United States. Photo: KnowInsiders
United States. Photo: KnowInsiders

The study from enterprise cloud software platform Approve.com weighed factors like average annual wage, top corporate income tax rate, and average prices for utilities like electricity and internet.

Cheapest States for Running A Business in America






Most Expensive States for Running A Business in America


New Jersey


District of Columbia



What Are the Top Cheapest States for Running A Business In The United Stated?

1. Texas

Photo: EVA Air
Photo: EVA Air

Texas tops the list thanks to its tax policies and utilities costs. The state does tax businesses with annual revenues above $1,180,000 at a rate of 0.375%, but its corporate tax laws are considered to be among the friendliest to businesses in the country.

Perhaps that’s why Tesla co-founder and CEO Elon Musk announced last week that his company is moving its headquarters from Palo Alto, California, to Austin. Tesla will join Oracle, Hewlett Packard Enterprise, Charles Schwab and plenty of other companies that have moved their headquarters to Texas recently.

Of course, it’s not always only about the money. Some of those same companies have faced criticism for moving operations to the state, in the wake of multiple controversial political decisions by Texas lawmakers — including the state’s new restrictive voting laws, a law effectively banning abortions and bans on Covid vaccine and mask mandates.

2. Oklahoma

Photo: ABAY.vn
Photo: ABAY.vn

South Dakota's decent rate of new entrepreneurs and opportunity share of new entrepreneurs is good news for startups. Even better news: South Dakota takes the No. 2 spot for the best business tax climate.

Oklahoma scores well in startup activity, posting the third-highest rate of new entrepreneurs. However, there are some obstacles to starting a business in this Southern state.

Factors that don't bode well for people starting a business include the nation's fourth-worst business survival score and a potential employee education level that falls in the bottom 10 among states. Luckily, entrepreneurs can take solace knowing Oklahoma has the fourth-lowest cost of living in the country.

3. Kentucky

Photo: PlanetWare
Photo: PlanetWare

In terms of initial filing fees, Kentucky LLCs cost slightly less than Kentucky corporations—$40 vs $50. Plus, if your corporation decides to authorize more than 1000 shares, you’ll more than likely end up paying even more. Other filing requirements are similar. Both entities are required to submit annual reports ($15) and list officer/director or member/manager information.

During tax season, Kentucky LLCs and corporation are treated fairly equally. Although corporations are typically subject to double taxation, the rates for corporate and personal income taxes are low. Taxes for corporations top out at 6% and personal income tax is a flat rate of 5%. Note that Kentucky also imposes a Limited Liability Entity Tax, which applies to both corporations and LLCs. Thankfully, the minimum tax is only $175 and shouldn’t get higher—unless you’re generating a multi-million dollar revenue.

The Kentucky LLC is user-friendly and ideal for small to medium-sized businesses. They’re less expensive and provide flexible management. However, the Kentucky corporation is your best choice if you’re wanting to grow substantially and attract strong investors.

4. Nevada

Photo: State of Nevada
Photo: State of Nevada

New businesses are on the rise in Nevada, with more than 340 residents per 100,000 becoming an entrepreneur and helping to diversify a gaming-centric economy. The new businesses are a welcome addition for the state, which has struggled to rebound from the COVID-19 outbreak with an infection rate of 8,125 per 100,000 residents as of January 12, 2021, and new cases are up slightly in recent weeks.

New entrepreneurs face an uphill battle, with the five-year business survival rate at 47.5%. Another sticking point is the lack of affordable labor, with the median annual income sitting at $63,276.

Nevada’s tax climate is attractive to new business owners, with no corporate or individual income tax, though the state sales tax tops off at around 8.23%. Other good news is that consumer spending was up 3.7% in 2019, coming in at $43,166 in 2019.

Natural disasters are at a minimum in Nevada, with wildfires and the occasional earthquake the norm. And though the southern portion of the state is hot, the northern part enjoys four seasons.

5. Georgia

Photo: Vietship
Photo: Vietship

Experts throughout the country have recognized the promise of doing business in Georgia. Site Selection magazine named Georgia the number one state for business six years in a row. That ranking is based on announced projects, the tax climate, and site selection. In addition, Area Development magazine also listed Georgia in its “Top States for Business” list for five years in a row. Georgia earned top place because of its business-friendly laws, proactive economic development, and a strong support of business development. Most importantly, Georgia has been able to hold these rankings for an extended period of time.

Whether you are an entrepreneur looking to start your first business or are a larger company seeking to relocate to a business-friendly state, Georgia should be on your radar. By choosing to do business in Georgia, you are taking advantage of an environment that favors economic growth, entrepreneurs, and job creators.

What Are The Most Expensive States for Running A Business In The United States?

1. California

Photo: VEJA
Photo: VEJA

California workers have the nation’s ninth-highest average annual wage, at $47,290 per year. The state also easily has the country’s highest electricity prices, averaging 17.7 cents per kilowatt hour.

A February study by the UC Berkeley Haas School of Business found that customers of Pacific Gas and Electric Company (PG&E), California’s largest utility, pay nearly 80% more per kilowatt-hour than the national average, due to both wildfire-related costs and fixed costs associated with the state’s energy efficiency programs.

2. New Jersey

Photo: Dreamstime.com
Photo: Dreamstime.com

New Jersey possesses a number of good incentives to start a business — but also a major deterrent. On the plus side, the state scores well for productivity thanks to its $56,721 per capita GDP. Business opportunity seems to favor entrepreneurs in New Jersey more than in other states.

With living costs that rank among the most expensive in the nation, however, New Jersey comes in low on our list. But it's really businesses taxes that bring the Garden State down, ranking worst in that category. Property taxes in New Jersey are some of the highest in the U.S., and the state's 9% corporate income tax is notably high as well.

3. Vermont

Photo: Visit The USA
Photo: Visit The USA

Vermont is something of an outlier on this ranking: The Green Mountain State is one of the least populous in the U.S., which typically correlates with lower start-up costs. However, the Approve.com study noted that Vermont has the second-highest electricity costs in the country — and, perhaps more notably, the ninth-highest top corporate income tax rate, at 8.5%.

4. District of Columbia

Photo: United Egg Producers
Photo: United Egg Producers

If you are planning to establish a startup company District of Columbia then you can choose from different types of business entities including Limited Liability Companies, C and S Corporations, Nonprofit Corporations, Professional Corporations, General Partnerships, Limited Partnerships, Benefit Corporations, Statutory Trusts, and General or Limited Cooperative Associations. It is home to one of the strongest economies in the nation with over $3.36 billion in capital investment forecasted over the years. It is a thriving marketplace for invention and innovation and is the favored headquarters for giants like Lockheed Martin, General Dynamics, The Advisory Board, Blackboard, CoStar, Hilton Worldwide, Fannie Mae, and the World Bank.

What makes District of Columbia a great state of small businesses and start-ups? The most important reason is that DC is the capital and supports a positive business climate. There are plenty of reasons to register a new company in District of Columbia and there are several drivers or catalyst that will aid in the overall growth of a business entity. It is also important that you identify the type of business that you want to establish as each entity type will have its own set of advantages and disadvantages. Let’s take a look at some of the advantages of these two business entities:

5. Iowa

Photo: USA Love List
Photo: USA Love List

Iowa ties for the lowest rate of new entrepreneurs and has very few startups per established businesses.

There are some signs, however, that this state could be favorable to starting a business. The cost of living in Iowa is on the cheaper side, and potential employees' education level ranks in the top 10 among states. And, the opportunity share of new entrepreneurs in Iowa is among the highest in the nation.

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