All Info › Rankings

Best States for Small Business

Ranked by LLC formation cost, corporate and franchise tax exposure, total tax burden, and local labor market — every state, side by side.

Where you incorporate and operate shapes payroll, tax, and compliance for years. We combine Tax Foundation business climate scores, state Secretary of State LLC fees, Tax Foundation total burden, and BLS unemployment into a single composite.

How we scored each state

Each factor is normalized 0–100 against the actual 51-state distribution (min → 0, max → 100; inverted when lower is better). The composite is a weighted average; states missing data for a factor receive a neutral 50 so all 51 still rank.

Factor	Weight	Direction	Data source
Business Climate Rank	25%	Lower = better	Tax Foundation 2025 State Business Tax Climate Index (rank 1 = best)
Low Corporate Tax	20%	Lower = better	policy_small_business corporate income tax top rate
Low LLC Filing Fee	10%	Lower = better	State Secretary of State LLC formation fee (small business)
No Franchise Tax	10%	Higher = better	policy_small_business has_franchise_tax flag (no franchise tax scores higher)
Low Total Tax Burden	15%	Lower = better	Tax Foundation state and local tax burden (% of personal income)
Strong Labor Market	20%	Lower = better	BLS Local Area Unemployment Statistics (state-average unemployment rate)

Full 51-State Ranking

#	State	Business Climate Rank	Low Corporate Tax	Low LLC Filing Fee	No Franchise Tax	Low Total Tax Burden	Strong Labor Market	Overall
1	Alaska	—	—	—	—	100	—	58
2	Tennessee	—	—	—	—	85	—	55
3	Texas	—	—	—	—	67	—	53
4	Wyoming	—	—	—	—	73	—	53
5	Florida	—	—	—	—	62	—	52
6	Georgia	—	—	—	—	60	—	52
7	Indiana	—	—	—	—	60	—	52
8	Louisiana	—	—	—	—	62	—	52
9	Missouri	—	—	—	—	60	—	52
10	Oklahoma	—	—	—	—	63	—	52
11	South Dakota	—	—	—	—	65	—	52
12	Alabama	—	—	—	—	59	—	51
13	Arizona	—	—	—	—	56	—	51
14	Idaho	—	—	—	—	55	—	51
15	Mississippi	—	—	—	—	56	—	51
16	Nevada	—	—	—	—	56	—	51
17	New Hampshire	—	—	—	—	58	—	51
18	North Dakota	—	—	—	—	58	—	51
19	South Carolina	—	—	—	—	58	—	51
20	Colorado	—	—	—	—	53	—	50
21	Kansas	—	—	—	—	47	—	50
22	Kentucky	—	—	—	—	51	—	50
23	Michigan	—	—	—	—	53	—	50
24	Montana	—	—	—	—	47	—	50
25	North Carolina	—	—	—	—	53	—	50
26	Ohio	—	—	—	—	48	—	50
27	West Virginia	—	—	—	—	49	—	50
28	Arkansas	—	—	—	—	45	—	49
29	Massachusetts	—	—	—	—	40	—	49
30	Nebraska	—	—	—	—	40	—	49
31	New Mexico	—	—	—	—	43	—	49
32	Pennsylvania	—	—	—	—	44	—	49
33	Washington	—	—	—	—	42	—	49
34	Wisconsin	—	—	—	—	40	—	49
35	Delaware	—	—	—	—	34	—	48
36	District of Columbia	—	—	—	—	37	—	48
37	Illinois	—	—	—	—	35	—	48
38	Iowa	—	—	—	—	37	—	48
39	Utah	—	—	—	—	38	—	48
40	Virginia	—	—	—	—	38	—	48
41	Maine	—	—	—	—	30	—	47
42	Maryland	—	—	—	—	27	—	47
43	New Jersey	—	—	—	—	27	—	47
44	Oregon	—	—	—	—	29	—	47
45	Rhode Island	—	—	—	—	33	—	47
46	California	—	—	—	—	23	—	46
47	Connecticut	—	—	—	—	20	—	46
48	Minnesota	—	—	—	—	22	—	46
49	Vermont	—	—	—	—	26	—	46
50	Hawaii	—	—	—	—	12	—	44
51	New York	—	—	—	—	0	—	43

Scores are normalized 0–100; higher is better. Click any state name for the full state profile.

FAQ

Which states are best for forming an LLC?

From a pure-cost standpoint, states with the lowest LLC filing fees (often under $50) and no annual franchise tax are friendliest to new entities. But total tax burden and corporate income tax usually matter more in year two onward. The ranking weights the long-run factors more heavily than one-time filing costs.

What's franchise tax and why does it matter?

Franchise tax is an annual flat or formula-based fee a state charges for the privilege of operating a corporation or LLC there. Some states (Texas, California, Delaware) have meaningful franchise tax obligations; many have none. The flag here marks states with any form of franchise tax regardless of size.

Why include unemployment rate?

Small businesses need to hire from a local labor pool. Low state unemployment means tighter labor markets (harder to find workers, higher wages); high unemployment means easier hiring but also weaker consumer demand. The lower-is-better direction here reflects that most small business owners we surveyed prioritize hiring ease.

Where does the business climate rank come from?

The Tax Foundation publishes an annual State Business Tax Climate Index ranking all 50 states (1 = most competitive overall). It composites corporate tax, individual income tax, sales tax, property tax, and unemployment insurance tax structures. We use the most recent 2025 release.

Mubboo Editorial Team. Cross-domain rankings combine state-level data from multiple Mubboo Info datasets — see the methodology table above for per-factor sources. Datasets refresh annually; rankings recompute every 24 hours. See our full methodology →

Explore other topics

Browse data and guides across all major life topics.

DMV & Licensing Healthcare & Medicaid Renting Rights Immigration Senior Care Tax Filing Education & Schools Housing & Real Estate Taxes & Revenue Health & Wellness Safety & Crime Economy & Jobs Environment