Top Five States for Starting a Small Business

LegalZoom’s latest research revealed the top five states in the U.S. for business formation this year as well as the top five industries. The research was done, the company said, “to help inform entrepreneurs on where they should focus either starting a business or expanding a business in the coming year.”

Coming in number one was Texas, followed by California, Florida, New York and Georgia. The top five industries for small business formation in 2022 were professional, scientific and technical services (such as graphic design, accounting, retail and IT services, among others).

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It’s important to note that small businesses are facing many challenges in today’s economy. One of the biggest is the competition from larger, more established companies. Larger firms often have more resources and can offer lower prices, making it difficult for small businesses to compete.

Another challenge facing small businesses is the difficulty of obtaining financing. Many small companies struggle to get loans from banks and other lending institutions, making it difficult to invest in new equipment, expand their operations or even cover day-to-day expenses.

However, while small businesses face many hurdles, they are also a vital part of the economy and can often adapt and overcome these challenges to succeed. Regarding the research from LegalZoom, it can help inform entrepreneurs as to where they should locate their business.

In its analysis, LegalZoom said Texas had more than 49,000 LLCs that were formed since December 2021. “One of the main reasons Texas is a strong state to start a small business is due to the fact that Texas has no personal or corporate state income tax,” LegalZoom said in its report. “This, along with Texas’ low cost of living, makes starting a business in Texas especially appealing.”

In California, more than 48,000 LLCs were formed since late 2021. “Despite having a high cost of living, California remains one of the top places to form an LLC due to incentives and tax credits offered by private investors as well as the state,” the authors of the report said. “There also is governmental support during tough times. For example, during the pandemic, the state launched the California Rebuilding Fund to help impacted small businesses rebuild from the economic crisis.”

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