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10 Most and Least Expensive States to Start a Business

Many business owners are keeping a close eye on their expenses and trimming costs due to inflation and increasing interest rates. Despite the economic uncertainty, the Census Bureau has reported a record number of business formations in recent years, including 429,800 in February alone.

To be one of the few entrepreneurs that survive long term, it’s critical to factor in the cost of doing in each state before deciding where to operate a business.

Simplify LLC recently released a study on the most and least expensive states to start a business using the most recent data from Bureau of Labor Statistics, Small Business Administration, and Census Bureau.

Several metrics were analyzed including the cost of labor, corporate tax rates, available commercial real estate, commercial electric bills, and the health of the business environment in all 50 states and D.C.

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Least Expensive States to Start a Business

  1. Nevada
  2. Colorado
  3. Arkansas
  4. Montana
  5. North Carolina
  6. South Dakota
  7. Wyoming
  8. Idaho
  9. Arizona
  10. Kentucky

“The top of the list is heavy with Western states,” Simplify says, “which likely speaks to the fact that many states in the region don’t levy a corporate income tax and have relatively low fees for starting an LLC. The West is the only region where the average state’s score is in double digits.”

Most Expensive States to Start a Business

  1. Minnesota
  2. New York
  3. Louisiana
  4. Alabama
  5. Alaska
  6. Wisconsin
  7. West Virginia
  8. Nebraska
  9. Kansas
  10. Tennessee

The highest average corporate income tax rate in the U.S. is Minnesota (9.8 percent), followed by Illinois (9.5 percent).

So, what’s the best state to start a small business? Texas and Florida top that list, although in terms of cost they fall at No. 12 and No. 18, respectively.

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