10 best cities for entrepreneurs

Launching a new business is becoming more popular than ever before, even in increasingly volatile economic times. Between 2021 and 2022, the number of small businesses in the U.S. grew from 32.5 million to 33.2 million^[1]. But is success influenced by where a new company is launched?

To find out, we looked at the 50 most-populated American cities to find out which areas are the most entrepreneur-friendly, whether you’re a solopreneur starting a side hustle or a start-up founder hoping to become the next big thing. Our research focused on four data points in two areas: small business funding and taxes.

• Venture capital funding: Some areas definitely see more venture capital deals than others. We looked at the number of deals made in each city (data through 2017) to see which areas can help launch the most startups.^[2]
• SBA 7(a) and 504 loan funding (by state): SBA funds are originated by private lenders; this data shows which states are approving the most amount of loans. 
• State income tax rate: The less you pay in taxes, the better chance you have of succeeding in your business. We ranked states by the highest bracket’s tax rate.^[3]
• Corporate income tax rate: Corporate taxes also eat away from your business’s cash flow. Again, we pulled the highest tax rate in each state. It should be noted that a few states charge tax on gross receipts rather than net income (after deductions) and at a much lower rate. Many tax experts state that this causes a higher burden on businesses. But for a new entrepreneur with minimal start-up costs, this could still be more beneficial, and so we’ve weighted this data for all states equally.^[4] 

Find out which states offer the friendliest conditions for becoming an entrepreneur, both in terms of finding funding and minimizing your tax burden.

#2: Dallas, Texas

Dallas small businesses receive a solid amount of funding from venture capital firms as well as SBA lenders. They also benefit from favorable tax treatment in Texas, especially for those incorporated as a sole proprietor or general partnership. 

• Venture capital deals: 394
• SBA 7(a) loan funding for state: $2,801,311,100
• Maximum state income tax rate: 0%
• Maximum gross receipts tax rate: 1.00%

Fun fact for entrepreneurs: Browse advice from the top entrepreneurs in the region in this piece from D CEO^[5].

#3: Houston, Texas

As we learned with Austin and Dallas, Texas is very tax-lenient for both individual and corporate incomes. Houston’s reputation may not be as far-reaching as Austin’s but small businesses with less than 100 employees actually make up 97% of all businesses in the city^[6]. That’s quite impressive and shows that the city’s culture is very small business-friendly. Plus, the city has a solid track record of venture capital investment. 

• Venture capital deals: 300
• SBA 7(a) loan funding for state: $2,801,311,100
• Maximum state income tax rate: 0%
• Maximum gross receipts tax rate: 1.00%

Fun fact for entrepreneurs: In addition to federal COVID-19 relief programs for small businesses, the city of Houston offered a $15 million small business recovery program.

#4: Seattle, WA

Seattle ranks sixth for VC funding deals. Plus, Washington is another state with no income tax. Gross receipts are taxed instead of net income, and the rate depends on your business classification. Wholesalers, retailers and manufacturers are taxed around the 0.48% rate. 

• Venture capital deals: 927
• SBA 7(a) loan funding for state: $807,398,800
• Maximum state income tax rate: 0%
• Maximum gross receipts tax rate: 0.480%

Fun fact for entrepreneurs: Seattle Entrepreneurs is a networking group that offers events on topics like bootstrapping your business and pitching to investors^[7].

#5: Miami, Florida (tied)

Miami is on par for VC deals compared to Texas cities and SBA funding is also competitive in the state. Plus, Floridians don’t pay income tax. Corporate taxes are slightly higher than previous cities on the list, but the 4.458% tax rate is only applied to net income after accounting for expenses and other deductions.  

• Venture capital deals: 354
• SBA 7(a) loan funding for state: $1,953,913,800
• Maximum state income tax rate: 0%
• Maximum corporate income tax rate: 5.5%

Fun fact for entrepreneurs: Endeavor Miami is a local group that helps high-impact entrepreneurs scale their businesses^[8].

#5: San Antonio, Texas (tied)

San Antonio is on the lower end of VC deals but SBA 7(a) funding is high in Texas. Paired with minimal state taxes for both individuals and corporations, and it's an ideal place to launch your next great idea. 

• Venture capital deals: 63
• SBA 7(a) loan funding for state: $2,801,311,100
• Maximum state income tax rate: 0%
• Maximum gross receipts tax rate: 1.00%

Fun fact for entrepreneurs: Get inspired by this list of the best entrepreneurs in San Antonio, including a tropical house plant shop^[9]!

#7: Columbus, Ohio

Columbus has grown as a city known for its commitment to innovation and small businesses. That’s certainly evident in the remarkable amount of venture capital invested in city businesses, which saw 143 funded deals in 2017 and over $1 billion in state SBA funding in 2022. Additionally, Ohio ranks 16th for income tax rates, which is just under 4%. 

• Venture capital deals: 143
• SBA 7(a) loan funding: $1,039,104,600
• Maximum state income tax rate: 3.99%
• Maximum corporate income tax rate: 0%

Fun fact for entrepreneurs: Starting a business in Columbus gives you more leeway when it comes to living expenses. Compared to San Francisco, the venture capital of the world, Columbus is 40% less expensive^[10].

#8: Orlando, Florida (tied)

Orlando entrepreneurs get to take advantage of Florida's low tax structure, as well as nearly $2 billion in SBA funding for 2022. And there's a growing VC community as well, with city businesses securing 110 deals. 

• Venture capital deals: 110
• SBA 7(a) loan funding for state: $1,953,913,800
• Maximum state income tax rate: 0%
• Maximum corporate income tax rate: 5.5%

Fun fact for entrepreneurs: Work towards creating positive change in Orlando and beyond by joining Rally, a local social hub that helps scale early stage startups^[11].

#8: Cleveland, Ohio (tied)

Ohio has a zero corporate tax rate, and its maximum income tax rate is below 4%. On top of that, businesses in Cleveland receive a relatively high amount of VC deals.

• Venture capital deals: 118
• SBA 7(a) loan funding: $1,039,104,600
• Maximum state income tax rate: 3.99%
• Maximum corporate income tax rate: 0%

Fun fact for entrepreneurs: Check out Cleveland Score, a networking organization for entrepreneurs that offers free advice. There are plenty of resources for specific groups as well, like veteran- and Hispanic-owned businesses[12].

#8: Tampa, Florida (tied)

Tampa and Florida as a whole both have quite a bit of capital available for entrepreneurs and small businesses in the form of both investments and loans. Plus, Floridians don’t pay income tax. Corporate taxes are slightly higher than previous cities on the list, at 5.5%.

• Venture capital deals: 101
• SBA 7(a) loan funding for state: $1,953,913,800
• Maximum state income tax rate: 0%
• Maximum corporate income tax rate: 5.5%

Methodology

The Zebra pulled four data points to analyze the top 50 MSAs (by population) in the U.S. related to entrepreneurship:

• Venture capital deals: Center for American Entrepreneurship
• SBA 7(a) and 504 loan funding: 2022 funding by state
• State income tax rate: The Tax Foundation
• Corporate income tax rate: The Tax Foundation

MSA data was used where applicable, and we sometimes substituted city or state data as necessary.