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The Best States for Small Businesses in 2022

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Every year, different publications conduct studies to determine the best states for small and midsize businesses (SMBs) based on a variety of factors. In 2022, two prominent ones were by Thumbtack and the Motley Fool. These studies provide valuable information for aspiring entrepreneurs and business owners looking for the best state to establish their operations. Here, we provide an overview of their findings.

Thumbtack’s Annual Small Business Friendliness Survey

Thumbtack’s survey primarily solicits the opinions of SMB owners about their respective states’ business-friendly regulations and support. Their rankings for 2022 are as follows:

  • Top States for SMB Friendliness: Maine, New Hampshire, South Carolina, Florida, Georgia, Kentucky, Maryland, Arkansas, Hawaii, Texas, and Washington.
  • Top Cities for SMB Friendliness: Jacksonville, Salt Lake City, Baltimore, Orlando, Dallas, Fort Lauderdale, Seattle, West Palm Beach, Atlanta, Houston, and New York.

On the other end of the spectrum, the states considered the least friendly for SMBs were Indiana, Kansas, Mississippi, Illinois, Colorado, Missouri, Wisconsin, Iowa, Delaware, Pennsylvania, Oregon, Minnesota, and Michigan.

The Motley Fool’s Analysis

The Motley Fool’s analysis took a more data-driven approach, taking into account factors like the tax climate, consumer spending, rate of new entrepreneurs, business survival rate, labor costs, and effects of climate change. Their top 10 states for SMBs in 2022 were:

  1. Montana: This state scored highly due to its excellent rate of new entrepreneurs, good business survival rate, relatively low labor costs, and negligible climate change effects.
  2. South Dakota: With a favorable tax climate, relatively low labor costs, strong business survival rates, and low climate change effects, this state stood out, despite a lower rate of new entrepreneurs.
  3. Florida: Known for its high rate of new entrepreneurs and good tax climate, Florida’s business survival rate is middling, and there are concerns regarding climate change effects.
  4. Texas: Texas is known for its high rate of new entrepreneurs, a good business survival rate, and low risk from climate disasters, but it suffers from high taxes and somewhat high labor costs.
  5. Idaho: Idaho had positive factors like low climate change risk and reasonable rates of consumer spending, new business formation, business survival, and labor costs. However, a high tax burden is one of its downsides.
  6. Utah: High consumer spending and low climate change risks made Utah a favorable option, but the rate of new entrepreneurs and labor costs were relatively low.
  7. Arizona: Arizona had minimal effects from climate change and a relatively high rate of business openings but struggled with low business survival rates and a high tax rate.
  8. Oregon: While Oregon has few new businesses, those that open tend to survive. High taxes were a significant drawback here.
  9. Wyoming: Wyoming excelled in the tax category, with no corporate or personal income tax, and a low sales tax. However, consumer spending and the business survival rate were notably low.
  10. Nevada: Nevada had a high rate of new businesses but a below-average survival rate. There is no corporate or individual income tax, but the sales tax is slightly high.

Both Thumbtack’s and The Motley Fool’s studies highlight Florida and Texas as favorable environments for setting up new businesses. These states exhibit beneficial conditions such as healthy rates of entrepreneurship, supportive tax climates, and robust business survival rates, making them appealing choices for aspiring business owners.

However, it’s important to remember that choosing the best location for your business isn’t a one-size-fits-all decision. The crucial factors can vary greatly depending on the nature of your venture. For instance, if you’re considering starting a sole proprietorship or consultancy, labor costs might not be as significant a consideration compared to other businesses.

So, when you’re in the process of launching a new business, carefully consider these studies and rankings, but also weigh the unique needs and priorities of your business. What matters most is finding a location that aligns well with your business model, target market, and long-term growth plans. The right environment will provide your enterprise with a solid foundation and foster its success in the years to come.

Written by
Elizabeth Path

Elizabeth Path is an esteemed journalist from Belgium, known for her insightful coverage of the startup scene. With over a decade's experience in the field, Elizabeth brings a European perspective to the fast-paced world of startups. Her work reflects her passion for innovation and her knack for identifying trends that shape the future of entrepreneurship. Elizabeth's credentials extend beyond journalism with an MBA. From her base in Brussels, Elizabeth keeps her finger on the pulse of startup activities both locally and globally.

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