Location considerations when starting a business
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 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.Â
- 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]Â
Find out which states offer the friendliest conditions for becoming an entrepreneur, both in terms of finding funding and minimizing your tax burden.