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The Top 10 Tax-Friendly States For Small Businesses

Grants are a great way to find free money to start or increase a small business, but they are not easy to find. Another area for small business owners to look at are taxes. The tax structure for each state makes a big difference to the bottom line for small business entrepreneurs.

Taxes can be anything from state income tax to corporate, property, sales, and unemployment insurance tax. The tax policies in each state vary and can either compete or be friendly to small business. In 2012, Wyoming had the best business tax climate in the country, and New York had the worst. According to the annual Tax Foundation’s report, here are the top 10 most tax-friendly states for business.

Top 10 Tax-Friendly States

Wyoming, South Dakota, Nevada, Alaska, Florida, Washington, Montana, New Hampshire, Utah, and Indiana.

The term tax systems does not necessarily mean the state has the lowest taxes. Some like Alaska and New Hampshire were still in the top ten list even though they have some of the highest corporate tax collections per capita. Other forms of taxes are included because they make a difference in how small business will fare. Alaska, for example, has no personal income tax, and New Hampshire has no sales tax. The rates on income tax are important to small business because 94 percent of small business tax filings are through personal income tax, not corporate taxes. Less taxes means more money in their pockets.

The bottom line is that when entrepreneurs are looking for states in which to open or expand their businesses, grant money is great when you can find it, but they should not ignore the importance of taxes. Examining state tax structures before making a decision can result in the elimination of overhead cost and other cost factors related to tax compliance that will not have to eat into small business profits.

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