With its robust employment growth rate, lower labor costs and other advantages, the Phoenix metro was ranked as one of the top cities in the nation to launch a startup.
The Valley came in at No. 7 on the 2022 Best Cities to Start a Business list from Real Estate Witch.
The real estate website analyzed data for 50 cities from the U.S. Census Bureau, Bureau of Economic Analysis, Bureau of Labor Statistics, UpCounsel, Google Trends, U.S. Patent Office and the American Legislative Exchange Council Center for State Fiscal Reform. The data was weighted to emphasize new business applications over the past five years and employment growth in the past 12 months.
Other key criteria included average annual income, filing fees for LLCs and incorporation, corporate tax rate and per-capita number of chief executives.
In Phoenix, employment has been growing at 5.6%, above the national average of 3.90%, and the average annual income of $51,851 came in 18% below the national average of $63,363.
“Such low operation costs allow funding to last longer, giving businesses more time to get off the ground,” the report said.
There were 5,666 business applications per 100,000 residents over the the past five years, which is slightly lower than the national average of 5,931.
Filing fees in Phoenix for LLCs, at $50, and for corporations, at $60, were well below the national averages of $154 and $135. Phoenix’s corporate tax rate of 4.90% was also well below the 7.05% average.
The report also noted the community support that can be found in the Valley through the Arizona Founders Fund as well as more than 40 coworking spaces and accelerators that can help founders expand their networks.
Other top cities
Las Vegas came out on top of the ranking thanks in large part to the fact that it had the lowest corporate tax rate (0.65%) and the highest employment growth rate (8.5%). Las Vegas had 7,766 business applications per 100,000 residents, and its average annual income is $51,244.
Also ahead of Phoenix were Salt Lake City, Orlando, Miami, Atlanta and Tampa Bay. Jacksonville, Denver and Kansas City rounded out the top 10. The four Florida cities were helped in the rankings by their state’s lack of an income tax and low corporate tax rates, the study said.
Taken together, the top 15 cities on the list had a business application rate about 27% higher than the national average, and they had lower LLC filing fees ($115 versus $154) and corporation filing fees ($83 versus $135) than average.
The report pointed out the high rate of innovation in the Silicon Valley capital of San Jose, where there were 32.56 patents per 1,000 residents, compared to Phoenix’s 1.55 and the national average of 2.73. Even so, the report said, other cities are showing that startup success isn’t limited to the Bay Area.
“As cities across the U.S. develop their research institutions and business infrastructure, entrepreneurs have found success outside the (Silicon) Valley,” the report said.
