Quit work and open your own business: in which states of America is it easiest to build a small business

Leaving your job to finally pursue your business idea is an exciting and risky proposition. But at the end of the day, your location can play a huge role in determining what kind of employees and clients you can attract, as well as what the costs, taxes, and wages will be. Edition CNBC published a ranking of the best US states to start a business.

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According to Looka.com, California is the best place for those who are finally ready to quit their daily jobs and start their own business. This is despite the notoriously high cost of living, including one of the highest corporate tax rates in the country.

Here are the first five states on the list:

1. California
2. Texas
3. New Jersey
4. Illinois
5. Georgia

California has long been a hub for new businesses, especially for the tech industry, but the Golden State has recently seen a massive exodus of high-end businesses leaving the state in search of lower costs and, in many cases, lower taxes. Tesla, Oracle, and Hewlett Packard are among the biggest companies that have moved their headquarters out of California since 2020.

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But Looka.com points to the still high concentration of small businesses and startups in California with fewer than five employees and one of the best survival rates for new businesses in the country. California also ranks first in annual wages for businesses with fewer employees. “These entrepreneurs are, on average, better able to pay themselves and their team,” a Looka spokesperson said.

The ranking cites a study by the nonprofit Kaufman Foundation showing that in 2021, 82,56% of new businesses in California were still operating after their first year of existence. The national average is 81,7%.

Just behind California is Texas, which boasts the fourth largest concentration of businesses with fewer than five employees. The state also offers the second-highest annual payroll for businesses with fewer than five employees and a below-average cost of living, helped by the state's lack of personal income tax.

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Rhode Island sits at the very bottom of the rankings with the lowest number of new businesses in the country and one of the worst survival rates for new businesses, at just over 77% in 2021. West Virginia is ranked 49th, second to last.

The complete list looks like this:

1. California
2. Texas
3. New Jersey
4. Illinois
5. Georgia
6. Massachusetts
7. New York
8. Florida
9. Oklahoma
10. Tennessee
11. Arizona
12. Ohio
13. Colorado
14. North Carolina
15. Pennsylvania
16. Minnesota
17. Louisiana
18. Missouri
19. Iowa
20. New Mexico
21. Idaho
22. Michigan
23. Virginia
24. Mississippi
25. Nebraska
26. Indiana
27. Wisconsin
28. Maryland
29. Connecticut
30. Washington
31. Alaska
32. Wyoming
33. Арканзас
34. Oregon
35. Kentucky
36. Montana
37. Nevada
38. Maine
39. Utah
40. Kansas
41. Alabama
42. New Hampshire
43. North Dakota
44. Vermont
45. Hawaii
46. Южная Каролина
47. South Dakota
48. Delaware
49. West Virginia
50. Rhode Island

Looka.com said that states were ranked according to six criteria to compile their rankings:

• the number of businesses with fewer than five employees;
• average income;
• survival rate for new ventures;
• the cost of living;
• annual salary for businesses 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, World Population Review 2022, and data from the Kaufman Foundation.

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