Best States to Start a Business
US News and World Report recently combined the data from two studies that take different approaches to measuring the friendliness states in the US to entrepreneurs: the 2008 New State Economy Index, by the Kauffman Foundation and the Information Technology and Innovation Foundation, and the Small Business Survival Index 2008, by the Small Business and Entrepreneurship Council.
Here is an excerpt of their findings:
1. Washington. The Evergreen State tops the list by coming in second on the New State Economy Index and fifth on the Small Business Survival Index. Washington also has very low taxes, making the costs of growing a business quite low. It does not have its own income or capital-gains taxes, either personal or corporate.
2. Virginia. This state mixes the highly educated workforce and technological sophistication of blue states like Massachusetts with the low taxes and spending of red states like Texas. Virginia also lands in the top 10 of states with the lowest consumption taxes.
3. Colorado. It's probably not a coincidence that one of the fastest-growing states (the population is estimated to have grown 13 percent from 2000 to 2007) is also one of the best to start a business. What's attracting so many people to Colorado might be the third-most-educated workforce in the nation. That brainy workforce has pushed Colorado to fourth place in terms of the number of patents issued to companies or individuals per 1,000 workers. The state also finishes in the top half of all states in terms of the level of income, capital gains, consumption, and property taxes.
4. Texas. Globalization has made it possible for entrepreneurs to serve markets in not just their immediate community, region, or country but the whole world. Texas has the lowest workers' compensation costs of any state. The Lone Star State also lacks an income or capital-gains tax for individuals.
5. Nevada. Nevada has a reputation as a state where "anything goes." That is almost true when it comes to the state government's policies toward business. Nevada has no income or capital-gains tax for individuals or corporations, the 15th-lowest property taxes, and the second-lowest number of government employees.
6. Utah. While Utah has a reputation for being one of the most culturally conservative states, don't confuse that conservatism with a lack of dynamism or risk-taking. Utah has the third-fastest-growing firms in the country. It also ranks third in "job churning"--the number of new start-ups combined with business failures. It might seem strange to count failures as a good thing. But a large amount of job churning indicates that the state's economy is replacing old and inefficient businesses with new and more efficient ones.
7. Florida. Florida's economy has some fundamental advantages that are not going away simply because of a recession. Its low corporate and unemployment taxes and nonexistent individual taxes attract business people. Additionally, Florida has done a good job adjusting to new economic and technological trends: It ranks ninth in the nation in the export focus of its manufacturing sector and eighth in the number of Internet domain names created per firm.
