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Top 5 States To Start a Business in 2024

Some states are more advantageous than others for starting a business. Find out which states made our list this year.

What you'll learn:

Starting a business is an exciting time. Long before you open your doors, however, you may want to consider where you want to open your doors. Some states are more advantageous than others. In addition, your unique living, working, and tax situations might affect where you should start a business. Here, Rocket Lawyer provides some insight into finding the best location for your new business.


Can I register an LLC in a different state than where I live or do business?

Most new business owners assume that they have no other choice but to register their corporation or LLC where they live or where their business operates. While there are benefits to forming your business in the same state where you live, you may not have to do so. Instead, you may choose the best state based on factors other than your physical location.

Many companies do, however, form in their home state. The reality is that if you operate in more than one state, you will likely need to register as a foreign company in each state in which you do business.

That means that if you register in one state, for example, but only operate in another state, you might needlessly have to register in two states. Nevertheless, there are certain situations when registering in a state other than your home state has more benefits than drawbacks.


What can I consider before deciding where to start my business?

Getting a business off the ground is difficult, no matter which state you call home. Some state rules and regulations, however, make registering an LLC or starting a corporation even harder. As an entrepreneur or startup, you can keep a few key factors in mind as you review the options.


Business taxes

In some situations, business taxes will depend on your personal income tax within a state. In other circumstances, your personal income taxes might be wholly irrelevant. Ask the following questions when you evaluate your business’s “home state:”

  • Does it have a favorable tax rate for certain types of businesses?

  • Are there additional taxes levied on your industry or niche?

  • What is the individual state tax rate?

  • What is the corporate tax rate?

  • What are the sales tax rates?

  • If you own real property, how do the property tax rates compare to other potential locations?

Some states, like Wyoming and Texas, do not have state income tax, so that can be beneficial. Those with low taxes can save companies thousands of dollars over time, which is especially helpful for startups. Keep in mind, however, that you generally pay state taxes wherever you operate your business, even if that state is not technically your home state.


Business regulations

Some states may regulate certain industries or locations. For instance, some states or localities may have more stringent zoning laws, licensing requirements, or hiring standards. They might also have health, safety, or environmental regulations that affect some businesses more than others.

If your company falls into a heavily regulated area, it may be worth the time and effort to review the regulations in other states. Some provide more advantages to “domestic” companies compared to foreign companies as well. As a result, it may be beneficial to register an LLC in one state simply to take advantage of less rigorous regulations.


Business costs

Formation costs vary from state to state. Maintaining a business entity oftren requires an annual or biannual fee. In some cases, those fees can be significant. As a result, you may want to consider what the costs for creating the company might be and how difficult maintaining the entity is in that specific state.

For those who are looking to move with their business, consider the cost of living, which affects everything from your personal expenses to labor costs to the prices your business pays for goods and services.


Convenience

It may be convenient to register an LLC in the state in which you live and operate. You often understand the laws and requirements better in your home state, and it is sometimes easier to file and communicate with regulators when you are physically located nearby.


State-specific factors

You might want to generally consider how friendly a state is to new businesses. The business climate or business environment of a state may dictate whether it will be friendly or strict regarding regulations, licensing, and taxes. For instance, states that try to attract new businesses (like Michigan, Ohio, North Carolina, and Kansas) might provide incentives, such as tax credits or grants, to encourage them to operate in their states.

New companies and startups might also want to consider the business survival rate in that state. Small businesses are difficult to get off the ground, and some states provide more support to help new businesses thrive compared to others. The Small Business Association and the Bureau of Labor Statistics track business survival rates in each state.


What are the top 5 states to start a business?

In our estimation, the five best states to start a business in 2024 are:

  • Indiana.

  • South Dakota.

  • California.

  • Texas.

  • Florida.


Indiana

Indiana makes the list because of its high rates for business survival. The national average business survival rate is 80.6%, and Indiana’s survival rate is 83.6%.

Registering a business in Indiana will cost less than $100. Corporate taxes are higher in Indiana compared to other states, but they have a flat income tax of just 3.23%. The favorable personal income tax rates make Indiana even more appealing to companies that operate as pass-through tax entities, such as LLCs and S-corporations.

The cost of living in Indiana is significantly below the national average as well. A lower cost of living will generally mean lower employee wages and lower startup costs.


South Dakota

South Dakota is often considered one of the most business-friendly states in the nation because of its favorable tax treatment. There is no corporate or individual tax in South Dakota.

The cost of living is also relatively low, which means new businesses can get their companies off the ground with lower upfront investments and access to a more affordable labor pool. At the same time, South Dakota’s spending is higher than the national average—making it a great location for elastic goods.

The number of new entrepreneurs is low in South Dakota, but the state has made some efforts to attract new businesses by offering breaks on property taxes and other incentives. More than half of all businesses started in South Dakota will still be in operation five years into the future, which is higher than the national average of about 50%.


California

While California, with higher than average cost of living, and other associated high costs, may not be the cheapest place to start a business, it can often be the best. California boasts the largest economy in the country, along with a very large talent pool with highly skilled workers.

What California lacks in cost savings, it makes up for in innovation, talent, and the large population. Notably, both the one year and five year business survival rates are above the national averages.


Texas

In recent years, Texas has been voted the best state to start a business. Texas has become a popular place for new businesses, in part, because of individual cities, including Laredo, Lubbock, and Austin, providing helpful resources for startups.

Texas also does not have individual or corporate income taxes, which is certainly appealing for tax-conscious business owners. In addition to these benefits, Texas has a lower-than-average cost of living and a huge labor pool.


Florida

Like Texas and South Dakota, Florida does not have any individual income tax. Its corporate tax is just 5.5%, making it one of the lowest rates in the country. It has high entrepreneurial growth, with new startups increasing steadily over the last several years. It has a lower cost of living and lower median income in many areas.

Florida has a lower-than-average business survival rate, however, and both individuals and companies may need to contend with various natural disasters in this area.





Rocket Lawyer business service specialists are trained to help business owners who are not sure what they need as well as those who are ready to take the next step toward registering their business. Rocket Lawyer can help you with information about how to choose a business structure and can then help you file the necessary paperwork. After your business registration is approved, whether it is an LLC, corporation, or nonprofit, Rocket Lawyer can help you stay in compliance with state laws, secure trademark protection for business and product names and logos, and protect your business with customizable documents and contracts.

If you have questions about where to start your new business, reach out to a Rocket Lawyer network attorney for affordable legal advice.

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.

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