These Are the Best States to Start a Small Business: Study

For every one business that closed in Nevada last year, about 1.3 businesses opened.

That ratio, of businesses opening to closing, makes Nevada the best state to open a small business, according to a new study from AI software company MRPeasy.

“It is interesting to analyze the U.S. states with the highest and lowest rates of small business openings and closures since the ratio reveals economic trends and growth,” MRPeasy director of business development Mike Lurye stated.

The study drew from U.S. Small Business Administration Office of Advocacy data for 2023 to find the number of business openings and closings in each state during the year, calculate the ratio between them, and rank each state in a list. It defined a small business as a company with less than 500 employees.

Related: 1 in 5 Small and Medium-Sized Businesses Could Be Out of Cash By Christmas, According to a New Report

Louisiana, meanwhile, was at the bottom of the list as the worst state to start a small business. It was the only state with a negative ratio of business openings to closures, meaning that more businesses shut down than started in Louisiana last year.

Small businesses are likely to fail: U.S. Bureau of Labor Statistics data shows that 65% fail within the first decade. Over 60 million Americans are employed by small businesses, per U.S. Chamber of Commerce data, and there are more than 33 million small businesses in the U.S. One in five small businesses indicate that they only have one to five months of cash reserves on hand for emergencies, according to a recent study.

Here are the best and worst states to open a small business, based on the balance between business openings and closings last year.

Related: Household Incomes Are Up For the First Time in 4 Years. Here’s Which States Have the Highest Gains.

^{Las Vegas, Nevada. Photo Credit: Getty Images}

The Best States

1. Nevada

Small business openings: 18,296

Small business closings: 8,012

Ratio: 1.284

2. Washington

Small business openings: 29,963

Small business closings: 13,419

Ratio: 1.233

3. Vermont

Small business openings: 4,037

Small business closings: 2,133

Ratio: 0.893

4. New Jersey

Small business openings: 45,577

Small business closings: 24,347

Ratio: 0.872

5. Tennessee

Small business openings: 25,753

Small business closings: 14,543

Ratio: 0.771

6. Maine

Small business openings: 7,379

Small business closings: 4,310

Ratio: 0.712

7. South Carolina

Small business openings: 20,872

Small business closings: 12,344

Ratio: 0.691

8. Idaho

Small business openings: 11,426

Small business closings: 6,765

Ratio: 0.689

9. Connecticut

Small business openings: 15,892

Small business closings: 9,598

Ratio: 0.656

10. Rhode Island

Small business openings: 6,343

Small business closings: 3,836

Ratio: 0.654

The Lowest-Ranked States

1. Louisiana

Small business openings: 11,189

Small business closings: 11,998

Ratio: -0.067

2. Oregon

Small business openings: 17,483

Small business closings: 14,795

Ratio: 0.182

3. Missouri

Small business openings: 28,137

Small business closings: 23,579

Ratio: 0.193

4. Montana

Small business openings: 6,585

Small business closings: 5,439

Ratio: 0.211

5. Minnesota

Small business openings: 17,084

Small business closings: 13,879

Ratio: 0.231

6. North Dakota

Small business openings: 2,892

Small business closings: 2,317

Ratio: 0.248

7. New Mexico

Small business openings: 6,786

Small business closings: 5,352

Ratio: 0.268

8. Virginia

Small business openings: 32,318

Small business closings: 25,336

Ratio: 0.276

9. Nebraska

Small business openings: 6,997

Small business closings: 5,485

Ratio: 0.276

10. Iowa

Small business openings: 9,177

Small business closings: 7,138

Ratio: 0.286