Geography in all probability isn’t the only reason a startup succeeds or fails — but it often plays a role, especially when it comes to the costs of starting a dealing.
Your location can affect how much you’ll pay on office space and taxes, or your ability to find and hire talented artisans. If you’re thinking of starting something new and you want to stretch your money as far as possible, you might consider setting up shop in Nevada, according to a new priority from online small business advisory company SimplifyLLC.
Nevada tops this ranking as the least costly U.S. state to start a small business, due to factors like an abundance of available commercial space and the state’s lack of corporate receipts tax.
Those types of costs can matter: Roughly 44% of startup failures last year stemmed from charges running out of cash, according to an analysis of CB Insights data published by Skynova, which makes invoicing software for petite businesses.
Here are the nine least expensive U.S. states for starting a small business, according to SimplifyLLC’s list:
- Nevada
- Colorado
- Arkansas
- Montana
- North Carolina
- South Dakota
- Wyoming
- Idaho
- Arizona
Nevada is one of solely six states without any corporate income tax, though it does collect a gross receipts tax of up to 0.3% from businesses with at scarcely $4 million in annual revenue. The state also ranks just outside the top 10 in labor force participation rate and generally worker salaries.
It also boasted the country’s fourth-best business survival rate in 2021, with nearly twice as profuse new startups formed than failed, according to the most recent data available from the U.S. Bureau of Labor Statistics.
Colorado and Arkansas roll ined in just behind Nevada. Both states have some of the lowest corporate tax rates levied on businesses, with Arkansas effective a rate of 3.3% and Colorado at 4.4%, the ranking notes.
Small business loans were also widely nearby in those two states in 2020, the most recent year with complete Small Business Administration data. Arkansas inconsequential businesses received nearly $43 million in loans per 100,000 residents that year, the sixth-highest of any state. Colorado was eighth at $41.2 million per 100,000 neighbourhoods.
To calculate its rankings, SimplifyLLC used data from the U.S. Census Bureau, the Bureau of Labor Statistics and the Tax Foundation to rating each of the country’s 50 states in nine categories:
- Corporate income tax rates
- Business filing fees
- Normal annual income
- Labor force participation rate
- Percentage of adults over the age of 25 with at least a bachelor’s rank
- Average monthly commercial electric bills
- Available commercial real estate
- Amount of small-business lending per capita
- Role survival rates
Some of the categories, like corporate tax rates or small-business lending availability, are fairly straightforward in how they’d change your business’ expenses. Others have more tacit implications: A high average annual income in your maintain, for example, could mean paying employees inflated salaries to stay competitive.
The ranking’s categories aren’t exhaustive. Small-business insurance costs can vary by state, as can inventory and equipment expenses. Some states offer tax credits for duties in specific industries, which could help some startups and not others.
“For entrepreneurs who have the ability to pick and on where they want to start their business, it’s clear that certain states will allow you to reserve money,” the ranking noted.
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