune 500 companies
- 79% of all US initial public offerings in 2022
Delaware is widely considered to be one of the most business-friendly states in America due to its favorable corporate laws, quick business formations, and specialized courts for handling business disputes.
The state also offers favorable tax policies and an updated, well-maintained infrastructure. For these reasons, Delaware consistently ranks among the best states for small businesses in the finance and technology sectors. If you start a business in Delaware, there’s no sales tax or VAT on goods sold in the state.
Other advantages of setting up shop in Delaware include accessibility to metro areas like Washington, DC, Philadelphia, and New York City; low cost of living; and highly skilled and educated workforce. In fact, Delaware is ranked second among states for PhDs per capita and third for patents per capita.
3. Georgia
- 5.75% corporate tax rate
- 4% sales tax
- $100 filing fee
- 440 of Fortune 500 companies are here
- 1.2 million small businesses (99.6% of Georgia businesses)
- 1.7 million small business employees
Georgia has one of the fastest-growing state economies, with a rapidly expanding, highly skilled, and innovative workforce. This is due largely to the popularity of the Atlanta metropolitan area as a place to live and work.
Georgia offers a variety of incentives for businesses, including special tax credits and exemptions, and support programs for startups. Plus, it has had a steady and reasonable corporate tax rate of 5.75% since January 2019. In-state sales are the only factor determining your state income tax liability.
Georgia also has one of the lowest debt-per-capita levels in the nation. And as many as 440 Fortune 500 companies have offices here, offering plenty of networking and business opportunities.
4. Minnesota
- 9.8% corporate tax rate
- 6.875% sales tax
- $30–$50 filing fee
- 9% of businesses are in retail trade
- 20,569 jobs net employment gain in Q1 2023
Minnesta has a history of worker protections. Additionally, a high quality of life and overall resident happiness score makes it an attractive place for some of the country’s most educated and skilled workers. It also has a strong labor force participation rate among women.
Minnesota ranks No. 3 in terms of the number of Fortune 500 companies per capita, and No. 2 for economic opportunity. Medical-based businesses in particular stand to do well here, as it has the most medical device patents per capita in the country and represents the top health technology cluster in the world.
The state also boasts well-maintained infrastructure and a supportive business community, making Minnesota one of the most consistently high-ranked places in the US to live and work.
5. North Carolina
- 2.5% corporate tax rate
- $125 filing fee
- 4.75% sales tax
- 45% of workers (1.78 million jobs) are employed by small businesses
- 994,576 small businesses (99.6% of North Carolina businesses)
North Carolina is one of the fastest-growing economies in an already fast-growing region of the US, according to the US Census Bureau. This is due primarily to its pro-business policies, relatively low taxes (a 2.5% corporate tax rate), and overall favorable business climate.
North Carolina has a highly skilled workforce, making it an attractive location for small businesses in technology and manufacturing industries. The state also offers various incentives for businesses, like tax credits and startup support initiatives such as the Research Triangle Regional Partnership.
Plus, business opportunities abound here. North Carolina has a strong business presence across several key industries, including furniture, textiles, biotechnology, information technology, and finance.
6. Tennessee
- 6.5% corporate tax rate
- 7% sales tax
- 0% personal income tax
- 21,516 new entities in Q1 2023
- 199,309 renewed licenses in Q1 2023
- 3.4% unemployment
Tennessee’s two bustling metropolitan areas—Memphis and Nashville—and its dynamic, high-tech economy make the state a great place to start a new business, especially for professional services businesses like health offices and accounting firms. It also offers a variety of tax credits and exemptions—plus, access to capital investments and mentorship programs.
Plus, Tennessee residents don’t pay any income tax. Combined with a low cost of living, Tennessee is home to a qualified workforce.
7. Texas
- 0.375% corporate tax for retail or wholesale
- 6.25% sales tax
- $300 filing fee
- 8th largest economy in the world
- 3.1 million small businesses (99.8% of Texas businesses)
- 4.9 million small business employees
As the saying goes: Everything is bigger in Texas—including economic opportunity for small businesses. The Lone Star State’s favorable business climate is based largely on its low taxes, large and highly educated skilled workforce, pro-business laws, and favorable tax codes.
Small businesses in the technology, energy, health care, and logistics sectors do particularly well in Texas—though businesses of any type can take advantage of its tax credits, job creation incentives, and startup financing initiatives. Texas is also one of the few states that levies no income tax on corporate earnings.
8. Utah
- 4.85% corporate tax
- 6.1% sales tax
- $54 filing fee
- 313,590 small businesses (99.3% of Utah businesses)
- 2.4% unemployment rate
- 97.1 Hachman Index for economic diversity
Utah is considered one of the more business-friendly states in the West due to several important factors, including its low taxes (4.85% corporate income tax), fast-growing economy, highly skilled workforce, state-of-the-art technological infrastructure, and support for startups and small businesses.
Utah also has a strong venture capital community, which provides access to funding for small businesses in their startup phase. According to research, one out of every 61 Utah startups backed by venture capital reaches unicorn status, meaning a privately held startup is valued at over $1 billion. This is almost 70% above the national average.
9. Virginia
- 6% corporate tax
- 5.3% sales tax
- $100 filing fee
- 795,624 small businesses (99.5% of Virginia businesses)
- 1.6 million small business employees
They say Virginia is for lovers—but it’s also for entrepreneurs. The Commonwealth of Virginia’s widely recognized business friendliness is mainly based on its favorable business climate. Virginia’s corporate taxes are relatively low (6%), and its economic hub stretches from the Norfolk–Virginia Beach area to Richmond to Northern Virginia, near the major metropolitan area of Washington, DC.
The District and Hampton Roads are both often considered centers for government and military operations, lending Virginia businesses access to lucrative government contracts. Virginia’s workforce is considered one of the most highly educated in the country.
10. Washington
- 0% personal income tax
- 0% corporate tax
- Varying business and occupation (B&O) tax rates
- $180 filing fee
- 657,529 small businesses (99.5% of Washington businesses)
- 1.4 million small business employees
Washington is home to a dynamic venture capital community, making it one of the more accessible places in America for startups and small businesses to acquire third-party funding. The state also boasts a favorable tax climate; it levies no taxes on corporate income.
The Evergreen State also has a highly educated and skilled workforce. It’s top-ranked for STEM-friendliness (science, technology, engineering, and math), including a steady increase in degrees in the STEM education category.
What makes a state business friendly?
There are various factors—including laws, demographics, and infrastructure—that contribute to some states consistently ranking among the most business friendly. These include:
Taxation
Although all businesses in the US are subject to certain federal tax obligations, local tax treatment can vary greatly from state to state. Some state tax systems are friendlier to small business owners than others. Washington and Texas, for example, levy no corporate tax on income generated by corporations.
Labor laws
State laws on minimum wage, employee insurance requirements, and payroll taxes can substantially drive up labor costs. States like Louisiana and New Mexico have been recognized for their low labor costs.
Infrastructure
Businesses across the US rely on dependable local infrastructure like roads, rail lines, and business utilities. A well-designed or maintained transit system is crucial for on-time shipping, smooth logistics, and a continuous supply chain.
Additionally, up-to-date telecommunications infrastructure (with high-speed internet and low incidence of service interruptions) are critical for small businesses that operate primarily online so they can quickly—and consistently—respond to orders and customer inquiries. Washington and North Dakota rank high in areas of this category.
Education and skills of the local population
The education level of a state’s workforce is linked to business success. States with traditional colleges, as well as alternative occupational training programs and opportunities, tend to produce a more diverse and well-educated local workforce. This is a valuable resource to businesses because it helps ensure a skilled workforce and adequate labor supply to meet various business needs. Both Utah and Minnesota are known for their highly educated workforces.
Ease of business setup
Some states offer easier pathways to setting up a small business than others. Colorado and North Carolina, for example, offer low new business formation fees and quickly navigable online incorporation processes.
Cost of doing business
Besides startup costs, average ongoing business costs informs a state’s business friendliness. This often coincides with a state’s cost of living. Higher density, more urban states like California generally levy higher costs of doing business as a factor of their higher costs of living than more sparsely populated rural states like North Dakota, or states with smaller populations overall, like Delaware.
Most business-friendly states FAQ
What are the potential benefits for businesses that choose to relocate to or expand in a business-friendly state?
What are some of the key factors that make a state attractive to businesses?
- Low taxes
- A growing economy
- A highly educated and skilled workforce
- Access to capital
- Favorable business laws (regarding taxes and labor)
- Tax incentive programs
- Startup funding opportunities
