April 9, 2013

Best and Worst States for Small Business in 2013

What lures entrepreneurs? It’s not what politicians think, Thumbtack says

Provo, Utah—a bustling hub in the state that tops the list. (Provo was also ranked the third-best city for educated job seekers. See link below.) Provo, Utah—a bustling hub in the state that tops the list. (Provo was also ranked the third-best city for educated job seekers. See link below.)

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Despite the claims by advocates that lower taxes entice business, a new survey finds it’s actually professional licensing requirements, and not taxes, that take the top spot when considering where to set up shop.

The survey, in partnership with the Ewing Marion Kauffman Foundation, was released by Thumbtack.com, a website that provides recommendations about local vendors for services ranging from planning a wedding to remodeling a home. In addition to ranking each state by the business atmosphere, it found that licensing requirements were 30% more important than taxes in determining a state's overall business friendliness. Its research also found that 40% of U.S. small businesses are subject to licensing regulations by multiple jurisdictions or levels of government.

"Small businesses are top-of-mind for lawmakers nationwide, but too often their needs are more a matter of conjecture rather than actual evidence," Sander Daniels, the website’s co-founder, said in a statement. "Some 7,000 businesses owners across the country have told us that they care about a lot more than just taxes—for most businesses, simple licensing regulations and helpful training programs are even more important to their success."

Other key findings include:

• Utah was the top-rated state, and Austin, Texas, was the top rated city. At the other end of the spectrum, Rhode Island and Newark, N.J., were the lowest-rated state and city.

• The ease of obtaining health insurance was an important factor for many businesses. One-third of small business owners rated obtaining and keeping health insurance as "very difficult," versus only 6% who rated it "very easy."

• Small businesses were relatively unconcerned with tax rates—more than half of small business owners felt they pay about the right share of taxes.

"It is critical to the economic health of every city and state to create an entrepreneur-friendly environment," added Dane Stangler, director of Research and Policy at the Kauffman Foundation, who co-produced the survey. "Policymakers put themselves in the best position to encourage sustainable growth and long-term prosperity by listening to the voices of small-business owners themselves."

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