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Best States for Business in 2010

Written by Diane Kennedy, CPA on January 7, 2010

Do a Google search for “best states for business” and you’ll find a number of different lists. There are different criteria used in determining what is best, such as: education of population, general ease of doing business, related services, tax system, Internet support and the like. I did a very informal poll on Twitter about what made business owners choose their spot for their business and came back with clear-cut bricks and mortar answers: going where the customers were, location for their business, access.

My businesses are pretty much virtual, so I personally look for lifestyle, tax system and technological support such as reliable high speed Internet.

But, let’s say you could choose anywhere – where is the best place for your business? I came up with my own list, kind of a conglomeration of the normal items for business locations plus a look at the budget outlook for the state. If a state is having trouble meeting their budget, you can almost count on increasing taxes and more audits. None of that is good for business, or the people who own them.

Following are the 10 states that project cash reserves in excess of 10% of their budget for the year. In other words, they’ve got cash in the bank. That’s not to say it’s going to stay there and another bad tax collection year won’t wipe it out, but at least they’ve semi-survived so far.

Alaska – Alaska has a cash reserve and is considered the 7th best state to do business in. That’s a pretty combination of sound fiscal responsibility and good business climate. Of course, it’s cold there.

Texas – Texas surprised me, ranking high both in good business climate and in a high reserve. In fact, Texas is considered the 5th best state to do business in. Personally, I’m nervous about the Texas Margin tax, which is a semi-gross receipts tax. That means that there is a tax based on the ‘top line’ revenue amount for the company. There are 3 choices of deductions you can take against it, but if you have a business that is high volume and low margin, you’re going to get hit with taxes. On the other hand, Texas hasn’t been super-aggressive at collecting or defining nexus for the state.

Montana – Montana is another somewhat fiscally sound state. But, it’s not a great business climate – ranking 31st.

Wyoming – WY is probably the hands down favorite when you look at both indicators. Good coal reserves means a healthy government economy and Wyoming has no state income tax. They also have no state income tax and decent asset protection law. I wish they had a Series LLC, which is my new favorite business structure. They do rank as 3rd for general business climate.

North Dakota – ND has plenty of money, but they rank 36th in business climate. I think overall, I’d probably pass on a new business in ND, if I had other states to choose from.

Nebraska – The Corn Husker state has good cash reserves too, but they rank a dismal 40th for business climate.

Georgia – Atlanta’s got a fond spot in my heart, so I was happy to see that GA has a solid budget, some cash reserves and is 19th for business climate. Not the top of the group, but not bad either.

Indiana – Indiana also has cash reserves, but they are behind Georgia at 22nd for business climate.

Delaware – Neck in neck with Indiana, they rank 21st for business climate, but do have money.

West Virginia – Another state on the Eastern seaboard, WV has some cash reserves, but ranks 39th for business climate.

I pulled my stats for business climate from Business Week and the budget information from the National Association of State Budget Officers.

Personally, my businesses reside in Nevada. My family is living right now in Baja California and in Reno. Nevada has no state income tax and a long history of solid laws and court decisions that protect business. The plummet of Las Vegas real estate values has created a lot of stress on the budget, but the legislature appears to be pretty pro-active and making the tough decisions they need to.

Where is your business located? What helped you make that decision?

4 Comments

  1. Thanks for the list, Diane! This is great information!

  2. Thanks Rebecca. It was really interesting to dig through the budget reports. I figured Alaska would be fine, and suspected Wyoming would be as well. Texas surprised me, though. I had thought the new Margin Tax was a strategy to try to get badly needed revenue. Looks like it was more pre-planning. Odd to see government thinking ahead!

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