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15 Worst States in America To Start A New Business

Simi January 30, 2018

Small businesses bolster an economy. Obviously big companies and corporations bring in billions of dollars and employ thousands of workers, but it is the small business which is supposed to be the engine which drives economic recovery. And economic recovery is what the entire world is in dire need of.

Since the financial crisis of 2008 and the subsequent global recessions which we have been dealing with, everyone is looking for ways to make money. People are working multiple jobs, trying to spend sparingly, saving and maybe even starting their own businesses.

Currently, banks can lend money from the government at very low rates. This should mean that getting credit to start-up a reasonable business should not be too difficult. And yet small businesses are finding it hard to get off the ground due to the unavailability of credit, even though Washington is encouraging banks to increase their lending. If against these odds, credit is obtained and a person’s dream of owning their own business is finally realized, there is absolutely no guarantee that it will survive.

Having your company go bankrupt is possibly one of the biggest knocks a person can take, both financially and emotionally. A person has the potential to lose absolutely everything when they become an entrepreneur. Because the stakes are so incredibly high, one needs to do an immense amount of research before opening their doors. Regardless of the nature of the business, location is paramount. Therefore, these are the 15 worst states to start a business in.

15. Vermont

This New England state is the 6th smallest state in terms of area and is the 2nd least populated state in the United States. Its capital Montpelier is not even the most populated city in the state, this would be Burlington. In 2015 Vermont was the largest producer of maple syrup and in 2016 it was ranked as the safest state in the country.

Like Maine, Vermont has a long history of indigenous populations. These include the Abenaki and Mohawk peoples. Vermont became a republic during the American Revolution in 1777. It was the first republic to partially abolish slavery and it became the 14th state to join the U.S. after the initial thirteen.

Since 2006, Vermont has been steadily dropping in Forbes list which names the best states to do business in. It started at number 30 but has since made a short decline to number 42 in 2015. This state of affairs has only verified what an economist said in 2008. This was that the economy in Vermont is a stagnant one and that this should persist for at least the next 30 years. If the size of states is not taken into account, then Vermont ranks 50th in terms of GSP. The per-capita GSP ranking is somewhat better and was 34th in 2010.

The economy may be stagnant n Vermont, but the workforce is quite dependent on small businesses for employment. This state has small businesses which hire some of the most workers in the country. There is also still a workforce available were new businesses to settle and start-up there. But, starting a business in Vermont can be a very expensive venture due to the cost of living and the business tax climate.

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14. Maryland

Maryland is one of the smallest states in America, with only 12 407 square miles. It is one of the original thirteen colonies and is at times referred to as the home of freedom of religion in America. George Calvert formed it in the 17th century, with the intention being that Catholics who were being persecuted in Europe could travel across the Atlantic and seek refuge here. It is home to 6 million people, coupled with its small area, it is, therefore, one of the most densely populated states.

Since 2009 its households have had the highest median income throughout the United States. This is because Maryland had an economy which is quite diverse. It has a booming biotechnology, service and manufacturing industry. Its poverty rate sits at 7.8% making t the lowest in the country and in 2013 it boasted the most millionaires per capita.

This economic strength is in part because the state is so close to the federal government, which is based in Washington D.C. The other contributing factor is that in Maryland, there are many medical and research institutions. One of the larger of these being John Hopkins University which is now the biggest employer in Baltimore.

Already established residents of Maryland enjoy a relatively high quality of life and yet, it is not a very good place for newcomers and small businesses which are trying to find their feet. It comes in at number 37 on the small business survival index. This is due to the business tax climate which is not ideal for new businesses. Its opportunity share for new businesses is 73.11%, which further adds to its low rate of new entrepreneurs.

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13. Oregon

This Pacific Northwest state is one of three states that have a coastline on the Pacific. It has the 27th biggest population in America and is the 9th largest state. Across its 98 000 square miles spans a diverse range of geographical elements. These include bodies of water, mixed and evergreen forests, volcanoes semi-arid shrublands and even deserts. While the timber industry was the major contributor to its economy in the 20th century, its varying landscape also allows for the emergence and success of other industries. These include fishing, hydroelectric power, and agriculture.

In September 2016, the unemployment rate in Oregon was marginally higher than the overall US rate, sitting at 5.5% while the national average was 5%. While its population is the 3rd biggest food stamp user in the country, in 2015 it had the 17th highest median income for each household. This was calculated to be $60,834.

Oregon’s agricultural industry is rather large and boasts a wide variety of produce. These include hazelnuts, blueberries, and cranberries. The climate and condition of the soil in this state are also startlingly similar to those in France. This has produced the perfect environment for wineries which grew by 12% in 2013.

This state scores well on a number of different ranking systems and yet it sits at number 38 on the small business survival index. It may have workers that are educated and available, a solid GDP, an agreeable business tax climate and a good percentage of workers that are employed by small businesses, but these factors do not necessarily make it a suitable place to start a new business. This state has a diverse industry and landscape, but it is also very densely populated which may have contributed the decreased lifespan of small businesses.

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12. North Carolina

North Carolina is home to Charlotte which is the third largest banking center in America. It is the 9th most populous state and extends from sea level, all the way up to Mount Mitchell which sits at 6,684 feet above sea level.

This state may only have the third largest population among the South Atlantic states, but it is also the leader in many industries in that same area. It produces the most tobacco, furniture, and textiles in the whole of the United States. When it comes to the farming of trout, hogs, turkeys, pigs and Christmas trees it comes in 2nd.

The success of industries such as these may appear to provide for a stable economy, and yet there is a large divide between urban and rural growth. The cities in North Carolina reap the benefits of a stable and growing economy, these being low unemployment, rising income, and job growth. The same is not true for the rural areas. This lack of consistency has meant that overall, the state has the 14th highest poverty rate and the amount of families that fall below the poverty line sits at 13%.

In 2010 Forbes magazine names North Carolina the 3rd best state to start a business, but it only comes in at number 39 on the small business survival index. The cost of living is relatively low in this state and the tax climate is quite favorable for businesses. But, the number of workers that are employed by small businesses is low and is only 44.8%. Start-up density and the rate of new entrepreneurs both sit at acceptable levels, but it is not advisable to start a small business in this subtropical state.

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11. Connecticut

Connecticut is a Crown Colony and was one of the thirteen colonies which fought in the American Revolution to overthrow British rule in America. It is the 3rd smallest state but is also the 4th most densely populated one. Since 2010 it has had the highest median household income and highest income-per-capita. Other common names for this state include the Constitution State, Nutmeg State, Land of Steady Habits and Provisions State.

Prior to major settlement of the British in the 1630s, the Dutch settled in the area which is now known as Hartford. The settlement was a short-lived one and formed part of the New Netherland which was a Dutch colony.

In 2013, Connecticut had a per-capita personal income of $60,847, which was the highest in the country. But, this mass of income is far from equally spread. The gap between the top-earning 1% and the rest of the population is the 2nd largest in the United States. The poorest municipality is Hartford which had an income per-capita of $13,428 which was substantially lower than the richest, New Canaan which had an income of $85,459. Prior to 1991, there existed no tax on income which was earned through employment. Only investment gains were taxed and that was done at a whopping 13%. Since then income tax has been implemented and individuals are taxed in one of six different tax brackets.

Connecticut may be the 6th most expensive state to live in, but with its high GDP for most, it is marginally affordable. Workers in this state are also very educated, but this is not enough to keep small businesses alive. On the small business survival index, Connecticut ranks at number 40.

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10. Iowa

The state flag of Iowa is a very clear indication of its heritage. During the colonial times, Iowa formed part of French and Spanish Louisiana. This is seen in its flag which was designed with the French national flag in mind. Their economy became based on agriculture after the Louisiana Purchase. This only changed well into the 20th century when the economy become more diversified. Along with agriculture, there are industries such as processing, financial services, biotechnology, green energy production, information technology, and manufacturing.

It is the 30th most populated state and the 26th biggest in terms of area in the United States. Iowa, which has been nicknamed the Hawkeye State, is said to be the safest state to live in. In 2010 CNBC released a list called ”Top States for Businesses in 2010”. This list had multiple categories, with Iowa featuring in the top 20 in a few of them.

In terms of cost of doing business, Iowa ranked number 1. These costs included everything from general costs of doing business and taxation. Other places Iowa obtained were, 12th for business friendliness, 16th for education, 10th for economy, 17th for cost of living and quality of life and 20th for the workforce. Their lowest ranking was for access to capital, where they came in at number 36.

There is a lot of opportunity for entrepreneurs in Iowa. This is due to the low cost of living and the availability of educated workers. In the coming years, Iowa could possibly see a boom in the growth of small businesses but, as of yet it is number 41 on the survival of small business index. This is reflected in its very low start-up rates.

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9. Hawaii

These volcanic islands are unique when it comes to the topic of States in America. Firstly, it is the newest state. Hawaii only became an official state of the United States on the 21st of August 1959. Secondly, it is the only state out of 50 that is comprised totally of islands. These are in the Oceania, in the northernmost part of Polynesia. This state is also the only state in America that has such a huge and palpable Asian influence in both the culture and population. It may be the 8th smallest state but it is also the 13th most densely populated one.

When considering the scenery and climate in Hawaii, it is obvious that tourism would be their larges industry. Since it was made an official state, traveling to Hawaii became incredibly easy for American people. In 1997, tourism contributed at least 24.3% to the GSP of Hawaii. There have been attempts to diversify the economy, with success of this being varied across the board. Hawaii’s location may be desirable as a holiday destination, but it is also quite far from the American mainland.

This makes exporting goods an almost infeasible option. But, this had not halted exports altogether. Hawaii export goods such as clothes, pineapples, livestock, sugarcane, coffee, macadamia nuts and honey.

By the end of 2015, unemployment in Hawaii was only 3.2%. Also, according to Phoenix Marketing International, these islands had the 4th most millionaires per capita. With this being said, it is the most expensive state to live in. And, this cost of living does indeed translate to operating costs. This added to the fact that the workforce is not that highly educated, makes for an unfortunate environment for starting new businesses.

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8. Minnesota

The Land of 10 000 lakes is the 22nd most populated of the states. Many Scandinavians and Germans moved to the area starting in the 19th century, giving it its rich German American and Scandinavian American culture. People living in Minnesota are known to be big civic participators and there is always a high turnout of voters in this state. The workers here are some of the highest educated in the country and they enjoy a higher than average GDP per-capita and standard of living.

Being the 12th largest state in America, Minnesota previously dealt in the production of raw materials. But, it is now home to an economy which is much more diversified. The state now produces finished products from their raw materials and partakes in service production. This diversity is so marked that the relative size of the economic divisions quite closely resembles those of America as a whole.

Out of the 1000 top publicly traded companies in America, 33 of them had their headquarters in Minnesota in 2008. These included Valspar, SuperValu, Target, UnitedHealth, U.S. Bancorp, Best Buy, General Mills and many others. The largest privately-owned company in America, Cargill is also based in Minnesota. In 2008 it had the 10th highest personal income per-capita in the United States. The unemployment rate is also lower than the national average and was at 3.1% in November 2017.

The opportunity share for new entrepreneurs may be quite high in Minnesota, but the actual rate of new entrepreneurs is quite low and is currently sitting at only 0.28%. It might be due to the presence of major corporations or the tax scheme, but either way, Minnesota ranks at number 43 on the small business survival index.

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7. Massachusetts

The Commonwealth of Massachusetts has always been incredibly influential culturally, historically, industrially and even in terms of popular culture and sports. In the New England region, Massachusetts remains the most populated state. With more than 80% of its residents residing in the Greater Boston area. The name itself is attributed to a tribe called the Massachusett, who lived in the area long before any European settlers arrived.

The economy was initially centered around fishing, agriculture, and trade. It was only after the Industrial Revolution that it became a more manufacturing based state. In the 20th century, this changed again. Massachusetts is now mostly service-based and has made themselves known for their incredible higher education, biotechnological, engineering, and finance sectors.

In Springfield and Holyoke, the games basketball and volleyball were developed in the 19th century. It was also in Massachusetts where same-sex marriages were first legalized in 2004. It is only the 44th biggest state in terms of area and yet it is home to political dynasties like the Kennedys and Adams, and it is the sight of the oldest institution of higher education in the country. This is none other than Harvard University. This university, as well as Massachusetts Institute of Technology(MIT), are top-ranking universities globally. This makes the populous of Massachusetts some of the most highly educated in the entire country.

The cost of living in this state might be high, but it also has the highest per-capita GDP in the country. The tax structure here is relatively low and yet it is not an ideal location for small businesses. On the small business survival index, it comes it at number 44. The highly educated work-force along with the high cost of living may very well be too much for a small business to handle.

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6. Rhode Island

The State of Rhode Island and Providence Plantations is the smallest state in America and yet it is the most densely populated. It is only 1,214 square miles in size, 14% of this being inlets and bays. Thus, giving it the nickname of ”The Ocean State”. It was the first state out of the Thirteen Colonies that renounced its British allegiance. This was on the 4th of May 1776.

With such a large part of its area being surrounded by water, it is no surprise that historically Rhode Island depended on fishing. The cotton mill at Blackstone River, which was started in 1793, utilized the water power in its surroundings and made this state, for a time at least, a major contributor to the textile industry. But the Great Depression saw the majority of these factories being located to states further south. There is some manufacturing that still takes place, but the economy of Rhode Island is more focused on services.

The largest service sector being health care, with tourism being the second and manufacturing coming in third. This manufacturing is mostly nautical in nature, including submarine manufacturing, shipbuilding, and boat building.

Before 2010, taxes in Rhode Island were significantly higher than neighboring states. This inhibited the growth of business until the new tax laws were passed. These saw a drop in the maximum tax rate and it also brought down the number of tax brackets. This has not done much to bring in new entrepreneurs. It has some of the lowest new entrepreneur rates in the country and if there are start-ups, they tend not to hire anyone other than the founder themselves. Despite the new laws, the tax climate is still unfavorable to new businesses.

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5. Maine

This state has the 9th smallest population and is the northernmost point in the New England region. It has a rocky coastline and has a heavily forested region in its interior parts. The territory which is now known as main was inhabited by indigenous people for thousands of years. In 1604, the area saw its first European settlers. These came from France and they settled in Saint Croix island.

The harsh geographical climate along with various skirmishes with the indigenous inhabitants meant that many of the later British colonies did not survive long. By the time the 18th century rolled along, only a few European settlements were left. Maine only became a separate state in 1820, when it left Massachusetts.

In 2007, Maine had a rather low personal income-per-capita and only ranked in at number 34. Its agricultural exports are varied and quite large in parts. These outputs are cattle, maple syrup, maple sugar, apples, dairy products, eggs, poultry, and blueberries. In 2012 Maine was named by the USDA as the largest blueberry producing state. These blueberries are primarily low-bush berries and amounted to 91 100 000 pounds. There is also a steady commercial fishing industry in Maine, but it is outdoor recreation and tourism which is proving to be increasingly more prominent.

There is a substantially large amount of small businesses in Maine. They employ 57.5% of the population, but these numbers do not necessarily guarantee the survival of small businesses. The cost of living and the current tax climate that businesses are facing, put Maine at number 46 on the small business survival index. These conditions have been improving since 2016 but the state is still largely an unfriendly place for new small businesses.

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4. West Virginia

West Virginia became a state in 1861 and was the sole state which formed by separating themselves from a pre-existing confederate state. This Southern state is known for its hills and mountains and boasts a host of outdoor activities. These include fishing, hiking, backpacking, rock climbing, hunting and many more. This is the only state which is completely inside the area known as the Appalachia and is a hot spot for scientific research and recreational caving.

In 2010 tourism was the biggest industry in the state and thus contributed the most to its economy. In this same year tourism and its related businesses employed 44 400 people and made $4.27 billion. Most of this business is due to the states outdoor opportunities. Adventurers go rock climbing in Seneca Rocks, enjoy winter sports in the Canaan Valley, white-water raft in the New River Gorge and hike in the Monongahela National Forest.

The largest resource in this state is coal. Its electricity is produced solely on this product and West Virginia even produces a surplus of energy each year. There is also a fair amount of farming that is practiced here but due to the mountainous landscape, it is quite sporadic.

This 41st biggest state in America may be the spot for an idyllic vacation, but it is not an ideal place to start a business. It is ranked number 36 on the small business survival index and has the worst start-up rate in the country. The cost of living may be quite low here and it does have an educated workforce, but its current per-capita GDP is still rather sluggish at $36,315. It does have a good opportunity share for new entrepreneurs, but one should think twice before investing all their money here.

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3. New York

Unsurprisingly, the state of New York boasts one of the highest GDPs in the United States. This value sits at $64,579 and is obviously thanks to the ever-burgeoning New York City. This internationally recognized city is not only the most populated city in the state, but it is also the most populated city in the entire United States. About 60% of the state’s population resides in the municipality of New York while a further 40% in Long Island. The Duke of York gave both the city and state its name in the 17th century. New York may not be the state capital, that is Albany, but that has not stopped it from making its name known globally and in every possible circle.

New York City has been known as the capital of finance, culture, and media. It is also the base for the headquarters of the United Nations. Furthermore, the economy of the state of New York is so sizable and profitable that it can even rank among entire countries.

In 2015 the GSP (Gross State Product) of the state of New York came in at a whopping $1.44 trillion. Going on these values, if it were to be ranked as an independent nation it would land up being either the 12th or 13th biggest economy in the world.

One would think that these numbers would make New York a good place to start a business. While there is a high density of start-ups, it is not a favorable location for small businesses. The state has one of the harshest tax climates in the country, which few small businesses would be able to withstand. This state may be ideal for huge corporations and investors, but it is not welcoming to small-scale entrepreneurs.

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2. California

This Pacific Region state is home to 39.5 million people. It is the 3rd largest state in America and has the biggest population. This enormous population is spread across the vast state in cities such as Los Angeles, San Francisco and the capital, Sacramento.

The San Francisco Bay Area and Greater Los Angeles Area may slightly trail behind the New York Metropolitan Area in terms of urban economies, but the state of California hosts the largest economy in the country. If it were to be ranked as an independent nation its population would come in at number 36 while its economy would be the 5th largest in the world. This ranking would be made on the fact that the economy of California comes in at $2.717 trillion.

This state has long held the title of trendsetter. It is the home of the film industry, the internet, the personal computer and the hippie counterculture, to name but a few. The economy of California is so large and so diverse that while its agricultural industry only contributes 1.5% to the state’s economy, it is still the highest output in the country. Finance, real estate, technology, government and other business services make up 58% of the economy in this state.

While California alone contributes 13.9% to Americas Gross Domestic Product, it also sports an incredibly tough environment for small businesses. The start-up density may be incredibly high and there are a startling number of new entrepreneurs in this state, but this does not necessarily translate to small businesses. The cost of living is extraordinarily high, and the tax structure is the third worst in the entire country. These conditions mean that the start-up and running costs of a small business are generally so high, that starting said businesses are actually not viable.

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1. New Jersey

Despite New Jersey being the 4th smallest state in America, its population of 9 million people makes it the 11th most populated state. This combination of small size along with a large population squarely makes New Jersey the most densely populated state in the United States. Statistically, this small state fully lies within the areas of Philadelphia and New York City. When considering the median income of each household, the Garden State was the 3rd richest in the country.

New Jersey had Native American inhabitants over 2 800 years ago and it was only in the 17th century when the first European settlers arrived. These were of Dutch and Swedish origin. While the region may have changed hands in the following years, by the time the American Revolution arrived it landed up hosting some very decisive battles in the 18th century. New Jersey was not only influential during times of war, it was also a large contributor to the Industrial Revolution.

This state was home to ”The Big Six” in the 19th century. These cities were Elizabeth, Jersey City, Paterson, Camden, Trenton and Newark with each having factories. In the last part of the 20th century a process known as suburbanisation aided in the growth of the state’s economy. This process did not continue indefinitely and towns which utilized auto-mobiles over railways tended to marginally fall behind.

The rate of new entrepreneurs is among the highest in the country and sits at 0.34%. With the majority of these businesses being started out of sheer opportunity. The per-capita GDP of New Jersey is $57,084, which is sufficiently high to possibly make it attractive to prospective business founders. This would be the case if the tax climate was not so unwelcoming to small businesses. On the business tax climate index, New Jersey ranks last, with the major contributor being very high property taxes.

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