From favorable tax climates and robust infrastructure to skilled workforces and strategic locations, the best states for business growth have crafted environments that entrepreneurs and established enterprises alike find irresistible. As businesses continue to pivot and adapt in a globalized world, understanding which U.S. states offer the most promising landscapes for expansion and success is crucial.
Recently, business consulting firm Venture Smarter analyzed data sourced from the Bureau of Labor Statistics (BLS), in order to identify the business growth rate in each state based on the number of establishments in December 2021 compared to December 2022. Their findings are quite revealing.
The 10 Best States in the U.S. for Business Growth
The states that lay along the so-called Sunbelt in the U.S. carried some of the top spots. For instance, the No. 1 spot on the list is Georgia, which experienced a business growth rate of 13.5%. In December 2022, there were 397,515 business establishments compared to 350,189 in December 2021. One of many conducive factors to Georgia’s business growth is that its corporate income tax is set at a reasonable rate of 5.75%. What’s more, Georgia also offering job tax credit to reduce corporate tax liability for eligible businesses.
The No. 2 best state for business growth is Virginia, which experienced an impressive business growth rate of 10.5%. In Virginia, the number of businesses increased from 305,345 in December 2021 to 337,394 one year later. The state offers many small business incentive programs, including the Virginia Enterprise Zone, which has many benefits, ranging from tax exemption for rehabilitated structures to tax credits for creating employment. Virginia has for some time benefitted from the so-called Dulles Technology Corridor, which is a business cluster composed of several defense and technology companies.
Arizona came in third place, boasting a business growth rate of 10.4%, just behind Virginia. From December 2021, when there were 191,756 business establishments, that figure rose above the 200k mark, reaching 211,683 in December 2022. Arizona, apparently, has the 14th lowest corporate income tax rate in America at 4.9%.
Montana and Vermont tied for fourth place, with both states witnessing a business growth rate of 10.2% year-over-year. Some factors that help explain the business growth rates in Montana includes the fact that starting an LLC in Montana requires an initial filing fee of just $35, which is significantly lower than in other states, such as California, which has an approximate cost of $500. Meanwhile, in Vermont, residents can take advantage of several business incentives, such as flexible profit distribution, which allows companies registered as LLCs to choose various ways to distribute profits.
In No. 5 best state for business growth is Michigan, which experienced a business growth rate of 9.8%. The state saw establishments increase from 275,636 in December 2021 to 302,624 in December 2022, an increase greater than 25,000 businesses in absolute terms. Michigan experienced a small business revenue increase of 24% between January 2020 and January 2022, significantly higher than the 6.9% average rate across the nation. The state has certainly come a long way since the depths of the Great Recession.
South Carolina came in at No. 6, with the Palmetto State overseeing the number of business establishments grow from 155,945 in December 2021 to 170,968 in December 2022, resulting in a business growth rate of 9.6%. South Carolina offers incentives for new businesses registered as a corporation, such as no local income tax, no state property tax, and no inventory tax. All three of these features make South Carolina particularly conducive to entrepreneurs.
The No. 7 best state for business growth is North Carolina, which experience a business growth rate of 9.2%, with the number of business establishments rising from 325,058 in December 2021 to 354,823 in December 2022. Not coincidentally, North Carolina has one of the country’s lowest corporate income tax rates at just 2.5%.
Colorado and Hawaii tied for eighth place. These states both experienced a business growth rate of 9.1% year-over-year from December 2021 to December 2022. Following closely behind those two is Idaho in ninth place. Idaho witnessed the number of business establishments rise from 82,118 in December 2021 to 89,454 in December 2022, equivalent to a growth rate of 8.9%. A range of business tax credits are available to Idaho entrepreneurs, including the small employer capital investment credit, which offers a tax credit of 3.75% to small businesses on new equipment purchased in the state. And lastly, there is No. 10 Utah. This state experienced a business growth rate of 8.4%: In December 2021, Utah had business establishments, before increasing by 8.4%, to 137,277 business establishments in December 2022. Utah has a low corporate income tax rate of 4.85%, as well as an LLC filing fee of $54 with an additional charge of $18 every year.
Bottom Line on the Best States for Business Growth
Meanwhile, on the opposite end of the spectrum, Washington state has the worst business growth rate at -16.8%. The state had 284,440 business establishments in December 2021, which decreased by 47,644 in December 2022. In fact, Washington was the only state to witness an outright decrease of establishments. A key thing to keep in mind, however, is that regardless of your state, it is essential to research the fees you will be expected to pay as they can vary significantly across states – not to mention, there are many incentives to take advantage of if you are eligible that can make the process of starting a business smoother and cheaper, said Venture Smarter.
Read the full article here
