Best States to Start a Small Business in 2025

If the entrepreneur in you has ever wondered what the best US state to start a small business in is — oh, have I got the list for you!

Even though they’re all part of one country, the states have completely different socioeconomic environments. With this in mind, I’ve compared all the US states — plus the District of Columbia — across 16 different metrics related to their business costs, business climate, workforce, and economies.

The data was pulled from the most recent public record available on US government sites or official state websites.

You can read more about the methodology used for the rankings later — for now, here are the top 5 states to start a small business in 2025.

#1: Florida

Florida is the best state to start a business in the US. 

Not only does it levy no personal income taxes whatsoever, but it also ranks 16th among all US states for corporate taxes and 21st for property taxes — and lower taxes means higher profits.

The overall business climate in Florida is flourishing, with a net increase in establishments of 16,602 according to the most recent data. More importantly, the amount of Venture Capital in Florida per $1m GDP is a respectable $2,400.17. 

At the same time, Florida ranks 3rd among all states when it comes to loans to businesses with revenues of $1m or less, with reporting banks loaning $7.2b. That’s just behind California and Texas and ahead of New York!

The economy is also faring decently, with a GDP per capita of $73,784 and personal consumption per capita of $60,204. Couple this with its fairly high minimum wage of $13 and you’ve got a population that’s willing to spend — and capable of it.

The workforce is also sizable, with 80.7% of its population being 18 or older — the 7th highest ratio in all the states — and 34.92% of the working age population having at least a Bachelor’s, graduate, or professional degree. So the workforce is there, no matter what kind of business you want to start.

#2: Colorado

The number 2 spot goes to Colorado — a state that ranks in the low teens or lower in quite a few of the categories used to derive these rankings.

Although the tax situation isn’t stellar — with it ranking 18th for personal income tax and 36th for property tax — it’s the 10th best state with regards to corporate tax.

It’s also the 5th ranked state in the amount of venture capital investment per $1m GDP ($7,365.87) and 14th in bank loans to small businesses ($1.6b). The GDP per capita is rather high ($93,026), as is the personal consumption expenditure per capita ($64,781) — the 7th highest in the USA. 

The cost of living is on the higher end, ranking 35th among all the states, but it has a minimum wage of $14.81 and the 5th lowest rate of poverty (5.9%). 

Not only that, Colorado also boasts the 15th highest percentage of working age population (79.6%) and has the 3rd most well-educated workforce — 2nd if we don’t count the District of Columbia — with 46.43% having at least a Bachelor’s degree. 

#3: North Dakota

The bronze medal goes to North Dakota.

While it ranks 17th for individual income tax — which isn’t a horrible rating — it ranks 7th for corporate tax and 4th for property tax, generally making it one of the best states to start a business in for tax purposes.

While the most recent reports show a net increase in establishments of only 412, it’s worth noting that businesses in North Dakota have a higher than average chance of surviving for 5 years (52.91%).

Granted, the state is a bit more bootstrappy when it comes to funding — North Dakota ranks 35th by venture capital per $1m GDP ($1,271.58) and 40th with regards to the amount of bank loans to small businesses ($407.8m). 

Nevertheless, thanks to its high GDP per capita of $95,982 — the 7th highest if you exclude the District of Columbia — and its low cost of living, this is less of an issue than it would be in other states. The personal expenditure per capita is also fairly solid at $55,780, despite the state having a minimum wage of only $7.25. 

North Dakota also has the 6th lowest rate of poverty (6.2%) and the second lowest unemployment rate in all of the USA, behind only South Dakota. 

Considering the fact that 76.7% of the population is aged 18 or older, and that the workforce is well-educated — with 33.55% having at least a bachelor’s degree — North Dakota is an excellent environment for starting any kind of small business.

#4: Utah

The 4th spot goes to Utah.

Utah ranks 9th with regards to personal income tax — and keep in mind that the 6 states tied for 1st place don’t levy any personal income tax, so among the states that do, it’s the 3rd most lenient. It also ranks 17th regarding corporate tax and 12th for property tax, overall making it one of the less taxing states to live in — both for small businesses and their owners.

In terms of business growth, Utah saw an increase in the number of establishments of 2,677 — the 12th highest among all the states. It also ranks 9th in the amount of venture capital investment per $1m GDP with $4,681.08. 

That being said, the bank loan situation isn’t as impressive, with reporting banks having only loaned $753.8m. That’s not a horrible rate given Utah’s population, but it is worth noting.

The economy in Utah is also strong, with a GDP per capita of $86,506, despite the low personal consumption expenditure per capita of $51,027. This suggests the people there are sitting on a lot of savings. The other explanation would be that there is a large income inequality, but having the 3rd lowest poverty rate and the 9th lowest unemployment rate makes this less likely. 

What’s more, Utah ranks dead last in terms of the percentage of working-age population (73.4%), but it has one of the more highly-educated workforces, with 38.39% of it holding at least a Bachelor’s degree.

#5: North Carolina

Coming in at number 5 is North Carolina.

While this state does levy personal income taxes — ranking 21st among all the states in this category — it makes up for this with the 3rd best corporate tax policy. It also ranks 20th with regards to property tax, making it one of the business-friendly states.

In terms of establishment growth, North Carolina saw a net increase of 8,068. What’s even more impressive is that its 5-year business survival rate is 54.44%. 

The amount of Venture Capital per $1m GDP in North Carolina is $2,523,83, and reporting banks have loaned $2.9b to businesses with revenues of $1 million or less, meaning that getting your small business off the ground shouldn’t be too hard.

The state is ranked 31st in terms of GDP per capita ($75,876) and 33rd in personal consumption expenditure per capita ($51,081). North Carolina has the lowest minimum wage ($7.25), making it tied for 32nd place with 19 other states, but it also has relatively low unemployment, sharing the 21st spot with Arkansas, Florida, Iowa, and West Virginia. 

Regarding its workforce, 78.6% of its population constitutes people aged 18 or more, and 36.79% of this workforce boasts at least a Bachelor’s degree. 

Ranking the best and worst states to start a business in 2025

Curious to see how the other states fare?

Here’s the full list of all 50 US states plus the District of Columbia.

The weighted average rank shows the weighted arithmetic mean rank of each state based on the 16 ranking tables we used — you can learn more about it below.

Overall Rank	State/Region	Weighted Average Rank
1	Florida	18.93
2	Colorado	19.90
3	North Dakota	20.00
4	Utah	20.53
5	North Carolina	20.88
6	Washington	21.25
7	Arizona	21.40
8	California	21.75
9	Virginia	21.78
10	Missouri	22.27
11	New York	22.32
12	Connecticut	22.37
13	South Dakota	22.46
14	Texas	22.97
15	New Hampshire	23.04
16	Pennsylvania	23.16
17	Illinois	23.89
18	Nevada	24.10
19	Tennessee	24.13
20	Maryland	24.13
21	Michigan	24.14
22	Indiana	24.24
23	Massachusetts	24.36
24	Georgia	24.92
25	New Jersey	24.97
26	Delaware	25.00
27	Minnesota	25.16
28	Wyoming	25.69
29	Montana	25.98
30	Wisconsin	26.12
31	District of Columbia	26.22
32	Nebraska	26.41
33	Alabama	26.70
34	Iowa	27.05
35	Oklahoma	27.38
36	Maine	27.72
37	Hawaii	27.88
38	Vermont	27.92
39	Kansas	28.55
40	Rhode Island	28.57
41	Alaska	29.30
42	Ohio	29.47
43	South Carolina	29.48
44	West Virginia	29.87
45	Kentucky	29.94
46	Idaho	30.11
47	Oregon	31.21
48	Arkansas	31.58
49	New Mexico	33.19
50	Mississippi	33.39
51	Louisiana	34.08

FAQ

Before I go over the ranking methodology, here are the answers to some of the most burning questions regarding this topic!

What are the best states for startups?

The 2 best states for startups are Massachusetts and California.

Massachusetts actually has the most highly educated workforce and it also has the highest venture capital investment per $1m GDP. 

California has the second highest venture capital investment and — while a much smaller proportion of its workforce is as highly educated — it has the benefit of highly concentrated tech talent.

What is the best state to register a business in?

Business formation fees weren’t something I took into consideration when calculating the rankings, since these are usually one-time expenses and — in some cases — very small expenses.

For example, the business registration fee in Kentucky is just $40.

For reference, the most expensive state to register a business is Massachusetts, where this costs $500.

But even with this in mind, these fees don’t play a large role when it comes to the overall ranking for cost of doing business by state.

I should also note that some states have additional fees — sometimes recurring ones. For example, while it only costs $70 to register a business in California, it also has an annual $800 tax for every LLC doing business in that state. So, while the one-time registration cost is low, the additional fees make it much more expensive in the long run.

What is the best state to start a business for tax purposes?

When it comes to taxes, the only 2 states that levy neither personal income tax nor corporate tax are Wyoming and South Dakota — making them the de facto best states to start a business for tax purposes.

How I ranked the states (and why you should make your own rankings)

To create the ranking system for calculating the best US state to start a business in, I collected and examined the latest available data for the following 16 metrics provided in the table below. 

Each state, plus the District of Columbia, was ranked from 1 to 51 for each metric. 

The rankings were then calculated using the weighted arithmetic mean of all the rankings for each state.

Metrics Used for Ranking	The Weight of Each Metric
Individual tax	1.6
Corporate tax	1.6
Property tax	1.6
Growth in the number of businesses in the last year	1.6
5-year business survival rate	1.2
Amount of venture capital investments per $1m GDP	1.2
Amount of bank loans approved for businesses with a revenue of less than $1m	1.0
Expenditure per capita	1.4
GDP per capita	1.4
Cost of living	1.4
Minimum wage	1.2
Poverty rate	0.8
Unemployment rate	1
Percentage of working-age population	1
Working population over 25 with a bachelor’s degree or higher	1
Internet access	1

This was my input for the rankings. But your business idea will probably require different inputs, completely disregarding some of the metrics I used and weighing others differently.

For example, if you’re starting a tech company, you won’t care about the minimum wage at all, since you’ll be paying way more than this to attract the necessary talent. 

And, unlike a local B2C business, you won’t care about the poverty rate, since you’ll likely have a global customer base. You can also disregard the unemployment rate — if you’re hiring a global remote team. 

Moving on, property tax won’t affect you as much as it would businesses that require significant physical real estate, so you’ll want to weigh it less — let’s say 0.8. 

On the other hand, you’ll care more about the Internet access, venture capital investment, and rate of higher education, so their weights should go up. Let’s say 1.6 for Internet access and higher education, and 1.8 for venture capital investment.

With the input changed like this, the top 10 states are: 

1. North Dakota
2. Utah
3. Colorado
4. Florida
5. North Carolina
6. Texas
7. Virginia
8. Arizona
9. Washington
10. California

So, if you don’t find my rankings relevant for your specific situation, you can use the tables below to make your own.

Individual income, corporate, and property taxes

Taxes are a major factor when choosing where to start a business, as they significantly impact your overall earnings.

Individual income taxes refer to the taxes levied on the amount of personal income, regardless of the source. 

Corporate tax refers to the taxes corporations pay on their profits. If an LLC is considered a corporation for tax purposes, it also pays corporate taxes. 

Property tax refers to the tax levied on the value of owned property.

For each category, the lower the taxes, the higher the rank.

The information on individual, corporate, and priority tax rates was drawn from the 2025 State Tax Competitiveness Index.

State/Region	Individual Income Tax Rank	Corporate Tax Rank	Property Tax Rank
Alabama	34	14	14
Alaska	1	34	30
Arizona	8	13	13
Arkansas	39	15	19
California	49	41	23
Colorado	18	10	36
Connecticut	47	31	50
Delaware	42	50	1
District of Columbia	47	32	48
Florida	1	16	21
Georgia	31	12	34
Hawaii	46	25	24
Idaho	11	21	3
Illinois	13	42	41
Indiana	16	8	5
Iowa	19	23	32
Kansas	27	27	29
Kentucky	23	18	27
Louisiana	33	29	16
Maine	22	40	48
Maryland	45	37	35
Massachusetts	41	33	46
Michigan	14	9	28
Minnesota	44	43	26
Mississippi	32	6	38
Missouri	20	4	11
Montana	10	19	18
Nebraska	26	20	45
Nevada	7	39	7
New Hampshire	12	32	39
New Jersey	48	44	43
New Mexico	37	22	2
New York	50	28	47
North Carolina	21	3	20
North Dakota	17	7	4
Ohio	25	45	6
Oklahoma	28	5	15
Oregon	40	49	31
Pennsylvania	38	38	9
Rhode Island	30	35	37
South Carolina	24	11	42
South Dakota	1	1	10
Tennessee	1	48	33
Texas	1	46	40
Utah	9	17	12
Vermont	43	36	49
Virginia	36	24	22
Washington	15	47	25
West Virginia	29	26	17
Wisconsin	35	30	8
Wyoming	1	1	44

Growth in the number of businesses in the last year

I used the 2025 Small Business Profiles for the States, Territories, and Nation to find the growth in the number of businesses between the periods of March 2023 and March 2024 — the latest available info. This report was also my source for the amount of bank loans to small businesses.

While only the net change in establishments was used to rank the states, this table also shows the amount of total businesses, as well as how many establishments opened and closed during this period.

The higher the net change in businesses, the higher the rank.

Rank	State/Region	Number of small businesses	Businesses opened	Businesses closed	Net change
1	California	4.3 million	245,382	183,211	+62,171
2	Florida	3.5 million	111,346	97,744	+16,602
3	Washington	695.695	24,701	14,578	+10,123
4	North Carolina	1.1 million	38,748	30,680	+8,068
5	Texas	3.5 million	86,385	78,648	+7,737
6	Arizona	706,640	28,101	21,351	+6,750
7	Georgia	1.4 million	41,761	37,392	+4,369
8	Tennessee	741,196	24,569	20,866	+3,703
9	New Jersey	1.1 million	35,980	32,444	+3,536
10	Virginia	880,366	33,983	30,684	+3,299
11	South Carolina	530,402	20,541	17,427	+3,114
12	Alabama	265,610	16,141	13,115	+3,026
13	Utah	371,569	17,190	14,513	+2,677
14	Nevada	353,621	14,820	12,241	+2,579
15	New York	2.4 million	66,875	64,442	+2,433
16	Maryland	696,710	19,289	17,008	+2,281
17	Wisconsin	497,370	18,895	16,828	+2,067
18	Missouri	590,131	28,251	26,227	+2,024
19	Kentucky	393,860	13,733	11,786	+1,947
20	West Virginia	118,045	6,745	4,802	+1,943
21	Pennsylvania	1.2 million	34,248	32,610	+1,638
22	Oklahoma	395,520	13,472	11,896	+1,576
23	Michigan	983,079	25,756	24,412	+1,344
24	Kansas	273,419	11,181	9,865	+1,316
25	Colorado	730,887	32,161	30,972	+1,189
26	District of Columbia	82,666	6,348	5,177	+1,171
27	Connecticut	381,129	14,304	13,229	+1,075
28	Iowa	289,962	9,349	8,325	+1,024
29	Idaho	207,670	10,867	9,928	+939
30	Arkansas	292,728	10,446	9,538	+908
31	Delaware	111,346	4,580	3,753	+827
32	Maine	160,215	6,444	5,717	+727
33	New Hampshire	145,314	7,032	6,374	+658
34	South Dakota	96,770	3,849	3,196	+644
35	Vermont	81,949	3,552	3,020	+532
36	Rhode Island	116,149	5,385	4,854	+531
37	Indiana	591,671	16,993	16,463	+530
38	Wyoming	81,924	3,425	2,934	+491
39	Nebraska	193,495	7,158	6,668	+490
40	Montana	141,011	6,462	6,027	+435
41	North Dakota	78,219	3,199	2,787	+412
42	Illinois	1.4 million	35,143	34,914	+229
43	Alaska	77,814	2,159	2,199	-40
44	Mississippi	294,768	7,444	7,621	-177
45	Hawaii	144,375	4,609	4,813	-204
46	Oregon	417,747	18,784	19,152	-368
47	Louisiana	511,235	12,078	12,456	-378
48	New Mexico	172,113	6,441	6,960	-519
49	Ohio	1.1 million	26,579	27,585	-1006
50	Minnesota	560,428	16,029	21,448	-5419
51	Massachusetts	756,096	22,386	28,099	-5713

5-year business survival rate

Starting a business is tough, sure, but the real challenge is keeping it open.

I used the establishment age and survival data by state from the Bureau of Labor Statistics, Business Employment Dynamics page to calculate what these rates are.

For the rankings, I only looked at the 5-year survival rate between March 2019 and March 2024 — the most recent available data — but the table below also contains the average 1-year survival rate for the same period, i.e., how likely your business is to survive long enough to celebrate its 1st birthday.

The higher the 5-year survival rate, the higher the rank.

Rank	State/Region	5-Year Survival Rate (March 2019-2024)	Average 1-Year Survival Rate (2019-2024)
1	West Virginia	57.60%	81.27%
2	Connecticut	57.54%	79.01%
3	Alaska	56.02%	76.27%
4	Arizona	56.02%	76.27%
5	Pennsylvania	56.01%	80.29%
6	Ohio	55.05%	78.62%
7	South Dakota	54.96%	77.68%
8	Illinois	54.88%	79.40%
9	California	54.63%	83.39%
10	North Carolina	54.44%	79.02%
11	Minnesota	54.17%	78.03%
12	Michigan	53.90%	77.85%
13	Montana	53.88%	78.35%
14	Massachusetts	53.79%	79.47%
15	Indiana	53.36%	79.35%
16	Iowa	53.31%	79.77%
17	Maine	53.03%	78.16%
18	Texas	52.95%	79.15%
19	Alabama	52.91%	78.07%
20	North Dakota	52.91%	77.50%
21	Mississippi	52.83%	78.45%
22	Kentucky	52.63%	78.65%
23	Louisiana	52.27%	77.94%
24	Wisconsin	52.10%	79.18%
25	Tennessee	52.00%	79.45%
26	South Carolina	51.96%	78.45%
27	Vermont	51.35%	76.50%
28	Oregon	51.32%	78.45%
30	New Jersey	50.27%	79.06%
29	Nebraska	50.25%	78.19%
31	Oklahoma	50.12%	78.83%
32	Florida	50.12%	76.96%
34	Utah	49.99%	77.18%
33	Hawaii	49.97%	75.91%
36	New York	49.45%	78.02%
35	Arkansas	49.43%	77.25%
37	Georgia	49.22%	75.44%
38	New Hampshire	48.93%	75.61%
39	Colorado	48.84%	77.62%
40	Maryland	48.72%	76.22%
41	New Mexico	48.57%	76.34%
42	Rhode Island	48.22%	74.77%
43	Nevada	47.87%	76.15%
44	Virginia	47.74%	77.22%
45	Wyoming	47.50%	76.54%
46	Delaware	47.20%	77.48%
47	Idaho	47.13%	76.66%
48	Kansas	46.84%	75.28%
49	District of Columbia	44.70%	72.71%
50	Missouri	43.21%	74.41%
51	Washington	41.13%	78.50%

Amount of venture capital investments per $1m GDP

Venture capital investment per $1 million GDP shows the magnitude of venture capital investments adjusted for the size of a state’s economy. Venture capital is one of the main sources of funding for start-ups and tech companies, so the best states for start-ups are those that rank highly on this list.

The higher the investment, the higher the rank.

The data on venture capital investments was found on the Science and Engineering State Indicators webpage on venture capital disbursement.

Rank	State/Region	Amount of Venture Capital Investment per $1m GDP
1	Massachusetts	$21,735.94
2	California	$19,774.64
3	Delaware	$17,110.30
4	New York	$9,171.12
5	Colorado	$7,365.87
6	District of Columbia	$5,906.60
7	Nevada	$5,622.07
8	Maryland	$4,744.75
9	Utah	$4,691.08
10	Vermont	$4,336.00
11	Washington	$4,274.53
12	Wyoming	$3,997.68
13	Virginia	$3,685.43
14	Tennessee	$3,429.38
15	Missouri	$3,168.46
16	Texas	$2,904.97
17	New Hampshire	$2,841.80
18	Illinois	$2,788.69
19	New Jersey	$2,643.37
20	Minnesota	$2,629.58
21	Arizona	$2,555.00
22	North Carolina	$2,523.83
23	Pennsylvania	$2,409.38
24	Florida	$2,400.17
25	Connecticut	$2,205.38
26	Georgia	$2,090.51
27	Oregon	$1,979.52
28	Michigan	$1,720.57
29	Ohio	$1,636.73
30	Idaho	$1,478.15
31	Rhode Island	$1,453.92
32	Maine	$1,442.45
33	New Mexico	$1,355.59
34	Alabama	$1,317.77
35	North Dakota	$1,271.58
36	Oklahoma	$1,219.43
37	Hawaii	$1,113.38
38	Kansas	$1,107.02
39	Indiana	$1,033.29
40	Nebraska	$962.50
41	Montana	$960.32
42	Iowa	$822.34
43	Arkansas	$580.57
44	Louisiana	$549.00
45	Kentucky	$499.48
46	South Carolina	$453.39
47	Wisconsin	$451.46
48	South Dakota	$300.19
49	Mississippi	$273.91
50	Alaska	$208.21
51	West Virginia	$45.12

Amount of bank loans approved for businesses with a revenue of less than $1m

The amount of bank loans approved for businesses with a revenue of less than $1 million is one of the best indicators for determining the best states for small businesses in particular. It directly shows how much banks are willing to invest in small businesses in any given state, as well as how easy it is to get starting capital. 

The higher the loans, the higher the rank.

The data favors states with larger populations since it’s not adjusted in any way.

Rank	State/Region	Bank Loans to Businesses with Revenues of $1 Million or Less
1	California	$9.9 billion
2	Texas	$8.6 billion
3	Florida	$7.2 billion
4	New York	$5.0 billion
5	Illinois	$3.3 billion
6	North Carolina	$2.9 billion
7	Georgia	$2.8 billion
8	Pennsylvania	$2.8 billion
9	New Jersey	$2.7 billion
10	Tennessee	$2.0 billion
11	Michigan	$1.9 billion
12	Virginia	$1.9 billion
13	Missouri	$1.8 billion
14	Colorado	$1.6 billion
15	Washington	$1.6 billion
16	Massachusetts	$1.5 billion
17	Arizona	$1.4 billion
18	Indiana	$1.4 billion
19	Louisiana	$1.4 billion
20	Maryland	$1.4 billion
21	South Carolina	$1.4 billion
22	Alabama	$1.2 billion
23	Wisconsin	$1.2 billion
24	Minnesota	$1.1 billion
25	Oklahoma	$1.1 billion
26	Arkansas	$1.1 billion
27	Ohio	$2.2 billion
28	Kentucky	$954.5 million
29	Mississippi	$871.6 million
30	Connecticut	$885.2 million
31	Utah	$753.8 million
32	Oregon	$762.9 million
33	Iowa	$744.2 million
34	Kansas	$633.6 million
35	Nevada	$647.3 million
36	Nebraska	$517.9 million
37	Idaho	$490.3 million
38	Maine	$464.0 million
39	South Dakota	$433.8 million
40	North Dakota	$407.8 million
41	Montana	$397.7 million
42	Hawaii	$350.5 million
43	New Hampshire	$313.7 million
44	New Mexico	$310.1 million
45	West Virginia	$296.9 million
46	Delaware	$255.3 million
47	Wyoming	$237.1 million
48	Rhode Island	$228.4 million
49	District of Columbia	$153.3 million
50	Alaska	$142.4 million
51	Vermont	$124.9 million

Personal consumption expenditure per capita

Personal consumption expenditure refers to the average total amount of money each person spends annually.

The lower the expenditures, the higher the rank.

The latest data for personal expenditures by states was taken from the U.S. Department of Commerce, Bureau of Economic Analytics.

Rank	State/Region	Personal Consumption Expenditure per Capita
1	District of Columbia	$92,037
2	Massachusetts	$69,101
3	New Hampshire	$65,908
4	Connecticut	$65,128
5	California	$64,835
6	New Jersey	$63,814
7	Colorado	$63,781
8	New York	$63,775
9	Alaska	$62,900
10	Washington	$60,528
11	Maine	$60,250
12	Florida	$60,204
13	Vermont	$58,958
14	Illinois	$58,333
15	Hawaii	$58,115
16	Delaware	$57,672
17	Pennsylvania	$57,009
18	Wyoming	$56,941
19	Minnesota	$56,489
20	Maryland	$56,052
21	Rhode Island	$55,967
22	North Dakota	$55,780
23	Virginia	$55,776
24	Oregon	$55,412
25	Montana	$55,264
26	Nevada	$54,054
27	Arizona	$53,921
28	Wisconsin	$52,593
30	Texas	$52,299
29	Michigan	$52,210
31	Nebraska	$52,177
32	South Dakota	$52,133
34	Missouri	$52,097
33	North Carolina	$51,081
36	Utah	$51,027
35	Ohio	$50,583
37	Georgia	$50,282
38	Indiana	$49,527
39	Kansas	$49,348
40	Tennessee	$49,326
41	South Carolina	$49,252
42	Louisiana	$48,425
43	Iowa	$47,833
44	West Virginia	$47,589
45	Kentucky	$47,272
46	Idaho	$46,270
47	New Mexico	$46,076
48	Alabama	$44,529
49	Oklahoma	$44,398
50	Arkansas	$44,254
51	Mississippi	$42,131

GDP per capita

GDP per capita refers to a state’s total gross domestic product divided by the number of residents. It’s used to gauge the economic prosperity of a territory. 

The higher the GDP per capita, the higher the rank.

The data for GDP per capita by state was sourced from the U.S. Bureau of Economic Analysis.

Rank	State/Region	GDP per capita
1	District of Columbia	$263,220
2	New York	$117,332
3	Massachusetts	$110,561
4	Washington	$108,468
5	California	$104,916
6	Connecticut	$100,235
7	Delaware	$98,055
8	North Dakota	$95,982
9	Alaska	$95,147
10	Nebraska	$93,145
11	Colorado	$93,026
12	Illinois	$90,449
13	Wyoming	$90,335
14	New Jersey	$90,272
15	Maryland	$87,021
16	Texas	$86,987
17	Virginia	$86,747
18	Utah	$86,506
19	Minnesota	$86,371
20	New Hampshire	$85,518
21	Nevada	$80,880
22	South Dakota	$80,685
23	Hawaii	$80,325
24	Iowa	$79,631
25	Kansas	$79,513
26	Georgia	$78,754
27	Pennsylvania	$78,544
28	Ohio	$78,120
29	Oregon	$77,916
30	Indiana	$76,004
31	North Carolina	$75,876
32	Tennessee	$75,748
33	Wisconsin	$75,605
34	Rhode Island	$74,594
35	Florida	$73,784
36	Arizona	$73,203
37	Missouri	$72,108
38	Louisiana	$71,642
39	Michigan	$71,083
40	Vermont	$70,131
41	Maine	$69,803
42	Montana	$66,379
43	New Mexico	$66,229
44	Oklahoma	$64,719
45	Kentucky	$64,110
46	Idaho	$63,991
47	South Carolina	$63,711
48	Alabama	$61,846
49	West Virginia	$60,783
50	Arkansas	$60,276
51	Mississippi	$53,061

Cost of living

Cost of living refers to the cost of necessities and other basic expenses — health care, utilities, taxes, food, and housing. 

The higher the cost of living index, the higher the rank.

I used the data from the cost of living index by state for the first quarter of 2025 by the Missouri Economic Research and Information Center, and removed Puerto Rico.

Rank	State/Region
1	Oklahoma
2	Mississippi
3	Alabama
4	Missouri
5	West Virginia
6	Iowa
7	Kansas
8	Michigan
9	Tennessee
10	Arkansas
11	North Dakota
12	Indiana
13	Kentucky
14	Georgia
15	Texas
16	Nebraska
17	Louisiana
18	Minnesota
19	New Mexico
20	South Carolina
21	Illinois
22	Ohio
23	Montana
24	Wyoming
25	South Dakota
26	Pennsylvania
27	North Carolina
28	Nevada
29	Wisconsin
30	Utah
31	Virginia
32	Idaho
33	Florida
34	Delaware
35	Colorado
36	Rhode Island
37	New Hampshire
38	Washington
39	Arizona
40	Oregon
41	Maine
42	Connecticut
43	Vermont
44	New Jersey
45	Maryland
46	New York
47	Alaska
48	District of Columbia
49	California
50	Massachusetts
51	Hawaii

Minimum wage

The higher the minimum wage, the higher the score.

While it may seem counterintuitive to count high minimum wage as a positive factor for entrepreneurs — seeing as it directly increases their expenses — the minimum wage is a reflection of the economy within a state.

According to a Berkeley News research report on the effects of a minimum wage increase, high minimum wage contributes to reducing poverty rates, increasing purchasing power, increasing productivity at work, and reducing turnover, which in turn reduces the costs of training and hiring.

The data for minimum wage laws by state table was taken from the State Minimum Wage Laws page on the U.S. Department of Labor website.

Rank	State/Region	2025 Minimum Wage (Hourly)
1	District of Columbia	$17.95
2	Washington	$16.66
3	California	$16.50
3	New York	$16.50
5	Connecticut	$16.35
6	Oregon	$15.05
7	New Jersey	$15.49
8	Delaware	$15.00
8	Rhode Island	$15.00
8	Massachusetts	$15.00
8	Maryland	$15.00
8	Illinois	$15.00
13	Colorado	$14.81
14	Arizona	$14.70
15	Maine	$14.65
16	Vermont	$14.01
17	Hawaii	$14.00
18	Missouri	$13.75
19	Nebraska	$13.50
20	Florida	$13.00
20	Alaska	$13.00
22	Michigan	$12.48
23	Virginia	$12.41
24	Nevada	$12.00
24	New Mexico	$12.00
26	South Dakota	$11.50
27	Minnesota	$11.13
28	Arkansas	$11.00
29	Ohio	$10.70
30	Montana	$10.55
31	West Virginia	$8.75
32	South Carolina	$7.25
32	Texas	$7.25
32	Tennessee	$7.25
32	Utah	$7.25
32	Wisconsin	$7.25
32	Pennsylvania	$7.25
32	Alabama	$7.25
32	Oklahoma	$7.25
32	North Dakota	$7.25
32	North Carolina	$7.25
32	New Hampshire	$7.25
32	Mississippi	$7.25
32	Louisiana	$7.25
32	Kentucky	$7.25
32	Kansas	$7.25
32	Iowa	$7.25
32	Indiana	$7.25
32	Idaho	$7.25
32	Georgia	$5.15
32	Wyoming	$5.15

Poverty rate

Poverty tends to beget more poverty, with the aforementioned UC Berkeley study showing that children in low-income families are more likely to have bad health, do worse in school, continue to work low-income jobs in the future, and eventually turn to crime — all of which has a significant negative impact on a state’s economy. 

So, the lower the poverty rate, the higher the state ranks.

The data for the poverty rates by state was taken from the National Institute on Minority Health and Health Disparities.

Rank	State/Jurisdiction	Poverty Rate (Percent)
1	New Hampshire	4.4%
2	Minnesota	5.5%
3	Utah	5.7%
4	Vermont	5.7%
5	Colorado	5.9%
6	North Dakota	6.2%
7	Maryland	6.3%
8	Washington	6.4%
9	Maine	6.5%
10	Massachusetts	6.6%
11	Wisconsin	6.6%
12	Nebraska	6.7%
13	Alaska	6.8%
14	Connecticut	6.8%
15	Virginia	6.8%
16	Hawaii	6.9%
17	Iowa	6.9%
18	Idaho	7.0%
19	New Jersey	7.0%
20	Rhode Island	7.0%
21	Montana	7.1%
22	Wyoming	7.1%
23	Delaware	7.3%
24	Oregon	7.3%
25	South Dakota	7.4%
26	Kansas	7.7%
27	Pennsylvania	8.1%
28	Illinois	8.2%
29	California	8.4%
30	Indiana	8.4%
31	Missouri	8.4%
32	Michigan	8.8%
33	Arizona	8.9%
34	Florida	8.9%
35	Nevada	9.0%
36	Ohio	9.2%
37	North Carolina	9.4%
38	New York	9.8%
39	Georgia	9.9%
40	Tennessee	9.9%
41	South Carolina	10.1%
42	Texas	10.5%
43	District of Columbia	10.7%
44	Oklahoma	11.1%
45	Alabama	11.3%
46	Arkansas	11.5%
47	Kentucky	11.8%
48	West Virginia	11.9%
49	New Mexico	13.7%
50	Louisiana	14.2%
51	Mississippi	14.3%

Unemployment rate

Unemployment has a negative impact on state funds, reduces the purchasing power of the unemployed, and lowers the state’s GDP and economic output.

So, the lower the unemployment rate, the higher the score.

The rate of unemployed people by state was taken from the Bureau of Labor Statistics.

Rank	State/Region	June 2025 (Preliminary) Rate
1	South Dakota	1.8
2	North Dakota	2.5
3	Vermont	2.6
4	Hawaii	2.8
4	Montana	2.8
6	Nebraska	3.0
7	New Hampshire	3.1
7	Oklahoma	3.1
9	Alabama	3.2
9	Utah	3.2
9	Wisconsin	3.2
12	Maine	3.3
12	Maryland	3.3
12	Minnesota	3.3
12	Wyoming	3.3
16	Georgia	3.5
16	Tennessee	3.5
16	Virginia	3.5
19	Idaho	3.6
19	Indiana	3.6
21	Arkansas	3.7
21	Florida	3.7
21	Iowa	3.7
21	North Carolina	3.7
21	West Virginia	3.7
26	Connecticut	3.8
26	Kansas	3.8
28	Delaware	4.0
28	Mississippi	4.0
28	Missouri	4.0
28	New York	4.0
28	Pennsylvania	4.0
28	Texas	4.0
34	Arizona	4.1
34	South Carolina	4.1
36	New Mexico	4.2
37	Louisiana	4.5
37	Washington	4.5
39	Illinois	4.6
40	Alaska	4.7
40	Colorado	4.7
42	Massachusetts	4.8
42	Rhode Island	4.8
44	Kentucky	4.9
44	New Jersey	4.9
44	Ohio	4.9
44	Oregon	4.9
48	Michigan	5.3
49	California	5.4
49	Nevada	5.4
51	District of Columbia	5.9

Percentage of working-age population

A greater number of working-age individuals within a state increases its economic output potential, as well as the pool of people employers have to choose from.

This data was taken from the State Population by Characteristics report by the United States Census Bureau.

The higher the percentage of the working-age population, the higher the ranking.

Rank	State/Region	Percentage of Working-Age Population
1	Vermont	82.6%
2	Maine	82.4%
3	New Hampshire	82.3%
4	Rhode Island	81.6%
5	District of Columbia	81.5%
6	Massachusetts	81.0%
7	Florida	80.7%
8	Oregon	80.7%
9	West Virginia	80.3%
10	Connecticut	80.2%
11	New York	80.0%
12	Pennsylvania	79.9%
13	Delaware	79.7%
14	Hawaii	79.7%
15	Colorado	79.6%
16	Montana	79.5%
17	Michigan	79.2%
18	Washington	79.2%
19	Wisconsin	79.2%
20	Arizona	79.1%
21	New Mexico	79.0%
22	South Carolina	79.0%
23	Nevada	78.9%
24	Illinois	78.8%
25	California	78.7%
26	North Carolina	78.6%
27	Virginia	78.6%
28	New Jersey	78.5%
29	Ohio	78.3%
30	Wyoming	78.2%
31	Maryland	78.1%
32	Tennessee	78.1%
33	Alabama	78.0%
34	Missouri	78.0%
35	Kentucky	77.6%
36	Minnesota	77.6%
37	Iowa	77.5%
38	Arkansas	77.3%
39	Georgia	77.3%
40	Indiana	77.1%
41	Mississippi	77.1%
42	Louisiana	76.8%
43	Kansas	76.7%
44	North Dakota	76.7%
45	Idaho	76.6%
46	Alaska	76.4%
47	Oklahoma	76.4%
48	South Dakota	76.1%
49	Nebraska	75.9%
50	Texas	75.5%
51	Utah	73.4%

Working population over 25 with a bachelor’s degree or higher

More people with higher educational attainment means a greater pool of qualified employees for small businesses that need it. People with higher levels of education are also less likely to contribute to state unemployment rates.

Therefore, the higher the education rate, the higher the score.

This table was created manually using the data search from the US Census Bureau.

Rank	State/Region	Working age population estimate	Bachelor’s Degree	Graduate or professional degree	Total Degrees	Percentage of Total Degrees
1	District of Columbia	482,919	129,951	188,506	318,457	65.94
2	Massachusetts	4,975,152	1,261,847	1,115,362	2,377,209	47.78
3	Colorado	4,135,123	1,170,106	749,951	1,920,057	46.43
4	New Jersey	6,511,081	1,712,683	1,137,602	2,850,285	43.78
5	Maryland	4,297,439	964,064	915,936	1,880,000	43.75
6	Vermont	471,255	118,611	87,196	205,807	43.67
7	Connecticut	2,559,922	591,246	507,069	1,098,315	42.90
8	Virginia	6,037,339	1,446,760	1,114,602	2,561,362	42.43
9	New Hampshire	1,030,965	253,142	166,959	420,101	40.75
10	New York	13,885,155	3,136,170	2,506,737	5,642,907	40.64
11	Washington	5,511,197	1,340,967	888,371	2,229,338	40.45
12	Minnesota	3,941,575	1,022,673	553,553	1,576,226	39.99
13	Rhode Island	786,493	182,054	125,045	307,099	39.05
14	Utah	2,085,019	513,565	286,811	800,376	38.39
15	Illinois	8,710,996	1,983,481	1,350,893	3,334,374	38.28
16	Oregon	3,050,675	715,933	432,705	1,148,638	37.65
17	California	26,969,649	6,137,666	3,972,659	10,110,325	37.49
18	Hawaii	1,024,897	237,228	141,981	379,209	37.00
19	Maine	1,039,460	241,654	142,889	384,543	36.99
20	North Carolina	7,487,552	1,718,641	1,036,280	2,754,921	36.79
21	Delaware	731,427	153,565	113,137	266,702	36.46
22	Kansas	1,956,252	438,965	261,748	700,713	35.82
23	Georgia	7,448,119	1,585,916	1,051,879	2,637,795	35.42
24	Pennsylvania	9,171,006	1,921,489	1,319,854	3,241,343	35.34
25	Nebraska	1,307,246	298,782	162,498	461,280	35.29
26	Florida	16,421,870	3,550,180	2,183,714	5,733,894	34.92
27	Montana	795,845	180,347	95,188	275,535	34.62
28	Texas	20,029,447	4,324,866	2,533,540	6,858,406	34.24
29	Wisconsin	4,116,216	914,463	474,936	1,389,399	33.75
30	North Dakota	520,006	121,205	53,269	174,474	33.55
31	Arizona	5,150,254	1,051,136	674,980	1,726,116	33.52
32	South Dakota	615,517	141,083	63,884	204,967	33.30
33	Missouri	4,255,810	860,267	553,717	1,413,984	33.22
34	South Carolina	3,745,394	765,869	466,979	1,232,848	32.92
35	Michigan	7,007,856	1,395,186	894,676	2,289,862	32.68
36	Alaska	493,892	99,091	60,116	159,207	32.24
37	Idaho	1,305,704	281,799	137,888	419,687	32.14
38	Ohio	8,172,692	1,578,402	1,039,643	2,618,045	32.03
39	Tennessee	4,931,967	952,495	610,117	1,562,612	31.68
40	New Mexico	1,471,057	257,431	208,130	465,561	31.65
41	Wyoming	403,853	77,762	45,114	122,876	30.43
42	Iowa	2,166,425	425,714	230,786	656,500	30.30
43	Indiana	4,614,970	882,311	512,087	1,394,398	30.21
44	Alabama	3,498,967	616,025	394,815	1,010,840	28.89
45	Nevada	2,253,253	421,005	226,146	647,151	28.72
46	Oklahoma	2,684,421	498,843	271,967	770,810	28.71
47	Kentucky	3,107,275	506,856	358,409	865,265	27.85
48	Louisiana	3,102,893	525,591	311,927	837,518	26.99
49	Arkansas	2,078,254	345,836	198,184	544,020	26.18
50	Mississippi	1,980,147	307,215	198,457	505,672	25.54
51	West Virginia	1,259,219	182,741	119,338	302,079	23.99

Internet access

A slow Internet connection can hinder small businesses from accessing important data, the project management software that helps them run their business, or even the business itself in cases where it’s performed entirely online.

The data on Internet access across US states for 2024 was taken from the U.S. Federal Communications Commission report.

Specifically, we look at the ratio of fixed connections with at least 940 Mbps of downstream speed and 500 Mbps upstream speed compared to all fixed broadband locations in that state. 

The higher the ration, the higher the ranking.

Rank	State/Region	Ratio of Fixed Connection With at Least 940 Mbps
1	Nevada	0.92
2	District of Columbia	0.86
3	Rhode Island	0.79
4	Connecticut	0.77
5	Kentucky	0.73
6	Texas	0.71
7	North Dakota	0.68
8	Nebraska	0.67
9	New York	0.67
10	Minnesota	0.66
11	Tennessee	0.66
12	New Jersey	0.66
13	Kansas	0.65
14	Utah	0.65
15	Hawaii	0.63
16	Arkansas	0.62
17	Maryland	0.62
18	Virginia	0.59
19	Mississippi	0.59
20	Indiana	0.58
21	Iowa	0.57
22	Missouri	0.57
23	South Dakota	0.56
24	New Hampshire	0.55
25	Oklahoma	0.54
26	Georgia	0.54
27	Delaware	0.52
28	Ohio	0.52
29	South Carolina	0.51
30	Pennsylvania	0.5
31	Alabama	0.5
32	Florida	0.5
33	Vermont	0.49
34	North Carolina	0.49
35	Massachusetts	0.49
36	Oregon	0.47
37	Colorado	0.45
38	California	0.43
39	New Mexico	0.41
40	Wisconsin	0.41
41	Louisiana	0.4
42	Maine	0.39
43	Idaho	0.38
44	Washington	0.37
45	Illinois	0.35
46	Arizona	0.32
47	Michigan	0.31
48	Wyoming	0.29
49	West Virginia	0.29
50	Montana	0.28
51	Alaska	0.04

Increase your company’s productivity regardless of the state

Location is not the most important factor that determines the success or failure of a business, especially now that remote work has become a viable option for many businesses.

Sure, business costs directly affect the amount of profits a business with the same revenue would have in different states — that’s why I weighed taxes so heavily in my calculations. In that sense, choosing a state with lower taxes is great for maintaining a high revenue-to-profit ratio.

But you can get your profits even higher — in any state — by increasing your productivity!

And the best way to increase productivity is to use the CAKE.com Bundle.

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So don’t just start a business in the most favorable state — use the most favorable productivity tools as well. 

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