The Best (and Worst) States to Incorporate In (2017)

1. Wyoming

As the highest-rated state in the nation for business tax friendliness, Wyoming is one of seven states with no income or corporate tax whatsoever. But while other states that do not tax income choose instead to tax sales heavily, Wyoming does not.

2. South Dakota

In 2011, South Dakota only collected $19 per capita of corporate income tax, lower than all other states excluding the four states that do not collect corporate taxes. The state also boasts an unemployment rate of just 4.4%, lower than all states except for North Dakota and Nebraska.

3. Alaska

Alaska’s high total revenue per capita (mostly taken from oil and gas companies) is offset by no income taxes, strong state economy, and a lower than average unemployment rate across the country.

4. Florida

The Sunshine State has no individual income tax, a relatively low flat corporate tax rate of 5.5%, and a number of tax deductions that allow nearly half of the state’s businesses to avoid having to pay taxes altogether.

5. Nevada

A sizable chunk of the state’s revenue comes from taxes on gambling revenue and high sales tax. In return, Nevada doesn’t collect any individual or corporate income taxes and is therefore one of the cheapest state to incorporate in.

6. Montana

Montana has some of the lowest property taxes in the entire country—0.72% of median home value in 2011—as well as has a flat corporate income tax, with all businesses paying 6.75% of all profits.

7. New Hampshire

New Hampshire is the only state other than Tennessee that restricts personal income taxes to just interest and dividends, ranking ninth in the nation for individual income policy and first for sales tax policy. However, the state had the highest property tax rate in 2012, at 5.68% of residents’ income.

8. Indiana

Since the passing of legislation adopted in 2011, Indiana has increased on the Business Tax Index each year by lowering its corporate income tax rate. Further reductions are planned through 2022 with a schedule phase down to 4.9 percent. Indiana also ranks well on the index in property taxes, unemployment insurance, sales tax and individual income tax.

9. Utah

Unlike most of the high ranking states for their business climate, Utah does levy taxes in all five tax areas measured by the Tax Foundation; however, the state received good marks because its taxes were not high in any particular area.

10. Oregon

Oregon actually ranks low on the totem pole for its corporate tax rate, individual income tax rate and unemployment insurance rate. However, the state’s 4th place ranking in sales tax just barely pushes the Beaver State into the top ten.

41. Louisiana

The “Pelican State” has the worst sales tax ranking in the entire country, coming it at 50th place and dropping it into the bottom ten overall from 36th the year before. This high tax rate is due to a decrease in revenue and structural shortfalls. The combined state and local sales tax rate is now approaching 10 percent.

42. Maryland

Even though the “Old Line State” boasts the 10th best business tax climate in the country, a relatively high corporate tax rate lowers its appeal to many businesses. Maryland also has one of the highest state taxes in the U.S.

43. Connecticut

The “Constitution State” ranks at towards the bottom of the every business tax friendly scale except for its Unemployment Insurance Tax rate, which it is not much to boast about either at 21st place. The high corporate taxes, sales taxes and individual income taxes make Connecticut one of the worst states to incorporate a business in according to the Tax Foundation.

44. Rhode Island

On top of being tied with California for having the highest unemployment rate in the country, Rhode Island is the worst state for unemployment insurance taxes. This is especially problematic for business owners who must foot the bill for the state’s unemployment insurance programs.

45. Ohio

In addition to having the fifth worst corporate tax rating out of every state in the country, the Buckeye State also ranked in the bottom three for it’s high individual income tax. Despite securing the number four spot for unemployment insurance tax and having a decent property tax rating, Ohio repeatedly ranks at the low end of the business tax friendliness scale.

46. Minnesota

Minnesota’s corporate and individual income tax rates are higher than all but six states, and it is one of just a handful of places across the country where lawmakers are seeking to further raise an already high sales tax rate in order to offset personal income taxes.

47. Vermont

Business owners running sole proprietorships and partnerships who pay taxes through individual income returns should know that the tax rate paid by Vermont’s highest income bracket is especially high at 8.95%.

48. California

While California doesn’t have a problem attracting large employers (Apple, Google, Hewlett-Packard, etc.), it is continually ranked lower than all other states except New York in terms of individual income tax, and the state is rated sixth worst for its corporate tax policy.

49. New York

Although the state actually ranks in the better half in terms of corporate tax policies, New York has the second worst business climate in the nation, according to the Tax Foundation. This is because it retains the worst individual income tax policies, and burdensome unemployment and property taxes.

50. New Jersey

New Jersey scored at or near the bottom in several different types of tax policies, including property taxes, individual income taxes and state sales tax. The state took last place in 2012 and 2017.