If senior local government officials, such as councilors and recruiters, are supportive of new businesses, it can make a huge difference in the success of those businesses. Julie Albertson, the chef and owner of the Texas Pie Company, is a prime example of this. For 18 years, she has been tantalizing customers with her grandmother's cake recipes. Starting out as a wholesaler of restaurants in nearby Austin, the company in Kyle, Texas has now opened its doors to the public.
Albertson, a former banker, attributes the growth of her business to the Texas environment. With 18 employees, she has seen an increase in both tourism and people moving to the state and Central Texas. People from all over the world are drawn to Texas for its promise of good jobs and reasonable housing costs. When it comes to financing their businesses, many small business owners turn to their local banks first. States such as California, New York and Texas have an advantage here due to their high density of branches.
Rohit Arora, CEO and co-founder of Biz2Credit, an online intermediary between borrowers and lenders based in New York City, confirms this. Indiana is at the top of our list due to its business-friendly climate. Entrepreneurs enjoy a low cost of living that is 15% lower than the national average, along with an unemployment rate of 2.8%, which is lower than average. Although it hasn't been widely recognized as the best state to start a business in the past, Indiana has come a long way in recent years. North Dakota is another attractive option for tax-conscious businessmen due to its corporate tax rate of just 4.31% and personal income tax rate of 2.1% (the lowest in the country). Pennsylvania may be the most expensive state on our list in terms of cost of living, but it is quickly becoming a popular alternative to New York with its lower cost of living and higher business survival rate.
On top of that, Pennsylvania's income tax is less than a third of that of New York at 3.07% compared to 10.9%.South Dakota stands out for its cost of living that is approximately 5% below the national average but its average personal spending per capita is just above the national average. This indicates that their purchasing power for elastic goods (as opposed to inelastic ones) is greater than states like New York which has the highest average personal expenses per capita in the country at 13% above the national average combined with a cost of living 33% above the national average. New Mexico's sales tax is a hybrid tax which the state calls a gross income tax with an overly broad base that includes more business-to-business transactions than most states' sales taxes. Companies are expected to respond better than individuals to low-tax jurisdictions than individuals which is consistent with Wasylenko and McGuire's (198) findings that personal income taxes indirectly affect businesses by influencing people's location decisions. Creating an independent business entity or corporation can provide many benefits from privacy to asset protection. Here are six key factors that make states attractive to small businesses according to experts and businessmen:1) Low taxes
2) Cost of living
3) Unemployment rate
4) Percentage of workers with degrees
5) Number of universities per capita
6) User interface base subindex scoresThe Tax Foundation's state business tax climate index allows business leaders, government policy makers and taxpayers to assess how their states' tax systems compare.
Bartik concluded that conventional views that state and local taxes have little effect on businesses are false. User interface base subindex scores are based on how they determine which companies should pay UI tax and how much as well as other user interface-related taxes companies may be subject to. Wasylenko and McGuire (198) found that higher rates of two business taxes - sales tax and personal property tax - are associated with lower employment growth. For this metric, data from the Bureau of Labor Statistics was used to find the unemployment rate in each state and percentage of workers who have earned a degree. Data from the Census Bureau was used to calculate how many people in each state are of working age (between 15 and 6 years old). The National Center for Education Statistics provided data for total number of degree-granting institutions in each state. The company must then collect sales tax on its own products resulting in a tax being charged on a price that already contains taxes.
Bartik (198) found that high sales taxes especially those imposed on equipment had a negative effect on small business creation. While these measures are not ideal (effective tax rates for personal and immovable property would be preferred for both businesses and individuals), they are the best available measures due to significant data restrictions property tax collections represent. A company's experience rating will vary depending on charging method used by state government. In surprising contrast to previous reviewers, Bartik concluded that taxes have quite significant effects on business activity. Consumers will resort more frequently to cross-border purchases or certain online purchases which will reduce business activity in the state.
