What Are the Most and Least Business-Friendly States?

Starting a business can be a daunting task, and the success of your venture can depend on the state you choose to set up shop. The best states for paying small business taxes include Wyoming, South Dakota, and Alaska, while the worst states include New York, New Jersey and California. Business incubators are cost-effective programs that support the success of startups by providing office space, as well as professional services and advice. Your industry and product can determine how favorable a particular area is for your business; for example, a fishing rental company could be a successful business in Florida, while a music production company should consider starting in Nashville.

States with the fastest growing small businesses include Mississippi, Nebraska, Maine and Texas. These states were ranked based on their State Business Tax Climate Index score, a composite of five factors that measure individual income tax, sales tax, corporate income tax, property tax, and tax. When choosing where to open a business, consider also where you would like to live and prepare for retirement. The Thumbtack survey asked small business owners for their views on the sympathy of their states and communities.

The Motley Fool's analysis approached the question differently by looking at unemployment insurance (UI) (a payroll tax paid by businesses), property taxes, and sales tax rates. Companies with the fastest growth were slightly younger compared to the general business population, but a larger percentage had employees. Individual income tax rates can have an effect on sole proprietors, owners of limited liability companies (LLCs), partners in corporations, and owners of S corporations because they pay corporate income tax as part of their individual tax returns. This is designed to prevent attempts to avoid wealth taxes, but can have a negative effect on small business owners operating as sole proprietors, S corporations, or LLC's.

When considering where to open your business, think about what you need to be successful. If you want to move to a state that has a consistent warm climate, you could consider Florida, which is also one of the most tax-friendly states for businesses. Consider all factors when deciding where to start your business; location matters and can determine how easily you can get your business off the ground.