How to Choose The Best State For Your Business

How to Choose the Best State for Your Business

As a freelance writer, I can live anywhere in the country. Once I got my business off the ground and no longer needed a part-time job, I decided to relocate to save money. At the time I knew I wanted to start another business, possibly based on homesteading or farming. So I needed to find a state with low housing costs, reasonable income and property taxes, and favorable cottage food laws. I considered a few different states including Kansas, Alaska, Tennessee, and North Carolina before settling on Michigan. 

Here’s a quick rundown of why I chose Michigan, plus some factors to consider if you’re looking for the best place to start or expand your business. 

Why I Chose Michigan

The rural area of Michigan I chose has low property taxes and housing costs. I paid less than $200,000 for my homestead on 10 acres of wooded land, which is perfect for the woodworking business I decided to start. I have more high-quality pine than I know what to do with! 

Plus, Michigan was ranked number one by Wallethub when it comes to total spending on business incentives as a percentage of GDP. So if I ever need a small business grant, it may be easier to get one here than where I came from in Massachusetts. 

Michigan also has favorable cottage food laws. This would make it easy to sell my homegrown vegetables at the farmer’s market if I ever want to. The cherry on top is that I live in an area that gets lots of tourism in the summer. As a result, there are lots of local farmer’s markets and boutiques where I can sell my woodworking crafts. 

But your business and priorities may be different from mine. Here are some pointers on how to choose the best location for your unique business needs. 

Choosing The Best State For Your Business 

To choose the right state for your business, you have to determine your top priorities. If you’re trying to launch a clothing business, you might look for a state that has a robust manufacturing industry so you can find a factory to partner with. You might also shortlist states with affordable rent so you can find cheap warehouse space to store all your inventory. 

Here are some of the main factors that you may want to consider when choosing a location, depending on your needs and business goals. 

Taxes 

Choosing a state with low income and corporate taxes could save you thousands of dollars per year. Several states don’t have a personal income tax

  • Alaska 
  • Florida 
  • Nevada 
  • South Dakota 
  • Tennessee 
  • Texas
  • Wyoming 

South Dakota and Wyoming don’t have a corporate income tax either, which can result in big savings. 

If you work from home, pay attention to property taxes as well. I only pay $200 per month in property tax for my 2,000 square foot home on 10 acres. I’d probably pay triple that amount if I tried to buy a similar home where I used to live in Massachusetts. 

Business Incentives and Grants

Some states offer more incentives and grants to small businesses and solopreneurs than others. For example, self-employed individuals can apply to a program called Tulsa Remote. If selected, you’ll get $10,000 and other perks like free desk space just for moving to Tulsa, Oklahoma. West Virginia and Alabama have similar programs that are worth checking out if you’re a solopreneur looking for a new home base. 

Office Rent 

Office rent is going to be one of your biggest expenses. So it pays to look for a state with affordable rent prices (or housing costs for solopreneurs who work at home). According to Wallethub, Iowa, Maine, South Dakota, and Montana offer the cheapest office space

Labor Cost and Availability 

If you think you may want to expand and hire employees in the future, it’s a good idea to assess the cost and availability of labor in the states you’re considering. If your business requires highly skilled workers, consider states that have the most educated populations, such as Massachusetts, Colorado, Maryland, and New Jersey. But if keeping labor costs down is essential, states that have lower average labor costs such as Mississippi, West Virginia, and Arkansas may be a better fit. 

Economic Stability 

Choosing a state with an active, healthy economy could increase your company’s chances of success. States with robust economies may be more likely to have customers who can afford your products and services. US News ranked these states as having the best economies: 

  • Utah 
  • Colorado 
  • Idaho 
  • Washington 
  • Massachusetts 
  • Nevada 
  • Arizona 
  • Florida 

Another metric to consider is each state’s business failure rate. Washington, Illinois, Iowa, and Indiana have the lowest business failure rates in the first year

How did you go about choosing the best state for your business? If you’re still looking for the perfect state, which of the factors above is most important to you? Share your thoughts in the comments below!

Read More

Top 4 Dangers of Starting a Business With Friends

5 Side Hustles That Aren’t Worth Your Time

3 Flexible Business Ideas Without Deadlines