Which States Have the Most Small Businesses?

According to the U.S. Small Business Association (SBA), 99.9% of all the businesses in America are small businesses. There are 30.7 million of them in total, and they employ nearly 60 million people. That’s 47.3% — roughly half — of America’s combined workforce. Most work for businesses that employ fewer than 100 people.

And while nearly three out of four of them are still owned by men, women own 12.3 million small businesses. Of those that are owned by women, 47% are owned by women of color. In total, minorities own 45% of America’s small businesses.

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[ Read: The Best Small Business Loans in 2020 ]

To uncover the states with the smallest businesses, we consulted the SBA’s 2020 Small Business Profiles Report. States were ranked by the total number of businesses with less than 500 employees in their state. Naturally, there’s a correlation with population — small or sparsely populated states dominate the bottom of the list while larger populous states reached to the top.

According to the U.S. Chamber of Commerce, “American small businesses report they have reopened in some capacity and are showing signs of optimism about the future, even while still dealing with many ongoing challenges related to the pandemic.”

Keep reading for a glimpse at America’s struggling — but vibrant — small business community.

#51. Wyoming

Total small businesses: 68,641 (98.9% of businesses)
Small business rate: 15,424 per 100k residents 18+ (#3 highest among all states)
Total small business employees: 128,883 (#51 highest among all states)
Small business share of total employment: 63.8% (#2 highest among all states)
Self-employed minorities: 3,364 (#49 among all states)

Wyoming doesn’t have a lot of small businesses because it doesn’t have a lot of people—with a total population of less than 600,000, it’s the least-populous state in America. On a per-capita basis, however, it boasts one of the country’s highest rates of new entrepreneurship, thanks to the state’s business-friendly climate. There’s no corporate income tax, no individual income tax, no gross receipts tax and Wyoming boasts one of the lowest sales tax rates in the country.

#50. Alaska

Total small businesses: 73,298 (99.1% of businesses)
Small business rate: 13,289 per 100k residents 18+ (#11 highest among all states)
Total small business employees: 137,271 (#50 highest among all states)
Small business share of total employment: 52.4% (#12 highest among all states)
Self-employed minorities: 10,413 (#41 among all states)

Like Wyoming, Alaska has one of the country’s highest rates of new entrepreneurship. It also ranks as one of the most business-friendly states in America, thanks to the absence of both sales and income taxes.

#49. North Dakota

Total small businesses: 74,202 (98.8% of businesses)
Small business rate: 12,752 per 100k residents 18+ (#18 highest among all states)
Total small business employees: 195,312 (#47 highest among all states)
Small business share of total employment: 57.4% (#5 highest among all states)
Self-employed minorities: 3,652 (#48 among all states)

Low taxes and high quality of life have helped to make North Dakota a prime state for startups. Between the 2008 recession and the current COVID-19 crisis, the state’s economy roared like few others. Much of that had to do with an energy boom, but North Dakota is also home to a significant tech-industry presence.

#48. Washington D.C.

Total small businesses: 78,313 (98.2% of businesses)
Small business rate: 13,559 per 100k residents 18+ (#8 highest among all states)
Total small business employees: 250,345 (#43 highest among all states)
Small business share of total employment: 47.5% (#31 highest among all states)
Self-employed minorities: 14,471 (#37 among all states)

With more than 700,000 residents, the District of Columbia has a larger population than the state of Wyoming, all within less than 70 square miles. The nation’s capital is home base for the federal government, but its business climate can be challenging. The District is known for its complex and costly system of regulations and taxes.

#47. Vermont

Total small businesses: 78,759 (99% of businesses)
Small business rate: 15,443 per 100k residents 18+ (#2 highest among all states)
Total small business employees: 157,322 (#49 highest among all states)
Small business share of total employment: 60.8% (#3 highest among all states)
Self-employed minorities: 2,331 (#51 among all states)

Vermont consistently lands near the bottom of major reports that rank states by business-friendliness. Entrepreneurs there grapple with high costs, high taxes, lots of regulations and low growth prospects.

#46. Delaware

Total small businesses: 84,675 (98.4% of businesses)
Small business rate: 10,994 per 100k residents 18+ (#40 highest among all states)
Total small business employees: 187,221 (#48 highest among all states)
Small business share of total employment: 46.7% (#34 highest among all states)
Self-employed minorities: 11,944 (#38 among all states)

The state of Delaware has long been known as a corporate tax shelter state, but it’s not generally an easy place to start a small business. Entrepreneurs there often have a hard time securing capital, and the tax code is unusually complex, according to several recent studies. However, business community leaders in the state refute those findings and point to things like Delaware’s relatively-simple zoning and licensing procedures.

#45. South Dakota

Total small businesses: 88,191 (99% of businesses)
Small business rate: 13,211 per 100k residents 18+ (#13 highest among all states)
Total small business employees: 209,403 (#46 highest among all states)
Small business share of total employment: 58.2% (#4 highest among all states)
Self-employed minorities: 3,096 (#50 among all states)

Business climate studies tend to give South Dakota lousy ratings in things like workforce quality, access to capital, and technology and innovation. The economy, however, is solid—before the COVID crisis, at least—and the cost of doing business is low in the state, which is business-friendly overall.

#44. Rhode Island

Total small businesses: 103,986 (98.9% of businesses)
Small business rate: 12,164 per 100k residents 18+ (#25 highest among all states)
Total small business employees: 229,212 (#45 highest among all states)
Small business share of total employment: 52.6% (#11 highest among all states)
Self employed minorities: 7,154 (#43 among all states)

Even before the COVID-19 crisis, job growth was stagnant in Rhode Island, which in recent years has consistently landed at or near the bottom of rankings of best states for business, like the one that CNBC conducts every year. The most significant obstacles to success tend to involve the cost of doing business, the economy, and infrastructure.

#43. West Virginia

Total small businesses: 113,779 (98.9% of businesses)
Small business rate: 7,942 per 100k residents 18+ (#51 highest among all states)
Total small business employees: 269,789 (#42 highest among all states)
Small business share of total employment: 49.1% (#23 highest among all states)
Self employed minorities: 3,938 (#46 among all states)

Entrepreneurs in West Virginia enjoy a low cost of doing business and a low cost of living. There are significant barriers there, however, in terms of access to capital, workforce quality, and technology and innovation.

#42. Montana

Total small businesses: 123,419 (99.3% of businesses)
Small business rate: 14,689 per 100k residents 18+ (#4 highest among all states)
Total small business employees: 245,758 (#44 highest among all states)
Small business share of total employment: 65.3% (#1 highest among all states)
Self employed minorities: 6,411 (#44 among all states)

The Montana Small Business Development Center Network operates 10 centers across the state and maintains a user-friendly website. Entrepreneurs can use this resource throughout the entire process of opening a business in the state.

#41. Hawaii

Total small businesses: 135,567 (99.3% of businesses)
Small business rate: 12,148 per 100k residents 18+ (#26 highest among all states)
Total small business employees: 275,908 (#41 highest among all states)
Small business share of total employment: 50.7% (#15 highest among all states)
Self-employed minorities: 53,064 (#21 among all states)

For several years, Hawaii has scored low marks on several studies ranking states by how friendly they are to small businesses. The state performed poorly across most categories, including licensing, ease of hiring, regulatory standards and ease of launching a business.

#40. New Hampshire

Total small businesses: 136,535 (99% of businesses)
Small business rate: 12,362 per 100k residents 18+ (#21 highest among all states)
Total small business employees: 300,628 (#39 highest among all states)
Small business share of total employment: 49.8% (#19 highest among all states)
Self-employed minorities: 4,793 (#45 among all states)

Like Hawaii, New Hampshire ranked low across most criteria on several studies that measure the environment for small businesses across all 50 states. The biggest drag by far was a shortage of qualified workers.

#39. Maine

Total small businesses: 149,355 (99.2% of businesses)
Small business rate: 13,635 per 100k residents 18+ (#7 highest among all states)
Total small business employees: 293,872 (#40 highest among all states)
Small business share of total employment: 57.2% (#6 highest among all states)
Self-employed minorities: 3,777 (#47 among all states)

A recent WalletHub study ranked all 50 states and the District of Columbia based on how badly their small businesses have been affected by the COVID-19 crisis. Maine came out worse than most of the country, coming in 19th on the list of the hardest-hit states.

#38. New Mexico

Total small businesses: 156,996 (99% of businesses)
Small business rate: 9,685 per 100k residents 18+ (#50 highest among all states)
Total small business employees: 339,731 (#37 highest among all states)
Small business share of total employment: 54.2% (#9 highest among all states)
Self-employed minorities: 51,090 (#23 among all states)

Forbes ranked New Mexico in the bottom six for seven consecutive years, through 2019, in its annual Best States for Business report. A weak labor supply was one of the key barriers to businesses in the state.

#37. Idaho

Total small businesses: 169,151 (99.2% of businesses)
Small business rate: 12,634 per 100k residents 18+ (#20 highest among all states)
Total small business employees: 325,294 (#38 highest among all states)
Small business share of total employment: 56.3% (#7 highest among all states)
Self-employed minorities: 9,203 (#42 among all states)

Small businesses have been central to the incredible economic growth that Idaho has experienced over the last decade—much of which has been driven by women entrepreneurs. Women opened more than 620 businesses in 10 years, and the state is now home to nearly 5,000 women-owned businesses that employ 36,000 Idahoans and pay salaries and wages totaling more than $1 billion.

#36. Nebraska

Total small businesses: 179,509 (99.1% of businesses)
Small business rate: 12,309 per 100k residents 18+ (#23 highest among all states)
Total small business employees: 412,587 (#36 highest among all states)
Small business share of total employment: 49.5% (#22 highest among all states)
Self-employed minorities: 10,611 (#40 among all states)

Nebraska consistently ranks in the top 10 on major surveys of small business climates from state to state. Steady growth and a low cost of doing business drive the entrepreneur-friendly state’s culture.

#35. Arkansas

Total small businesses: 255,004 (99.3% of businesses)
Small business rate: 11,003 per 100k residents 18+ (#39 highest among all states)
Total small business employees: 490,680 (#34 highest among all states)
Small business share of total employment: 47.6% (#29 highest among all states)
Self-employed minorities: 25,654 (#33 among all states)

Thumbtack, a platform that connects small businesses with the people who need their services and products, conducted a major nationwide study in 2019. It ranked Arkansas as the #1 most small business-friendly state in the whole of America.

#34. Kansas

Total small businesses: 256,950 (99.1% of businesses)
Small business rate: 11,611 per 100k residents 18+ (#31 highest among all states)
Total small business employees: 605,147 (#31 highest among all states)
Small business share of total employment: 50.5% (#16 highest among all states)
Self employed minorities: 20,356 (#36 among all states)

Although many entrepreneurs cited problems with finding skilled workers, Kansas small business owners enjoyed a revival of growth and success through early 2020. That mdoest business growth was driving the state’s overall economic expansion before the COVID-19 crisis.

#33. Mississippi

Total small businesses: 262,272 (99.3% of businesses)
Small business rate: 11,515 per 100k residents 18+ (#33 highest among all states)
Total small business employees: 437,242 (#35 highest among all states)
Small business share of total employment: 46.5% (#35 highest among all states)
Self employed minorities: 34,152 (#30 among all states)

Mississippi recently allocated $240 million to offer grants of up to $25,000 to small business owners affected by COVID-19. That’s on top of $60 million for $2,000 checks to 29,000 small businesses, for a total of $300 million that came from Mississippi’s $1.25 billion share of the CARES Act federal fund.

#32. Iowa

Total small businesses: 272,555 (99.3% of businesses)
Small business rate: 11,224 per 100k residents 18+ (#37 highest among all states)
Total small business employees: 649,796 (#30 highest among all states)
Small business share of total employment: 48% (#28 highest among all states)
Self-employed minorities: 11,843 (#39 among all states)

Iowa recently received a $13.1 million federal grant for gap funding that will be doled out to the state’s small businesses in the form of revolving loans. Back in April, the state agreed to pay utility bills for Iowa’s small businesses and nonprofits.

#31. Nevada

Total small businesses: 283,333 (99.2% of businesses)
Small business rate: 11,867 per 100k residents 18+ (#29 highest among all states)
Total small business employees: 503,144 (#33 highest among all states)
Small business share of total employment: 42.2% (#49 highest among all states)
Self-employed minorities: 52,451 (#22 among all states)

COVID-19 cases are rising in Nevada, a state that was especially hard hit by the economic shutdown because it relies so heavily on tourism and gaming dollars. Even so, only Las Vegas and Clark counties have received federal relief money. Every other county in the state is still waiting, leaving thousands of small businesses struggling.

#30. Utah

Total small businesses: 301,265 (99.3% of businesses)
Small business rate: 13,244 per 100k residents 18+ (#12 highest among all states)
Total small business employees: 590,417 (#32 highest among all states)
Small business share of total employment: 46% (#38 highest among all states)

Self-employed minorities: 21,497 (#34 among all states)

Utah’s businesses received more than $5 billion in federal aid by the end of June. The money proved to be a lifeline to the state’s smallest businesses—the vast majority of the 50,000 loans the aid package financed were for less than $150,000. In total, the federal relief funds have allowed 800,000 Utahans to continue receiving paychecks.

#29. Connecticut

Total small businesses: 350,376 (99.4% of businesses)
Small business rate: 12,347 per 100k residents 18+ (#22 highest among all states)
Total small business employees: 745,085 (#27 highest among all states)
Small business share of total employment: 48.5% (#26 highest among all states)
Self-employed minorities: 43,867 (#26 among all states)

Across the country, small businesses owned by minorities and women have suffered disproportionately in the face of the pandemic. In response, philanthropists and the state government in Connecticut launched a $1.5 million emergency loan program specifically for minority- and women-owned businesses.

#28. Kentucky

Total small businesses: 355,998 (99.3% of businesses)
Small business rate: 10,275 per 100k residents 18+ (#47 highest among all states)
Total small business employees: 712,477 (#28 highest among all states)
Small business share of total employment: 43.8% (#46 highest among all states)
Self-employed minorities: 21,137 (#35 among all states)

A CNBC study before the COVID crisis ranked Kentucky in the bottom 10 among states in terms of being a good place to do business. Skilled worker availability got the lowest of several poor marks across 10 categories, but good infrastructure was one bright spot.

#27. Oklahoma

Total small businesses: 358,647 (99.4% of businesses)
Small business rate: 11,936 per 100k residents 18+ (#28 highest among all states)
Total small business employees: 710,271 (#29 highest among all states)
Small business share of total employment: 52.2% (#13 highest among all states)
Self-employed minorities: 50,271 (#24 among all states)

Recruiters charged with luring entrepreneurs to Oklahoma have a lot to work with. The cost of living in the state is roughly 40% lower than the national average. It also boasts a business tax burden that’s among the lowest in the country, likewise with regulatory hurdles. Entrepreneurs can start a business there without even having to secure a general business license.

#26. Oregon

Total small businesses: 387,819 (99.4% of businesses)
Small business rate: 11,573 per 100k residents 18+ (#32 highest among all states)
Total small business employees: 871,241 (#24 highest among all states)
Small business share of total employment: 54.6% (#8 highest among all states)
Self-employed minorities: 42,869 (#27 among all states)

Oregon has some of the lowest business tax rates in America and some of the cheapest commercial energy, thanks to the state’s widespread use of hydropower. Housing there is less expensive than its West Coast neighbors of California and Washington, and in terms of the workforce, only six states can claim a lower workers’ compensation cost.

#25. Alabama

Total small businesses: 401,717 (99.4% of businesses)
Small business rate: 10,530 per 100k residents 18+ (#45 highest among all states)
Total small business employees: 802,920 (#26 highest among all states)
Small business share of total employment: 47.5% (#30 highest among all states)
Self-employed minorities: 46,916 (#25 among all states)

Economic development publication Business Facilities recently ranked Alabama as the #1 state in America for entrepreneurs and businesses. It’s not an anomaly. Thanks to low taxes, low cost of living, and large-scale business development incentives, Alabama consistently lands at or near the top of such rankings.

#24. South Carolina

Total small businesses: 431,835 (99.4% of businesses)
Small business rate: 10,696 per 100k residents 18+ (#42 highest among all states)
Total small business employees: 817,008 (#25 highest among all states)
Small business share of total employment: 43.8% (#45 highest among all states)
Self-employed minorities: 57,623 (#20 among all states)

Like Alabama, South Carolina is no stranger to the top spots on business state best-of lists. It has a diverse economy anchored by several strong sectors, low commercial energy costs, and a strong workforce education and training program.

#23. Wisconsin

Total small businesses: 456,884 (99.4% of businesses)
Small business rate: 10,029 per 100k residents 18+ (#49 highest among all states)
Total small business employees: 1.3 million (#15 highest among all states)
Small business share of total employment: 49.5% (#21 highest among all states)
Self-employed minorities: 26,623 (#32 among all states)

Wisconsin officials recently created a five-point legislative program designed to help the state’s small businesses reopen smoothly and safely. It includes regulatory relief, unemployment insurance reform, financial assistance, liability protection and tax relief.

#22. Louisiana

Total small businesses: 457,636 (99.5% of businesses)
Small business rate: 12,851 per 100k residents 18+ (#16 highest among all states)
Total small business employees: 905,147 (#23 highest among all states)
Small business share of total employment: 53.6% (#10 highest among all states)
Self-employed minorities: 64,735 (#17 among all states)

Only 70,000 of Louisiana’s small businesses received federal aid to help recover from the pandemic. But that recently changed and qualifying small businesses that initially missed out can now apply for grants worth up to $15,000.

#21. Indiana

Total small businesses: 521,656 (99.4% of businesses)
Small business rate: 10,101 per 100k residents 18+ (#48 highest among all states)
Total small business employees: 1.2 million (#17 highest among all states)
Small business share of total employment: 44.4% (#44 highest among all states)
Self-employed minorities: 38,852 (#28 among all states)

According to Agrinovus Indiana, the Hoosier State has the #1 small business regulatory climate in the entire country. It also boasts the #2 lowest cost of doing business and the #3 best state infrastructure.

#20. Minnesota

Total small businesses: 526,350 (99.5% of businesses)
Small business rate: 12,138 per 100k residents 18+ (#27 highest among all states)
Total small business employees: 1.3 million (#15 highest among all states)
Small business share of total employment: 46.9% (#33 highest among all states)
Self-employed minorities: 30,846 (#31 among all states)

Minnesota is consistently ranked as one of the best places to do business in America. Its economy is diverse and strong, it has good schools and an educated workforce, and officials there have spent years concentrating on lowering business taxes and removing regulations.

#19. Missouri

Total small businesses: 530,380 (99.4% of businesses)
Small business rate: 11,126 per 100k residents 18+ (#38 highest among all states)
Total small business employees: 1.2 million (#17 highest among all states)
Small business share of total employment: 46.2% (#37 highest among all states)
Self-employed minorities: 37,621 (#29 among all states)

Small business owners in Missouri have endured the virus crisis and economic shutdown far better than most of America. It’s in the top 10 states least affected by the pandemic.

#18. Arizona

Total small businesses: 592,485 (99.4% of businesses)
Small business rate: 10,508 per 100k residents 18+ (#46 highest among all states)
Total small business employees: 1.1 million (#20 highest among all states)
Small business share of total employment: 43.5% (#47 highest among all states)
Self-employed minorities: 122,590 (#9 among all states)

A recent WalletHub study ranked Arizona as the seventh-best state to start a business, citing the overall business environment as the state’s strongest attribute. That includes low labor costs, steady growth and good access to capital.

#17. Maryland

Total small businesses: 604,176 (99.5% of businesses)
Small business rate: 12,825 per 100k residents 18+ (#17 highest among all states)
Total small business employees: 1.2 million (#17 highest among all states)
Small business share of total employment: 49.5% (#20 highest among all states)
Self-employed minorities: 116,369 (#11 among all states)

Maryland, too, made it into the top 10 in a recent survey about the ease of doing business America’s 50 states, this time in a report from Thumbtack. The study cited improvements in several categories between 2018-19, including the ease of starting a business, regulations, the tax code, licensing, and government websites.

#16. Tennessee

Total small businesses: 620,125 (99.5% of businesses)
Small business rate: 11,658 per 100k residents 18+ (#30 highest among all states)
Total small business employees: 1.1 million (#20 highest among all states)
Small business share of total employment: 42.1% (#50 highest among all states)
Self-employed minorities: 58,191 (#19 among all states)

Just before the start of 2020, Tennessee held the #1 spot among all states in terms of small business growth. Hourly earnings there also grew at a rate higher than the national average in 2019.

#15. Washington

Total small businesses: 630,819 (99.5% of businesses)
Small business rate: 10,599 per 100k residents 18+ (#43 highest among all states)
Total small business employees: 1.4 million (#14 highest among all states)
Small business share of total employment: 50.7% (#14 highest among all states)
Self-employed minorities: 91,902 (#12 among all states)

The Washington Policy Center recently released a report stating that while Washington state has one of the country’s highest small business startup rates, it also has one of the highest rates of failure. The report’s recommendations included reducing the more than 6,000 pages of new rules that the state issues every year and lowering the state’s burdensome business and occupation tax on gross receipts.

#14. Colorado

Total small businesses: 653,639 (99.5% of businesses)
Small business rate: 14,528 per 100k residents 18+ (#5 highest among all states)
Total small business employees: 1.1 million (#20 highest among all states)
Small business share of total employment: 48.1% (#27 highest among all states)
Self-employed minorities: 72,132 (#14 among all states)

According to Business News Daily, “Colorado is a state in rapid economic ascension,” with historic growth touching small businesses in all industries and all major metros for several years. Among the sectors where Colorado’s small businesses have enjoyed the most expansion are gyms, party services, daycare services, and digital marketing, advertising, and copywriting agencies.

#13. Massachusetts

Total small businesses: 700,646 (99.5% of businesses)
Small business rate: 12,648 per 100k residents 18+ (#19 highest among all states)
Total small business employees: 1.5 million (#13 highest among all states)
Small business share of total employment: 45.5% (#39 highest among all states)
Self-employed minorities: 62,049 (#18 among all states)

Massachusetts has a vibrant and diverse economy and an educated workforce, but it’s an expensive place to do business. Housing costs and taxes are steep. There’s a huge disparity in economic and business opportunities between the hub of jobs and wealth in the coastal east and the more-rural western portion of the state.

#12. Virginia

Total small businesses: 766,826 (99.5% of businesses)
Small business rate: 11,489 per 100k residents 18+ (#34 highest among all states)
Total small business employees: 1.6 million (#12 highest among all states)
Small business share of total employment: 47.1% (#32 highest among all states)
Self-employed minorities: 123,774 (#8 among all states)

In 2019, CNBC ranked Virginia as the #1 state in all of America for doing business. It’s known for business-friendly regulations, excellent schools and one of the best workforces in the country and the world.

#11. Michigan

Total small businesses: 886,557 (99.6% of businesses)
Small business rate: 11,304 per 100k residents 18+ (#36 highest among all states)
Total small business employees: 1.9 million (#8 highest among all states)
Small business share of total employment: 49% (#24 highest among all states)
Self-employed minorities: 69,149 (#16 among all states)

Michigan consistently ranks among the top states with the most favorable business taxes for entrepreneurs. It’s seen the most improvement in the categories of sales tax and unemployment insurance tax.

#10. New Jersey

Total small businesses: 908,209 (99.6% of businesses)
Small business rate: 13,080 per 100k residents 18+ (#14 highest among all states)
Total small business employees: 1.8 million (#9 highest among all states)
Small business share of total employment: 49.9% (#17 highest among all states)
Self-employed minorities: 145,721 (#7 among all states)

The polar opposite of Michigan is New Jersey, which has long been notorious for prohibitively-high taxes. Its property, sales, income, and corporate taxes are the highest in the region and among the highest in the country.

#9. North Carolina

Total small businesses: 934,604 (99.6% of businesses)
Small business rate: 11,415 per 100k residents 18+ (#35 highest among all states)
Total small business employees: 1.7 million (#10 highest among all states)
Small business share of total employment: 45.3% (#41 highest among all states)
Self-employed minorities: 120,268 (#10 among all states)

Both Forbes and Site Selection named North Carolina as the #1 state in America for business in 2018. Its 2.5% corporate tax is the lowest in the nation and building costs, energy costs, and the cost of living there are lower than the national average.

#8. Ohio

Total small businesses: 965,576 (99.6% of businesses)
Small business rate: 10,598 per 100k residents 18+ (#44 highest among all states)
Total small business employees: 2.2 million (#7 highest among all states)
Small business share of total employment: 45.3% (#40 highest among all states)
Self-employed minorities: 69,645 (#15 among all states)

Although Ohio was among the first and hardest hit by the 2008 recession, the state has spent the ensuing recovery years as one of the 10 best places to do business in America. Although the state suffers from some workforce issues and a lack of economic diversity, taxes and regulations are manageable, and business owners report a high level of community support and customer loyalty.

#6. Pennsylvania (tie)

Total small businesses: 1.1 million (99.6% of businesses)
Small business rate: 10,819 per 100k residents 18+ (#41 highest among all states)
Total small business employees: 2.5 million (#5 highest among all states)
Small business share of total employment: 46.2% (#36 highest among all states)
Self-employed minorities: 89,074 (#13 among all states)

Pennsylvania regularly finds company among the bottom half of the states in business climate rankings. Things like starting a business, paying taxes, and registering property are commonly cited barriers in the state.

#6. Georgia (tie)

Total small businesses: 1.1 million (99.6% of businesses)
Small business rate: 13,558 per 100k residents 18+ (#9 highest among all states)
Total small business employees: 1.7 million (#10 highest among all states)
Small business share of total employment: 43.1% (#48 highest among all states)
Self-employed minorities: 202,769 (#5 among all states)

Site Selection ranked Georgia as the #1 business climate in America for seven straight years through 2019. The state has recently been lauded for its comprehensive workforce training program and infrastructure improvements.

#5. Illinois

Total small businesses: 1.2 million (99.6% of businesses)
Small business rate: 12,178 per 100k residents 18+ (#24 highest among all states)
Total small business employees: 2.5 million (#5 highest among all states)
Small business share of total employment: 45.1% (#43 highest among all states)
Self-employed minorities: 152,706 (#6 among all states)

Unlike neighboring states in the region, Illinois is a hard place for entrepreneurs—mostly due to taxes. Corporate, unemployment insurance and property taxes are all prohibitively high, and the state lags the nation in business creation.

#4. New York

Total small businesses: 2.2 million (99.8% of businesses)
Small business rate: 14,262 per 100k residents 18+ (#6 highest among all states)
Total small business employees: 4.1 million (#3 highest among all states)
Small business share of total employment: 49.8% (#18 highest among all states)
Self-employed minorities: 381,950 (#4 among all states)

In New York, taxes are high, and regulations are many. According to a recent report from the Tax Foundation, the Empire State comes in at #38 for unemployment insurance taxes, #46 for property taxes, #43 for sales tax, and #48 for individual tax.

#3. Florida

Total small businesses: 2.7 million (99.8% of businesses)
Small business rate: 15,654 per 100k residents 18+ (#1 highest among all states)
Total small business employees: 3.5 million (#4 highest among all states)
Small business share of total employment: 41.7% (#51 highest among all states)
Self-employed minorities: 527,247 (#3 among all states)

Both Florida’s economy and population are diverse and growing. It’s one of the few states with no personal income tax, and the business-friendly state is known for its many business tax exemptions and tax advantages.

#2. Texas

Total small businesses: 2.8 million (99.8% of businesses)
Small business rate: 12,965 per 100k residents 18+ (#15 highest among all states)
Total small business employees: 4.8 million (#2 highest among all states)
Small business share of total employment: 45.1% (#42 highest among all states)
Self-employed minorities: 710,215 (#2 among all states)

Remarkably, if Texas were a country, it would have the ninth-largest economy in the world. Hosting the headquarters of 50 Fortune 500 companies, it’s a haven for big business and small businesses can share the glory too.  There’s no corporate income tax, no personal income tax, thin regulations, a skilled and educated workforce and excellent infrastructure.

#1. California

Total small businesses: 4.1 million (99.8% of businesses)
Small business rate: 13,391 per 100k residents 18+ (#10 highest among all states)
Total small business employees: 7.2 million (#1 highest among all states)
Small business share of total employment: 48.5% (#25 highest among all states)
Self-employed minorities: 1.2 million (#1 among all states)

Step aside, Texas. If California was a country, its $3.2 trillion economy would be the fifth-largest on Earth, beating out even the mighty Lonestar State. Home to nearly 40 million people, it beats #2 Texas’ population by eight figures. Unlike Texas, however, California is not a particularly business-friendly state. Taxes and housing costs are both notoriously high, and the state’s reputation as a dense jungle of regulations has been well-earned.

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Andrew Lisa

Contributing Writer

Andrew Lisa has been writing professionally since 2001. He was one of the youngest nationally distributed columnists at the largest newspaper syndicate in the country, the Gannett News Service, and later worked as a section editor at AMNewYork, the most widely distributed newspaper in Manhattan. After four years living and working as a freelance writer in Los Angeles, Andrew has recently moved back to New Jersey.

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  • Andrea Perez
    Andrea Perez
    Personal Finance Editor

    Andrea Perez is an editor at The Simple Dollar specializing in personal finance. Prior to that she specialized in digital marketing content for online learning websites. She holds a master’s degree in journalism and media studies from the University of South Florida.