4 Best States to Start a New Business In


America is the land of entrepreneurship. The dream of quitting the 9-to-5 rat race and becoming your own boss is alive and well: There are an estimated 54 million independent workers out there today.

Regardless of their generation, many Americans are becoming entrepreneurs, freelancers, or small business owners. Baby boomers are starting 50% of new business and 66% of Millennials would like to start their own business.

As with everything else business-related, the old maxim of "location, location, location!" also applies to starting a new business. Improve the odds of your business surviving its first years and thriving throughout all of its life by choosing one of the best states to start a new business in.

1. Utah

In 2016, the Beehive State topped Forbes' annual ranking of the best states for business across 40 business metrics. And it has done so for the sixth time in the last seven years of this survey. With 93.5 startup businesses per 1,000 business firm population, Utah has the third-highest density of startup businesses.

One of the top reasons that Utah is so friendly to business is its track record of showing entrepreneurs the money. In 2015, business owners in Utah held the most Small Business Administration (SBA) guaranteed loans per 100,000 people in the nation, with an average SBA loan size of $278,754. In 2014, Utah companies raised over $800 million in venture capital, more than twice the $316.2 million raised the year before. With a population of just three million, Utah is able to outrank major states, including New York, based on venture capital dollars raised per capita.

Key hotbeds for entrepreneurial activity in Utah are Provo and Ogden. The Provo metro area offers Camp 4, a collaboration between the public and private sector to help startup tech businesses with office space and other resources, and Brigham Young University's Innovation Academy, a small business incubator for university students. For its part, Odgen starts off Utah's well-known ski corridor that has been dubbed "Silicon Slopes."

2. Texas

Everything's bigger in the Lone Star State, including entrepreneurial spirit. While Texas came in fourth place on Forbes' 2016 list, the state makes it up by being home to four of the top 10 metro areas to start a business in America, according to CNBC. With its city of Austin taking the top spot in the nation, Texas also offers Houston, Dallas, McAllen, El Paso, and San Antonio as attractive alternatives for would-be business owners.

Austin has consistently drawn Internet companies, including the recruiting site Indeed.com, digital coupon site RetailMeNot.com, photo-entertainment site TheChive.com, and technology investments, such as Google Fiber in 2013.

Affordability is a major force enabling entrepreneurial growth. A combination of no state tax on personal and corporate income, a median home price below the national average, and an overall lower cost of living compared to other states in the nation allow Texas to provide a cost of doing business that is 10% below the national average. Many small business owners are taking note of the business-friendly Texas climate because the number of SBA loans per 100,000 grew by 41.90% during the 2012–2015 period.

3. Colorado

Since 1993, the nonprofit Kauffman Foundation has been providing educational resources for U.S. entrepreneurs, working to accelerate metro-area entrepreneurship hubs. Through its indexes of startup activity, main street entrepreneurship, and growth of entrepreneurship, in 2016 the Kauffman Foundation provided a positive outlook for potential and current business owners in the Centennial State:

  • 8.56% of adult residents list business owner as their main occupation (highest in the nation);
  • 70.28% of firms 10 years or younger that started small grew to employ 50 people or more by their tenth year of operation;
  • 87.2 startup businesses per 1,000 business firm population;
  • 47.93% of small businesses remained in operation throughout their first five years.

Colorado also fared well on Forbes' list, ranking #5 for the best states for business. Three key factors contributing to Colorado's high ranking are its young and highly-educated labor force (38% of adults have a college degree, a figure behind only Massachusetts), robust current economic climate, and expected second-fastest job growth in the nation over the next five years.

One key area in Colorado that is experiencing extraordinary growth is the Denver metro area, in part due to the legalization of marijuana in 2012. The legal marijuana industry has been estimated to be worth $1 billion per year since 2014 and created more than 18,000 full-time jobs in 2015.

4. North Carolina

Ranking second on Forbes' list (and in the top five overall for 11 straight years), the Tar Heel State generated $2.7 billion in foreign direct investment and 5,300 jobs in 2015. Key reasons for these numbers are that North Carolina's business costs are 11% below the national average (fourth lowest in the nation) and only 3% of the state's workforce is unionized.

In 2016, the Kauffman Foundation provided the following key details about North Carolina:

  • 49.28% of small businesses remained in operation throughout their first five years;
  • 75.5 startup businesses per 1,000 business firm population;
  • 0.33% of adults became entrepreneurs in a given month (fourth in the nation).

Key hotbeds for entrepreneurial activity in North Carolina are Charlotte and the tri-city region of Durham, Chapel Hill, and Raleigh (known as the Triangle). Over the past few years, attracted by fairly low property taxes, affordable home prices and living costs, and low tax rates (5% for corporate tax and 5.75% for personal income tax), many Americans have been moving into these two areas and looking to establish businesses of their own.

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Guest's picture
Jennifer Embry

I would like to start a good child care/early childhood development here in town. We have several child cares but I would not send my dog to them

Damian Davila's picture

Hi Jennifer, what's the town that you're referring to? Best of luck in your business endeavours!