Quitting your job to finally pursue your business idea is an exciting and risky endeavor. If you are in the right position, you can take enough steps to be successful.
Finally, the location of your business can play a big part in what types of employees and customers you can attract, as well as costs like taxes and labor costs. To help you narrow your search, Looka.com — a site that provides branding and design tools for startups — has released a new ranking of the best US states for entrepreneurs.
According to Luca, California is the best place to be if you’re ready to finally quit your job and start your own business. And that’s despite a notoriously high cost of living, which includes one of the highest corporate tax rates in the country.
Here are the top 5 states on the list:
- New Jersey
California has long been a hotbed for new businesses, particularly in the tech industry — but the Golden State has recently seen an exodus of high-profile companies leaving the state in search of lower costs and, in many cases, lower taxes. Tesla, Oracle and Hewlett Packard are among the biggest names to relocate their headquarters from California since 2020.
But Luca points to California’s still high concentration of small businesses and startups with fewer than five employees and one of the best survival rates for new businesses in the country. California also ranks first in terms of annual payroll for companies with fewer employees. “These entrepreneurs can, on average, pay themselves and their team better,” a Luca spokesman told CNBC Make It.
The ranking cites research by the nonprofit Kaufman Foundation, which shows that in 2021, 82.56% of new businesses in California were still operating after their first year. The national average is 81.7%, and with all the challenges new businesses face, they often need all the help they need to survive.
Just behind California is Texas, which has the fourth largest concentration of companies with fewer than five employees. The Lone Star state also boasts the second-highest annual payroll for companies with fewer than five employees and a below-average cost of living — aided by the state’s no income tax.
Rhode Island is at the bottom of the rankings, with the lowest number of new businesses in the nation and one of the worst survival rates for new businesses: just over 77% in 2021. West Virginia ranks 49th, second to last. median household income and the number of new businesses established between 2020 and 2021.
To compile his ranking, Luca says the states were judged on six criteria:
- Number of establishments with fewer than five employees
- median household income
- Survival rate for new businesses
- cost of living
- Annual wage accounting for companies with fewer than five employees
- Percentage of new business in each state from 2020 to 2021
The company relied on data from the US Census Bureau, the World Population Review 2022 and the Kaufman Foundation’s Indicator of Entrepreneurship.
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