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States with the most small businesses

  • States with the most small businesses

    According to the U.S. Small Business Association (SBA), 99.9% of all the businesses in America are small businesses. There are 30.7 million of them in total and they employ nearly 60 million people. That’s 47.3%—nearly half—of America’s combined workforce. Most work for businesses that employ fewer than 100 people.

    Small businesses are the lifeblood of the biggest economy in the history of the world, and the ambitious and hard-working entrepreneurs who open them, nurture them, and grow them come from all walks of life. While nearly three out of four of them are still owned by men, women own 12.3 million small businesses. Of those that are owned by women, 47% are owned by women of color. In total, minorities own 45% of America’s small businesses. They are not, however, distributed equally across the country.

    To uncover the states with the most small businesses, The Simple Dollar consulted the SBA’s 2020 Small Business Profiles Report. States were ranked by the total number of businesses with less than 500 employees in their state. Naturally, there’s a correlation with population—small and/or sparsely populated states dominate the bottom of the list and large, populous states are concentrated at the top.

    The Simple Dollar also used sources like state business organizations, research reports, surveys, and news accounts to get a feel for the climate in each state as it pertains to small business and entrepreneurship.

    It’s hard to imagine that there’s a single small business that wasn’t affected in one way or another by the coronavirus and the economic shutdown it caused. With the crisis ongoing, the total carnage is not yet quantifiable, but many that closed will certainly never open again. Even so, there appears to be light on the horizon.

    According to the U.S. Chamber of Commerce, “American small businesses report they have reopened in some capacity and are showing signs of optimism about the future, even while still dealing with many ongoing challenges related to the pandemic.”

    Keep reading for a glimpse at America’s currently struggling but vibrant small business community.

  • #51. Wyoming

    - Total small businesses: 68,641 (98.9% of businesses)
    - Small business rate: 15,424 per 100k residents 18+ (#3 highest among all states)
    - Total small business employees: 128,883 (#51 highest among all states)
    - Small business share of total employment: 63.8% (#2 highest among all states)
    - Self employed minorities: 3,364 (#49 among all states)

    Wyoming doesn’t have a lot of small businesses because it doesn’t have a lot of people—with a total population of less than 600,000, it’s the least-populous state in America. On a per capita basis, however, it boasts one of the country’s highest rates of new entrepreneurship, thanks to the state’s business-friendly climate. There’s no corporate income tax there, no individual income tax, no gross receipts tax, and Wyoming boasts one of the lowest sales tax rates in the country.

  • #50. Alaska

    - Total small businesses: 73,298 (99.1% of businesses)
    - Small business rate: 13,289 per 100k residents 18+ (#11 highest among all states)
    - Total small business employees: 137,271 (#50 highest among all states)
    - Small business share of total employment: 52.4% (#12 highest among all states)
    - Self employed minorities: 10,413 (#41 among all states)

    Like Wyoming, Alaska has one of the country’s highest rates of new entrepreneurship. Also like Wyoming, it ranks as one of the most business-friendly states in America, thanks to the absence of both sales and income taxes.

  • #49. North Dakota

    - Total small businesses: 74,202 (98.8% of businesses)
    - Small business rate: 12,752 per 100k residents 18+ (#18 highest among all states)
    - Total small business employees: 195,312 (#47 highest among all states)
    - Small business share of total employment: 57.4% (#5 highest among all states)
    - Self employed minorities: 3,652 (#48 among all states)

    Low taxes and high quality of life have helped to make North Dakota a prime state for startups. Between the 2008 recession and the current COVID-19 crisis, the state’s economy roared like few others. Much of that had to do with an energy boom, but North Dakota is also home to a significant tech-industry presence.

  • #48. Washington D.C.

    - Total small businesses: 78,313 (98.2% of businesses)
    - Small business rate: 13,559 per 100k residents 18+ (#8 highest among all states)
    - Total small business employees: 250,345 (#43 highest among all states)
    - Small business share of total employment: 47.5% (#31 highest among all states)
    - Self employed minorities: 14,471 (#37 among all states)

    With more than 700,000 residents, the District of Columbia has a larger population than the state of Wyoming, all within less than 70 square miles. The nation’s capital is home base for the federal government, but its business climate can be challenging. The District is known for its complex and costly system of regulations and taxes.

  • #47. Vermont

    - Total small businesses: 78,759 (99% of businesses)
    - Small business rate: 15,443 per 100k residents 18+ (#2 highest among all states)
    - Total small business employees: 157,322 (#49 highest among all states)
    - Small business share of total employment: 60.8% (#3 highest among all states)
    - Self employed minorities: 2,331 (#51 among all states)

    Vermont consistently lands near the bottom of major reports that rank states by business-friendliness. Entrepreneurs there grapple with high costs, high taxes, lots of regulations, and low growth prospects.

  • #46. Delaware

    - Total small businesses: 84,675 (98.4% of businesses)
    - Small business rate: 10,994 per 100k residents 18+ (#40 highest among all states)
    - Total small business employees: 187,221 (#48 highest among all states)
    - Small business share of total employment: 46.7% (#34 highest among all states)
    - Self employed minorities: 11,944 (#38 among all states)

    The state of Delaware has long been known as a corporate tax shelter state, but it’s not generally an easy place to start a small business. Entrepreneurs there often have a hard time securing capital, and the tax code is unusually complex, according to several recent studies. Business community leaders in the state refute those findings, however, and point to things like Delaware’s relatively-simple zoning and licensing procedures.

  • #45. South Dakota

    - Total small businesses: 88,191 (99% of businesses)
    - Small business rate: 13,211 per 100k residents 18+ (#13 highest among all states)
    - Total small business employees: 209,403 (#46 highest among all states)
    - Small business share of total employment: 58.2% (#4 highest among all states)
    - Self employed minorities: 3,096 (#50 among all states)

    Business climate studies tend to give South Dakota lousy ratings in things like workforce quality, access to capital, and technology and innovation. The economy, however, is solid—before the COVID crisis, at least—and the cost of doing business is low in the state, which is business-friendly overall.

  • #44. Rhode Island

    - Total small businesses: 103,986 (98.9% of businesses)
    - Small business rate: 12,164 per 100k residents 18+ (#25 highest among all states)
    - Total small business employees: 229,212 (#45 highest among all states)
    - Small business share of total employment: 52.6% (#11 highest among all states)
    - Self employed minorities: 7,154 (#43 among all states)

    Even before the COVID-19 crisis, job growth was stagnant in Rhode Island, which in recent years has consistently landed at or near the bottom of rankings of best states for business, like the one that CNBC conducts every year. The most significant obstacles to success tend to involve the cost of doing business, the economy, and infrastructure.

  • #43. West Virginia

    - Total small businesses: 113,779 (98.9% of businesses)
    - Small business rate: 7,942 per 100k residents 18+ (#51 highest among all states)
    - Total small business employees: 269,789 (#42 highest among all states)
    - Small business share of total employment: 49.1% (#23 highest among all states)
    - Self employed minorities: 3,938 (#46 among all states)

    Entrepreneurs in West Virginia enjoy a low cost of doing business and a low cost of living. There are significant barriers there, however, in terms of access to capital, workforce quality, and technology and innovation.

  • #42. Montana

    - Total small businesses: 123,419 (99.3% of businesses)
    - Small business rate: 14,689 per 100k residents 18+ (#4 highest among all states)
    - Total small business employees: 245,758 (#44 highest among all states)
    - Small business share of total employment: 65.3% (#1 highest among all states)
    - Self employed minorities: 6,411 (#44 among all states)

    The Montana Small Business Development Center Network operates 10 centers across the state and maintains a user-friendly website. Entrepreneurs can use this resource throughout the entire process of opening a business in the state.

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