It’s exciting and hazardous to consider leaving your work to finally try out that company idea of yours. If you live in the correct state, you might have a slight advantage that will help you succeed.
After all, the location of your business can have a significant impact on the type of personnel and clients you can draw in, as well as the costs associated with running it, such as taxes and payroll. Looka.com, a company that provides branding and design tools for companies, has recently published a new rating of the greatest U.S. states for entrepreneurs to help you focus your search.
Looka says that if you’re finally prepared to leave your day job and launch your own business, California is the ideal location to be. Despite a historically high cost of living and one of the highest corporate tax rates in the nation, this is the case.

The top five on the list are listed as follows:
- New Jersey
- Georgia
- California
- Illinois
- Texas
California has long been a center for startup companies, particularly in the IT sector. However, in recent years, high-profile companies have started to leave the Golden State in quest of lower prices and, in many cases, lower taxes. The major companies that have relocated their headquarters outside of California since 2020 include Tesla, Oracle, and Hewlett Packard.
However, Looka highlights the state’s continued high concentration of startups and small enterprises with fewer than five employees, as well as one of the strongest new business survival rates in the nation. In terms of annual payroll for companies with fewer than one employee, California also takes the top spot. A Looka representative told that “Those entrepreneurs are, on average, able to pay themselves and their team better.”
According to data by the nonprofit Kauffman Foundation, 82.56% of new businesses in California survived after their first year of operation in 2021, according to the ranking. The national average is 81.7%, and given the difficulties that newly established firms encounter, they frequently require all the support they can receive to survive.
Texas, which has the fourth-highest concentration of companies with fewer than five employees, is right behind California. Additionally, thanks to the absence of a personal income tax, the Lone Star State has the second-highest annual payroll for companies with fewer than five employees and a lower-than-average cost of living.
With the lowest number of new enterprises in the nation and one of the worst survival rates for new businesses—just over 77% in 2021—Rhode Island is near the bottom of the list. When it comes to the median household income and the number of new enterprises founded between 2020 and 2021, West Virginia came in second-to-last, placing 49th overall.
States were evaluated based on six factors, according to Looka, to create its rankings:
- The number of companies with fewer than five employees
- Median income for a family
- Rate of new businesses surviving
- Cost of living
- Annual payroll for enterprises with fewer than five employees
- Each state’s percentage of new businesses from 2020 to 2021
The business used information from the World Population Review 2022, the U.S. Census Bureau, and the Kauffman Foundation’s Indicators of Entrepreneurship.