What are the best states to do business in — and why? Here’s our look at the 10 best business-friendly states.
First, we’ll discuss which criteria we used to evaluate the states with the best economic conditions for doing business. Then we’ll review America’s top states for business and what makes each one business-friendly.
How Do You Pick the Best States for Business?
What are the top state economies for running a business? The answer depends on which criteria you prioritize when ranking states, as well as who you ask. Chief executive officers (CEOs) value 3 criteria most highly, according to a survey by Chief Executive Group, a membership group for CEOs.
When considering locations for doing business, CEOs prioritize:
- Tax policy (ranked as the most important consideration by 37% of CEOs)
- Regulatory climate (35%)
- Talent availability (25%)
Based on these criteria, other important considerations and feedback from CEOs, here’s a list of the best states to do business:
Texas has topped Chief Executive Group’s list of best states for doing business for 17 years in a row. A number of factors come together which lead CEOs to favor Texas as a business location. One of the Lone Star State’s main draws is its large pool of talented workers, a byproduct of the large number of technology and manufacturing companies that operate there, a legacy of the state’s rich natural resources and historic role in the aerospace and computer industries.
Texas also has a favorable tax climate, coming in at No. 11 overall for business taxes and No. 6 for individual income taxes among states ranked by the Tax Foundation, an independent tax policy nonprofit group. Coupled with high living standards, a low cost of living and ready access to sources of business financing, these factors combine to make Texas exceptionally friendly for businesses.
The Sunshine State comes in second as the best state for doing business. In addition to a location that makes the state ideal for tourism, agricultural production and maritime trade, Florida shares with Texas a historic role in the aerospace industry, just a few of the factors which help make the state hospitable to a wide range of business sectors.
Fast-growing metro areas provide a ready labor pool. The Tax Foundation ranks Florida at No. 4 overall for business taxes, with a rank of No. 6 for corporate taxes and No. 1 for individual income taxes. These advantages and others help make Florida a great spot to run a business.
The Volunteer State rose from No. 4 to No. 3 in the Chief Executive Group rankings from 2020 to 2021, a trend that reflects Tennessee’s growing stature among homes for businesses. The state’s Department of Economic and& Community Development emphasizes Tennessee’s commitment to manufacturing and its pro-business policies, which include no personal income tax and right-to-work laws promoting low union participation.
When it comes to business tax climate, the Tax Foundation ranks Tennessee No. 18 overall and No. 8 for individual income taxes. Tennessee further boasts a strong commitment to cultivating an educated workforce, including a Drive to 55 initiative which aims to have 55% of all residents equipped with a college degree or certificate by 2025. These are just a few of the draws which help make Tennessee a leading home for businesses.
4. North Carolina
The Tar Heel State is a national manufacturing leader, helping account for its rank among the country’s business havens. North Carolina’s manufacturing industry is supported by a highly talented labor pool, drawn from 53 colleges and universities in the state. Favorable tax policies, a relaxed regulatory environment and low costs of doing business are other leading reasons why companies do business in North Carolina.
The Tax Foundation ranks North Carolina at No. 10 overall for business tax environment and No. 4 for corporate taxes. Add in grant programs designed to help business financing and you have a recipe for a favorable entrepreneurial climate.
The Hoosier State hosts a strong business environment thanks to its strong manufacturing industry, growing tech sector and favorable tax policies. Indiana, a top steel producer and automotive manufacturer, leads the nation in the percentage of workers employed in the manufacturing sector at 18.6%, according to data from the Census Bureau and Labor Department’s American Community Survey and the Census Bureau’s Center for Economic Studies.
To support its industries, Indiana offers strong tax incentives for businesses, including research and development tax credits, headquarter relocation credits and incentives for enhancing employee skills. The Tax Foundation ranks Indiana No. 9 overall for business taxes and No. 12 for corporate taxes.
6. South Carolina
A diverse industrial economy, a relaxed regulatory climate and favorable tax policies help make the Palmetto State a friendly home for businesses. South Carolina hosts a wide range of industries, led by the agriculture, aerospace, automotive, manufacturing and tourism sectors. Located on the East Coast halfway between New York and Miami, South Carolina is ideally situated for shipping by truck, rail or port and for both domestic and international trade.
The state supports businesses with relaxed health, safety and environmental regulations and right-to-work laws which help keep the cost of hiring workers low. The Tax Foundation ranks South Carolina No. 5 on corporate taxes.
The Buckeye State ranks high among business-friendly states for its healthy manufacturing industry, talented workforce, low corporate taxes and attractive tax incentives. Ohio hosts a strong manufacturing economy with a central location for shipping by land, waterways or air. Real estate, finance and health care form other components of the state’s robust economy.
One of Ohio’s appeals for business is its simplified tax structure, which includes a 0% state corporate income tax touted in a recent ad campaign. The state offers tax incentives for businesses, including job creation tax credits, as well as economic development grants.
The Silver State offers businesses a relaxed regulatory environment, low personal income taxes and a growing workforce. The state’s economy boasts a growing technology sector in the north and logistics and manufacturing in the south.
Nevada features a low-regulation business environment with a streamlined licensing process and favorable taxes. The Tax Foundation ranks Nevada No. 7 overall for business taxes and No. 5 for personal income taxes. The state’s population grew at 2.1% between 2017 and 2018, making it the fastest-growing state in the nation and offering employers an expanding talent pool.
A favorable tax environment, tax incentives, low costs of doing business and a rich talent pool help make the Peach State an attractive home for businesses. Georgia is a national leader in industries such as advanced manufacturing and financial technology. Its industries are supported by an advanced workforce which includes a strong pool of engineering talent.
Georgia’s right-to-work laws and tax policies help keep the cost of doing business low. The Tax Foundation ranks Georgia No. 7 in the nation for corporate taxes. Tax incentives for businesses include credits for job creation, research and development, expansion investments and port shipping.
The Grand Canyon State welcomes businesses with low taxes and light regulatory policies which favor the state’s growing economy. Major economic sectors include aerospace, electronics manufacturing and financial services.
The Tax Foundation ranks Arizona No. 17 in the nation for individual income taxes, a policy that favors business owners. Incentives include quality jobs tax credits, job-training grants and tax credits for research and development.
Optimize Your Business Location Strategy to Maximize Your Revenue
Factors such as tax policy, regulatory environment and labor availability help determine how conducive a state is for doing business. Based on these criteria, a wide range of states throughout the country offer business-friendly environments, topped by Texas, Florida and Tennessee.
However, opportunities abound all over the U.S. and the key is finding the location which offers the best fit for your business model. Invest the time in selecting the right location to keep your taxes low, your workforce accessible and your profits high.