Best and Worst States to Start a Small Business in 2024

Roberto Galan / Getty Images

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

With a record 5.5 million entrepreneurs launching new businesses in 2023, the landscape for small businesses in America is more vibrant than ever. As we look ahead to 2024, it’s crucial for potential business owners to understand the best and worst states to set up shop, based on recent comprehensive studies by SimplifyLLC and WalletHub.

Best States for Starting a Small Business

Texas stands out as the top state for entrepreneurs in 2024. With no corporate income taxes and a business growth rate of 23.7% last year, Texas is also benefiting from a significant influx of educated workers, with net migration of nearly 76,000 college-educated adults annually.

Florida and Wyoming follow closely. Florida boasts strong job creation and an influx of educated workers, while Wyoming, also without corporate income taxes, saw the highest business growth rate in the country at 39.2%. However, potential entrepreneurs should be wary of Wyoming’s high inflation rate and low consumer spending growth.

Other top states include Missouri and Delaware, where high rates of job creation and business growth provide fertile ground for new ventures.

Worst States for Starting a Small Business

Louisiana ranks as the worst state for entrepreneurs, with stagnant business growth and low consumer spending growth. The state also sees a net outflow of educated workers, which can stymie business innovation and growth.

Washington D.C., California, Mississippi, and New Hampshire round out the bottom five. These states suffer from various issues such as high corporate taxes, low business growth rates, and significant outflows of educated workers.

Key Metrics to Consider

• New Business Growth: States like Wyoming and Texas are leading with explosive new business growth rates, while states like Georgia and Mississippi are seeing declines, indicating less favorable conditions for startups.
• Job Creation: Strong job creation, seen in states like Delaware and Utah, often correlates with a robust business environment and is a positive indicator for potential business owners.
• Consumer Spending Growth: High consumer spending growth, indicative of economic vitality, is best in states like Alaska and Nebraska, whereas New Hampshire and other New England states lag behind.
• Corporate Taxes: States with no corporate income taxes, such as Wyoming and South Dakota, offer a financial advantage to new businesses compared to states with high taxes like Minnesota and Illinois.
• Inflation: Low regional inflation helps maintain a stable cost of living and business costs, with New England states generally faring better than places like Montana or Idaho.
• Educated Worker Mobility: A strong inflow of educated workers, seen in states like Florida and Texas, enhances a state’s talent pool, crucial for fostering innovation and business growth.

Breaking Down Statistics for Best States

1. Texas
   • Key Statistics:
     • Business Growth: 23.7%
     • Net Migration of Educated Workers: 76,000
     • Corporate Tax Rate: No corporate income tax
   • Why It’s Great: Texas leads the nation in business growth and attracts a significant number of educated workers, making it an ideal place for innovation and talent acquisition. The absence of corporate income tax further enhances its appeal for new businesses.
2. Florida
   • Key Statistics:
     • Job Creation: 12.7%
     • Net Migration of Educated Workers: 145,000
   • Why It’s Great: Florida boasts strong job creation and a large influx of educated workers, providing a robust environment for new businesses to grow. Its favorable business environment is complemented by a supportive community of professionals.
3. Wyoming
   • Key Statistics:
     • Business Growth: 39.2%
     • Corporate Tax Rate: No corporate income tax
     • Inflation: 19.8%
   • Why It’s Great: Wyoming’s explosive business growth and lack of corporate taxes make it an attractive option for entrepreneurs. Despite higher inflation, the state’s business-friendly environment outweighs this drawback.
4. Missouri
   • Key Statistics:
     • Business Growth: 29.1%
   • Why It’s Great: Missouri offers impressive business growth, providing ample opportunities for new enterprises to flourish. Its central location also offers logistical advantages for businesses targeting nationwide markets.
5. Delaware
   • Key Statistics:
     • Job Creation: 17.1%
     • Business Growth: 24.8%
   • Why It’s Great: Delaware’s strong job creation and business growth rates make it a fertile ground for new businesses. Additionally, its well-known corporate laws and business-friendly regulations add to its attractiveness.

Breaking Down Statistics for Worst States

1. Louisiana
   • Key Statistics:
     • Business Growth: -0.2%
     • Consumer Spending Growth: 0.9%
     • Net Migration of Educated Workers: -16,000
     • Inflation: 18.3%
   • Why to Avoid: Louisiana’s stagnant business growth, low consumer spending growth, and negative migration of educated workers present significant challenges for new businesses. The high regional inflation further exacerbates the state’s unfavorable business environment.
2. Washington, D.C.
   • Key Statistics:
     • Corporate Tax Rate: 8.25%
     • Consumer Spending Growth: 1.2%
   • Why to Avoid: The capital’s high corporate tax rate and low consumer spending growth make it a tough place for new businesses. Despite being a political hub, it offers little in terms of business growth and economic vitality.
3. California
   • Key Statistics:
     • Job Creation: 12.3%
     • Net Migration of Educated Workers: -149,000
     • Corporate Tax Rate: 8.84%
   • Why to Avoid: California’s high costs and significant outflow of educated workers present challenges for startups. While job creation is high, the state’s high taxes and cost of living can deter new businesses.
4. Mississippi
   • Key Statistics:
     • Business Contraction: -5.7%
     • Consumer Spending: -3.2%
   • Why to Avoid: Mississippi’s business contraction and declining consumer spending make it a challenging environment for new businesses. The economic conditions are not conducive to growth and sustainability for startups.
5. New Hampshire
   • Key Statistics:
     • Consumer Spending: -3.2%
     • Business Growth: -2.9%
   • Why to Avoid: New Hampshire faces low consumer spending growth and declining business activity. These factors, combined with regional economic challenges, make it less appealing for entrepreneurs.

Key Metrics by State

• New Business Growth: Wyoming (39.2%), Pennsylvania (33%), Georgia (-8%), Mississippi (-5.5%)
• Job Creation: Delaware (17.1%), Utah (14.7%), Hawaii (7.1%), Rhode Island (8.5%)
• Consumer Spending Growth: Alaska (5.7%), Nebraska (5%), New Hampshire (-3.2%)
• Corporate Taxes: States with no corporate income tax, Minnesota (9.8%), Illinois (9.5%)
• Inflation: Lowest in New England, nearly 20% in Montana, New Mexico, Idaho
• Educated Worker Mobility: Florida and Texas (net nearly 145,000 and 76,000 respectively), California (-149,000), New York (-121,000), Illinois (-54,000)

Conclusion

Selecting the right state for your business can be pivotal to your success. States like Texas, Florida, and Wyoming offer a conducive environment with strong growth potential and supportive business conditions. Conversely, states like Louisiana and California may pose significant challenges due to high costs and unfavorable economic conditions. As you plan your entrepreneurial journey in 2024, consider these insights to choose a location that aligns with your business goals and aspirations.

Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.

Share This Article: