What are the Best US States for Entrepreneurs?

What do Austin and Miami have in common? Other than the sweltering heat, it’s the boom in their tech industries! As we hear of tech giants moving out of California to more favorable (and affordable) states, we can’t help but wonder: What are the best states for entrepreneurs?

While most American entrepreneurs consider a host of options for the success of their business, few consider their state as a business success factor. But the truth is, tax laws, cost of living, and median household income can all play a role in how your business fares in the long run.

To hone in on the best US states for entrepreneurs, we examined six factors:

  • Number of businesses with less than 5 employees
  • Median household income by state
  • Survival rate for businesses by state
  • Cost of living in each state
  • Annual payroll for businesses with less than 5 employees
  • Percentage of new business in each state from 2020-2021

After weighing these factors against all of the states, we’ve listed the top 10 best US states for entrepreneurs below. Drum roll please!

The 10 best US states for entrepreneurs

We’ve ranked each state in order of best to worst. Here are our key Findings:

1. California: California is consistently ranked as the best state for entrepreneurs. Though the cost of living in California is high, it has the highest number of businesses with fewer than 5 employees, highest annual payroll for employees, and the best survival rate for entrepreneurs. No wonder so many small businesses start off in California!

2. Texas: Texas comes in 2nd as the best state for entrepreneurs, due in part to ranking 4th in the number of businesses with fewer than 5 employees and 2nd in high annual payroll for employees. Texas also has no personal income tax, and a lower cost of living, making it appealing to many entrepreneurs.

3. New Jersey: New Jersey is ranked 3rd best state for entrepreneurs. Across the board, New Jersey has a high annual income, ranking 2nd behind California, and ranked 8th overall in businesses with less than 5 employees. Additionally, New Jersey has a high annual payroll for employees, coming in at 7th.

4. Illinois: Illinois is ranked as the 4th best state for entrepreneurs. Though Illinois has a relatively low rate of entrepreneurs, ranking only 36 out of 50, they also have a higher median household income, and ranks as the 5th state for businesses with fewer than 5 employees.

5. Georgia: Georgia is ranked 5th overall best state for entrepreneurs. Though the median household income in Georgia is less than average, Georgia has a low cost of living which is beneficial to small businesses and entrepreneurs. Georgia ranked 7th in businesses with fewer than 5 employees and ranked 8th in high annual payroll.

6. Massachusetts: Massachusetts is ranked as the 6th best state for entrepreneurs. Massachusetts has a high median household income, coming in at 3rd, but it also has a high survival rate for entrepreneurs and small businesses.

7. New York: New York is ranked as the 7th best state for entrepreneurs. Though New York has a high cost of living, they ranked 3rd in our category of businesses with less than 5 employees and ranked 3rd for high annual payroll for employees.

8. Florida: Florida is ranked 8th in our ranking for the best state for entrepreneurs. Florida came in 1st with the highest number of entrepreneurs in the United States. They also ranked 2nd in the high number of businesses with fewer than 5 employees category, but ranked 45 in survival rate.

9. Oklahoma: Oklahoma ranked as the 9th best state for entrepreneurs. Oklahoma ranked 3rd in the low cost of living category and fourth for the high rate of entrepreneurs category. Both of these factors make Oklahoma an obvious choice for many entrepreneurs.

10. Tennessee: Tennessee ranked 10th in our list of the best state for entrepreneurs. Tennessee has a low cost of living, ranking 6th in that category, and ranked 13th in survival rate for small businesses. It also has low business taxes and no personal income tax!

Best Us satates for entrepreneurs map

What business owners have to say

It’s clear that location can contribute immensely to whether a business survives or fails. We asked several small business owners in these top states about their experience, both good and bad, in starting up their small business:

1. Makeda Made Designs

Makeda Made Designs in CA started her business in 2021. Her advice for anybody wanting to start a small business is:

“Don’t be beholden to your convictions. You have to believe in yourself fiercely, but if data, feedback, and everything is telling you some part of your business needs to change, be open to that.”

2. Woodland Toy Company

Woodland Toy Company from Oklahoma has been in business since 2010 and notes that the hardest part of starting a small business is, “Unless you have a lot of capital, you are responsible for every aspect. You are the design team, creator, photographer, copywriter, accounting, and marketing departments. I have met so many people over the years that think, “I’m really good at this one thing, so I can run a business doing it.”

3. Murph’s Woodworks

Are you looking forward to the independence that being a small business owner provides? Murph’s Woodworks from Illinois has been around since 2017 and says the most rewarding part about being a small business owner is:

“is having total control over all aspects. I decide what things should look like, how much time, I can accept wild projects if I want, and I can turn down projects that really don’t interest me.”

Find a business you’re passionate about and ensure you’re in the right state for success!

4. Oglewood Avenue

Oglewood Avenue in TN opened up their brick-and-mortar store almost two years ago in October of 2020. Owner Jade Adams says, “The hardest part of being a business owner is all of the hats that have to be worn. It was also hard learning the ways of business when I majored in microbiology and had no business experience” and her advice is:

“My favorite quote is no risk, no reward. I put myself out there and put all my savings on the table to start Oglewood. I would say if you are passionate about something, put your all into it!”

5. Abi B. Made

Abi B. Made speaks for many creatives, “I love being able to lean into my loves (people, creativity, etc) unhindered.

“I also love all the relationships I’ve made with other small business owners and makers. I’ve also been able to support others in ways I’ve never had the resources for.”

Consider your state as you start to work towards entrepreneurship, and think of the legal and statistical advantages that moving or expanding your business can have. With so many options, the US is your oyster!

best states for entrepreneurs

Data collected from U.S. Census Bureau, American Community Survey (ACS) 2020, U.S. Census Bureau County Business Patterns (CBP) 2019, World Population Review 2022, Kauffman’s Rate of Entrepreneurs 2020, and Kauffman’s Startup Early Survival Rate 2020.

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