If you're thinking about forming an LLC in New York or the District of Columbia, you may want to think again - those jurisdictions were ranked as the two worst in the nation for small business, according to the latest Small Business Survival Index by the Small Business and Entrepreneurship Council.
It may come as a surprise, given New York City's considerable startup culture, which has only blossomed in recent years with brands like foursquare, Etsy, Gawker and Tumblr calling the city home. But analysts point to the state's high tax rates and costs of living as especially burdensome.
"New York, unfortunately, is a very good example [of a state with poor small business policies]," Raymond Keating, chief economists at the SBE Council, told The Street. "Personal income, corporate income, capital gains, property taxes, gas taxes are all high. And high consumption-based taxes in New York … it's also the second highest in government debt."
A similar diagnosis could be ascribed to Washington, D.C., as well as the rest of the bottom five states, which included New Jersey, Vermont, Rhode Island, and California. Benno Schmidt, interim president and CEO at the Ewing Marion Kauffman Foundation, points out that many of these states enact a litany of public programs to help promote entrepreneurship, but they leave in place a legal framework that adheres to a different employment model.
So what are the best states for small business?
Snagging the top spot in this year's survey is South Dakota, followed by Nevada, Texas, Wyoming, and South Carolina. Keating explains that the states at the top of the list benefit from a total lack of income taxes. More importantly, though, these governments are able to keep other taxes under control.
Texas, which often places at near the top of these kinds of rankings, is known for its fiscal conservatism and business-friendliness.
"Like its cohorts in the top five, Texas demands no personal income, individual capital gains, corporate income, corporate capital gains, or death taxes of residents and businesses," reports Laurie Kulikowski for The Street. "The Alamo State also has a low level of state and local government spending and low workers compensation costs."
Of course, Texas also suffered from a considerable budget shortfall last year, in large part due to its low tax structure. While such a system may benefit entrepreneurs looking to incorporate in Texas, it does not bode well for the state's educational, healthcare, or transportation infrastructures.
Tags : Taxes, Texas, New York, California, Corporate Books
Posted: Feb 17th, 2012