Best States & Worst States for Your Small Business

The 5 Best (& Worst) States for Your Small Business in 2018

Are you thinking about starting a business in 2018? Do you know the best state to start a small business in? The answer might surprise you!

We took a look at the Tax Foundation’s “2018 State Business Tax Climate Index” to help you decide where to start your business.

The 5 Best States to Start a Small Business In

These states are the best states to start a small business in, based on their corporate income tax, individual income tax, and sales tax.

5. Nevada

  • Highest Corporate Income Tax Rate: Nevada does not have corporate income tax.
  • Highest Individual Income Tax Rate: Nevada does not have individual income tax.
  • State-level Sales Tax Rate: 6.85%

Unfortunately, Nevada imposes a gross receipts tax. Nevada does, however, have a lot of available employees. When it’s time to grow your business, you’ll have a lot of talent to choose from.

4. Florida

  • Highest Corporate Income Tax Rate: 5% or a 3.3% alternative minimum tax (AMT)
  • Highest Individual Income Tax Rate: Florida does not have an individual income tax.
  • State-level Sales Tax Rate: 6.85%

Florida also has low unemployment insurance taxes, which can save you a lot of money.

3. Alaska

  • Highest Corporate Income Tax Rate: 4%
  • Highest Individual Income Tax Rate: Alaska does not have individual income tax.
  • State-level Sales Tax Rate: Alaska does not have a state-level sales tax, but the average local sales tax is only 1.76%.

Although Alaska has a high corporate income tax rate, they also have a high per capita gross domestic product (GDP).

Like Nevada, you will have a lot of talent to choose from when it’s time to hire employees and grow your business.

2. South Dakota

  • Highest Corporate Income Tax Rate: South Dakota does not have corporate income tax.
  • Highest Individual Income Tax Rate: South Dakota does not have individual income tax.
  • State-level Sales Tax Rate: 4.5%

South Dakota does not impose a gross receipts tax and offers a lot of opportunities for entrepreneurs looking to start a new business.

1.     Wyoming

  • Highest Corporate Income Tax Rate: Wyoming does not have corporate income tax.
  • Highest Individual Income Tax Rate: Wyoming does not have individual income tax.
  • State-level Sales Tax Rate: 4%

Wyoming does not have a gross receipts tax and has very few small businesses close their doors. Starting your small business in Wyoming will set you up for success.

The 5 Worst States to Start a Small Business In

Now that you know the best states to start your small business in, take a look at the worst states to start your small business in, so you can try to avoid them.

5. Minnesota

  • Highest Corporate Income Tax Rate: 8%
  • Highest Individual Income Tax Rate: 9.85%
  • State-level Sales Tax Rate: 6.875%

Minnesota has very few small businesses, so if you start your business there, you will be competing with larger companies and will have a hard time finding a small business mentor.

4. Vermont

  • Highest Corporate Income Tax Rate: 5%
  • Highest Individual Income Tax Rate: 8.95%
  • State-level Sales Tax Rate: 6%

Besides having high taxes, Vermont also does not have a lot of employees available. If you want to grow your business and hire some employees, you will have a hard time finding someone to hire.

2.     California

  • Highest Corporate Income Tax Rate: 84%
  • Highest Individual Income Tax Rate: 13.3%
  • State-level Sales Tax Rate: 6.25%

California has a high cost of living, on top of their high tax rates. It has the second-highest cost of living in the country, behind Hawaii.

3.     New York

  • Highest Corporate Income Tax Rate: 5%
  • Highest Individual Income Tax Rate: 8.82%
  • State-level Sales Tax Rate: 4%

New York’s high taxes and high cost of living are the biggest deterrents for small businesses.

1.     New Jersey

  • Highest Corporate Income Tax Rate: 9%
  • Highest Individual Income Tax Rate: 8.97%
  • State-level Sales Tax Rate: 6.875%

Although New Jersey’s cost of living is not as high as California, their business costs and tax rate make it the worst state to start a small business in.