New study from Simplify LLC evaluates states on a variety of business-cost criteria

Brice Wallace, Business Journal 

If you’re a just-getting-started entrepreneur, relatively speaking, Utah won’t dent your wallet.

A new study from Simplify LLC indicates that Utah is the least expensive state to start a business. Utah’s costs are “consistently favorable” across the categories of the study, which included factors such as taxes, business filing fees, commercial rent and utilities, labor costs, regulations, and small-business lending.

The study’s costs were based on the most recent data from the Bureau of Labor Statistics, Federal Reserve of St. Louis, Tax Foundation, Energy Information Administration and others.

Among factors in Utah’s favor is having the No. 2 Small Business Administration lending rate in the nation, with $15.4 million per 100,000 residents. Colorado is the highest at $15.7 million, while Hawaii is the lowest, at nearly $3.8 million.

Utah is No. 4 for its labor force participation rate of 68.3 percent. The District of Columbia is highest, at 71.8 percent, while Mississippi is lowest, at 54.7 percent. A high percentage of working-age people being employed supports robust hiring and growth for new ventures, the study says.

Utah is ranked No. 14 for a “moderate” corporate income tax rate of 4.65 percent. Minnesota has the highest rate, at 9.8 percent, while North Carolina’s is the smallest, at 2.5 percent.

Utah is No. 7 for having the highest average commercial rent per square feet, at $21. Hawaii leads the pack at $36, while Kansas has the lowest rent, at $12.33.

Other Utah figures include an average wage of $63,854, ranked No. 25; a low LLC filing fee of $59, No. 11; and electricity costs of $663.34, No. 26.

Following Utah on the least-expensive-states list are (in order) South Dakota, Colorado, Wyoming, Montana, Idaho, Nebraska, Kansas, Nevada and North Dakota. The 10 most expensive locations are California, New York, Hawaii, Tennessee, Massachusetts, Alabama, New Jersey, D.C., Illinois and West Virginia.

California’s spot as the most expensive state is cemented by its 420,434 regulations, the highest in the nation; electricity costs of $1,273.73; average wages of $87,490; rent per square foot of $31.78; and a corporate income tax rate of 8.84 percent.

“For entrepreneurs who have the ability to pick and choose where they want to start their business, it’s clear that certain states will allow you to save money in various business-related areas, which could help propel your business to the next level,” the study says.

Simplify LLC said an unprecedented number of Americans have started their own businesses so far in this decade. The number of new business applications filed with the U.S. Census Bureau's Business Formation Statistics (BFS) has increased by 59.7 percent from 2020 to 2024, compared to the five years prior.

Starting a business, however, does not mean sustaining a business. U.S. Bureau of Labor Statistics indicate that during the 2014-24 period, 20.3 percent of startups were out of business within one year, and only 34.9 percent remained in business after 10 years.

Among factors influencing startups are compensation costs for workers that increased 3.8 percent for the 12-month period ending in December 2024, according to the Bureau of Labor Statistics; commercial rent growing 3.2 percent for the 12-month period ending March 2024, according to the National Association of Realtors; and the average price of electricity for commercial customers increasing by 22 percent from 2020 to 2024, according to the U.S. Energy Information Administration.

While a record 25.6 million Americans have started their own businesses over the past five years, according to the Census Bureau’s Business Formation Statistics, startups this year are facing a unique challenge with higher operating expenses following historic inflation. The economic landscape has changed across the country and choosing a location where wages, rent, utilities and taxes are reasonable could mean the difference between success and failure, the study says.

Details of the study are at https://www.simplifyllc.com/most-and-least-expensive-states-to-start-a-business-2025/.