Want to Start a Small Business? Here Are the Best States to Try (and the Ones to Avoid). Plus, here's how many businesses closed in your state last year.
By Sherin Shibu Edited by Melissa Malamut
Key Takeaways
- A new study from AI software company MRPeasy highlights the best and worst states to start a small business.
- Nevada was at the top of the list, while Louisiana came in last.
- The study looked at the number of businesses that opened and closed in every U.S. state.
For every one business that closed in Nevada last year, about 1.3 businesses opened.
That ratio, of businesses opening to closing, makes Nevada the best state to open a small business, according to a new study from AI software company MRPeasy.
"It is interesting to analyze the U.S. states with the highest and lowest rates of small business openings and closures since the ratio reveals economic trends and growth," MRPeasy director of business development Mike Lurye stated.
The study drew from U.S. Small Business Administration Office of Advocacy data for 2023 to find the number of business openings and closings in each state during the year, calculate the ratio between them, and rank each state in a list. It defined a small business as a company with less than 500 employees.
Louisiana, meanwhile, was at the bottom of the list as the worst state to start a small business. It was the only state with a negative ratio of business openings to closures, meaning that more businesses shut down than started in Louisiana last year.
Small businesses are likely to fail: U.S. Bureau of Labor Statistics data shows that 65% fail within the first decade. Over 60 million Americans are employed by small businesses, per U.S. Chamber of Commerce data, and there are more than 33 million small businesses in the U.S. One in five small businesses indicate that they only have one to five months of cash reserves on hand for emergencies, according to a recent study.
Here are the best and worst states to open a small business, based on the balance between business openings and closings last year.
Related: Household Incomes Are Up For the First Time in 4 Years. Here's Which States Have the Highest Gains.
Las Vegas, Nevada. Photo Credit: Getty Images
The Best States
1. Nevada
Small business openings: 18,296
Small business closings: 8,012
Ratio: 1.284
2. Washington
Small business openings: 29,963
Small business closings: 13,419
Ratio: 1.233
3. Vermont
Small business openings: 4,037
Small business closings: 2,133
Ratio: 0.893
4. New Jersey
Small business openings: 45,577
Small business closings: 24,347
Ratio: 0.872
5. Tennessee
Small business openings: 25,753
Small business closings: 14,543
Ratio: 0.771
6. Maine
Small business openings: 7,379
Small business closings: 4,310
Ratio: 0.712
7. South Carolina
Small business openings: 20,872
Small business closings: 12,344
Ratio: 0.691
8. Idaho
Small business openings: 11,426
Small business closings: 6,765
Ratio: 0.689
9. Connecticut
Small business openings: 15,892
Small business closings: 9,598
Ratio: 0.656
10. Rhode Island
Small business openings: 6,343
Small business closings: 3,836
Ratio: 0.654
The Lowest-Ranked States
1. Louisiana
Small business openings: 11,189
Small business closings: 11,998
Ratio: -0.067
2. Oregon
Small business openings: 17,483
Small business closings: 14,795
Ratio: 0.182
3. Missouri
Small business openings: 28,137
Small business closings: 23,579
Ratio: 0.193
4. Montana
Small business openings: 6,585
Small business closings: 5,439
Ratio: 0.211
5. Minnesota
Small business openings: 17,084
Small business closings: 13,879
Ratio: 0.231
6. North Dakota
Small business openings: 2,892
Small business closings: 2,317
Ratio: 0.248
7. New Mexico
Small business openings: 6,786
Small business closings: 5,352
Ratio: 0.268
8. Virginia
Small business openings: 32,318
Small business closings: 25,336
Ratio: 0.276
9. Nebraska
Small business openings: 6,997
Small business closings: 5,485
Ratio: 0.276
10. Iowa
Small business openings: 9,177
Small business closings: 7,138
Ratio: 0.286
