Nearly two thirds (63%) of US prospective business owners say that funding is the biggest roadblock preventing them from kickstarting a company. However, not all obstacles are equal: in fact, the cost of building a business can differ significantly by tens of thousands of dollars depending on which US state it exists in.
In this new study, Wix.com analysed average annual wage, average hourly wage, corporate income tax, personal income tax, average corporate electricity bill and the cost of LLC registration to determine which state is the best to open a new business.
Key findings:
- Mississippi is the most affordable US state to start an enterprise, according to the study.
- South Dakota and Wyoming are the only two states where businesses and employees pay no tax.
- Idaho businesses pay the lowest electricity bill on average.
- By far, Massachusetts is the worst state to open a business.
The most affordable US states to start a business
| Rank | State | Average Employee Expenses (USD, annual) | Average Employee Expenses (USD, hourly) | Corporate Income Tax | Personal Income Tax* | Annual Corporate Electricity Bill (USD) | Startup Business Score (/10) |
| 1 | Mississippi | $45,180 | $21.72 | 5.00% | 4.70% | $562.84 | 8.90 |
| 2 | Kentucky | $51,490 | $24.76 | 5.00% | 4.00% | $606.42 | 8.35 |
| 3 | South Dakota | $49,980 | $23.99 | 0.00% | 0.00% | $551.31 | 8.31 |
| 4 | South Carolina | $50,650 | $24.35 | 5.00% | 4.50% | $540.38 | 8.29 |
| 5 | Missouri | $54,520 | $26.21 | 4.00% | 4.80% | $594.65 | 8.25 |
| 6 | Wyoming | $54,440 | $26.17 | 0.00% | 0.00% | $491.91 | 8.22 |
| =8 | Idaho | $51,530 | $24.69 | 6.50% | 5.80% | $393.60 | 8.12 |
| =8 | West Virginia | $49,170 | $23.64 | 6.50% | 5.12% | $422.02 | 8.12 |
| 9 | Indiana | $53,500 | $20.24 | 4.90% | 3.05% | $679.48 | 8.10 |
| 10 | Arkansas | $48,570 | $23.35 | 5.90% | 4.80% | $495.24 | 8.04 |
See the full data, including stats on LLC registration costs, here.
Mississippi leads as the most affordable state for entrepreneurs to kickstart a new business, with a score of 8.90/10.
The Southeastern state may be more expensive for average electricity bills relative to other states in the top 10 – Idaho’s $393.60 bill is 30% cheaper than Mississippi’s $562.84 – but employers will likely be paying less in remunerations. The average annual wage is just $45,180, and the average hourly wage is $21.72: only Indiana is less, at $20.24.
With a business score of 8.35/10, Kentucky is the second best state to create a new company for those looking to save cash. While Kentucky may not lead on any one factor, it does have the lowest personal income tax (4.00%) after South Dakota and Wyoming (0%). Additionally, those creating a business will benefit from a very affordable registration process. Kentucky is one of ten states that charges $50 or less for LLC registration, and is one of nine to not take additional payments every year.
South Dakota takes the bronze medal with an overall score of 8.31/10. Like Wyoming, it takes no tax from personal income or corporate income, but South Dakotan business owners are likely to spend as much on employees. They pay less in average annual wages ($49,980 compared to $54,440) and average hourly pay ($23.99 compared to $26.17).
The worst US states to start a business
| Rank | State | Average Employee Expenses (USD, annual) | Average Employee Expenses (USD, hourly) | Corporate Income Tax | Personal Income Tax* | Annual Corporate Electricity Bill (USD) | Startup Business Score (/10) |
| 1 | Massachusetts | $76,600 | $36.83 | 8.00% | 9.00% | $872.99 | 3.47 |
| 2 | California | $73,220 | $35.20 | 8.44% | 13.30% | $1,173.66 | 4.00 |
| 3 | New Jersey | $70,890 | $34.08 | 11.50% | 10.75% | $803.60 | 4.14 |
| 4 | New York | $74,870 | $36.00 | 7.25% | 10.90% | $937.82 | 4.22 |
| 5 | Rhode Island | $64,530 | $31.03 | 7.00% | 5.99% | $842.46 | 4.51 |
| 6 | Maryland | $69,750 | $33.53 | 8.25% | 5.75% | $1,116.72 | 4.65 |
| 7 | Connecticut | $69,310 | $33.32 | 7.40% | 6.99% | $811.44 | 4.71 |
| 8 | Illinois | $69,390 | $30.73 | 9.50% | 4.95% | $698.64 | 4.88 |
| 9 | Delaware | $62,260 | $29.93 | 8.70% | 6.60% | $665.02 | 5.02 |
| 10 | Minnesota | $63,640 | $30.60 | 9.80% | 9.85% | $749.70 | 5.25 |
Massachusetts is the worst state to start a business when considering overheads. Payments are high in almost every element, with an average annual wage of $76,600 and hourly wage of $36.83.
The largest barrier to entry for new business owners in Massachusetts is the cost of LLC registration. The $500 first-time payment is the most expensive in the country – over four times the national average of $123.96. Then, businesses pay another $500 every year to stay registered: while Mississippi, South Carolina and Missouri charge their entrepreneurs no additional payment after the initial expense.
California, with a score of 4/10, is the second worst place to start a business. Despite being famous for business hotspots like Silicon Valley, the state has the highest corporate electricity bill at $1,173.66, whilst New Jersey, ranking in third, has the highest corporate income tax at 11.5%.
Methodology
- A list of LLC registration and LLC annual fees were obtained from Forbes.com.
- Where multiple pricing options were available depending on how payments were made, the less expensive option was always chosen.
- The average corporate electricity bill was obtained from the US Energy Information Administration.
- The average hourly and annual salary in each state were sourced from Forbes.com.
- Corporation tax in each state was obtained from Wikipedia.
- State income tax was obtained from TaxFoundation.org.
- *Where states had variable income tax, the state’s highest income tax was always chosen.
- Each factor was ranked using the excel PERCENTRANK formula and an index score was calculated.
- All data was sourced in July 2024 and is accurate as of then.
