Best, worst states for new businesses in 2025 are...
Entrepreneurship is on the rise in the United States, with one state in the Pacific Northwest leading the way as the best state for new businesses.
A new report from SimplyLLC compiled data including job creation, consumer spending, inflation, business growth, corporate taxes and educated worker migration to determine the best and worst states for business creation heading into 2025. Washington took the top spot, driven by strong business growth (110.8% increase in the year ending November 2024) and a lack of corporate income taxes, making it an appealing state for new businesses.
According to data from the U.S. Treasury Department, 430,000 entrepreneurs opened new businesses every month in 2024, an increase of 50% since 2019. Seven-in-10 new jobs since 2019 have come from small businesses.
The Evergreen State was followed by Texas, Maine, Nevada and Oregon to round out the top five, with Florida, Rhode Island, Colorado, Vermont and Hawaii making up the top 10. Texas dropped from first place last year, but it still landed at high on the list due to its high job creation rate (17.3), influx of educated workers (62,000 more educated adults moved into the state than moved out in 2023) and, like Washington, a lack of corporate income taxes.
Maine saw more consumer spending growth than anywhere else (7.3% increase between 2022 and 2023), while Nevada had the highest job creation rate in the U.S. (21.1), and Oregon had a high rate of new business growth (57.4%).
On the other side of the entrepreneurial spectrum, Alabama ranked as the worst state for business growth in 2025. It had one of the biggest declines in new business openings (down 14.5%), and was one of only two states to see declines in consumer spending growth (-0.6%) year-over-year. Alabama has also struggled to attract a professional workforce, with about 3,000 more educated adults moving out of the state than into it in 2023. The region has a high inflation rate, with prices up 22% relative to early 2021 prices.
Iowa was second to last, given its above-average maximum corporate income tax rate (7.1%) and stagnant consumer spending growth (0.4% year-over-year). Minnesota, Mississippi and West Virginia also landed among the bottom five. New business openings have fallen by 11.3% in Minnesota, while consumer spending growth and job creation was subpar in Mississippi and West Virginia. Inflation was high across the board, at either 21% or 22% in each region.
Between the 2024 and 2025 rankings, New England states (Vermont, New Hampshire, Rhode Island, Massachusetts, Connecticut and Maine) climbed in the rankings this year largely because of increases in job creation and consumer spending growth, according to SimplifyLLC. On the other hand, Kansas, Pennsylvania, Delaware and Utah, all fell more than 30 places after scoring poorly across the board.
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“While the U.S. is defined by its iconic business hubs from Silicon Valley to New York City and everywhere in between, new workplace, technology and economic trends are reshaping American entrepreneurship and allowing unexpected new hotspots to emerge,” said SimplifyLLC. “For new startup founders and seasoned executives alike, understanding how these trends affect the business landscape in different parts of the country is crucial when deciding where to launch, expand or relocate your firm.”
