Starting a business is tough no matter where you are, but choosing a location with lower costs — like rent, labor, and taxes — can make it easier.
If you live on the U.S. coasts, moving inland might be a smarter option, according to a recent ranking by SimplifyLLC, an online small business advisor.
Utah is ranked the most affordable state to start a business in 2025, based on SimplifyLLC’s analysis of business costs across all 50 states.
Factors considered include corporate income tax rates, business filing fees, labor costs and availability, commercial rent and utility expenses, and the overall business environment.
Utah stands out with one of the lowest corporate tax rates in the U.S. at 4.65%, along with low utility costs and an average annual wage under $64,000, according to data from the U.S. Bureau of Labor Statistics.
This helped Utah secure the 13th spot on CNBC’s 2024 list of the Top States for Business.
The next nine cheapest states for starting a business are all located in the Western or Midwestern regions — none are on the coast.
Here are the 10 most affordable states for starting a business, according to SimplifyLLC:
- Utah
- South Dakota
- Colorado
- Wyoming
- Montana
- Idaho
- Nebraska
- Kansas
- Nevada
- North Dakota
Utah also ranks high in small business funding, with $15.4 million in Small Business Administration loans per 100,000 residents — the second-highest in the country, just behind Colorado’s $15.7 million.
North Dakota, the second-cheapest state, benefits from one of the lowest corporate tax rates (1.4% to 4.3%) and a high labor force participation rate of 68.8%, according to data from the Federal Reserve of St. Louis.
SimplifyLLC based its rankings on data from the Census Bureau, the Bureau of Labor Statistics, the Federal Reserve, the National Association of Realtors, the SBA, and the Tax Foundation. The eight key factors used to calculate the rankings were:
- Corporate income tax rates
- Business filing fees
- Average annual income
- Labor force participation rate
- Percentage of adults with a bachelor’s degree or higher
- Average monthly commercial electric bills
- Average commercial rent per square foot
- Small business lending per capita
Since lack of funds is one of the main reasons businesses fail, experts recommend that entrepreneurs carefully assess their finances before launching a business.
Choosing a location where costs are lower can give new businesses a better chance of success.
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