Research

10 best cities for entrepreneurs in 2022

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Launching a new business is becoming more popular than ever before. In 2021, a surge of people quitting their jobs was dubbed “The Great Resignation.” In August alone, 4.3 million Americans quit their jobs — that’s almost 3% of the entire workforce. Many experts believe that entrepreneurship is a major driving force behind this employment trend. After all, working for yourself gives you greater flexibility in work hours, which has certainly become more important as Americans juggle ever-changing schedules for in-person work for themselves and schooling for their children. 

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 investment than others. 
  • SBA 7(a) loan funding (by congressional district): SBA funds are originated by private lenders; this data shows which cities are approving the most 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.
  • 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. 

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

#1: Austin, Texas

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Austin ranks in the top 10 cities for both venture capital funding and SBA 7(a) financing. On top of that, Texans enjoy a 0% income tax rate. The state also levies a gross receipts tax instead of a corporate income tax rate of just 1%. And if you’re a sole proprietor or general partnership, you’ll be exempted from this corporate tax altogether.  

  • Venture capital funding:$799 million
  • SBA 7(a) loan funding: $178,487,400
  • Maximum state income tax rate: 0%
  • Maximum gross receipts tax rate: 1.00%

Fun fact for entrepreneurs: We at The Zebra agree that the city is great for start-ups — we’re an Austin-based company!

#2: Seattle, Washington

Seattle ranks fifth for VC funding, which topped $1.85 billion in 2020. 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 funding: $1.85 billion
  • SBA 7(a) loan funding: $115,282,100
  • 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.

#3 (tied): Houston, Texas

Three cities tied for third place, including Houston. Together, VC funding and SBA 7(a) financing totalled over $755 million in 2020. And as we learned with Austin, 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. That’s quite impressive and shows that the city’s culture is very small business-friendly. 

  • Venture capital funding: $656 million
  • SBA 7(a) loan funding: $100,013,500
  • 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.

#3 (tied): 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 reached $573 million in 2020. Ohio ranks 16th for income tax rates, which is just under 5%. The state also taxes corporations based on gross receipts, but only when those gross receipts exceed $150,000 in a year. 

  • Venture capital funding: $573 million
  • SBA 7(a) loan funding: $169,186,800
  • Maximum state income tax rate: 4.797%
  • Maximum gross receipts tax rate: 0.260%

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.

#3 (tied): Tampa, Florida

Our final third-place finisher is Tampa. There is 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, but the 4.458% tax rate is only applied to net income after accounting for expenses and other deductions.  

  • Venture capital funding: $328 million
  • SBA 7(a) loan funding: $170,085,600
  • Maximum state income tax rate: 0%
  • Maximum corporate income tax rate: 4.458%

Fun fact for entrepreneurs: Looking to establish a physical presence where you can connect with other entrepreneurs? Tampa is home to several co-working spaces, including Cowork Tampa and WeWork.

#6: Denver, Colorado

Denver ranks second for SBA 7(a) loan funding, with more than $350 million awarded to small businesses. Both personal and corporate income tax rates are 4.55% at the highest levels, but you could pay less if you’re in a lower tax bracket.  

  • Venture capital funding: $709 million
  • SBA 7(a) loan funding: $350,873,300
  • Maximum state income tax rate: 4.55%
  • Maximum corporate income tax rate: 4.55%

Fun fact for entrepreneurs: Join one of many entrepreneurial networking groups in Denver, like Startup Grind or Blackstone Entrepreneurs Network.

#7: 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 funding: $268 million
  • SBA 7(a) loan funding: $97,210,900
  • Maximum state income tax rate: 0%
  • Maximum gross receipts tax rate: 1.00%

Fun fact for entrepreneurs: Recent studies ranked the University of Houston and Rice University as having the best undergraduate and graduate entrepreneurship degree programs, respectively.

#8: Salt Lake City, Utah

Salt Lake City ranks among the top three cities as having the most SBA 7(a) loan funding. Its venture capital scene is also quite competitive compared to other areas, with $470 million in start-up capital awarded in 2020. Both personal and corporate income tax rates max out at 4.95%.

  • Venture capital funding: $470 million
  • SBA 7(a) loan funding: $210,772,900
  • Maximum state income tax rate: 4.95%
  • Maximum corporate income tax rate: 4.95%

Fun fact for entrepreneurs: Salt Lake City is a top-ranking city for net business creation in the U.S.

#9: Cleveland, Ohio

Ohio has a low corporate tax rate on gross receipts, and its maximum income tax rate is below 4.8%. On top of that, businesses in Cleveland receive a relatively high amount of VC funding and SBA financing. 

  • Venture capital funding: $19 million
  • SBA 7(a) loan funding: $113,378,000
  • Maximum state income tax rate: 4.797%
  • Maximum gross receipts tax rate: 0.260%

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.

#10: Atlanta, Georgia

Atlanta ranks fourth in the nation for the amount of SBA 7(a) loan funding. And the amount of venture capital exceeds $550 million annually, which is quite impressive considering how far Atlanta is from Silicon Valley. Clearly there’s a strong network of investors who are committed to growing entrepreneurship in the city. Income and corporate tax rates in Georgia are, however, slightly high compared to the other states on our top 10 list. 

  • Venture capital funding: $551 million
  • SBA 7(a) loan funding: $186,593,700
  • Maximum state income tax rate: 5.75%
  • Maximum corporate income tax rate: 5.75%

Fun fact for entrepreneurs: The Gathering Spot is a private, invitation-only networking club that connects entrepreneurs and other professionals and politicians in the city, with a focus (though not exclusively so) on Atlanta’s community of Black emerging leaders.

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Methodology

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

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

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