Planning is so important when you are going to start a business. You need to set the foundation for success, which means doing your research and determining exactly how you are going to position your company for maximum growth and profitability. Probably one of the most important considerations is where you will locate your business. Some states are far more favorable to small businesses than others. If you have an option, you might as well go with a state that you know will support your efforts to become a successful entrepreneur.
Some studies have shown that somewhere around 1/5th, or 20% of businesses fail within the first year that they are open. Even worse, only around half or 50% make it past five years. Considering the odds that are stacked against success, it only makes sense to try and find the most fertile ground for your new venture. You want to do all in your power to ensure that you have a reasonable chance of getting your business off of the ground.
There are multiple lists out there that rank states on how conducive they are to business – so it is possible to get different states in the top rankings depending on where you look. Some rankings use only a few metrics, such as the corporate tax rate and the ease of getting funding, while others are much more comprehensive, taking into consideration the cost of living, labor costs, educated workforce and many others. All of that being said, there are definitely some states that make the top of every list, even if they are not always in the exact same order. Here are four states that tend to make the top of business-friendly lists year in and year out.
Starting a Business? Here are 4 of the Top States to Consider
Texas now has one of the biggest economies in the country, second only to the massive California economy. The biggest reason why Texas takes the top spot or near the top of every list is because of the potential for growth it offers businesses. Over the next five years the Texas economy is expected to grow substantially. It also offers an extremely friendly business environment, one that few other states are willing or capable of matching.
There is a lot to like about Texas for small businesses. It has a massive workforce and multiple top universities to draw from for employees. Its geographic location is fantastic for multiple reasons, not the least of which is how it is situation on the Gulf of Mexico with the gigantic ports near Houston – and all of the cheap fuel that is shipped in and processed in the area. All of the energy profits in the state allow it to skip state taxes – so you get to keep more of what you make with your business and so do your employees.
Utah is another state that keeps hitting number one or near number one on the lists of the best states to start a business. Many of the same benefits that you find in Texas you will find in Utah. The state has a great labor supply so you do not have to look far to find employees. It has a supportive regulatory environment as well, which means you do not have to jump through excessive hoops to get licenses and permits to do your business as you need to do it.
Utah has a great tax system, one favorable to business and simple enough for small businesses to understand and participate in. There are certainly taxes in Utah, but they are structured in such a way that they do not present an undue burden to businesses. In fact, you only have to pay a flat five percent tax on your personal and corporate taxes. Compared to many other state taxes on corporate earnings, Utah’s tax rate is quite friendly.
If the white sand beaches and mild climate don’t draw you in, the state’s favorable business climate may. Florida’s efforts to attract businesses include a tax structure that does away with state income taxes and a number of tax write-offs and financial incentives for specific types of businesses – so if you are starting a certain kind of business, such as a business in a rural area, you could get even better tax benefits.
Florida serves as a hub for many international firms because of its prime location and accessibility to the global economy. Warehousing and distribution are particularly prevalent in the state since it is so easy to get products to and from the Florida ports.
The state also prides itself on making regulations as business-friendly as possible. You can get your business up and running with less paperwork and less hassle than you might face in some of the more restrictive business environments in other states.
Colorado is another state that does a great job of balancing businesses with quality of life. People love living in Colorado because of its beauty and outdoor opportunities. However, there are other incentives that are more focused on the bottom line. These include a heavy focus on investment capital in local businesses and the existence of multiple programs designed to incentivize the establishment of small and medium-sized businesses in the state.
Colorado also makes taxes easier and less costly than many other states. They have one of the lowest state income tax rates in the country. While there are other states that don’t charge any income tax at all, Colorado strives to keep its rates so low that you and your employees don’t feel the pinch regardless.
Which State Should You Choose?
There are more reasons to choose a home for your business than taxes and regulations – although these should certainly be part of your consideration. Ultimately, you need to choose a location that makes the most sense for your business needs. Once you understand your goals and challenges, you can pick a home that positions your company for long-term success.