According to the Small Business & Entrepreneur Council, if you want to start a small business, you should head for the hills of South Dakota. The state has a low crime rate and, according to the SBEC, also has a limited number of bothersome health insurance mandates. Hey, it worked for Phillip Vandamm.

The SBEC’s list is dominated by Western states, and includes Wasington, Wyoming, Nevada and Texas. The worst states for small businesses? According to the SBEC, those are mostly back east, and include New York, New Jersey and Washington, D.C. What makes a state business-firendly? According to TheStreet.com, it’s all about labor costs and taxes.

The index ranks states by their public policy climates for small business and entrepreneurship, measuring the costs and burdens of state government on small business and looking at policy areas that enable competitiveness and growth.

Low labor costs and a lack of corporate income tax are common denominators in the best states, while the opposite is true for some of the worst states, experts say.

“A lot of states have instituted programs for small businesses, or even large businesses, that want to relocate to the state,” says [Mariano Soli, a state-taxation expert], citing grants, tax credits and temporary property tax reductions. When entrepreneurs can choose where to base a business, things to look at include corporate income tax rate, property tax and the sales tax burden.

High taxes — along with health insurance mandates and workers’ compensation costs — relegated California to the worst list, despite its reputation as being entrepreneur-friendly. But TheStreet.com sees a recent jobs-creation program as helpful to small business owners.

Best And Worst States For Small Business [TheStreet]

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