Finally, quitting your job to hit that business idea is a fun and risky proposition. Living in the right environment gives you a leg up for success.
After all, the location of your business plays a big role in determining what kind of employees and customers you can attract, as well as costs like taxes and wages. To give you some help narrowing down your search, Lookka.com — a website that provides branding and design tools for startups — has released a new ranking of the best US states for entrepreneurs.
According to Luca, if you’re finally ready to quit your day job and start your own business, California is the best place to be. That’s despite a high cost of living, including one of the highest corporate tax rates in the country.
Here are the top five states on the list:
- New Jersey
California has long been a hotbed for new businesses, especially the tech industry — but the Golden State has recently seen high-profile businesses leave the state in search of lower costs and, in many cases, lower taxes. Tesla, Oracle and Hewlett Packard are among the big names moving their headquarters out of California starting in 2020.
But Luca points out that California still has a high percentage of small businesses and startups with fewer than five employees and is one of the best places for new businesses in the country. California also ranks first in annual wages for businesses that pay less than workers. “These entrepreneurs are, on average, able to pay themselves and their teams better,” a Loka spokesperson told CNBC Make It.
The level of In 2021, 82.56 percent of new businesses in California were operating after their first year, according to a study by the nonprofit Kauffman Foundation. The national average is 81.7%, and with all the challenges new businesses face, they often need all the help they can get to survive.
Just behind California is Texas, which boasts the fourth highest number of businesses with fewer than five employees. The Lone Star State offers the second-highest annual payroll for businesses with fewer than five employees and a lower-than-average cost of living — helped by the state’s lack of personal income tax.
Rhode Island sits at the bottom of the rankings, with the nation’s lowest number of new businesses and one of the worst for new businesses: over 77% in 2021. West Virginia ranked 49th, finishing second to last in median household income and new businesses started between 2020 and 2021.
To summarize the rankings, Loka says regions are judged on six criteria:
- Number of businesses with less than five employees
- Average family income
- Survival rates for new businesses
- Cost of living
- Annual salary for businesses with fewer than five employees
- Percentage of new businesses in each state from 2020 to 2021
The company relied on data from the US Census Bureau, the World Population Review 2022 and the Kauffman Foundation’s Entrepreneurship Indicators.
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