Table of Contents
- Key Takeaways
- The Five Best States To Start a Business in 2024
- State-by-State Ranking: The Best States To Start a Business
- Conclusion
- Methodology
Millions of Americans are leaving their traditional jobs to pursue businesses that promise more happiness, fulfillment, and hopefully, greater income. However, building a successful business isn’t a walk in the park. In an era where the cost of living is soaring and wages are stagnant, the challenges are numerous. Even deciding which state to launch your business in, whether it’s forming an LLC or another business structure, can significantly impact your chances of success.
To determine the best states to start a business in 2024, Forbes Advisor analyzed 18 key metrics across five categories. We aimed to identify which states offer the most conducive environments for businesses to thrive. Our ranking considers factors like business costs, the business climate, the state of the economy, the available workforce, and financial accessibility in each state.
It’s essential to understand that these rankings serve as a guide rather than a definitive answer for every entrepreneur. When selecting a location, entrepreneurs should consider their specific business model and requirements since a state’s ranking can vary based on industry and personal circumstances. Additionally, these metrics provide a snapshot of the current situation and may change over time, emphasizing the importance of staying informed about ongoing economic and regulatory developments in your chosen state.
Why You Can Trust Forbes Advisor
Key Takeaways
The top pick for launching a business in 2024 is North Dakota. It boasts a robust business climate, low entry costs, and ample funding opportunities, making it an ideal spot for new ventures.
On the flip side, Vermont ranks at the bottom for starting a business. Factors like startup costs, the business climate, and potential obstacles for startups contribute to its less favorable status.
California leads the pack in business survival rates, boasting an impressive 81.5% survival rate, indicative of a thriving business environment. Conversely, Washington struggles, with the lowest survival rate at 59.2%.
When it comes to the cost of registering a business, Kentucky emerges as the most budget-friendly state, charging a mere $40. In contrast, Massachusetts demands the highest fee at $500, posing a significant initial expense for startups.
In terms of workforce quality, Massachusetts stands out for its educated workforce, with 46.65% holding a degree. Colorado and Vermont also excel in this regard. Additionally, Colorado boasts the largest proportion of the working-age population at 67.4%, closely followed by Massachusetts and California at 66.4%.
The Five Best States To Start a Business in 2024
North Dakota
North Dakota retains its top spot from 2023 and continues to shine as the prime choice for starting a business in 2024. Its business-friendly environment is evident, with a modest formation fee of just $135, making it easier for new businesses to get off the ground. This fee is particularly appealing for entrepreneurs mindful of keeping initial expenses in check. With a healthy business survival rate of 77%, North Dakota fosters a supportive and resilient atmosphere where businesses have a solid chance of success.
Adding to its allure is a cost of living index below the national average at 0.94 and a sizable working-age population, accounting for 64% of its residents. These factors, along with a perfect scaled score of 100, underscore North Dakota’s overall suitability for new businesses, blending economic viability with a robust labor market. Not only does the state offer financial incentives, but it also prioritizes workforce development, ensuring businesses have access to a skilled and capable workforce.
Indiana
Indiana secures the second spot in 2024 as a highly favorable state for starting a business. Its business-friendly environment shines with a modest formation fee of $100, which helps lower the barrier to entry for new companies. With a solid business survival rate of 77%, Indiana fosters a stable and nurturing atmosphere for business growth. Moreover, the average funding available for small businesses in the state is noteworthy, totaling $24,502, indicating ample financial support for entrepreneurs.
Beyond just numbers, Indiana’s economic appeal is evident. With a cost of living index of 0.91, well below the national average, it emerges as an economically enticing location for both business owners and their workforce. The demographic composition of the state further enhances its appeal, with 64% of its population falling within the working-age bracket, showcasing a robust labor pool. Taken together, these factors contribute to Indiana’s impressive scaled score of 98 out of 100, solidifying its status as an excellent choice for entrepreneurial endeavors
4. South Dakota
South Dakota presents a compelling case for entrepreneurs, combining several key attributes that help foster business growth and success. The state’s formation fee is set at $150, balancing affordability with access to a range of business services. A noteworthy aspect of South Dakota’s business environment is its survival rate of 74%, which points to a supportive atmosphere for maintaining and developing new businesses.
The financial support for small businesses in South Dakota is particularly strong, with an average of $32,477 available per business, indicating a healthy investment in business growth via grants and other programs. The state’s cost of living index is 0.92, less than the national average, which suggests economic advantages for both businesses and their employees. Additionally, 62% of South Dakota’s population is of working age, providing a reliable labor force. With a scaled score of 85 out of 100, South Dakota demonstrates a well-balanced mix of affordability, business support, and workforce readiness, making it a favorable location for new business ventures.
5. North Carolina
North Carolina presents a mix of favorable conditions for businesses. With a formation fee of $125, the state strikes a good balance between accessibility and quality service. Entrepreneurs benefit from a solid business survival rate of 77%, indicating a supportive and steady environment for startups to thrive.
In terms of financial support, North Carolina offers an average funding of $22,019 through grants and incentives, demonstrating its commitment to nurturing entrepreneurial endeavors. The cost of living index, standing at 0.96, closely mirrors the national average, ensuring affordability for both business owners and employees. Moreover, with 65% of its population in the working-age category, North Carolina boasts a sizable labor pool.
These combined advantages contribute to the state’s scaled score of 84 out of 100, making it a practical and promising location for new businesses to establish themselves and grow.
State-by-State Ranking: The Best States To Start a Business
Our detailed table offers entrepreneurs a thorough state-by-state breakdown, crucial for those weighing their options for business launch locations. This ranking delves into various factors, like population demographics, tax implications, small business growth rates, and funding availability. From income tax and corporate tax to property tax and formation fees, we cover it all. We also examine broader economic indicators such as GDP per capita and the cost of living index.
Each state’s placement in the ranking is the result of a careful analysis of these factors, showcasing its distinct business landscape and its promise for entrepreneurial endeavors.
Conclusion
Choosing the right location is crucial when you’re starting a business. Each state comes with its own set of challenges and opportunities, influenced by its economic conditions, regulations, and the support available for businesses. Our in-depth analysis of the best states to start a business in 2024 offers valuable insights into the factors that can make or break a venture.
If you’re considering forming a limited liability company (LLC), Forbes Advisor has a wealth of resources to help you navigate the process. Understanding the ins and outs of LLC formation is key, and our Best LLC Services guide offers detailed insights to help you pick the right service for your business requirements.
Furthermore, we’ve got you covered with practical steps for setting up an LLC in our guide on How To Start an LLC in 7 Steps. This resource breaks down the process into clear, actionable steps to make it easier for you.
For a broader perspective on starting a business from scratch, check out our guide on How To Start a Business. It delves into essential aspects like market research, business planning, and securing funding. Consider it your go-to resource for turning your business ideas into thriving ventures.
Methodology
To figure out which states are the best and worst for starting a business, the Forbes Advisor team looked at 18 different metrics spread across five categories: Business Costs, Business Climate, Financial Accessibility, Economy, and Workforce. We assigned a weight to each metric to give every state a score out of 100.
Business Costs: 30%
This metric covers income tax, corporate tax, and property tax rates as of January 1, 2022, sourced from The Tax Foundation. Formation fees for each state were obtained from Forbes Advisors’ research, while the minimum wage in each state comes from the Department of Labor. Additionally, the number of natural disasters in each state was sourced from the Federal Emergency Management Agency (FEMA) as of 2022.
- Income Tax (3 points)
- Corporate Tax (3 points)
- Property Tax (3 points)
- Formation Fee (9 points)
- Minimum Wage (9 points)
- Number of Natural Disasters (3 points)
Business Climate: 20%
This metric relies on data from the Small Business Administration (SBA) State Profiles to track the total net increase or decrease in businesses since 2020. Business survival rates are sourced from the Bureau of Labor Statistics. Additionally, we used data from the SBA to calculate the ratio of businesses to small business administration locations in each state, providing insights into the availability of SBA support for business owners in 2023.
Key factors include:
- Total Growth in Small Business Since 2020 (8 points)
- Business Survival Rate (8 points)
- Number of Businesses per Small Business Administration Location (4 points)
Financial Accessibility: 20%
In this assessment, we tapped into data from the Small Business Administration State Profiles to crunch the numbers on the total business funding available in 2021.
Key factor:
- Average Funding (20 points)
Economy: 15%
We dove into the Bureau of Economic Analysis data to uncover personal expenditures per capita in 2021. Additionally, we referenced Statista to gather details on the gross domestic product per capita and the cost of living index for each state.
Components considered:
- Per Capita Personal Expenditures (6 points)
- Gross Domestic Products per Capita (3 points)
- Cost of Living Index (6 points)
Workforce: 15%
We delved into the Bureau of Labor Statistics to uncover the unemployment rate in each state and the percentage of workers who’ve earned a degree. Then, leveraging data from the Census Bureau, we determined the number of individuals in each state falling within the working-age bracket (ages 15-64). To gauge educational accessibility, we tallied the number of universities per capita using information from the National Center for Education Statistics.
Key factors considered:
- Unemployment Rate (4.5 points)
- Percent of Population that is of Working Age (4.5 points)
- Percent of Degree-level Workers (3 points)
- Number of Universities and Colleges Per Capita (3 points)