The Cheapest (And Most Expensive) States To Run A Business In 2021

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The Cheapest (And Most Expensive) States To Run A Business In 2021
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Starting a new business is a step into the unknown, but new research from Approve.com can today reveal where are the cheapest and most expensive states to run a business in the USA.

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Globally, the USA is the third most expensive country to run a business.

Rank Country Average annual wage Average electricity price (cents per kWh) Average internet price (monthly) Top corporate income tax rate Business cost affordability score /10
1 Norway $55,780 94 $56.94 22% 2.97
2 Australia $55,206 22.8 $56.49 30% 4.04
3 United States $69,392 14.8 $65.94 21% 4.21
  • Only eclipsed by Norway and Australia, the United States is one of the most expensive countries in the world to run a business with its high annual salaries and internet prices.

The Cheapest States To Run A Business

Rank State Average annual wage Average electricity price (cents per kWh) Average internet price per Mbit Top corporate income tax rate Business cost affordability score /10
1 Texas $39,640 8.52 $2.29 -% 8.43
2 Oklahoma $37,110 7.96 $2.37 6% 8.16
3 Kentucky $37,230 10.82 $2.00 5% 7.93
4 Nevada $38,580 6.96 $4.73 -% 7.92
5 Georgia $38,660 10.52 $1.65 5.75% 7.84
6 North Carolina $38,740 8.18 $5.87 2.5% 7.82
7 Missouri $38,890 8.60 $4.41 4% 7.81
8 Florida $37,580 9.41 $3.71 4.46% 7.80
9 Mississippi $32,710 11.13 $2.91 5% 7.79
10 Utah $39,480 8.27 $4.52 4.95% 7.58
10 Ohio $40,300 9.74 $3.41 -% 7.58

Note: some states could not be ranked for tax as their unique franchise tax is incomparable to standardised corporate income tax. Hawaii and Alaska were omitted because of unavailable data.

  1. Texas 8.43/10

  • One of the country’s biggest and most populated states is also the cheapest when it comes to business costs, scoring 8.43 out of 10 for business affordability.
  • There are relatively low annual salaries to cover, but especially cheap electricity prices averaging 8.52 cents per kWh placing it as the eighth cheapest state for this cost. Internet connections are equally more affordable here, costing $2.29 per Mbit.
  • Although it should be noted that Texas’ corporate income tax rate was omitted from the ranking as its ‘franchise tax’ is not directly comparable to the standard tax.
  1. Oklahoma 8.16/10

  • Oklahoma places as the second most affordable state thanks to its positive scores across the board.
  • It has the ninth lowest salaries to cover, averaging $37,110 a year, and spending on electricity and the internet are particularly low. Corporate income tax in Oklahoma is also one of the lowest in the country, but it is higher than other states in the top 10.
  1. Kentucky 7.93/10

  • The third cheapest state to run a business is Kentucky. Its salaries and corporate income tax are both the tenth cheapest in the country and the cost for the internet is even cheaper, ranking as the eight cheapest state for this cost.
  • The average price for electricity however is on the more expensive end averaging 10.82 cents per kWh.

Most Expensive States To Run A Business

Rank State Average annual wage Average electricity price (cents per kWh) Average internet price per Mbit Top corporate income tax rate Business cost affordability score /10
1 California $47,290 17.74 $1.86 8.84% 5.08
2 New Jersey $48,130 12.37 $3.01 11.50% 5.14
3 Vermont $43,270 16.67 $2.96 8.50% 5.24
4 District of Columbia $79,650 12.65 $0.84 -% 5.33
5 Iowa $39,920 10.21 $6.34 9.80% 5.37
  1. California 5.08/10

  • As a hub of people and business, California is the most expensive place to run a business.
  • Despite actually being among the cheaper states when it comes to internet costs ($1.86), California was noticeably the more expensive when it came to energy bills, with a cost of 17.74 cents per kWh of electricity, which is over two and a half times higher than in the cheapest state (Nevada).
  1. New Jersey 5.14/10

  • New Jersey has the highest rate of corporate income tax, with those in the top bracket in the state paying 11.5%.
  • Electricity costs are the 11th highest in the country and average salaries are the seventh highest which all contribute to its position as the second most expensive state to set up a business.
  1. Vermont 5.24/10

  • One of the country’s smallest and least populated states was also among the most expensive to run a business in, with Vermont taking third place.
  • It has the second highest electricity costs and has the ninth highest corporate income tax bracket.

Methodology

  • Average annual wage in 2020 according to StatsAmerica.
  • Average electricity price to commercial consumers in May 2021 in cents per kilowatt-hours, according to the EIA.
  • Average internet price per megabit according to HighSpeedInternet.com.
  • Top corporate income tax rate paid by businesses in the highest tax bracket according to the Tax Foundation. Note that states that this factor was excluded from ranking calculations for states that do not pay corporate income tax, as these are usually replaced by similar taxes which aren’t directly comparable.

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