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:

Executive Summary

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:

  1. Wyoming
  2. Alaska
  3. South Dakota
  4. Florida
  5. Montana
  6. New Hampshire
  7. Oregon
  8. Utah
  9. Nevada
  10. Indiana

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:

  1. Vermont
  2. Ohio
  3. Minnesota
  4. Louisiana
  5. Iowa
  6. Arkansas
  7. Connecticut
  8. New York
  9. California
  10. 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

 

2019 State Business Tax Climate Index Ranks and Component Tax Ranks
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
Alabama 39 20 30 48 15 12
Alaska 2 25 1 5 23 35
Arizona 27 17 19 47 5 13
Arkansas 46 40 40 44 26 34
California 49 31 49 43 14 17
Colorado 18 16 14 38 12 40
Connecticut 47 29 43 30 50 23
Delaware 11 50 41 2 9 3
Florida 4 6 1 22 11 2
Georgia 33 8 38 29 24 38
Hawaii 38 14 47 24 16 26
Idaho 21 26 23 26 4 48
Illinois 36 39 13 36 45 42
Indiana 10 18 15 12 2 11
Iowa 45 48 42 19 39 33
Kansas 28 34 21 31 20 15
Kentucky 23 27 17 14 35 47
Louisiana 44 36 32 50 32 4
Maine 30 41 24 7 41 24
Maryland 40 22 45 18 42 28
Massachusetts 29 37 11 13 46 50
Michigan 13 11 12 11 22 49
Minnesota 43 42 46 27 31 25
Mississippi 31 15 27 35 36 5
Missouri 14 4 25 25 7 8
Montana 5 12 22 3 10 21
Nebraska 24 28 26 9 40 9
Nevada 9 33 5 40 8 45
New Hampshire 6 45 9 1 44 44
New Jersey 50 47 50 45 48 32
New Mexico 25 21 31 41 1 10
New York 48 7 48 42 47 31
North Carolina 12 3 16 20 33 7
North Dakota 17 23 20 32 6 14
Ohio 42 46 44 28 13 6
Oklahoma 26 9 33 39 19 1
Oregon 7 30 36 4 17 37
Pennsylvania 34 43 18 21 34 46
Rhode Island 37 32 29 23 43 29
South Carolina 35 19 34 34 27 27
South Dakota 3 1 1 33 28 39
Tennessee 16 24 8 46 29 22
Texas 15 49 6 37 37 18
Utah 8 5 10 16 3 16
Vermont 41 38 37 15 49 20
Virginia 22 10 35 10 30 43
Washington 20 44 6 49 25 19
West Virginia 19 13 28 17 18 30
Wisconsin 32 35 39 8 21 41
Wyoming 1 1 1 6 38 36
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).

Contact: info@startup-port.com 

Startup Port. First published on 2009, updates every year. Last update November 2018.

Source of this information is from several State data and the Tax Foundation. 2018