The Best (and Worst) States to Incorporate In: A Guide (2021)

1. Wyoming

Wyoming keeps going strong with another year at the top of the charts. The twin #1 rankings in corporate and personal income tax, along with a high sales tax ranking, are clearly the keys to the state’s success. But even the areas that aren’t as strong are improving. The unemployment insurance tax rank jumped from 37th to the 29th. Wyoming is a great place to do business and is only getting better.

2. South Dakota

South Dakota follows the pattern set by Wyoming of eliminating corporate and individual income taxes as the foundation of their strategy to attract business. South Dakota also follows the Wyoming pattern in making some modest improvements under the radar. The state’s rankings on sales tax and unemployment tax have nudged upward. The unemployment tax is the biggest hindrance to South Dakota moving to the top. They improved from 39th to 22nd last year, then immediately reverted to 42nd. Business owners like tax stability, so figuring this out is the opportunity for South Dakota to improve.

3. Alaska

Alaska holds firm at #3 with a lot of across-the-board stability. The property tax rank made marginal improvement, and the unemployment insurance tax rank showed slight slippage. Essentially, they canceled each other out. The middle-of-the-pack corporate tax ranking holds The Last Frontier back in terms of attractiveness for entrepreneurs. But no income tax and minimal sales tax are still pretty nice advantages and they are the main reason why Alaska remains one of the best states to start a business.

4. Florida

The Sunshine State keeps grinding forward while staying in place. By that we mean that Florida holds at #4 for the 4th straight year. They keep making modest improvements, this year with nudges upward in ranking for sales taxes and property taxes. Florida is using the motto that slow and steady wins the race, offering entrepreneurs both an attractive tax structure and the comfort of stability.

5. Montana

Montana’s only real area of strength is in sales taxes, where the state holds steady at third-best in the country. Montana took a slight step back in property taxes, the only change from their 2020 rankings. What helps the state remain strong is that none of the areas are really bad, all huddling around the middle of the pack. That fact, combined with the low sales taxes, is keeping Montana a good place to do business.

6. New Hampshire

The Granite State lets you make money and spend it in a tax-friendly way, with their lack of sales tax and low income tax leading to strong rankings in both categories. That has been more than enough to make up for high taxes and poor rankings in the other 3 areas. New Hampshire’s overall #6 ranking holds steady, rounding out a national Top 6 that is identical to 2020.

7. Nevada

Most of Nevada’s rankings are holding steady, with the exception of property tax ranking stepping from 6th to 5th. Nevada’s tax structure, with its strong rankings on income and property taxes, attract businesses that require large amounts of commercial space and can generate high revenue. That’s enough to make up for a poor position on sales and unemployment insurance tax rank.

8. Utah

Two trends continue for Utah. The first is that they continue to be in the overall top 10, meaning this is clearly a good state to start a business in. But the other trend, building for the past couple years, is not a positive one. In 2018, Utah ranked third on corporate taxes. They’ve been gradually slipping since then and now sit at 14th.

9. Indiana

Indiana’s overall position is mostly stable, with a little bump up 1 spot in the overall national rankings. But at the granular level, the way the Hoosier State got there has significantly changed. Corporate taxes improved, while individual income tax position worsened. They cancelled each other out and strong gains in the sales and property tax categories helped Indiana clock in at #9.

10. North Carolina

The Tarheel state is the one new entrant in this year’s Top 10, displacing Oregon. North Carolina’s tax structure goes direct in its appeal to businesses—come to this state and get low corporate taxes and low taxes on unemployment insurance. When you report your individual income, the state income tax situation is pretty good, too.

41. Alabama

Alabama is a new entrant into the bottom 10—although they were 40th last year, so it’s not as though this is a sudden decline. The state has strengths, with respectable ranks for property and unemployment insurance. But as that sales tax rank indicates, it’s expensive to buy a product in Alabama.

42. Louisiana

The strong ranking on unemployment insurance taxes isn’t enough to overcome the lack of any other clear strengths. Like Alabama, Louisiana makes it expensive to buy a product with their sales tax structure. The corporate and income taxes only add to the problems entrepreneurs face in going to Louisiana.

43. Vermont

Acquiring property comes at a significant cost in Vermont, with that #49 ranking in property taxes. This clearly works against any business venture requiring large amounts of commercial space. Entrepreneurs take a further hit in corporate and individual income taxes. At least sales and unemployment insurance taxes are pretty good, allowing the state to nudge up a spot from last year.

44. Maryland

Bad and getting worse would be the way to sum up the tax appeal for businesses in Maryland. The state continues to be in the bottom 10 and is down 2 spots from last year. The sales taxes are the only notable strength, but entrepreneurs pay through the nose everywhere else.

45. Arkansas

Arkansas and Maryland might have different political climates, but their business tax climates remain much the same—another year in the bottom 10 and losing ground in the process. Arkansas’ position on individual income taxes slipped a spot and there are no real advantages in the state’s tax structure.

46. Minnesota

Minnesota has its share of problems from a tax standpoint, but there are some signs of light. Corporate taxes, along with property taxes and unemployment insurance taxes, all improved by 1 spot in this year’s rankings. If that trend can continue, and Minnesota can address its corporate and income tax structure, the state could make its way out of the bottom 10.

47. Connecticut

Connecticut is holding “strong,” if you want to use that word to describe a second straight finish at #47. Connecticut’s problems are driven by the cost of commercial property, with that last-place ranking for property tax also holding for the second straight year.

48. New York

New York pushed forward 1 spot this year and created a little more space between themselves and the national cellar. This year’s improvement was driven by a 2-spot uptick in ranking on property taxes. Even though it was offset by a drop of the same amount in corporate taxes, the latter is still a definite improvement for New York.

49. California

It’s attractive to buy commercial property in California, thanks to that #14 ranking in property taxes. But it’s not attractive to do much else, at least from a financial standpoint. Debilitating income taxes, heavy sales taxes and mediocre corporate taxes keep the Golden State near the bottom of the rankings yet again.

50. New Jersey

Not much changed in the Garden State over the past year. Minor improvement in corporate tax ranking was offset by minor decline in unemployment insurance tax ranking. Finishing dead last in the nation is New Jersey’s dubious reward.