We have to be fair in making statements about which state is better for business.
Many have been promoting Delaware for decades. Yes, Delaware has its advantages but the fact is that it’s not the only State that is best for business. As a matter of fact Delaware ranks 11 in a recent study.
Which states have the best business tax climate for forming an LLC or corporation?
Deciding on the state in which to form your corporation or LLC is relatively easy if you will only be doing business in one state.
But the decision is much more complex if you plan to do business in multiple states or are considering incorporating in a state other than one in which you will be doing business. You will then want to see how the states under consideration compare in a number of areas.
When comparing which state to incorporate in, you should consider many factors such as:
- Laws & regulations
- Available workforce & Talent pool
- Transportation and Freight
- Education (access to university research and support)
- Quality of life
- Cost of living (If you are going to physically be there)
- Weather and Environment
- Formation fees
- Business Licenses requirements
- Annual fees & filings
- Legal & court system
- Access to Investors (if you are a startup seeking funds)
- Startup Support Ecosystem (for startups, how many support platforms are there?)
- Business tax climate
- Incentives (tax and other state incentives, some states have tax incentives for startups!)
- Ease of access (local and global)
- Business friendliness
To assist our readers and future startups in evaluating each state’s business tax climate, we want to direct you to a study performed by the Tax Foundation – non-profit a nonpartisan tax research group based in Washington, D.C. that was founded in 1937. According to the Tax Foundation’s 2018 State Business Tax Climate Index, here’s how all 50 states stack up to each other in terms of business friendliness and based on several very important criteria such as: state’s tax and fees system, laws, regulations, litigation formation, and few other things that a business needs to consider before filing. https://taxfoundation.org/publications/state-business-tax-climate-index/
Hope this helps make a better decision for all.
Here is also a copy of the study:
The Tax Foundation’s State Business Tax Climate Index enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare. While there are many ways to show how much is collected in taxes by state governments, the Index is designed to show how well states structure their tax systems and provides a road map for improvement.
The 10 best states in this year’s Index are:
- South Dakota
- New Hampshire
The absence of a major tax is a common factor among many of the top 10 states. Property taxes and unemployment insurance taxes are levied in every state, but there are several states that do without one or more of the major taxes: the corporate income tax, the individual income tax, or the sales tax. Wyoming, Nevada, and South Dakota have no corporate or individual income tax (though Nevada imposes gross receipts taxes); Alaska has no individual income or state-level sales tax; Florida has no individual income tax; and New Hampshire, Montana, and Oregon have no sales tax.
This does not mean, however, that a state cannot rank in the top 10 while still levying all the major taxes. Indiana and Utah, for example, levy all of the major tax types, but do so with low rates on broad bases.
The 10 lowest-ranked, or worst, states in this year’s Index are:
- New York
- New Jersey
The states in the bottom 10 tend to have a number of afflictions in common: complex, non-neutral taxes with comparatively high rates. New Jersey, for example, is hampered by some of the highest property tax burdens in the country, recently implemented the second highest-rate corporate income tax in the country, levies an inheritance tax, and maintains some of the nation’s worst-structured individual income taxes.
2019 Tax ranks Table
|Overall Rank||Corporate Tax Rank||Individual Income Tax Rank||Sales Tax Rank||Property Tax Rank||Unemployment Insurance Tax Rank|
|Note: A rank of 1 is best, 50 is worst. Rankings do not average to the total. States without a tax rank equally as 1. DC’s score and rank do not affect other states. The report shows tax systems as of July 1, 2018 (the beginning of Fiscal Year 2019).|
|Source: Tax Foundation|
|District of Columbia||46||27||45||25||47||33|
For more information and to be updated on the changes and other ranking changes in this index please visit the Tax Foundation site.
Warning: Make sure you make an educated decision not based on suggestions by service providers that only care about making money from services rather than giving you a proper legal, accounting and business advice. Talk to a registered Accountant or a Law firm to make the proper decision.
Startup Port has an ecosystem of “shared services” subject matter experts in the Legal, Financial, Accounting, Investment, Business Launch and Location Selection matters that can help you make the “right” and “best”, “de-risked” decisions about your business. Reach out for taking advantage of over three decades of expertise from our Operating Advisory Team. Your first hour of advise is totally “free” with no strings attached. Don’t make a mistake and be part of the statistics (of failures).
Startup Port. First published on 2009, we update this list every. Last update: November 2018.
Source of this information is from several State data and the Tax Foundation. 2018