To determine the best and worst states to start a business, a team of Forbes consultants examined 18 metrics across five categories: business costs, business climate, financial accessibility, economy and labor. Each metric is individually weighted, giving each state a score out of 100.
Business cost: 30%
This metric includes income tax, corporate tax and property tax rates as of January 1, 2022 from The Tax Foundation. The formation fee for each state comes from research by Forbes consultants, the minimum wage for each state comes from the Department of Labor, and the number of natural disasters by the Federal Emergency Management Agency (FEMA) as of 2022.
- Income Tax (3 points)
- Corporate Tax (3 points)
- Property Tax (3 points)
- Formation fee (9 points)
- Minimum wage (9 points)
- Number of natural disasters (3 points)
Business environment: 20%
This metric uses data from Small Business Administration (SBA) country profiles to find the total net additions and subtractions of businesses since 2020. We use data from the Bureau of Labor Statistics to calculate business survival rates. We used SBA data to divide the number of businesses in each state by the number of small business management locations in each state to determine the SBA locations available to business owners in 2022.
- Total small business growth since 2020 (8 points)
- Business Survival Rate (8 points)
- Number of businesses per small business management location (4 points)
Financial Accessibility: 20%
For this metric, we used data from Small Business Administration country profiles to calculate total business funding available in 2021.
- Average Funding (20 points)
Start an LLC Online with ZenBusiness Today
Click a status below to get started.
The indicator uses data from the Bureau of Economic Analysis to calculate per capita personal spending in 2021. We used Statista to calculate GDP per capita and cost of living indices for each state.
- Personal spending per capita (6 points)
- GDP per capita (3 points)
- Cost of Living Index (6 points)
For this metric, we used data from the Bureau of Labor Statistics to find the unemployment rate and the percentage of workers with degrees in each state. Using data from the Census Bureau, we calculated how many people in each state were of working age (between 15-64). We calculated the number of colleges per capita using data from the National Center for Education Statistics to calculate the total number of degree-granting institutions in each state.
- Unemployment (4.5 points)
- % of population
- Working age (4.5 points)
- Percentage of degree-level workers (3 points)
- Number of universities and colleges per capita (3 points)