Top States for Startups & Business Expansion

Area Development, a corporate site selection and relocation magazine, recently published their 6th annual report on the Top States for Doing Business (2016) survey. Website consultants were surveyed because they work on a variety of projects in various industries, interact with economic development offices and conduct their own research. Site consultants were asked to rank their top state picks in ten categories that impact their companies’ location and facility plans. According to Area Development, the responses were weighted with their first choice receiving three points, second pick receiving two points, and their third choice received one point.

What This Means for Startups

Entrepreneurs can use data and analyses like this and combine the findings with those of other helpful data and studies, such as the Tax Foundation’s State Business Tax Index, to help weigh the risk of launching a new business or expanding operations to another state or region. Businesses should have a full understand of available tax breaks and incentives offered in their state as it can be huge in terms of cost-savings. For example, 24 percent of businesses stated Federal taxes as a significant challenge to the future growth and survival of their business, with twelve percent stating state and local taxes as a major challenge.

Businesses without proper access to capital may need to close branches, downsize, or worse, close doors indefinitely. According to the National Small Business Association’s Year-End Economic Report of 2015, businesses that have trouble accessing available capital experience the following effects:

  • Unable to grow business or expand operations (31%)
  • Unable to finance increased sales (18%)
  • Reduced the number of employees (14%)
  • Unable to increase inventory to meet demand (10%)
  • Reduced benefits to employees (10%)
  • Closed stores or branches (1%)
  • Other (3%)

So what does it mean to be ranked as the best state for doing business? You’ll need the perfect recipe consisting of a thriving business environment, strong infrastructure, low unemployment rate, and economic growth/development.

The Top 10 States for Doing Business (overall):

  1. 1. Georgia
  2. 2. South Carolina
  3. 3. Texas
  4. 4. Tennessee
  5. 5. Louisiana
  6. 6. Alabama
  7. 7. Florida
  8. 8. Indiana
  9. 9. North Carolina
  10. 10. Mississippi

 

1. Georgia

The state of Georgia took first place overall because it ranked in the top six spots on each of the ten factors in the survey. Georgia ranked first for Workforce Development Programs, and ranked second for Competitive Labor Environment, Speed of Permitting, and Regulatory Environment. Georgia ranked so well due to a few key initiatives and programs. Their WorkSource Georgia Initiative is a unified statewide approach for helping employers find qualified job seekers, and offers spotlight training and educational opportunities. Their Quick Start program provides free training programs through the Technical College System of Georgia. The programs are designed around the specific skills that companies are looking to develop in their employees. Georgia secured a top spot in the Cooperative & Responsive State Government category due to their broad approach to marketing the state and aligning a wide range of services, departments, and initiatives.

2. South Carolina

The state of South Carolina, our favorite state (we may be biased), ranked second in the categories of Business-Friendly Environment and Permitting Processes, Strength of its Incentives, and Overall Cost of Doing Business. The state excelled in the tax environment because there are no state property taxes, inventory taxes, local income taxes, wholesale taxes, or taxes on manufacturing equipment or materials for finished products.  South Carolina also has a transportation cost advantage because millions of potential customers can be reached by truck in a few days or less.

The state scored well in Business Incentive Programs for a number of reasons. For example, corporations receive a 20 percent credit that can be applied to corporate income taxes or license fees if they move their headquarters to the state. Companies can receive additional tax breaks or incentives if they conduct their own research, create jobs, increase port usage on state port facilities, or create tourism infrastructure projects.

Slow permitting is a major downfall for businesses looking to expand. South Carolina ranked second under Speed of Permitting due to the creation of a Small Business Regulatory Review Committee comprised of volunteer business owners who review regulatory situations and order economic impact studies and flexibility analyses if necessary. Finally, South Carolina sits in the second top state overall for doing business due to major economic developments.

3. Texas

Texas scored first in Access to Capital, Competitive Labor Environment and Favorable Regulatory Environment. According to the Tax Foundation’s 2015 State Business Tax Index, Texas has one of the lowest tax burdens in the country, with no corporate or individual income tax, and no state property tax. The state recently (and permanently) cut their franchise tax by 25 percent, which frees up more business capital for investment. Texas has multiple programs that greatly help businesses access capital by awarding cash grants and government-sponsored venture capital, and reducing barriers to access necessary funding.

Texas is a great state to conduct business because it’s heavily focused on making a fairer legal system for businesses by enacting major packages of reform since the early 2000’s. Tort reforms, for example, protect both small and large businesses from faulty claims and suits in order to cut back on damages, end court-shopping, and allow judges to stop suits without merit.

Visit www.areadevelopment.com for more information on this study.

 

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