A new research study has put Tennessee at No. 10 on a list of the most expensive states to start a business.
Simplify LLC, a publication that shares how-to guides for small businesses, analyzed the the most recent data from the Bureau of Labor Statistics, the Small Business Administration and Census Bureau, including basic business costs, labor costs, worker availability, cost of space and utilities, as well the health of the business environment in each state across the nation, as well as Washington, D.C.
Based on those factors, Simplify ranked Minnesota as the most expensive state to start a new business, while Nevada ended up as the least expensive.
In Tennessee, business owners pay workers nearly $52,000 on average annually, pay an average 6.5% corporate tax rate and on average spend about $608 for a monthly commercial electric bill, according to the Simplify study.
That landed Tennessee within the 10 most expensive states to start a new business:
- Minnesota
- New York
- Louisiana
- Alabama
- Alaska
- Wisconsin
- West Virginia
- Nebraska
- Kansas
- Tennessee
Here's the breakdown that earned Tennessee its No. 10 ranking:
- Average corporate income tax rate: 6.5%
- LLC filing fees: $300
- Average annual wage: $51,929
- Labor force participation rate: 73%
- Percentage of post-college-age residents with at least a bachelor’s degree: 30.5%
- Commercial spaces available per 100,000 residents: 75.9
- Average monthly commercial electric bill: $607.58
- Small business lending per 100,000 people: $35,841,174
- Net rate of business births, 2021: 1.8
Western states ranked highest on the list of least expensive states, which Simplify says likely speaks to the fact that many states in the region do not levy a corporate income tax and have relatively low fees for starting an LLC.
The 10 least expensive states were:
- Nevada
- Colorado
- Arkansas
- Montana
- North Carolina
- South Dakota
- Wyoming
- Idaho
- Arizona
- Kentucky
The ranking of most and least expensive states to start a business underscores data that shows the nation has seen a surge in the number of new businesses that have formed in the years since the Covid-19 pandemic. Despite the economic uncertainty around inflation and rising interest rates, the Census Bureau reported an unprecedented number of businesses have formed in recent years, including 429,800 in February 2023.
And given that so many businesses fail in the first two years of opening, Simplify says that it is critical that entrepreneurs factor in the cost of doing business in each state before deciding where to operate.
