Exploring the best states for small businesses (+ why they’re better)

August 17, 2023
Talal Syed

Small businesses are the backbone of the U.S. economy. According to the SBA, small businesses account for 44% of the nation's economic activity and employ nearly half of the country's private-sector workforce. 

With so much riding on small businesses, it's no wonder that entrepreneurs are looking for the best states to launch and grow their ventures. 

This blog post explores the top states for small businesses, why they're better than others, and some tips for success. With this information, aspiring entrepreneurs can decide where to launch their businesses and have the best chance of success.

The best states for small businesses

When selecting a state for their small business, entrepreneurs should consider the cost of living, taxes, access to capital and resources, talent pool, and overall economic health. Some states are more favorable than others when launching and running a small business. 

For example, states like Colorado and Utah have lower taxes on businesses which can save owners money. Other states, like Massachusetts and California, have a larger talent pool, which makes it easier to find the right people to grow their businesses. 

Meanwhile, states like Texas and Florida have lower living costs and fewer regulations for businesses that can help small businesses save money. 

Below, we’ll cover some of the best and worst states for small businesses. But to kick things off, here’s an at-a-glance look at all the states on our list and how many businesses registered there from 2021 to 2022.

Business Registration Data

State Businesses registered in 2021
California 563,102
Texas 536,301
Florida 683,680
Indiana 93,786
Arizona 123,245
North Carolina 187,229
Colorado 120,830
Tennessee 101,631
Utah 68,579
Ohio 166,938
Georgia 349,426
Oklahoma 62,351
Rhode Island 12,341
New Hampshire 14,876
Hawaii 20,839


Texas is widely considered one of the best states for small business owners. It has no corporate or personal income tax, which can save businesses money on taxes. But the sales tax rate of 8.91 % is higher than in other states, which could impact the profitability of small businesses. 

The state boasts a large and diverse talent pool, with over 12.7 million employed workers. According to the SBA, Texas has many new entrepreneurs, ranking fourth in new business owners. 

The state also offers good access to capital resources like venture capital, where the startups attracted more than $10 billion, and angel investors and other resources like incubators and accelerators. In 2021, Texas was ranked as the fourth state-dominating venture capital in the United States. Additionally, Texas businesses benefit from its relatively pleasant spring and fall seasons and mild winters, with generally 231 sunny days.  

It also has good market access through an extensive highway system that connects major cities and ports. The state has high labor costs, but Texas can still be an attractive option for business owners with a skilled and versatile workforce available. 


Florida has a business-friendly climate for small businesses, with low % corporate taxes of 4.9% and a favorable tax structure. Basic business costs such as labor, energy, and insurance are also lower than the national average. 

The climate in Florida may be a major drawback for businesses. Florida experiences hurricanes and was severely affected by COVID-19. 40% of the businesses closed due to pandemic, and natural disasters account for $5 billion to $10 billion in economic loss in the state.

Accessibility in Florida is relatively good, with access to major interstate highways and 140 airports. The state has a well-educated workforce, with over 31.5% of the population having a college degree. Additionally, wages are slightly higher than the national average.


Indiana is a great state for small businesses due to its low flat tax of 3.4% and a tax policy encouraging small business growth. The cost of living in Indiana is 15% lower than the national average, making it one of the most affordable states in which to live. 

Indiana is also home to several major universities, providing a large and educated workforce for businesses to draw from. The climate in Indiana offers a broad range of temperatures and geographical diversity.


Still, the area can experience ice storms, floods which put 282,000 properties at risk, and a loss of $14 billion, tornados, and extreme heat waves. Indiana features an extensive network of roads, railways, and airports. Indiana has access to funding and resources to help small businesses succeed. 

The SBA reported that Indiana has the second-highest rate of small business loans granted in the nation, and it is home to more than 25 venture capital funds that support start-ups and small businesses. There is also a Small Business Development Center in Indianapolis to help entrepreneurs get the assistance they need to start or expand their businesses. 


The state of Arizona has had 71 natural disasters since 2000, that makes life challenging for small business owners. One of the disasters is the hot climate that sparks wildfires that costs $18.4 billion in loss throughout the state, damaging property and disrupting business operations.   

Despite this, Arizona remains a prime destination for small business owners as consumer spending is 4.1% higher than the U.S. average. The corporate tax rate in Arizona is 4.9%, and the tax burden is 8.37%. This may make it hard for small businesses to grow, and Arizona’s median annual income of $65,913 may make it expensive to afford labor.

Nevertheless, Arizona has a solid infrastructure and an interconnected transportation system, making it convenient for businesses to receive supplies quickly. It's also home to several ports and airports, plus a rich cultural heritage that allows businesses to tap into many potential customers.

North Carolina

North Carolina, affectionately known as the "Tar Heel State," is a flourishing site for small businesses, with a corporate tax rate of 2.5% and a personal income tax rate of 4.75%. The state also has an attractive incentive program for businesses, including tax credits and exemptions for small businesses.

Also, the Raleigh-Durham-Chapel Hill area, known as the Research Triangle, which houses many leading technology companies and biotech companies, has become a hub for start-up businesses in the state. It is close to three major research universities, Duke University, UNC-Chapel Hill, and NC State. This proximity only amplifies the area's ecosystem of entrepreneurs and innovative businesses. 

Climate-wise, North Carolina enjoys mild winters and hot summers but may experience tornadoes, hurricanes, heat waves, and floods. For instance, Hurricane Ian in 2022 cost a loss of $112.9 billion. This hurricane destroyed thousands of homes and businesses, leaving over 400,000 without power

The state's business environment is friendly, as SBTDC offers a FREE Startup Accelerator Program. Accessibility and infrastructure for transportation and communication are also well-developed.

North Carolina has an affordable labor pool, with an annual median of $41, 810 for all occupations combined. This ensures that small businesses can find the skilled employees they need at a competitive rate.


Colorado has an above-average business survival rate, with over three-quarters of businesses surviving after five years. The low corporate and individual income tax rate of 4.55% can be incredibly beneficial for small businesses. 

Colorado also offers a variety of business incentives and resources to encourage entrepreneurship. For example, to register for an LLC, you pay $50. The climate in Colorado is temperate and generally conducive to business. 

The state is well-connected in transportation, with numerous airports and efficient roadways. Small business loans are also easily accessible in Colorado, such as the SBA 7(a), SBA Express programs, and SBA 504. 

It offers a major incentive for new businesses with the Colorado Enterprise Zone Program, which provides up to $3,000 in tax credits for qualified businesses. The state's workforce consists of highly educated and experienced workers, with over 27.4% of adults aged 25 and over holding bachelor's degrees or higher.


Businesses in Tennessee pay a flat corporate income tax rate of 6.5 % and no personal income tax. There is a state-level sales tax of 7% and a low % unemployment rate of 3.5%.

Tennessee is also geographically situated in the middle of the country, making it an ideal spot for businesses that require quick delivery times and transportation of goods. 

The state has over six airports, barge services on five major rivers, and two of the nation's busiest cargo airports. The climate is humid subtropical, with mild winters and hot summers. Although flooding and severe storms are common in the state, it is generally favorable for businesses.

The workforce in Tennessee is highly skilled and well-educated, with 19.2%  of adults holding a bachelor's degree or higher. Tennessee has more than 73 colleges and universities, thus ensuring businesses have access to trained and skilled employees. According to the U.S. Census Bureau, the median household income was $58,516 in 2021


Utah's flat corporate income rate is 4.65%, and the personal income tax rate is 4.85%. The tax climate enables small businesses to keep more profits, allowing for growth and investment. The local and combined state tax is 7.19% and is quite low compared to other states.

Utah also has increased consumer spending. According to the U.S. Bureau of Labor Statistics, there was an increase of 9.1% from 2020 to 2021, with a consumer expenditure of $66,928 in 2021. The state has become more popular, raising the cost of living at a rate of 6.2%, with the average rent for one bedroom at $1,037.

The climate in Utah is mostly desert, dry, and semi-arid, with a few areas receiving more precipitation. While there are several skilled workers, finding labor in Utah is relatively expensive, with an annual average of $79,133.92.


Ohio boasts low taxes for businesses looking to keep their overhead costs low. There is no corporate income tax, only a franchise tax. Additionally, Ohio has a low sales tax rate of 5.75%, one of the lowest rates among competing states.

The climate in Ohio is perfect for any business that needs to adapt quickly and innovate. Businesses in Ohio have access to a range of funding sources from public and private organizations. The state has a strong infrastructure, with highways and freight facilities.

Low costs of housing, combined with the presence of major universities and a strong labor market, make Ohio an attractive option for businesses looking to access a qualified workforce. Many job training and apprenticeship programs are available for businesses to get the best talent.


Georgia is one of the top states with many approved loans for small businesses with an approval of 2.621 approvals and $1.79 billion. The state's cost of living is high, but the business tax climate favors small business owners. Georgia has one of the country's lowest state and local business taxes, at 7.4%.

The climate in Georgia is hot and humid in the summers, with brutal heat waves and mild during the winters. It is estimated that the prolonged heat wave could cost Texas about $9.5 billion in 2023 this is from a research conducted by Ray Perryman, an economist.

With a median annual salary of $65,030. The corporate tax rate is 5.75%, the personal income tax rate ranges from 1% to 5.75%, and the state sales tax is 4%. 

With major airports such as Hartsfield-Jackson International Airport in Atlanta, the busiest airport in the U.S., and easy access to the ports of Savannah and Brunswick, Georgia offers a convenient location for goods shipped across the U.S. and the world.


Entrepreneurs in Oklahoma can benefit from the state's low business costs and taxes and the wide range of resources available to those who want to start or expand a business, such as 40% lower energy costs compared to the national average. Business costs in Oklahoma are often lower than the national average due to low energy and real estate prices. 

The corporate tax is 4%, and the unemployment insurance tax rate is 0.3% to 9.2%. The state offers a variety of financing programs, such as seed funding and venture capital options, to help small businesses. 

Oklahoma's climate makes it an ideal place for business owners, but frequent tornadoes and extreme weather have occurred in recent years. The drought and heat wave cost a loss of $22.2 billion in 2022  and the 2021 winter storm and cold waves cost $25.6 billion. However, the state has a long tradition of rebuilding quickly after natural disasters.

The well-developed transportation infrastructure includes multiple trucking and freight options, airports, railroad lines, and ports. Labor force availability in Oklahoma is also high, with the state having a well-educated and highly skilled talent pool. 

The worst states for small businesses

Some states are not ideal for small businesses due to their high taxes, lack of access to resources and financing, or unfavorable climate. The worst states for small businesses in 2021 include New Hampshire, Rhode Island, and Hawaii.

New Hampshire

The corporate tax rate in New Hampshire is 7.5%, one of the highest in the U.S., and a 5% tax on dividends and interest income. This can make it difficult for small businesses to afford the taxes they need to remain in operation, especially those just starting. 

There is a relatively high cost of living in New Hampshire, with the average home price around $421K. The climate in New Hampshire can be a challenge for business owners, as well. New Hampshire is known to experience long winters with significant snowfall, making it difficult to get around and increasing costs for businesses that must keep their operations running. 

New Hampshire is not the most accessible state, either. Its many rural areas and few main highways make it difficult to get around the state.

Rhode Island

Rhode Island has a flat income tax rate that ranges from 3.75% to 5.99%, a corporate tax of 7%, and a local sales tax of 7% — higher than many other states. Health insurance is also expensive, and the cost of living is high. Small business owners in Rhode Island may also find it difficult to access capital, as banks tend to be more conservative in the state.

The climate of Rhode Island can also be a disadvantage for small business owners. Extreme weather and natural disasters, such as hurricanes, can be a risk to businesses that operate in the state.

The state has a relatively small and aging population, making it difficult for businesses to find the necessary talent. Additionally, the geographic location of Rhode Island can pose a challenge in terms of accessibility, as it is an island state with limited transportation options.


Hawaii is a beautiful state, and it's certainly an attractive place to start a business. However, for small businesses, Hawaii isn't quite as ideal. The state's business costs are relatively high compared to other states, including taxes, labor costs, and cost of living. Due to the substantial operating expenses, this makes it difficult for small businesses to get off the ground.

Hawaii's climate poses a problem for small businesses. While the mild weather may be ideal for tourists, unpredictable storms, tsunamis (which have caused $625 million in losses), earthquakes, and floods make planning and managing business operations difficult.

What are the top three states with the most small businesses?

California, Texas, and Florida are the top three states with the most small businesses. These states offer a variety of benefits to business owners in terms of resources, climate, and access to customers. As such, entrepreneurs who open small businesses in these states can take advantage of their many opportunities and resources.


California has the highest number of small businesses in the United States, with over 4.2 million small businesses operating there. It is also one of the best states for small businesses due to its diverse and innovative economy, favorable taxation, and resources for business owners.

It’s the leading state for the technology, entertainment, aerospace, and biotechnology industries. Small businesses in these industries can benefit from the state's infrastructure, talent pool, and access to venture capital. 

California also has a range of tax incentives to encourage small businesses, including the Small Business Stock Credit, which offers tax credits to businesses that invest in qualified stock. 

This state has many programs and organizations specifically designed to help small businesses succeed, such as the Small Business Development Center Network and the Governor's Office of Business and Economic Development.


Texas features numerous industries ideal for small businesses, such as agriculture, education, energy, health care, and technology. Many of these industries have seen growth in recent years that can benefit small business owners.

There are several incentives and programs specifically tailored for small business owners. They include tax incentives, grants, loans, and technical assistance. For example, the Texas Enterprise Fund provides grants for businesses that create jobs and stimulate the economy. The Texas Workforce Commission also offers a variety of training programs for small business owners in areas such as financial management, marketing, and human resources.


Florida is ideal for small businesses seeking to capitalize on warm weather, a large population base, and an attractive tax climate. The Sunshine State is home to leading profitable industries, including tourism, agriculture, and technology.

Florida offers several incentives to small business owners, making it an attractive option for entrepreneurs. The state is home to a bevy of tax advantages, personal income tax exemptions, corporate income tax credits, and research and development tax credits. 

Small business owners can leverage the Florida Small Business Development Center Network for assistance in areas such as technical assistance, counseling, and training.

Choosing the best state for your small business

No matter which state best fits your small business, tools are available to help entrepreneurs operate their businesses remotely and expand to different markets. A virtual mailbox is one such tool that can help small business owners establish a presence in multiple locations without physically being present.

A virtual mailbox is a service that provides virtual addresses, digital mail management, and forwarding. It allows users to send postal mail to a physical address and then have it scanned and sent to their digital mailbox

This can be a great way for small business owners to have a presence in multiple states, as they can access their email anywhere. They offer features such as mail forwarding, mail management, check depositing, and document storage that can help streamline business operations.

Create a successful business from anywhere with Stable

The best states for small businesses offer entrepreneurs a range of resources and opportunities to help them succeed. California, Texas, and Florida are all excellent options for businesses to explore, as each state offers unique tax incentives and programs tailored to small business owners. 

Virtual mailboxes from Stable allow small business owners to establish a presence in different states without physically being there. This allows entrepreneurs to grow their businesses and expand their customer base — no matter where they are.

Sign up for Stable today to start or expand your small business and build a successful business from anywhere.

Get 50% off your first year with Stable

Get a special discount on our virtual address + mailroom sent to your inbox
Oops! Something went wrong while submitting the form.
A virtual address + mailroom for businesses
Learn More

Get 50% off our Grow plan

Get a special discount on our virtual address + mailroom sent to your inbox
Thank you! We'll email you soon with the referral code.
Oops! Something went wrong while submitting the form.