The 10 Best States to Launch a Startup

Businesswoman walking in the city.

The best place to start a startup is typically where you are located. However, if you’re like many American entrepreneurs — you’re looking for a state that offers business incentives, a strong workforce, and tax benefits. It’s no secret that some states offer far more incentives to entrepreneurs that launch their company in their state than others. We are here to help you determine the state that best suits your startup’s needs with this guide to the 10 best states to launch a startup in the United States.

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Top States for Startups

We determined our top states to launch a startup in the United States by considering the following criteria. We evaluated each state based on their tax rates and levies, recent business and population growth, startup resources, and strength of the workforce to find the most business-friendly states in America.

1. Florida

Florida is consistently one of the most business friendly states due to their low corporate tax rate of only 4.5%, no personal income tax or sales tax levied, and a myriad of tax incentives for business owners. The state boasts a diverse range of startup sectors, including tech, life sciences, and renewable energy. Additionally, Florida’s location and infrastructure provide companies with optimal positioning for importing and exporting goods in the US and abroad.

Reasons to start a startup in Florida:

  • Low business and personal taxes
  • Fast-growing population
  • Business-friendly government incentives

2. Nevada

The biggest appeal of starting a business in Nevada is its tax structure. The state doesn’t levy personal income tax, franchise tax, or corporate income tax, and corporate shares are not taxed. Not to mention, the state prioritizes privacy and has low regulations for new businesses. They do, however, levy a gross receipts tax. Startups in Nevada can reap the benefits of state incentives for hiring employees through the Silver State Works program as well as take advantage of the close proximity to west coast markets.

Reasons to start a startup in Nevada:

  • Low formation and annual fees
  • Business-friendly tax structure
  • State incentives for corporations

3. Utah

Utah has relatively low taxes for corporations at only 4.95%, as well as a growing population. Startups in the area are commonly in the tech or financial services sectors. While Utah levies all major taxes, their tax rates are low — maintaining their business-friendly status. Moreover, Utah is home to several impressive universities, both public and private, which informs a skilled workforce of college graduates in several cities around the state, such as Salt Lake City and Provo.

Reasons to start a startup in Utah:

  • Low corporate tax rates
  • Strong economic growth
  • Skilled labor force

4. Texas

Despite having a relatively high sales tax rate, Texas secures a spot on many lists of the best states to form a business in. This could be due to Texas boasting the second-highest economy in the country — worth $1.8 trillion as of 2019. Office rents and cost of living are low here as well with the fastest growing population in the country. Being notoriously business-friendly, Texas doesn’t levy a corporate or individual income tax. However, like Nevada, Texas levies a gross receipt tax.

Reasons to start a startup in Texas:

  • No corporate or individual income tax
  • Strong hiring pool
  • High population growth and strong state economy

5. Georgia

Georgia has been awarded the title of the number-one state in the US to do business by several publications for many years. The state prides itself on being “pro-business” by offering relatively low corporate low tax rates of 5.75% and is the home to 440 Fortune 500 companies. With Georgia’s prioritization of economic and pro-business policies, it is no surprise that many successful startups and companies from fintech to healthcare sectors call Georgia home.

Reasons to start a startup in Georgia:

  • Skilled workforce
  • Low tax rates
  • Access to government contracts

6. Wyoming

Wyoming was ranked number one for business tax-friendliness in 2021 by the Tax Foundation based on their business tax climate index. Additionally, the state offers lower than average business formation and annual fees as well as a low cost of living. However, the drawback of this state is that it is extremely rural, with its largest city Cheyenne having a population of only 60,000. However, this may not affect all startup companies — especially if they operate primarily online.

Reasons to start a startup in Wyoming:

  • No business income tax or personal income tax
  • Low startup and annual fees
  • Low cost of living

7. Delaware

Delaware has a long history of being business-friendly. Today, the state still boasts several large financial institutions, a strong and skilled workforce, and a litany of successful startups, including over 66% of the nation’s Fortune 500 companies. This is due to the state’s light taxation rates, Court of Chancery which offers a more favorable legal process for corporations, as well as the option to operate a Delaware corporation in another state in order to bypass the state income tax. Moreover, Delaware’s usury laws are especially attractive to financial institutions as it allows them to charge a higher interest rate on loans.

Reasons to start a startup in Delaware:

  • Low tax rates and tax flexibility
  • Favorable legal processes for corporations
  • Business-friendly usury laws

8. Montana

While Montana’s corporate income tax rate is only moderate at 6.75%, the state still offers several advantages to potential business owners. Not only does the state of Montana not levy a state sales tax, but the cities of Missoula and Bozeman also have some of the highest levels of entrepreneurship for startups and high-growth companies.

Reasons to start a startup in Montana:

  • No sales tax levied and low tax rates otherwise
  • High entrepreneurial growth rates
  • Low risk for natural disasters

9. South Dakota

South Dakota doesn’t boast a large percentage of new businesses started in the state; however, for businesses that do choose to form in this state, there are plenty of advantages. To name a few, South Dakota doesn’t levy a corporate or individual income tax making it one of the most business-friendly states. The state does levy a sales and use tax; however, it is relatively low at only 4.5%.

Reasons to start a startup in South Dakota:

  • No corporate or individual income tax
  • Affordable labor costs
  • Low sales tax rate

10. Tennessee

Considered the hub of the healthcare startup sector, Tennessee offers several advantages for startups in this industry (and others) to grow and maintain their businesses. Not to mention, this state boasts a strong hiring pool of college graduates and doesn’t levy a business income tax. While the cost of living in some of the more populated areas such as Nashville can be high, there are several advantages to forming a startup in the state that may offset it.

Reasons to start a startup in Tennessee:

  • No business income tax
  • Strong hiring pool
  • Diverse, growing industries