In this article, we will take a look at the 20 most business friendly states in the US. If you want to skip our detailed analysis, you can go directly to 5 Most Business Friendly States in the US.
Why are Experts Fearing the Long Awaited Rate Cut
A decline in employment, delayed rate cuts, and an overall slowdown of the economy have impacted the business environment immensely. While rate cuts have been scheduled to go through next month, not all economists and investors are looking forward to it. On August 26, Reuters reported that while the economy is guided to have a soft landing, the narrative may not help US stocks in the future. Experts suggest that the market was looking forward to a rate cut announcement, which had investors on the go. However, now that rate cuts have been announced, the excitement of a cutting cycle may wear off. Historically, stocks perform well when a rate cut is announced after a period of strong economic growth, and not an economic slowdown, like we saw in the first half of 2024. Since 1970, the S&P 500 has grown by 18% on average after a rate cut in periods of economic growth. On the other hand, in recessionary years, the S&P 500 has only climbed 2% on average following a rate cut.
Business Environment in the US
The total number of business applications in July 2024 reached 420,000, down by 2.1% from June 2024. The retail trade industry recorded the highest number of business applications exceeding 73,000 in July. Projected business formations, on the other hand, for July were 28,110, down by 0.2% from June 2024.
That said, let’s take a look at Worth AI, an AI startup formed in Florida in 2023 disrupting the underwriting and legal industry. Worth AI streamlines financial underwriting using AI, provides real-time data on the market, enables risk modeling, provides detailed portfolio visibility, and engages in risk monitoring. The company has an all-in-one platform that helps companies leverage business credit tools. The company processed its latest round of seed funding on August 15 and is still in the works of listing a patent.
Using its proprietary AI, the company provides companies with an automated risk assessment and a unique business credit score, along with additional underwriting services. On April 5, Worth AI announced a partnership with Equifax. Under the agreement, Worth AI will leverage differentiated data provided by Equifax. The data will then be used to help small businesses gain access to capital and financial services.
READ ALSO 15 Trending AI Stocks on Latest Analyst Ratings and News and 11 Best AI Assistants in 2024.
Is MSFT the Most Important Company in the US Right Now?
Microsoft Corporation (NASDAQ:MSFT) is a renowned technology company known for its Office productivity suite. The company also specializes in cloud computing, gaming, and advertisement and is making significant leaps in artificial intelligence. In FY 2024, Microsoft Corporation (NASDAQ:MSFT) grew its revenue by 15% to reach $245 billion and cloud revenue exceeded $135 billion, up by 23% year-over-year. Azure and other cloud service segments were the top performers, growing revenue by 30% during the year.
The technology company owns multiple platforms backed by artificial intelligence including Microsoft Azure, Dynamics 365, Power platform, and Microsoft Cloud. Azure AI has more than 60,000 customers. These include leading names like H&R Block, Suzuki, Swiss Re, and Telstra. On the other hand, Microsoft Fabric, its AI data platform, has 14,000 paid customers including Accenture, Kroger, and Zeiss. Over 480,000 companies have used AI tools in Microsoft’s power platform, up by 45% from the previous quarter.
Microsoft Corporation (NASDAQ:MSFT) is also reducing its reliance on AI hardware companies in an attempt to produce efficient infrastructure systems for its AI products. Last year, the company introduced tailored AI chips capable of running general-purpose compute workloads on the Microsoft Cloud. Microsoft Corporation (NASDAQ:MSFT) is one of the first companies to fully transition to digitization, giving it the first mover advantage. Its proprietary technologies provide a roadmap for companies of all sizes to push their journey to innovation and AI.
While we acknowledge the potential of MSFT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Now that we have studied economic activity in the US, let’s take a look at the 20 most business friendly states in the US. You can also read our piece on the 10 best small cap AI stocks according to short sellers.
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Our Methodology
To come up with the 20 most business friendly states in the US we first went through multiple similar rankings on the internet. We then sourced the state-wise corporate income tax rates from the Tax Foundation, the aggregate business applications for each state, for the year ended 2023, from the US Census Bureau, and the GDP per capita from the Bureau of Economic Analysis. We sorted the states with the lowest corporate tax rates, the highest number of business applications, and the highest GDP per capita and assigned them ranks corresponding to their number on each list. We then took the average of our metrics to come up with the Insider Monkey Score. Our list is in descending order of the average rank of the three metrics, referred to as the Insider Monkey Score on our list.
Note: While the District of Columbia is not a state, it was included in our rankings due to its size and political nature.
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20 Most Business Friendly States in the US
20. Massachusetts
Number of Business Applications (2023): 75,990
GDP per capita (2023): $82,889.81
Corporate Income Tax Rate (2024): 8%
Insider Monkey Score: 15.75
Massachusetts ranks 20th on our list of the most business friendly states in the US. Massachusetts logged almost 76,000 new business applications in 2023. The state boasts a GDP per capita of almost $83,000 and has a corporate income tax rate of 8% on all income levels.
19. Iowa
Number of Business Applications (2023): 33,079
GDP per capita (2023): $94,540.81
Corporate Income Tax Rate (2024): 7.1%
Insider Monkey Score: 15.75
Iowa is one of the best states to do business in, with an Insider Monkey score of 15.75. The state levies a corporate income tax rate of 5.5% for income between $0 and $100,000. For income above $100,000, the corporate tax rate is 7.1%.
18. Wyoming
Number of Business Applications (2023): 58,486
GDP per capita (2023): $70,778.43
Corporate Income Tax Rate (2024): N/A
Insider Monkey Score: 15.25
Wyoming ranks 18th on our list of the best states to do business in. Wyoming does not levy a corporate income tax or personal income tax. Therefore, companies in the state enjoy tax-free profits. Wyoming had more than 58,000 new business applications in 2023.
17. Wisconsin
Number of Business Applications (2023): 65,089
GDP per capita (2023): $90,185.45
Corporate Income Tax Rate (2024): 7.9%
Insider Monkey Score: 15.25
Wisconsin is one of the best states to do business in. Wisconsin levies a 7.9% corporate income tax rate on all income levels. The state had a GDP per capita of over $90,000 and logged more than 65,000 new business applications in 2023.
16. Ohio
Number of Business Applications (2023): 147,977
GDP per capita (2023): $57,449.61
Corporate Income Tax Rate (2024): N/A
Insider Monkey Score: 15
Ohio ranks 16th on our list of the most business friendly states in the US. While Ohio does not levy a corporate income tax rate, it does have a commercial activity tax, levied at 0.26% of an entity’s gross revenue.
15. Alabama
Number of Business Applications (2023): 71,457
GDP per capita (2023): $82,228.47
Corporate Income Tax Rate (2024): 6.5%
Insider Monkey Score: 14.25
Alabama has an Insider Monkey score of 14.25, making it one of the most business friendly states in the US. Alabama recorded $82,228 in GDP per capita in 2023. It has a corporate income tax rate of 6.5% on all income levels.
14. Virginia
Number of Business Applications (2023): 131,312
GDP per capita (2023): $75,270.11
Corporate Income Tax Rate (2024): 6%
Insider Monkey Score: 13
Virginia ranks 14th on our list of the best states to do business in, with an Insider Monkey score of 13. Virginia levies a corporate income tax rate of 6% on all income levels, as of January 1. Over 130,000 new business applications were filed in Virginia in 2023.
13. Texas
Number of Business Applications (2023): 498,821
GDP per capita (2023): $58,755.78
Corporate Income Tax Rate (2024): N/A
Insider Monkey Score: 13
Texas is one of the best states to do business in. Texas does not levy corporate income tax. While state income taxes are not levied, Texas does have a franchise tax, levied on a company’s margin for revenues exceeding $1.23 million.
12. Indiana
Number of Business Applications (2023): 93,199
GDP per capita (2023): $77,618.55
Corporate Income Tax Rate (2024): 4.9%
Insider Monkey Score: 12
Indiana ranks 12th on our list of the most business friendly states in the US, with an Insider Monkey score of 12. Indiana had more than 93,000 new business applications in 2023. The corporate income tax on all income levels is 4.9%, as of January 1.
11. Missouri
Number of Business Applications (2023): 89,287
GDP per capita (2023): $76,860.56
Corporate Income Tax Rate (2024): 4%
Insider Monkey Score: 11.50
Missouri has an Insider Monkey score of 11.5, contributing to its ranking on our list of the most business friendly states in the US. Missouri levies a corporate income tax rate of 4% on all income levels. The state has a GDP per capita of $77,000.
10. North Carolina
Number of Business Applications (2023): 169,948
GDP per capita (2023): $68,405.39
Corporate Income Tax Rate (2024): 2.5%
Insider Monkey Score: 11.25
North Carolina ranks 10th on our list of the most business friendly states in the US, with an Insider Monkey score of 11.25. North Carolina levies a corporate income tax rate of 2.5% on all income levels. The state had almost 170,000 new business applications in 2023.
9. Mississippi
Number of Business Applications (2023): 52,862
GDP per capita (2023): $109,970.79
Corporate Income Tax Rate (2024): 5%
Insider Monkey Score: 11
Mississippi has an Insider Monkey Score of 11, contributing to its ranking on our list of the most business friendly states in the US. The state levies a corporate income tax rate of 4% on income between $5,000 to $10,000. Income above $10,000 is subject to a 5% corporate income tax rate.
8. California
Number of Business Applications (2023): 557,464
GDP per capita (2023): $88,537.52
Corporate Income Tax Rate (2024): 8.84%
Insider Monkey Score: 10.75
California ranks eighth on our list of the most business friendly states in the United States. California had over 550,000 new business applications in 2023, the second highest among all states. The state logged almost $89,999 in GDP per capita in 2023.
7. Michigan
Number of Business Applications (2023): 147,744
GDP per capita (2023): $86,294.41
Corporate Income Tax Rate (2024): 6%
Insider Monkey Score: 9.5
Michigan ranks seventh on our list of the most business friendly states in the United States. The corporate income tax rate in Michigan is 6%, as of January 1. The state logged 147,000 new business applications in 2023.
6. New York
Number of Business Applications (2023): 312,441
GDP per capita (2023): $99,118.49
Corporate Income Tax Rate (2024): 7.25%
Insider Monkey Score: 7.5
New York is one of the best states to do business in, with an Insider Monkey score of 7.5. New York levies a 6.5% corporate income tax rate on income between $0 and $5 million. Income greater than $5 million constitutes a corporate income tax rate of 7.25%. Over 300,000 new business applications were filed in New York in 2023.
5. Nevada
Number of Business Applications (2023): 65,609
GDP per capita (2023): $104,816.19
Corporate Income Tax Rate (2024): N/A
Insider Monkey Score: 7.5
Nevada ranks fifth on our list of the most business friendly states in the US, with an Insider Monkey score of 7.5. Only business entities grossing over $4 million in revenue per annum are required to file a Commerce Tax Return in Nevada. The tax rate is decided based on the gross receipts of a business. There is no state-level corporate income tax in Nevada.
4. Washington
Number of Business Applications (2023): 97,311
GDP per capita (2023): $90,702.50
Corporate Income Tax Rate (2024): N/A
Insider Monkey Score: 6.5
Washington ranks fourth on our list of the most business friendly states in the US. The state of Washington does not have a personal or corporate income tax, however, business owners must pay a public utility tax. The public utility tax rate is determined using the gross receipts of a business. For example, a retail business may have to submit retail sales tax. Washington logged over $90,000 in GDP per capita in 2023.
3. Georgia
Number of Business Applications (2023): 277,588
GDP per capita (2023): $94,046.02
Corporate Income Tax Rate (2024): 5.75%
Insider Monkey Score: 5.75
Georgia is one of the best states in the US to start a business in, with an Insider Monkey score of 5.75. Georgia has a corporate income tax rate of 5.75% for all levels of income. Georgia has a GDP per capita of $94,000 and logged more than 275,000 new business applications in 2023.
2. Florida
Number of Business Applications (2023): 664,567
GDP per capita (2023): $91,814.08
Corporate Income Tax Rate (2024): 5.5%
Insider Monkey Score: 4.75
With an Insider Monkey score of 4.75, Florida ranks second on our list of the most business friendly states in the US. Over 660,000 new business applications were filed in 2023, the highest among all states. The corporate income tax in Florida is 5.5%, as of January 1, for income earned above $50,000.
1. Colorado
Number of Business Applications (2023): 138,867
GDP per capita (2023): $257,442.13
Corporate Income Tax Rate (2024): 4.4%
Insider Monkey Score: 4.5
Colorado ranks first on our list of the most business friendly states in the United States. Colorado has a corporate income tax rate of 4.4% for all income levels. The state logged nearly 140,000 new business applications in 2023.
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Disclosure: None. This article was originally published at Insider Monkey.