Avalara > Blog > Business > Texas Is the Most Small Business-Friendly State in 2015

Texas Is the Most Small Business-Friendly State in 2015

  • Sep 1, 2015 | Tim Parker

Running a small business is no easy task and the last thing you want is to spend a bunch of time neck-deep in government regulations. Every state has differing regulations and complying with those regulations could be easy or time-consuming depending on the state or the city you live in.

Thumbtack, a website that connects service professionals with clients through an online bidding process, just released its fourth annual Small Business Friendliness Survey.

The survey was originally developed with experts from the Ewing Marion Kauffman Foundation, a well-known nonprofit focusing on equipping entrepreneurs to succeed in their small business endeavors.

Economists surveyed 17,633 small business owners across the United States, asking them 36 questions to get a picture of how they view the regulatory environment of their states and cities. Here are the highlights:

City by City

  • Texas topped the list as the best state for small business, with New Hampshire, Utah, Louisiana, and Colorado filling out the top five.
  • Rhode Island, Illinois, Connecticut, California, and New York ranked as the five least-hospitable states to small business.
  • Manchester, New Hampshire, took the honor of being called the most small business-friendly city, while Dallas, Texas; Richmond, Virginia; Austin, Texas; and Knoxville, Tennessee, completed the top five spots. Hartford, Connecticut; Albuquerque, New Mexico; Buffalo, New York; New Haven, Connecticut; and Providence, Rhode Island brought up the rear.

Tax Rates

  • The survey found that tax rates weren’t as important to small business owners as one might think. Although a couple of the top states had low rates--Texas with no state income tax and New Hampshire with low rates--Utah residents pay the 18th highest amount of income tax, Louisiana the 38th, and Colorado, the 30th highest.
  • The least business-friendly states didn't necessarily have have the highest taxes, either. While New York residents paid the most, Illinois ranked 37th, Connecticut 21st, and California 13th.
  • Instead, training was most important to small business owners, according to study authors. Training was 78 percent more important than tax considerations when small business owners ranked their states.

“Small business owners on Thumbtack have consistently told us that they welcome support from their governments but are frequently frustrated by unnecessary bureaucratic obstacles,” said Jon Lieber, chief economist of Thumbtack.com. “Given that there is a crisis of entrepreneurship in the United States, seen in the broad collapse of self-employment across industries and states, creating the right environment for business start-ups is more important than ever.”

The study attempts to look at small business friendliness in a human or organic manner instead of comparing existing data sources. According to Thumbtack, “evaluating how the tax burden affects a small employer is not simply a matter of looking at a region’s corporate or personal income tax rate or overall effective tax burden.

"This method misses the complexities of overlapping taxing jurisdictions or the difficulty of understanding or complying with a burdensome tax code. In contrast, by asking the small businesses themselves to rate how they feel about their overall tax burden, all relevant taxes and administrative burdens are considered while irrelevant ones are excluded.” 

The study authors surveyed nearly 6,000 additional business owners this year to get an even broader dataset. In 2014, Utah was the most small business-friendly state, followed by Idaho, Texas, Virginia, and Louisiana.

To see the full results, click here.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Tim Parker
Avalara Author Tim Parker