Location plays an important role in the success of any business. Business owners fight an uphill battle if they are running a business in a state with an unfriendly business environment. Today, we will share our list of the 5 worst states to own a business and follow it up with a blog post next week on the 5 best states.

Our list is a compilation of things. We considered similar lists done by reputable publications, while adding in our own spin from a tax, accounting and financial perspective. We’ll look at things like the overall business environment, state tax laws, cost of doing business and local economic factors.

So without further ado, here are the 5 states where owning a business will be the most challenging.

#5 – Illinois

The 5th worst state for business owners on our list is Illinois. Property taxes are near the highest in the country, state income tax recently was recently increased by 32% which is not good for any pass-through entity. Nor is it good for the consumers who might be shopping at your business. 

Over 7,500 business owners in the state were surveyed in 2018 and the grade given to the state of Illinois by its own business owners was an “F” in overall satisfaction.


#4 – Vermont

Vermont ranked 49th in the country in average growth for small businesses in 2018. People often attribute Vermont’s unfriendly business environment to the lack of human capital, cost of living and the amount of hours most people average working in the state. 

#3 – New York

Cost of doing business is very high on our list. According to chiefexecutive.net, New York scores just a 1.82 out of 10 on taxes and regulation. This horrendous rating alone is enough for us to want to rank it near the top on our worst places to do business.

New York is trying to do something to change the perception. They offer startups a 10-year span where they can essentially operate tax free if they are near a college or university. However, the state has some of the highest income and property tax rates in the country which squeezes the private sector, making it very difficult for businesses to survive in that environment.

#2 – New Jersey

Maybe it is because of the high cost of doing business (ranked worst in the country by CNBC), maybe it is because an opinion poll of CEOs who were asked: “where is the best place in the country to do business?” put New Jersey near the bottom of the list; or maybe it is because it is 43rd in the country for infrastructure. New Jersey is just not a place you want to be doing business right now.

#1 – Hawaii 

Hawaii is the worst state to start or run a business on just about every list these days. Perhaps it’s lack of access to resources is what is driving it, Wallethub ranks it dead last in this category. It is also the state with the highest cost of living which affects the cost of doing business. CNBC notes Hawaii’s highest cost of doing business, ranking it second only to New Jersey. These are not ideal conditions for starting or owning a business.

Check back next week for our list of the 5 BEST states to own a business!