From favorable tax environments and robust infrastructure to skilled workforces and strategic locations, the best states for business growth create an attractive environment for entrepreneurs and established businesses alike. As businesses continue to pivot and adapt in a globalized world, it's important to understand which U.S. states offer the most promising environment for expansion and success.
Recently, business consulting firm Venture Smarter analyzed data from the Bureau of Labor Statistics (BLS) to determine each state's business growth rate based on the number of establishments in December 2021 compared to December 2022. Did. The results are very clear. .
Top 10 US states for business growth
States along the U.S.'s so-called Sunbelt made up some of the top spots. For example, number one on the list was Georgia, where her business growth rate was 13.5%. There were 397,515 establishments in December 2022 compared to 350,189 establishments in December 2021. One of the many factors driving business growth in Georgia is the reasonable corporate tax rate of 5.75%. In addition, Georgia also offers employment tax credits to reduce the corporate tax burden of eligible businesses.
The second best state for business growth was Virginia, with an impressive business growth rate of 10.5%. In Virginia, the number of businesses increased from 305,345 in December 2021 to 337,394 a year later. The state offers many small business incentive programs, including the Virginia Enterprise Zone. Virginia Enterprise Zones offer many benefits, from tax exemptions for building renovations to tax credits for job creation. For some time, Virginia has benefited from the so-called Dulles Technology Corridor, a business cluster comprised of multiple defense and technology companies.
Arizona ranked third behind Virginia with a business growth rate of 10.4%. In December 2021, the number of establishments was 191,756, but that number exceeded 200,000 and reached 211,683 in December 2022. Arizona's corporate tax rate is 4.9%, the 14th lowest in the nation.
Montana and Vermont tied for fourth place, with business growth in both states at 10.2% year-over-year. Some factors that help explain Montana's business growth rate include the initial filing fee required to form an LLC in Montana of just $35, compared to states such as California that cost approximately $500. These include the fact that it is significantly lower than other states. Meanwhile, in Vermont, residents can take advantage of several business incentives, including flexible profit sharing, which allows businesses registered as LLCs to choose a variety of ways to distribute profits.
The fifth best state for business growth was Michigan, with a business growth rate of 9.8%. In the state, the number of establishments increased from 275,636 in December 2021 to 302,624 in December 2022, an increase of more than 25,000 in absolute terms. In Michigan, small business revenue increased by 24% between January 2020 and January 2022, significantly higher than the national average of 6.9%. The state has certainly come a long way since the depths of the Great Recession.
South Carolina ranked 6th, with the number of establishments served by the Palmetto State increasing from 155,945 in December 2021 to 170,968 in December 2022, representing a business growth rate of 9.6%. . South Carolina offers local income tax, state property tax, and inventory tax incentives for new businesses that register as corporations. All three of these characteristics make South Carolina especially suitable for entrepreneurs.
The seventh best state for business growth is North Carolina, with a business growth rate of 9.2% and the number of establishments increasing from 325,058 in December 2021 to 354,823 in December 2022. North Carolina has one of the lowest corporate income tax rates in the country at just 2.5%.
Colorado and Hawaii tied for eighth place. All of these states had a year-over-year business growth rate of 9.1% from December 2021 to December 2022. These two states are followed closely by the state of Idaho, which ranks 9th. The number of establishments in Idaho will increase from 82,118 in December 2021 to 89,454 in December 2022, representing a growth rate of 8.9%. A variety of business tax credits are available to entrepreneurs in Idaho. That includes the Small Employer Capital Investment Credit, which provides small businesses with his 3.75% tax credit on new equipment purchased within the state. And finally, No. 10 Utah. The state's business growth rate was 8.4%. As of December 2021, the number of establishments in Utah increased by 8.4% to 137,277 establishments in December 2022. Utah has a low corporate tax rate of 4.85%, and the LLC filing fee is $54, plus an additional $18 fee each year.
Conclusion on the best states for business growth
At the other end of the spectrum, Washington state had the worst business growth rate at -16.8%. As of December 2021, the number of establishments in the state was 284,440, but as of December 2022, the number had decreased by 47,644. In fact, only Washington state saw a complete decline in the number of establishments. However, the important thing to keep in mind is that regardless of the state, it is essential to research the fees you can expect to pay, as they can vary significantly from state to state. Needless to say, there are many incentives to take advantage of. Qualifications can make the process of starting a business smoother and cheaper, says Venture Smarter.