The Most Expensive US States to Start a Business in 2024

Journo Research

Tuesday, January 23rd, 2024

  • New York ranks as the most expensive state for entrepreneurs, with high commercial rent costs, weekly wages, and LLC filing costs. 

  • Washington ranks second, and Massachusetts ranks third as the most expensive states for entrepreneurs.

  • Mississippi was revealed as the most affordable state to set up and maintain a business. 

New research has revealed that New York is the most expensive state for entrepreneurs.

Business consulting firm Venture Smarter analyzed eight metrics that could influence the cost of setting up and running a business in each state. This included each state’s corporate tax rate, average LLC filing fees, average commercial rent costs, and the hourly minimum wage. 

These metrics were gathered for all 50 states with each scored out of 100 to reveal the most and least expensive states to be an entrepreneur. 

The research revealed that New York is the most expensive state in America to start a business, with a total score of 79.07 out of 100. The state offers the highest yearly commercial rent cost per square foot at $38.92, and the highest average weekly wage at $2,015. It costs $200 on average to file an LLC in New York, which is the fourth most expensive in the country alongside Alabama.  

The state also has the fourth-highest average sales tax rate at 4.5% and the fourth-highest hourly minimum wage at $14.20. The Empire State has an average corporate tax rate of 7.1% (14th highest), and an average annual LLC fee of $25 (tied 17th highest). New York’s labor force also makes up 49.7% of its population. 

Washington ranks as the second most expensive state to start a business, scoring 76.54 out of 100. The Evergreen State has the highest hourly minimum wage in America at $15.74 and the fifth-highest LLC filing cost of $190. Washington also has the eighth-highest sales tax rate alongside Arizona, at 2.8%. 

Massachusetts scores 71.29 out of 100 and places as the third most expensive state to start a business. The state has the highest annual renewal for LLC filing fees at $500, the third-highest hourly minimum wage at $15, and the ninth-highest corporate tax rate at 8%. 

California scores 69.79 out of 100 and places fourth on the list of the most expensive states to own and run a business. The home of Silicon Valley has the second-highest hourly minimum wage at $15.50, the second-highest average commercial rent costs per square foot ($32.99), and the fifth-highest corporate tax rate at 8.8%. However, the state does have the seventh lowest LLC filing costs on average, at just $70.

Scoring 66.83 out of 100 and ranking fifth is Illinois. The state has the third-highest average corporate tax rate at 9.5%, the ninth-highest LLC filing cost at $150, and the tenth-highest annual LLC fees at $75. 

New Jersey ranks sixth on the list, scoring 64.36 out of 100. The state has the fourth-highest corporate tax rate at 9% and the seventh-highest average commercial rent at $22.96 per square foot.  

Connecticut ranks seventh, with a score of 64.35 out of 100. The state is tied with New Jersey for the fourth-highest tax rate at 9% and has the sixth-highest hourly minimum wage at $14. Minnesota scores 60.08 out of 100 and is the eighth-most expensive state for entrepreneurs. The state has the second-highest corporate tax rate at 9.8%, as well as the tenth-highest average LLC filing cost at $135

Texas scores 59.74 out of 100 and is the ninth-most expensive state for entrepreneurs. The state ties with Tennessee for the highest initial LLC filing costs at $300. Unlike many other states, Texas does not require business owners to pay LLC filing fees each year to keep the business incorporated.

Maryland rounds out the top ten with a score of 58.38 out of 100. The state has the eighth-highest corporate tax rate at 8.3% and the ninth-highest average weekly wage at $1,541. 

Mississippi scores 11.87 out of 100 and is the least expensive state for entrepreneurs in America. The state has the fourth lowest corporate tax rate at 4.0% and is one of 20 states to set their minimum wage at $7.25 an hour, which is the lowest nationally. It costs $50 on average to file an LLC in Mississippi, and the state does not require business owners to pay annual renewal filing fees.

A spokesperson from Venture Smarter commented on the findings:

"Each state has its own complex regulatory and economic environment, which contributes to the differences in business costs. New York being the most expensive state for entrepreneurs, is partly attributed to its high living costs as well as its highly competitive business environment.

“In fact, more than 27,000 business applications were submitted here in November 2023 alone, according to the U.S. Census Bureau, which reflects an 11.4% increase over the previous year.

“On the other hand, Mississippi’s comparatively lower startup costs may be an intentional move to incentivize entrepreneurship, create more jobs and direct more money into the local economy, given they hold the highest rate of poverty of any state.

“This research aims to provide valuable insights into the business climate across various states, offering new entrepreneurs the information they need to make well-informed decisions on their entrepreneurial journey. By understanding the unique characteristics and challenges of each state, aspiring business owners can navigate the complexities of different markets and optimize their chances of success.”