10 Best & Worst States to Incorporate An LLC or Corporation (2018)

1. Wyoming

As the highest-rated state in the nation for business tax friendliness yet again, Wyoming is one of handful of 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

South Dakota has no corporate or individual income tax, helping it consistently rank in the number two spot year after year since 2015. The only major tax in the Mount Rushmore State that is above the national average is the state’s property tax which averages 1.36%.

3. Alaska

Alaska’s high total revenue per capita (mostly taken from oil and gas companies) is offset by no income taxes and no sales tax (the only state to do this), as well as a strong state economy. The downside is that America’s Last Frontier has a higher than average unemployment rate.

4. Florida

The Sunshine State has no individual income tax, a relatively low flat corporate tax rate, 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 Nevada’s revenue comes from taxes on gambling and high sales tax. In return, the Silver State doesn’t collect any individual or corporate income taxes and is therefore one of the cheapest state to incorporate in.

6. Montana

Montana has one of the lowest property taxes in the entire country—0.87% of median home value—as well as has a flat corporate income tax, with all businesses paying 6.75% of all profits. The Treasure State does have a personal income tax, ranging from 1% (the 18th-lowest rate) to 6.9% (the 15th highest rate).

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 second for sales tax policy. However, the state has the third highest property tax rate of any state, at an average effective rate of 2.05%.

8. Utah

Unlike most of the high ranking states for their business climate, Utah does levy taxes in all major tax areas. However, the state received good marks because its taxes were not high in any particular area. Relatively low unemployment also helps boost the local economy. Businesses should also consider local taxes in addition to state sale tax, as local tax rates can tack on up to 3.0% extra.

9. Indiana

Since the passing of legislation adopted in 2011, Indiana has slowly 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.

10. Oregon

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

41. Rhode Island

Rhode Island is renowned for being one of 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. However, sizable minimum rates on all unemployment insurance tax schedules led to the state improving on the Index, from 44th last year to 41st in 2018

42. Louisiana

The Pelican State has the highest combined average state and local sales tax rate in the country, coming it at 50th place and dropping it into the bottom ten overall. This high sales 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. Louisiana has fallen consistently in the rankings year after year, from 34 in 2015 to 42 in 2018.

43. Maryland

Although several Fortune 500 companies call Maryland home, the “Old Line State” has a relatively high corporate tax rate which lowers its appeal to many businesses. Maryland also has one of the highest state sales tax rates in the U.S.

44. Connecticut

The “Constitution State” ranks at towards the bottom of the every business tax friendly scale except for its Unemployment Insurance Tax rate (which is nothing to boast about at 21st place). The high corporate taxes, sales taxes, and individual income taxes make Connecticut one of the hardest places to incorporate a business in according to the Tax Foundation.

45. Ohio

Although Ohio boasts one of the best corporate tax ratings in the country, the Buckeye State ranks near the bottom for it’s combination of individual income tax, state sales tax, county tax, and speciality 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 a few 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 (those who earn over $413,350 per year) is especially high at 8.95%. This ranks as the sixth-highest in the U.S.

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 and new Jersey. On top of having the highest individual income tax in the nation, and the state is rated 32nd worst for its corporate tax policy. California dropped one place from last year due to local sales tax increases and a sizable increase in its cigarette tax.

49. New York

Although the Empire 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 one of the worst individual income tax policies, burdensome unemployment, and high property taxes (often double the national average in many New York counties outside of NYC).

50. New Jersey

New Jersey again scored at or near the bottom in numerous major types of tax policies, including property taxes, individual income taxes, corporate tax, and state sales tax. The Garden State has taken last place every year since 2015.