Starting a business is never easy. Over one-fifth of startups fail within their first year, according to the U.S. Bureau of Labor Statistics, and nearly half never reach their fifth anniversary. Staying afloat is difficult even in stable economic conditions—and even more so amid elevated inflation and ongoing labor market tightness.
Beyond these macroeconomic headwinds, one factor consistently ranks among the top reasons businesses fail: location. Choosing the right state can significantly influence whether a company merely survives or successfully scales. A supportive ecosystem—access to capital, skilled labor, affordable operating costs, and responsive government—can give entrepreneurs a critical edge.
In a new study, WalletHub compared all 50 states across 25 key indicators of startup success to determine the most fertile environments for launching and growing a business. The results reveal a sharp divide between the nation’s leaders and laggards, with Florida ranked No. 1, followed by Utah and Texas, while Rhode Island finished last at No. 50.
Florida: America’s Top Startup State
Florida claimed the top spot thanks to its strong entrepreneurial culture and sustained business growth. The state has the third-most startups per capita and the highest percentage of adults engaged in entrepreneurship nationwide. Between 2017 and 2023, Florida’s number of small businesses grew by nearly 16%, the fifth-highest rate in the country.
Low taxes are a major draw. Florida ranks among the 15 states with the lowest corporate tax burden, helping businesses keep more capital for reinvestment. Workforce dynamics further strengthen the state’s appeal. Despite its large retiree population, Florida’s working-age population (ages 16–64) is growing faster than in all but five states, and it ranks third nationally for worker enthusiasm and engagement.
Utah: Financing Access and Tech Efficiency
Utah ranked second-best for starting a business, driven largely by its favorable financing and labor conditions. It is the second-easiest state in the nation for securing business loans, giving startups critical access to capital early on. Utah also posted the fifth-highest year-over-year employment growth, exceeding 3%, signaling a healthy and expanding economy.
Business owners benefit from relatively lower benefit costs as well. Utah’s average health insurance premium per enrolled employee ranks 22nd nationally, placing it among the more affordable states for employee coverage.
The state has also been recognized as a top performer in the Digital States Survey by the Center for Digital Government, reflecting strong use of technology to improve efficiency and service delivery. For tech-savvy entrepreneurs, Utah’s digital infrastructure provides an additional competitive advantage.
Texas: Growth, Clusters, and Workforce Engagement
Texas placed third overall, buoyed by scale, growth, and industry concentration. The state has the 10th-highest entrepreneurship rate and the 11th-highest share of fast-growing firms, offering substantial upside for new ventures.
More than 53% of Texas businesses operate in “strong clusters,” ranking ninth nationally. These clusters—groups of interconnected firms in the same industry—help businesses access suppliers, talent, and customers more efficiently, though competition can be higher.
Texas also benefits from rapid population and employment growth. It ranks third in growth of the working-age population and third in employment growth overall. Workforce engagement is another strength, with Texas workers ranking as the third most engaged in the nation.
Rhode Island: Last Place Amid Structural Challenges
Rhode Island, meanwhile, ranked 50th, highlighting persistent barriers to entrepreneurship. Workforce engagement is low, with only about 31% of workers considered engaged, and the average workweek stands at 37.8 hours. Small business growth has been limited to roughly 2.5%, and only 48.2% of businesses survive five years.
High costs remain a major obstacle. Rhode Island’s cost-of-living index is approximately 128, well above the national average, and the state ranks 35th for corporate taxes, with a heavy overall tax burden on established firms.
Governance also plays a role. Rhode Island has experienced decades of one-party political dominance, along with a long history of public corruption cases involving elected officials. While reforms have been enacted, critics argue that limited political competition and recurring scandals have weakened accountability and dampened investor confidence.
A Clear Divide
The contrast between Florida, Utah, Texas, and Rhode Island underscores how policy, workforce engagement, access to capital, and governance shape economic outcomes. States that prioritize growth, competition, and efficiency continue to attract entrepreneurs, while those struggling with high costs and structural challenges risk falling further behind.
For business owners weighing where to plant roots, the data sends a clear message: the state you choose can make all the difference.
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