Where Should I Start My Small Business?
Putting care into locating your business can mean the difference between success and failure. While large companies typically pay professionals to find the most desirable locations to expand to, the cost of this service is generally prohibitive for small businesses, so they must do independent research to determine the best location to operate from. Considerations include the labor pool, special state incentives, distance from suppliers and distributors, and taxes. The right choice can mean the difference between a profitable business and a failed one, especially in an economic downturn.
The labor pool. When choosing a location, consider the size of your talent pool because you will need good employees to run a successful business. Also keep in mind that it may be difficult to attract talent willing to relocate to more remote locations.
Special state incentives. Do your research, because certain states may be offering special incentives to attract a business such as yours. Check with government officials state by state.
Distance from suppliers and distributors. Also consider availability of transportation and access to your local markets.
Taxes. Remember that tax rates differ significantly from state to state, and it is often true that states with lower tax rates also have lower costs. Business Week recently published a slide show featuring the Tax Foundation’s 25 states with the lowest projected tax rates for 2009, and they are as follows:
Wyoming
Tax Foundation Rank: 1
Top Business Tax Rate: None
Top Personal Income Tax Rate: None
State Sales Tax Rate: 4%
South Dakota
Tax Foundation Rank: 2
Top Business Tax Rate: None
Top Personal Income Tax Rate: None
State Sales Tax Rate: 4%
Nevada
Tax Foundation Rank: 3
Top Business Tax Rate: None
Top Personal Income Tax Rate: None
State Sales Tax Rate: 6.5%
Alaska
Tax Foundation Rank: 4
Top Business Tax Rate: 9.4% (on corporate income over $90,000)
Top Personal Income Tax Rate: None
State Sales Tax Rate: None
Florida
Tax Foundation Rank: 5
Top Business Tax Rate: 5.5% (on all corporate income)
Top Personal Income Tax Rate: None
State Sales Tax Rate: 6%
Montana
Tax Foundation Rank: 6
Top Business Tax Rate: 6.75% (on all corporate income)
Top Personal Income Tax Rate: 6.9% (on income over $14,900)
State Sales Tax Rate: None
Texas
Tax Foundation Rank: 7
Top Business Tax Rate: None
Top Personal Income Tax Rate: None
State Sales Tax Rate: 6.25%
New Hampshire
Tax Foundation rank: 8
Top Business Tax Rate: 8.5% (on corporate income over $50,000)
Top Personal Income Tax Rate: 5% (on interest and dividend income over $2,400; no tax on an individual’s reported W-2 wages)
State Sales Tax Rate: None
Oregon
Tax Foundation Rank: 9
Top Business Tax Rate: 6.6% (on all corporate income)
Top Personal Income Tax Rate: 9% (on income over $7,150)
State Sales Tax Rate: None
Delaware
Tax Foundation Rank: 10
Top Business Tax Rate: 8.7% (on all corporate income)
Top Personal Income Tax Rate: 5.95% (on income over $60,000)
State Sales Tax Rate: None
Utah
Tax Foundation Rank: 11
Top Business Tax Rate: 5% (on all corporate income)
Top Personal Income Tax Rate: 5% (on all taxable income)
State Sales Tax Rate: 4.65%
Washington
Tax Foundation Rank: 12
Top Business Tax Rate: None
Top Personal Income Tax Rate: None
State Sales Tax Rate: 6.5%
Colorado
Tax Foundation Rank: 13
Top Business Tax Rate: 4.63% (on all corporate income)
Top Personal Income Tax Rate: 4.63% of federal taxable income
State Sales Tax Rate: 2.9%
Indiana
Tax Foundation Rank: 14
Top Business Tax Rate: 8.5% (on all corporate income)
Top Personal Income Tax Rate: 3.4% of federal adjusted gross income with modification
State Sales Tax Rate: 7%
Virginia
Tax Foundation Rank: 15
Top Business Tax Rate: 6% (on all corporate income)
Top Personal Income Tax Rate: 5.75% (on income over $17,000)
State Sales Tax Rate: 4%
Missouri
Tax Foundation rank: 16
Top Business Tax Rate: 6.25% (on all corporate income)
Top Personal Income Tax Rate: 6% (on income over $9,000)
State Sales Tax Rate: 4.23%
Tennessee
Tax Foundation Rank: 17
Top Business Tax Rate: 6.5% (on all corporate income)
Top Personal Income Tax Rate: 6% (on all taxable income)
State Sales Tax Rate: 7%
Oklahoma
Tax Foundation rank: 18
Top Business Tax Rate: 6% (on all corporate income)
Top Personal Income Tax Rate: 5.5% (on income over $8,700)
State Sales Tax Rate: 4.5%
Mississippi
Tax Foundation rank: 19
Top Business Tax Rate: 5% (on corporate income over $10,000)
Top Personal Income Tax Rate: 5% (on income over $10,000)
State Sales Tax Rate: 7%
Michigan
Tax Foundation rank: 20
Top Business Tax Rate: 6.04% (on all corporate income)
Top Personal Income Tax Rate: 4.35% of federal adjusted gross income with modification
State Sales Tax Rate: 6%
Alabama
Tax Foundation rank: 21
Top Business Tax Rate: 6.5% (on all corporate income)
Top Personal Income Tax Rate: 5% (on income over $3,000)
State Sales Tax Rate: 4%
Arizona
Tax Foundation Rank: 22
Top Business Tax Rate: 6.968% (on all corporate income)
Top Personal Income Tax Rate: 4.54% (on income over $150,000)
State Sales Tax Rate: 5.6%
Illinois
Tax Foundation Rank: 23
Top Business Tax Rate: 7.3% (on all corporate income)
Top Personal Income Tax Rate: 3% of federal adjusted gross income with modification
State Sales Tax Rate: 6.25%
Hawaii
Tax Foundation Rank: 24
Top Business Tax Rate: 6.4% (on corporate income over $100,000)
Top Personal Income Tax Rate: 8.25% (on income over $48,000)
State Sales Tax Rate: 4%
South Carolina
Tax Foundation Rank: 25
Top Business Tax Rate: 5% (on all corporate income)
Top Personal Income Tax Rate: 7% (on income over $12,850)
State Sales Tax Rate: 6%
