Most businesses are sorted into established ones and start-ups. Start-ups have a large failure rate of as much as 90% in the first year, and 70% in the first five years. But, established businesses and start-ups have several things in common. Among them are the cost of labor, cost of online access, utilities, taxes, and whether state laws are favorable to companies.
Approve.com released a new study about the cheapest states to run a business. It looked at average annual wages in 2020, energy costs from May 2021 in cents per kilowatt-hours, average internet price per megabit, and the corporate income tax rate paid by businesses in the highest tax bracket. While the methodology may be incomplete, it is a fairly good proxy.
The authors of the study pointed out why they published it:
Nobody said running a business is cheap, with business owners having to balance a number of payments and procurement processes, integration and costs, such as staff wages, the cost of an internet connection, electricity bills, and taxes.
States were rated on a scale of 1 to 10, with a 10 being the best figure.
The state that scored the best was Texas, with a total of 8.43. The average cost of workers was fairly low at $39,640 per and the state has no corporate income tax, which gives it a huge advantage.
Second, on the list is nearby Oklahoma with a grade of 8.16, with a relatively low labor cost of $37,110. Electricity was also low at $2.37 per kilowatt-hour.
Oklahoma was followed by Kentucky (grade 7.93), Nevada (7.92), Georgia (7.84) and North Carolina (7.82).
The state that did the worst was California with a score of 5.08. Labor costs were unusually high at $47,290, and the corporate tax rate was 8.84%. New Jersey was the second worse with a score of 5.14. Its cost per employee was $48,130. It also had an extraordinarily high top business tax rate of 11.50%