As you look to start a small business, three of the main things you’re going to worry about are location, location, and location. And for good reason: the specific place and time in which you start up a small business, freelance operation, or independent contractor career can have a huge impact on the longevity and success of your venture.

There are benefits and drawbacks to starting a business in any area, from personal connections to larger societal contexts.

This guide will walk you through some of the best places to consider starting your business journey, along with what makes a state worth considering.

What makes a state good to start a business in?

It depends. It may well be your own state!

As a business owner, the first state you should consider for starting your business should be your current home state, or one you have roots in, especially if:

  • You live in a prime location for your industry
  • You have a strong network or support system where you live
  • Your business’ mobility is limited, at least for now

If you’re not in a prime location and you have the flexibility to pick and choose a location, there are many factors to consider.

It’s easy to imagine that the best state to own a business in is one that has the lowest taxes, or the biggest population, or any other simple quality like that. But it’s not that simple.

What factors matter?

Let’s consider some main factors that determined the outcomes of a 2019 Wallethub survey of the best and worst states to start a business and Seek Capital’s 2020 study of the best states to start a new business.

Per Wallethub, the main criteria for determining a good or bad state to start a business in are:1

  • Business environment
  • Access to resources
  • Business costs

And, according to Seek Capital, the main things a small business owner should consider when picking a location for their business are:2

  • Growth rate of working-age population (over 5 years)
  • New entrepreneur rate
  • Number of jobs created per startup
  • Investments (venture capital) per new company

Combining the two studies together, let’s take a look at…

The best states to start your business in

Besides your (great) state, what other states should you consider? Based on data from the studies linked above, the best options for a small business owner are:

Utah – Clocking in at #1 per Seek Capital and #2 per Wallethub, the beehive state’s motto, “Industry,” makes a lot of sense—especially when you consider that Utah boasts:

  • The highest projected growth rate (9.0%) in working-age population
  • The second-most access to resources of any state
  • $11,537,129 in venture capital invested per company

Texas – They say everything’s bigger in Texas, right? Wallethub’s #1 and Seek Capital’s #3 state, your own business can certainly benefit from factors like:

  • No state income tax
  • The #1 business environment rank
  • A 7.7% projected growth rate (second highest) in working-age population

Both models agree: these states boast incredible opportunity, regardless of industry, for a variety of reasons.

Beyond these two top-tier states to start your business in, there are some other excellent options to consider, as well:

Florida – Some of the biggest business benefits the sunshine state has to offer are:

  • The #4 business environment rank
  • The highest rate (0.46%) of new entrepreneurs

California – Some business benefits to make you echo California’s motto, Eureka, include:

  • The #3 rank in both business environment and access to resources and potential employees
  • $26,942,360 in venture capital invested per company

Colorado – In the centennial state, your business can benefit from:

  • A 7.2% growth rate of working-age population (tied for third highest).
  • The #6 business environment rank.

Beyond these best options, other honorable mentions include the great states of Oklahoma, Georgia, and North Dakota.

Although your state is likely a great option to start in for your business, regardless of general factors, there are some states that aren’t as ideal as others for the purposes of starting a business.

The worst states to start a business in

For a variety of reasons, some states are less ideal to start a business in. That doesn’t mean that businesses in these states can’t be viable! It just means that the conditions are sub-optimal.

If you’re picking a state to start in, it might be wise to steer clear of these. These are some of the worst state options to start a new business. Conversely, if you do have to begin your journey here, it’s important to be informed of your situation:

Rhode Island – Perhaps because of its size, the smallest state has:

  • The worst ranked business environment (#50)
  • The lowest rate (0.12%) of new entrepreneurs

New Jersey – Unfortunately, the garden state is home to:

  • The worst rank (#50) in business costs
  • A bottom-five growth rate (-1.4%) of working-age population

Connecticut – In soccer, you never want to be nutmegged, or have the ball pass through your legs. In business, the nutmeg state claims:

  • The third-worst rank (#48) in both business environment and costs
  • The third-lowest growth rate (-1.9%) of working-age population

Honorable (dishonorable?) mentions include the great states of New Hampshire, Maine, New York, and Alabama.

Get covered, get started: business insurance

No matter where you choose to start as a business owner, you’re going to need a couple of things to get off the ground, such as registration, licensing, and insurance.

At Thimble, we can help you with the latter: both in understanding insurance and securing the coverage you need. We offer general liability and professional liability policies to protect you from third-party claims of:

  • Bodily injury
  • Personal and advertising injury
  • Property damage
  • Negligence that results in a financial loss for your client

Our insurance is customizable, affordable, and simple to get. Answer a few questions, and sign up for the coverage you need by the hour, day, or month. All in just 60 seconds.

Wherever you choose to set up shop as an entrepreneur, understanding the relative benefits, the potential business cost to start, and the state’s corporate tax laws that apply to your business’ state is essential. Whether it makes more sense to be a hometown hero or relocate to a more suitable environment, the important thing is making that decision intentional and getting the most out of your ecosystem, wherever that is.

Once you’re set up, make sure you have all your bases covered: registration, licensing, networking, and insurance.