In a new study shared with Becker’s Dec. 19, business law firm Davies & Associates identifies which states offer the most favorable economic, workforce, infrastructure and tax environments for small businesses to operate and grow in 2026.
The study incorporated economic momentum, workforce quality, innovation, infrastructure, business costs, and taxes across all 50 states into its analysis.
1. Washington
- This state’s attractiveness to small businesses is driven by “explosive” startup activity, a strong science and technology-focused workforce and zero state income tax.
2. Massachusetts
- Intellectual capital and innovation are highlights of Massachusetts’ small business environment. Nearly half of its workforce, 47.8%, is college-educated, ranking first in the nation. It also leads the US in patents per 100,000 residents at 201.3 and venture capital investment at $32,800.
3. California
- The state remains a major hub for corporate headquarters and ranks second in the total value of goods produced at nearly $2 trillion. While the state ranks 50th for income tax at 13.3%, Davies & Associates contend that its “unmatched scale” and access to capital make it an ideal business environment
4. Virginia
- GDP growth stands at 6.2%, ranking seventh, while employment growth sits at 1.19%. The state also ranks highly for workforce quality, with over 42% of residents holding a college degree and more than 10% working in STEM fields, making it a stable choice for business owners.
5. Utah
- Utah held the highest GDP growth rate in the study at 7%. Employment growth and quality-of-life were also drivers of Utah’s ranking.
6. Texas
- Texas boasts zero income taxes and leads the nation in value of goods produced. While electricity costs are high, coming in at 46th, its business-friendly tax structure keeps it highly competitive.
7. New Hampshire
- It ranks first for labor productivity growth at 5% and second for patents per 100,000 residents. GDP growth is also strong at 6.2%.
8. Colorado
- Nearly 46.4% of its workforce is college-educated, ranking second nationally, and it places fifth for STEM workforce share. The state also ranks fourth in venture capital investment.
9. New York
- New York leads the nation in GDP per 100,000 residents at $9,153. It also ranks third for corporate headquarters and remains a global financial hub. While it ranks last for commute times and has a negative net migration of college-educated workers, its access to capital and markets make it a strong choice for business owners.
10. Delaware
- It ranks third for broadband connectivity and venture capital investment, and fourth for lowest sales tax. While employment growth is moderate, its business-friendly legal framework continues to attract company registrations.
