South Dakota Is Best State For Small Business

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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  1. Blueskylaw says:

    If I can make it there, I’ll make it anywhere, It’s up to you, South Dakota, South Dakota, Souuuuuuuth Dakota!!!!

  2. nybiker says:

    Here’s one reason New York State is on the list. The state recently changed its rules when it comes to certifying your company as a woman-owned business enterprise (WBE). Now you would think it’s just a matter of saying you’re a woman and you own the company and all you should have to do is prove you own it. Fine. The company I used to work for was certified a few years back as such a WBE. We go to renew the cert this year and the owner gets back a letter that says sorry, you no longer qualify. WTF? A recent change mandates that the owner’s net worth cannot exceed $3.5 million. And yes, hers is over that amount, so no certification. Why does an owner’s net worth have to do with being a woman-owned business? I understand the DBE (Disadvantaged Business Enterprise) status as having such a limit – $750,000, not including your home. But why the WBE? At least the NYC WBE cert is good until 2013.

    • qwickone says:

      You get other special privileges for the woman-owned designation (caries state by state, but I know this designation gets set-aside contracts with the US government). The assumption is that once you hit a certain threshold (net worth in this case), then you no longer require a protected status and should be able to stand on your own. Not arguing the merits of that, that’s just the reason.

      • nybiker says:

        It’s true that for the Fed’s SBA there are set-asides. For NYS and NYC, it’s a goal. As in a project might have a goal of 10% of the bid-winners will be WBEs. And a separate goal of 10% for MBE (Minority-owned business enterprises). It’s not a lock, though.
        My complaint is that when they started the program there was no net worth limit. Now there is.
        And for the small businesses, just because the owner has a high net worth, doesn’t mean it’s because the business they own is doing so well. In this case, she has other income (real estate, for one) that generates a lot of her income. The business where I was employed by her, however, did poorly, so while she gets no income from it, she’s personally not suffering. I am, though, as I’ve been unemployed for 2 years (but that’s another story).

    • Hi_Hello says:

      women get special privileges??? man… I want special privileges… what ever happen to treated equally and stuff…

      • Maximus Pectoralis says:

        Everyone is equal, but some are more equal than others!

        • junkyardmonkie says:

          This guy here, who’s name looks like it’s trying to imply he’s really buff and witty too!(but i could be wrong), doesn’t take facts into account before he spouts out hate for people who do not believe what he does. Women with the equal education, experience, age, etc. earn 77% of what a man would earn for the exact same (equal) position. Even though in the past few years, women have been starting businesses twice the rate men have, the average women owned business’s revenue is 27% of the average male owned business.

          I’m not saying that the problem is the “White Man” (which he obviously is because no one ever makes that complaint unless they feel they’ve been cheated somehow), but often times it’s a societal problem. We all collectively think of women as inferior (even women), and to break that stigma, we try to make the playing field equal.

          It’s kind of a terrible analogy, but in games like golf or whatever, they have a term called “handicaps” which make things a little more equal. This way game isn’t just given to the person who has a head start. So before any more hate is spouted, let’s do whatever we can to get to the point that we don’t need these crutches, and people can be considered truly equal.

          Before someone makes an accusation, I am a white guy, and I pretty much dont have a lot of trouble getting work and getting good pay. But, maybe that’s why i’m not so bitter.

          • Maximus Pectoralis says:

            This is exactly my point. Precisly why I even posted a message in the first place. People here spew so much hate and vitriol toward “teabaggers”, belittling them and boasting their superior intellect and “education”. I personally wouldn’t support the Tea Party movement (calling them Teabaggers IMO is the same as calling “progressives” Libtards) in its current form since it has strayed far from its origins of advocating responsible government spending. Just as the socialist movements have largely gone from equal rights to a feeding frenzy at the public trough.

            People always say I generalize when I say that “liberals” always resort to attacking the man rather than the idea. Take a look at any New Jersey web sites and you will mostly see “Chris Christie is fat!” instead of any real debate on his policies or ideas. And then there’s the double standards. It wasn’t that long ago that people on the left were directly calling for the death of Bush and other Republicans (not that I like them either) but now simply disagreeing with the party in power means you’re a violent radical maniac.

            So I have to ask — did I hurt your feelings? Are you not open to my ideas? Why are you so closed-minded and just take whatever your political overseers say as the word of God?

            • AnthonyC says:

              Personally, I consider myself a classical liberal. Not a classic “liberal,” the buzzword used in US political discourse, but someone whose political thinking follows the traditions of liberalism, following from Locke and so on. I believe the role of government is to protect the rights of citizens from encroachment by other citizens and foreign powers. In all other cases, the government should not interfere. The founders believed that the tenets of classical liberalism lead to limited government.

              Unfortunately, the number of ways one citizen can inadvertently encroach upon the rights of another is enormous. Comitting fraud against my neighbors forces me to expend more time and money protecting my information or evaluating products and companies before buying. Releasing pollutants into the air or water contaminates my body and adds to my health care costs. Selling tainted food or drugs imperils my life and well-being. I could go on, but you get the idea. And as a purely practical matter, it is far more cost effective for these problems to be handled at the level of collective policy making, rather than having each harmed party bring each offending party to court.

              So really, the problem is buzzwords. They disguise the underlying conflict- a legitimate debate about what rights we have as citizens, how far they extend, and which ones take precedence over which others.

              • Maximus Pectoralis says:

                This I agree with. It’s kind of like “assault rifle”. “Liberal” refers to freedom, but in politics it refers to “socialism”, “social justice”, “redistributive justice” or whatever phrase you choose which means essentially taking away from one to give to another. An “assault rifle” is, in technical terms, a hand-held select-fire weapon, meaning it can fire semi-automatic or full-automatic depending on the operator’s preference. The “Liberals” define “assault rifle” as “a scary-looking black gun” whether or not it is capable of full-automatic (machine gun) fire. People think the 1994 ban was for real full-auto assault weapons, but those were banned by the National Firearms Act of 1934.

                I don’t think anyone is advocating anarchy. Government obviously has a purpose in civilized society. But unfortunately the politicians we elect to manage our government often abuse their power. On the left, you have politicans giving away extraordinarily generous pay and benefits to unions, easy to abuse public assistance programs (cashing out welfare cards at casinos anyone?) and allowing illegal immigrants to come across the border freely, all in the game of cheap, easy votes. On the right you have politicians starting unnecessary wars to boost the military-industrial complex, legislating morality and trying to appeal to big business and wall street to maximize shareholder profits over actual economic growth.

                Some government regulation is necessary, but sometimes they just don’t make sense. Why is it legal for a diesel truck to idle its engine outside of an office for 20-30 minutes spewing out horribly toxic fumes, but someone who wants to smoke a cigarette must be 100 feet away from the nearest window? Why do we need to subsidize the ethanol fuel industry when it only costs taxpayers more money and creates more pollution and damage to equipment compared to pure gasoline? Every politician has his or her pet projects. Ideally the government would only spend our money on the things we really need and regulate everyday life in the least restrictive way when necessary, but things are getting out of control.

                • junkyardmonkie says:

                  Social justice is an interesting word to use there. That was introduced several months ago by Glenn Beck. He pulled that word to the forefront to make it the new buzz word. You made your comment seem as if you agreed with how buzz words were the problem, but you followed by using them is the exact way that the previous comment warned about.

                  They are called buzz words because people have attached so much meaning that they almost take a life of there own and they resonate (buzz) with people to invoke an emotion which in turn suppresses any discussion. The word itself could be innocuous or meaningless, but then people attach meaning to it and it basically becomes code words that people speak to one another.

                  The battle over guns is the balance of keeping true to the constitution, while trying to avoid the consequence of too much artillery (i.e. the wild west). The shooter in AZ used a gun that had a 31 bullet clip, but previously could only get a 10 bullet clip. The shooter was stopped only when he went to reload. Since the need for continuous fire isn’t really important when hunting animals (especially with a handgun), limiting the clips to prevent situations like this makes sense. The constitution has basic rules set as warnings to promote the prosperity of our nation and prevent the over control from an ominous group of people. This is why the officials are elected, and there are anti monopoly laws. But, the constitution didn’t outlaw slavery, so we know that it is not a perfect document. They could not foresee everything, and we need to learn from our history and create laws to protect of from it.

                  • Maximus Pectoralis says:

                    Actually I’m quite “social justice”, “redistributive justice”, “economic justice” etc. were all words Obama liked to use during his term as a senator. I wouldn’t know anything about Glenn Beck because quite frankly, I think he’s a moron about on the same level as Michael Moore.

                    As for AW ban, it didn’t prevent people from owning magazines of that capacity. It only prevented the manufacture of new ones for the civilian market. There was a large market of “pre-ban” firearm equipment which was perfectly legal since they were manufactured before the bans. I don’t know about the Glock 19 (the horrible murder assault weapon which, by the way, is standard issue for many large police departments including NYPD) but for the AR-15, a 10-round magazine was maybe $15 and a pre-ban 30-round was around $40-50. Do you think $25-35 is going to deter a criminal from buying a pre-ban magazine? Even for guns, the “assault” rifles (AR-15 with enough “scary” features) sold for mabe $400-500 more than a post-ban “non-scary” gun. Again, is a few $hundred going to deter a determined criminal?

            • junkyardmonkie says:

              First, you didn’t offer any ideas other than white men are the ones really being oppressed.

              Next, that last line was just to give context to the opinion because as you said, people like to attack the person instead of the idea.

              The term “Teabaggers” was actually originally used by people at the teaparty rallies, and then it was adopted afterward because opposers found it funny. I agree though that Libtard and Teabagger are both demeaning words used to marginalize the other side, which is why i didn’t use any.

              Business is not as cut and dry as you tried to explain. Decisions may not be made about re-bar, but they are made with investments. “Oh, that company sounded good until I met Laura…”, “Rick’s a ballbuster, just like i was…” Those quotes are obviously anecdotal, but it’s just little things like that which build up and cause a disparity in the facts. I gave you numbers. The playing field is not equal. Because neither of us have a good standpoint to view the situation, we look at numbers and look at the root cause of the situation. If someone “feels” like everything is equal, but the number don’t match up, then we do not make policy based solely on the “feelings” of the people who have the empirical advantage.

          • Maximus Pectoralis says:

            Oh and I missed your witty little line at the end. If you have such a high paying job, please do disclose what it is? I am a software engineer and there are plenty of job opportunities available to me. If the business I am starting myself doesn’t work out, I’m sure I can easily find a job in the $100k+ range, maybe even higher since I haven’t searched in a while

    • Maximus Pectoralis says:

      According to Libtards, everyone but the Great White Oppressor (any white man basically) is entitled to special treatment. This is the kind of ridiculous regulation that Teabaggers are against.

      • tbax929 says:

        Wow. I should totally join that Teabaggers movement. You think they’ll care that I’m black and gay, though? I can’t imagine I’m in their target audience. Oh, and I’m one of those elitist college graduates, too.

        • Maximus Pectoralis says:

          Right! I forgot a few qualifying factors:

          White Male Heterosexual Christian

          My absolute favorite is how a business can be “equal opportunity” and “affirmative action” at the same time. That’s basically saying “we don’t discriminate UNLESS you’re…”

        • Maximus Pectoralis says:

          Oh and enough with the “liberals are more educated” nonsense. I know plenty of “starving artist” liberal arts majors who technically are “more educated” than I am, but make a fraction of my salary working retail jobs while I work in a fairly well-paid high-tech job.

    • junkyardmonkie says:

      Is there some type of tax exemption for being certified WBE? If so, I think that the logic is that if you net $3.5 mil, you aren’t really in need of assistance anymore. I know that the “W” in WBE stands for women, but you have to draw the line somewhere if it’s tied to tax incentives. Netting 3.5 in most cases means you’re up on your feet.

    • rmorin says:

      I do not even understand preferring contracts, or setting a side a percentage of contracts to minority or women owned businesses period. With affirmative action, I can at least understand that some people hiring may actually be racist/sexist towards an individual applicant and those are why those protections are there. But with a business??

      Do these EVER happen?

      “Great, Company A sells cement for a good price for our highway bridge project …. Wait a second … A women owns that … SCREW THAT”

      “Well, the rebar is double the price, but a white man owns that company, and white men make great rebar!”

      I sincerly doubt it. Contracts funded by tax money should go to the best company in terms of price/quality/timeliness … I do not care if a dog owns it.

  3. alSeen says:

    Woohoo! Go my state.

    Another good thing is that we don’t have a state income tax.

  4. Mom says:

    If those states were truly the “best” for entrepreneurship, then they’d actually have a significant level of entrepreneurship. That doesn’t seem to be the case, however.

    I worked for a company that moved *from* one of the “best” places for entrepreneurship to one of the “worst”. The reason they moved? There wasn’t an educated, qualified labor force available. An area can have low labor rates, low taxes, and a complete and utter lack of regulation, but if there isn’t an educated, entrepreneurial workforce, it ain’t gonna happen. If you’re hiring illegal aliens to cut up chickens, then South Dakota’s probably fine. But if you’re starting the next Google, you’ll do better starting the company someplace where there’s a steady stream of smart technical people available, regardless of health care regulations.

    • Derigiberble says:

      This is the truth. The criteria used to draw up these lists should be very far down the list of priorities for a business (no matter what the size) to consider when picking a location. Work force availability, customer base, utilities connectivity, proximity to shipping centers and transit, etc, should all come before corporate income tax rates when picking a site. To pay income tax you actually have to make a profit first…

      These lists are really just attempts to foment a race to the bottom between states.

    • palfas says:

      So much this. If taxes and costs where the primary motivator, everyone would move to Mississippi, but I don’t see that happening any time soon.

  5. mac-phisto says:

    everything’s relative. SD has low labor costs & taxes b/c of its seclusion from mainstream society. it ranks 46th in terms of population (fun fact: there are 4 to 6 times more cows than humans in SD). their income per capita rank is 26.

    suppose that doesn’t matter if you’re in the drop ship business, but if your small business relies on local customer traffic (& those customers aren’t cattle), you could probably do much better elsewhere.

    • Costner says:

      I love when arrogant types use phrases like “seclusion from mainstream society”. It just proves you have never actualy spent time in the place you are attempting to judge and aside from looking up a few statistics via Google you have not a clue what you are referring to.

      Do you think South Dakota is somehow different from any other state in terms of being integrated into the American way of life? Do you think the the electric lamp and the automobile have yet to cross into the area? Better yet, in the modern world where access to vast amounts of knowledge and content is delivered via an Internet connection and/or television, do you somehow feel South Dakotans are isolated in some way?

      Wow – if anyone is secluded I’d say it is more likely you than anyone from South Dakota.

  6. Cheap Sniveler: Sponsored by JustAnswer.comâ„¢ says:

    Wow, I should move to South Dakota and start my business there!

    But, then I’d have to live in South dakota. Never mind. Where I am now is bad enough.

  7. Hi_Hello says:

    I was taught that location, location, and location was the main thing about buying a house and opening a business.

    Sure it’s ‘better’ to open in S. Dakota but what if the business failed because your target audience aren’t S. Dakota?

    For Example: I want to open a I heart NY gift shop. That sell EVERYTHING with I heart NY…. I’m pretty sure S. Dakota would be the best state to open this gift shop…

  8. Emerald4me says:

    What has the weather been like there this past week, or month? Getting to work must be a breeze. Also, I live in Los Angeles and we wanted to take the kids to Mt. Rushmore. We looked into flights. You get exactly 2 flights per week that go directly into that state. 2 per week! Another bonus – we are teaching our teen to drive. We saw the listings for the worst state to teach your kid to drive in. Yep, South Dakota. Very lax on their drunk driving laws too.

    • tbax929 says:

      I’m quite sure folks in South Dakota won’t cry if you stay in LA.

      Personally, I’ve never been to SD, but it seems lovely. Not everyone wants to live in a booming metropolis. I’ve driven in LA, and one trip there was enough for me.

    • eday says:

      1. You’re right, SD is a sucky state to live in. I’ve been stuck here most of my life.
      2. There are more than two flights per week into the state. Rapid City (where the Black Hills are) may only have two flights per week, but that’s because it’s the supposed meth capital of the midwest and a very depressing place. (Pretty scenery though.)
      3. Yes, you can drive as young as 14 here. It’s a really stupid law, but there’s no reason you *have* to let your kid drive that young.

    • Costner says:

      “Getting to work must be a breeze.”

      It is… if you aren’t scared of a little snow and have some driving skill. I wouldn’t expect anyone from LA to be able to make it though. Oh yea – average commute time is around 16 minutes, which means in comparison to the average LA commute (29 minutes), South Dakotans have an extra 56 hours a year to spend on things they enjoy or with their families rather than sitting on a freeway.

      “I live in Los Angeles and we wanted to take the kids to Mt. Rushmore. We looked into flights. You get exactly 2 flights per week that go directly into that state. 2 per week!”

      Perhaps there were two direct flights into Rapid City which is the largest city near Mt. Rushmore. However keep in mind Rapid City is only around 75,000 people and does not have a large airport, so most flights connect through Denver or Minneapolis. If you can’t be bothered to switch flights then I hardly feel that is room to complain. However had you bothered to check you could get a flight into Rapid City via Denver any day of the week.

      The major city in South Dakota is Sioux Falls and they have daily non-stop flights to a number of large cities including a few dozen flights back and forth between hub airports such as Denver, Minneapolis, and Atlanta.

      “Another bonus – we are teaching our teen to drive. We saw the listings for the worst state to teach your kid to drive in. Yep, South Dakota.”

      Which is based upon the fact that you can drive when you are 14 years old in South Dakota. The state is vast and expansive, so travel is a necessity which is why they continue to allow 14 year olds to obtain drivers licenses. If they changed it to 16 I’m sure the accident rate and other factors that go into a “worst state to teach your kid to drive in” would be much different.

      Then again, that ranking was probably written by someone incapable of driving on snow or gravel… two skills every South Dakota kid learns their first year behind the wheel.

      Different != Worse

    • HogwartsProfessor says:

      LA is fun to visit but I wouldn’t live there.

  9. Consumeristing says:

    The keyword here really is the best for SMALL businesses, i.e., mom and pop. So if you’re gonna launch a casual dining “concept” or a tech startup backed with millions of dollars, places like SD is not where to go. BUT, for the vast majority of other small businesses, ones that aren’t going to launch an IPO in the next 2 years, this list makes sense.

  10. Mold says:

    Yep, cheap labour!!! No eveel taxes!!! No incomes.
    Most of the labour pool is Federal employees..who won’t work for Galtian Overlord preferred wages. The rest toil in three, or more, low-wage, no benefit yuck jobs. Then there is the weather….
    They always tell how great and wunnerful, wunnerful these places are because the wages are low and the taxes are low and the services are minimal. Yet, the places that make you the money (are they not Capitalists?) are icky high wage, high tax, high service ones.
    Oh, the worshipers of entrepreneurial gods forgot to mention SD has had a Brain Drain and a Person Drain. Not only to the smart kids leave for eveelbigcities and living wages and choices…pretty much everyone does. Think Buffalo Common.

  11. ARP says:

    So, once small businesses flock to SD and the population booms, guess who will be forced to raise taxes to help improve the infrastructure that the small businesses use. Or they won’t be able to maintain it and they’ll move out of the state once they get big enough where it hurts their business. There’s a reason that many of the least populous states are also the most business friendly, very low overhead. Isn’t Texas facing a record deficit?

    • Consumeristing says:

      “Isn’t Texas facing a record deficit?”

      LOL! Being Californian, this is an annual event. Big thumbs up for Texas for only going through it now.

    • gman863 says:

      Texas has a huge “rainy day” fund; however Governor/Head Storm Trooper Rick Perry and his Tea Party BFFs refuse to dip into it. They’d rather cut education and social services than use the fund for its intended purpose.

      On tonight’s news, it was reported that Rick Perry’s main piece of “emergency” legislation has nothing to do with the state budget – instead, it’s a bill requiring abortion providers to subject clients to a mandatory sonogram of the fetus plus a mandatory 24-hour waiting period to “think about” it.

      Heil Perry! I wonder if his next move will require students to goose step while at school.

  12. Cetan says:

    What’s a South Dakota?

  13. sonneillon says:

    Yeah South Dakota might be good with taxes and cheap labor, but there are no customers in South Dakota. New York and Washington DC have high population densities making them advantageous for demand. Supply all you want if there is nobody to buy your products having cheap labor is useless. Also a lack of skilled personnel will bring down productivity.

  14. humphrmi says:

    So, summing up the article, some states are great because they don’t impose evil worker protection laws on employers.

    What do S.D.’s employees think about that?

    • Kate says:

      When I lived there, we thought we wanted a job, because there weren’t any. Nobody had booming business.

  15. FrugalFreak says:

    To pay fair Corporate taxes should be the best thing to do. Support the people who work for You, Don’t treat them like throwaways.

  16. AnthonyC says:

    Except, of course, that businesses also need employees and customers, and people don’t like living in states that provide fewer services to citizens, or that have a high income or sales tax rate to make up for the lack of a corporate income tax, or a too-low minimum wage.

  17. phervor123456 says:

    So SD is headed the way of that other pro business anti tax conservative mecca of fiscal responsibility, Texas?? Yikes, well here’s hoping they skip the whole deficit equal to a fifth of their entire budget thing that’s come along with all those consessions.

  18. gman863 says:

    Now we know why Citibank’s credit card division is based in South Dakota.

    • Costner says:

      Actually that has to do with usary laws. There is no maximum allow able interest rate in South Dakota which explains why there are the headquarters for Citibank, Wells Fargo, First Premier, HSBC, and another dozen or so credit card companies located there.

      Chances are if you have a credit card company, it originates from South Dakota or Delaware which share the lack of usuary laws and other business-friendly climates (like no income tax, no business inventory tax, no personal income tax etc).

  19. BocaMan says:

    Those states that might not be as good to start a business — New York, New Jersey, California, etc — are better places to be an employee… higher wages, diversity of jobs, good welfare (higher unemployment comp, disability), good infrastructure, and stuff to do!! I know that I will get slammed for this, but living there is worth the extra taxes to pay.

  20. Kate says:

    Um, nobody buys anything in South Dakota, most of the towns are half full of empty stores.