Starting a business can be an expensive venture, and outsized expenses can easily sink your new venture. But did you know that the cost of starting a business can vary depending on where you set up shop? According to a new ranking from online small business advisor SimplifyLLC, Minnesota is the costliest state for new entrepreneurs in the United States, beating out even coastal states.
One of the reasons why Minnesota is so expensive for small businesses is because it has one of the highest corporate income tax rates in the country, at 9.8%. It also has relatively high labor costs, with the average annual wage of Minnesotans last year being $60,598, according to the U.S. Bureau of Labor Statistics.
However, Minnesota is not the only expensive state to pursue your startup dreams in. SimplifyLLC’s ranking includes the following nine priciest states for starting a small business: New York, Louisiana, Alabama, Alaska, Wisconsin, West Virginia, Nebraska, and Kansas.
New York may be relieved that it’s not number one on the list, but it’s still an expensive place to start a business. Workers in the Empire State have the fifth-highest average annual income in the country, at more than $62,000, and the state has the sixth-highest average monthly commercial electric bill, at more than $806.
Louisiana, the third-most expensive state on the list, has the least amount of commercial space available per 100,000 people of any state. It also has a relative dearth of available talent, ranking in the bottom three among all U.S. states in terms of labor force participation rate, at 69.2%, and only 26.4% of its post-college-age workers have at least a bachelor’s degree.
The ranking from SimplifyLLC used data from the Census Bureau, the Bureau of Labor Statistics, and the Tax Foundation to rate the country’s 50 states in nine categories, including corporate income tax rates, business filing fees, average annual income, labor force participation rate, percentage of adults over the age of 25 with at least a bachelor’s degree, average monthly commercial electric bills, available commercial real estate, amount of small-business lending per capita, and business survival rates.
While categories like utility bills, taxes, and startup fees are fairly obvious in how they weigh on a business’s expenses, other expenses not covered in this ranking, such as small-business insurance or the actual cost of leasing commercial space, can also vary by state.
Overall, it’s important to remember that what’s true in one state isn’t true in another, and all things being equal, some states give entrepreneurs an advantage by making it a bit more affordable to set up shop. So, if you’re thinking of starting a small business, it’s worth considering the cost of doing business in different states before making a decision.