With the COVID-19 pandemic leading to more than 200,000 permanent business closures but the country starting to recover, the personal-finance website WalletHub today released its report on 2021’s Best & Worst States to Start a Business, and expert commentary.

To determine the most fertile grounds for planting and growing new ventures, WalletHub compared the 50 U.S. states across 28 key indicators of startup success. The data set ranges from financing accessibility to COVID-19 cases to office-space affordability.

Best States to Start a Business Worst States to Start a Business
1. Texas 41. Virginia
2. Georgia 42. Delaware
3. California 43. Pennsylvania
4. Florida 44. Missouri
5. Idaho 45. Alaska
6. Utah 46. Wyoming
7. Colorado 47. West Virginia
8. North Dakota 48. Rhode Island
9. North Carolina 49. Connecticut
10. Massachusetts 50. New Jersey

Best vs. Worst

  • Iowa has the cheapest average annual rent for office space, $12.08 per square foot, which is 2.2 times cheaper than in New York, the state with the most expensive at $26.66 per square foot.
  • Mississippi has the lowest labor costs (median annual income), $45,081, which is 1.9 times lower than in Maryland, the state with the highest at $84,805.
  • Massachusetts has the highest share of college-educated population, 43.70 percent, which is 2.1 times higher than in West Virginia, the state with the lowest at 20.60 percent.
  • Wyoming has the most startups per 100,000 residents, 214.10, which is 3.2 times more than in West Virginia, the state with the fewest at 67.13.

To view the full report and your state’s rank, please visit:

More from WalletHub

Expert Commentary

To what extent do state policies, such as corporate tax rates, influence decisions about whether and where to start a new business?

“Tax incentives go straight to the bottom line that satisfies the shareholders. Tax incentives attract big and small businesses. Federal and State corporate tax could be a concern for many start-ups only if they surround themselves with the right type of advisors. However, available talents might out weight the corporate tax rates. For example, when Amazon selected Crystal City, Virginia, as a second headquarters. The available talents were among the top reasons to develop the second headquarter, not necessarily the corporate tax rates.”
Chia-Li Chien – Ph.D., CFP®, PMP® – Assistant Professor, California Lutheran University

“These policies play a part but are not the only consideration when starting a business. There are also local policies, incentives, and support systems that play a big role.”
Martha (Marty) Mattare – Associate Professor, Frostburg State University and Director, Business Program – University System of Maryland at Hagerstown

Which, in your opinion, are the best industries for starting a business in 2021, and what states are most likely to see a start-ups activity increase? 

“Artificial intelligence, robotics, renewable energy, technology-enhanced education. I see a massive brain drain happening in California which is great news for the rest of us. Texas, Florida, and the mountain states will benefit now that Zoom has shown us what is possible using their technology.”
William Bowman – Professor, Catholic University of America

“I believe all the states will see an upsurge in business startups, and service industries in health care, elder care, travel and leisure, and personal care will be big.”
Martha (Marty) Mattare – Associate Professor, Frostburg State University and Director, Business Program – University System of Maryland at Hagerstown

What measures can state authorities undertake in order to encourage entrepreneurs to start new businesses in their state?

“States should continue to encourage business/university relationships as they have done for decades and concentrate on removing barriers that make those relationships difficult to bloom (one-sided patent policies, etc.). Watch Texas and Miami as they roll out pro-business programs that are taking root.
The world has suddenly changed and the tools for success are different. Entrepreneurs need to monitor what is working and what is not and get very good at placing bets on the winners.”
William Bowman – Professor, Catholic University of America

“Taxes and non-repayment grants are always mentioned but for the committed entrepreneur, there must be an ecosystem that he or she can tap into, learn, find partners and cofounders, and brainstorm with. Until those ecosystems are established outside of the standard locations – the Bay Area, Austin, Boston, NY, it will continue to be difficult to generate successful startups.”
Russ McBride – Assistant Professor, University of California, Merced

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