A record number of people started new businesses in the US last year, ushering in a new class of entrepreneurs.
New applications for an employer ID reached 1.1 million through mid-September last year, a 12% increase from the year prior, according to an analysis of the US Census Bureau data by The Wall Street Journal.
It might be the right time to start a new venture for many people, and where you launch can determine certain perks or challenges you'll encounter.
Swyft Filings, an online business incorporation and compliance provider that helps entrepreneurs start and grow their new companies, built a state-by-state analysis to rank the best entrepreneurial environments. To determine the list, they looked at factors and data points such as business survival rates, filing fees, tax rates, and cost of living.
Texas took the lead spot — thanks to its low cost of living and high rate of entrepreneurship — as high-profile founders flee expensive coastal hubs for the Lone Star state. Meanwhile, Washington, DC, ranked last due to the area's high filing fees and taxes.
Below are the top 10 states for starting a business, based on Swyft Filings's New Business Index.
10. Colorado
While many people may associate the state with its booming marijuana business, Colorado's business perks extend beyond the leafy green plant. In Denver, the fastest-growing tech industries are artificial intelligence and machine learning, blockchain, and cryptocurrency, according to entrepreneurial community Powderkeg's 2018 tech census.
The state has strong workforce factors, such as stable educational rates per capita and a lower than average unemployment rate of 6.5%. However, the cost of living is higher than other states: The typical home value in Denver, Colorado's capital, is $506,859, according to Zillow.
Meanwhile, Colorado Springs was ranked one of the best large cities to start a business, according to the personal finance website WalletHub. The company compared 100 U.S. cities across 21 key indicators of startup viability, including five-year business survival rate and office space affordability.
9. North Carolina
North Carolina ranks high on the list thanks to its low taxes and relaxed license policies.
The corporate net income tax is at 3% flat, sales tax is a flat 4.25%, the personal net income tax rate is a flat 5.75%, and there's no city tax. Additionally, there are no state or city business licenses, making it easier and cheaper for entrepreneurs to start up.
Meanwhile, Charlotte attracts fintech startups due to its robust banking industry— Wells Fargo has a strong presence in the city and Bank of America is headquartered there. Additionally, Charlotte was ranked 6th on WalletHub's ranking.
8. Iowa
The Hawkeye state packs many perks for business owners. Iowa's cost of living is ranked one of the most affordable in the US and the state boasts a below average unemployment rate of 5.4%.
Additionally, Iowa has a higher-than-average business survival rate of 81.4% and 65 funding programs throughout the state for business capital.
7. Indiana
Inexpensive filing fees and low taxes make Indiana an ideal location for frugal business owners. Filing articles of organization costs $100, a $95 base fee, and a $3 online fee for corporations.
Meanwhile, the corporate net income tax rate is 4.9% and the personal net income tax is a flat 3.3%. The state's affordable cost of living offsets the high sales tax rate of 7%.
6. Mississippi
Mississippi's housing is the most affordable in the nation, with the typical home value in the state's capital at $155,402, according to Zillow. Additionally, Mississippi ranks number one in cost-of-living affordability.
Mississippi is also growing in several industries, providing ample opportunity for entrepreneurs. Retail accounts for 26% of the state's jobs, according to the National Retail Federation.
5. Michigan
There's a lot to appreciate about Michigan's business climate. The cost of living remains low across the state and Detroit, Michigan's largest city, is in the midst of a post-bankruptcy entrepreneurial boom.
Retail is a powerful force and accounts for 26% of the state's jobs, according to the National Retail Federation. What's more, businesses that call Michigan home have an above-average survival rate of 80.2%.
4. Ohio
Retail-focused business owners might want to consider setting up shop in Ohio: 26% of the state's jobs are in the retail market, with a total GDP impact of $130.7 billion, according to the National Retail Federation.
Another perk of opening a business in Ohio is the low-hassle and affordable business filing experience. It costs $99 to file articles of incorporation — which is legally required for business owners planning to launch a new company as professional corporation, nonprofit corporation, or other classification — and articles of organization, which establishes a LLC at the state level.
3. Virginia
More than 90% of new businesses based in Virginia survive the first year of operating, compared to the national average of 79.6%, giving the state a competitive edge.
While the state ranked well across most categories, it's also growing its reputation as a tech hot spot since Amazon announced it would build its HQ2 in Crystal City. Educational institutions, such as Virginia Tech, are investing billions of dollars into satellite campuses near HQ2 as a way to boost local entrepreneurship and talent pipelines.
2. Oklahoma
Founders focused on capital should consider starting up in the Sooner State. Oklahoma boasts 80 financial programs available for new businesses looking for loans, funding, or savings.
Combine that with low filing costs, an above-average ranking for business survivability, and affordable housing — the typical home value in the capital city of Oklahoma City is $156,689, according to Zillow— and the state seems like a haven for the money-conscious entrepreneur.
What's more, don't ignore Tulsa's remote work program, which lures out-of-state workers to the city by offering a $10,000 grant.
1. Texas
No, you're not imagining it, a large amount of entrepreneurs are relocating to Texas lately. Tesla's founder Elon Musk and the tech giant Oracle both recently announced they're leaving San Francisco for Texas.
Meanwhile, a large number of households both moved in and out of Travis County, Texas, which houses Austin, highlighting a shift in the population between 2018 and 2020, according to an analysis by the Wall Street Journal.
In addition to a low cost of living — compared to coastal hubs like New York City or the Bay Area — Texas has the highest percentage of residents that start their own businesses, tied with Delaware and California.
Laredo, Lubbock, Austin, Fort Worth, and Dallas, also made the top 20 on WalletHub's ranking.