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REPORT: States With the Most (and Least) Small Businesses


Which states have the most and least small businesses?

Statistics, challenges and resources for entrepreneurs

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While it is certainly true that small business entrepreneurs are trailblazers in many respects, sometimes there are advantages to following the crowd. In the case of small business statistics, where small to medium-sized businesses can and can't be found in higher numbers may be a key indicator of important factors to consider when deciding where to incorporate your LLC or corporation.

For example, a location with lower than average small business rates might be a red flag that a city, state or region poses any number of challenges for entrepreneurs, such as:

  • High tax rates and/or startup costs
  • Burdensome regulations and annual filings
  • Limited or untrained labor pool
  • Anti-business reputation
  • Lack of investor interest
  • Small/nonexistent local customer base

While many factors go into deciding the best state to incorporate, taking into account the percentage of small businesses in each state can help provide a general overview of the health and potential of that state's small business economy—and you can gain valuable insight into what types of businesses the state prioritizes.

Continue reading to get answers to questions like:

  • How many small businesses are in your state?
  • What percentage of businesses in your state are small businesses?
  • How many jobs do small businesses create?
  • Which industries have the most and least small business jobs?
  • And more...

What is a small business?

According to the Small Business Administration (SBA), a small business is an independent business with anywhere from 1 to 499 employees (under 500).

National small business statistics

Nationally, there were nearly 31.7 million small businesses in 2020, comprising 99.9% of all businesses in the United States. Small businesses generated nearly one-third (32 percent) of the nation's $1.5 trillion in total exports.

In 2019, the nation grew at an overall rate of 2.3 percent, which was just slightly down from the rate of 2.9 percent in 2018.

The U.S. saw a net increase of 1.6 million small businesses jobs in 2019, primarily among businesses with 20 to 99 employees. A majority of growth in self-employment rates in 2018 was focused in the American West.

Based on employment numbers, a few of the largest industries among U.S. small businesses include:


Healthcare and social assistance
8.9 million

Accommodation and food services
8.5 million

Retail trade
5.5 million

Construction
5.3 million

Professional, scientific and technical services
5.1 million

Manufacturing
5.0 million

In contrast, the smallest industries nationwide based on number of employees were:


Utilities
111K

Agriculture, forestry, fishing and hunting
136K

Mining, quarrying, oil and gas extraction
244K

Management of companies and enterprises
423K

Information
984K

Arts, entertaining and recreation
1.4 million

Here's a big picture look at how small businesses are distributed by state:

Small Business Percentages By State Data 2020

Naturally, states with larger populations have correspondingly higher small business totals, which is why an arguably more insightful metric is the percentage of small businesses compared to all total businesses in each state.

Next, we'll explore this data—and highlight the states with the highest and lowest ratios of small businesses.

2020 small business statistics by state

(best and worst states ranked by the percentage of small businesses in each state)


2020 Small Business Statistics by State map

TOP 10     BOTTOM 10



This map indicates which states have the highest and lowest rates of small businesses. States in green have the highest percentages of small businesses compared to the total number of businesses, whereas states in orange have among the lowest percentages of small businesses in the U.S.

It's worth noting that in ALL states (and D.C.), more than 98 percent of total businesses were small businesses, accounting for a vast majority of economic activity. What's more, 99 out of 100 businesses were small businesses in 45 states. Only 5 states and Washington, D.C. fell below the 99 percent benchmark.

In other words:

Small businesses are unquestionably thriving in the United States, but in some states more than others.


States with the HIGHEST small business rate

State Percentage of small businesses
California (tie) 99.8%
Florida (tie) 99.8%
New York (tie) 99.8%
Texas (tie) 99.8%
Georgia (tie) 99.6%
Illinois (tie) 99.6%
Michigan (tie) 99.6%
New Jersey (tie) 99.6%
North Carolina (tie) 99.6%
Ohio (tie) 99.6%
Pennsylvania (tie) 99.6%

States with the LOWEST small business rate

State Percentage of small businesses
District of Columbia 98.2%
Delaware 98.4%
North Dakota 98.8%
Rhode Island (tie) 98.9%
West Virginia (tie) 98.9%
Wyoming (tie) 98.9%
New Hampshire (tie) 99.0%
New Mexico (tie) 99.0%
South Dakota (tie) 99.0%
Vermont (tie) 99.0%

NOTE: We included 11 top states since there was a 7-way tie for 99.6%.

Top states with BEST small business rate


1. California (tie)

california state icon
  • Total number of small businesses: 4.1 million
  • Percentage of small businesses: 99.8 percent
  • Number of small business employees: 7.2 million
  • Percentage of small businesses employees: 48.5 percent

Though California's economic growth rate was down in 2019 compared to 2018, the state grew slightly faster than the overall U.S. economy. This growth happened despite California ranking as the second-worst state when comparing business tax rates. The Golden state saw a net increase of 214,569 small businesses jobs in 2019, primarily among businesses with fewer than 20 employees. The biggest industries for small businesses in California were accommodation and food services, healthcare and social assistance services, and professional, scientific and technical services. The industries with the lowest small business employment rates were utilities, mining, quarrying and oil and gas extraction, and agriculture, forestry, fishing and hunting.



1. Florida (tie)

florida state icon
  • Total number of small businesses: 2.7 million
  • Percentage of small businesses: 99.8 percent
  • Number of small business employees: 3.5 million
  • Percentage of small businesses employees: 41.7 percent

Florida's economic growth rate of 2.6 percent was slightly stronger than the overall U.S. economy in 2019. The Sunshine state saw a net increase of 133,441 small businesses jobs in 2019, primarily among businesses with fewer than 20 employees. A majority of growth in self-employment rates in 2018 were focused in South Florida. The biggest industries for small businesses in Florida were accommodation and food services, healthcare and social assistance services, and construction. The industries with the lowest small business employment rates were mining, quarrying and oil and gas extraction, as well as utilities and agriculture, forestry, fishing and hunting.



1. New York (tie)

new york state icon
  • Total number of small businesses: 2.2 million
  • Percentage of small businesses: 99.8 percent
  • Number of small business employees: 4.1 million
  • Percentage of small businesses employees: 49.8 percent

New York's economic growth rate of 1.8 percent was slower than the overall U.S. economy in 2019, but up from the state's 2018 growth rate. The Empire state saw a net increase of 69,042 small businesses jobs in 2019, primarily among businesses with fewer than 20 employees. The biggest industries for small businesses in New York were healthcare and social assistance, accommodation and food services, and retail trade. The industries with the lowest small business employment rates were utilities, mining, quarrying and oil and gas extraction, and agriculture, forestry, fishing and hunting.



1. Texas (tie)

texas state icon
  • Total number of small businesses: 2.8 million
  • Percentage of small businesses: 99.8 percent
  • Number of small business employees: 4.8 million
  • Percentage of small businesses employees: 45.1 percent

Texas's robust economic growth rate of 4.4 percent was significantly stronger than the overall U.S. economy in 2019, and up from the state's 2018 growth rate. The Lone Star state also saw an impressive net increase of 227,487 small businesses jobs in 2019, primarily among businesses with 20 to 99 employees. A majority of growth in self-employment rates in 2018 was focused in Central Texas. The biggest industries for small businesses in Texas were healthcare and social assistance, accommodation and food services, and construction. The industries with the lowest small business employment rates were agriculture, forestry, fishing and hunting, utilities, and management of companies and enterprises.



5. Georgia (tie)

georgia state icon
  • Total number of small businesses: 1.1 million
  • Percentage of small businesses: 99.6 percent
  • Number of small business employees: 1.7 million
  • Percentage of small businesses employees: 43.1 percent

Georgia's economic growth rate of 2.0 percent was just below the overall U.S. economic growth rate of 2.1 percent in 2019, and down from the state's 2018 growth rate. The Peach state saw a net increase of 64,905 small businesses jobs in 2019, primarily among businesses with 20 to 99 employees. A majority of growth in self-employment rates in 2018 was focused in North Georgia and the Atlanta metro area. The biggest industries for small businesses in Georgia were accommodation and food services, healthcare and social assistance, and professional, scientific, and technical services. The industries with the lowest small business employment rates were mining, quarrying and oil and gas extraction, utilities, and agriculture, forestry, fishing and hunting.



5. Illinois (tie)

illinois state icon
  • Total number of small businesses: 1.2 million
  • Percentage of small businesses: 99.6 percent
  • Number of small business employees: 2.5 million
  • Percentage of small businesses employees: 45.1 percent

With an economic growth rate of 1.6 percent, Illinois grew slightly slower than the overall U.S. economy in 2019, which was also down from the state's 2018 growth rate. The Land of Lincoln saw a net increase of 20,410 small businesses jobs in 2019, primarily among businesses with 20 to 99 employees. A majority of growth in self-employment rates in 2018 was focused in Western and Southeastern Illinois. The biggest industries for small businesses in the state were healthcare and social assistance, accommodation and food services, and manufacturing. The industries with the lowest small business employment rates were agriculture, forestry, fishing and hunting, utilities, and mining, quarrying and oil and gas extraction.



5. Michigan (tie)

michigan state icon
  • Total number of small businesses: 886,557
  • Percentage of small businesses: 99.6 percent
  • Number of small business employees: 1.9 million
  • Percentage of small businesses employees: 49.0 percent

Michigan's economic growth rate of 0.7 percent was significantly less than the overall U.S. economic growth rate of 2.1 percent in 2019, and a big drop from the state's 2018 growth rate. Nevertheless, the Wolverine state saw a net increase of 26,199 small businesses jobs in 2019, primarily among businesses with 20 to 99 employees. A majority of growth in self-employment rates in 2018 was focused in Northern Michigan. The biggest industries for small businesses in the state were healthcare and social assistance, manufacturing, and accommodation and food services. The industries with the lowest small business employment rates were utilities, mining, quarrying and oil and gas extraction, and agriculture, forestry, fishing and hunting.



5. New Jersey (tie)

new jersey state icon
  • Total number of small businesses: 908,209
  • Percentage of small businesses: 99.6 percent
  • Number of small business employees: 1.8 million
  • Percentage of small businesses employees: 49.9 percent

Despite the fact that New Jersey consistently ranks as the state with among the highest business taxes in the country, the state saw an economic growth rate of 1.5 percent in 2019. The Garden state saw a net increase of 48,114 small businesses jobs in 2019, primarily among businesses with fewer than 20 employees. A majority of growth in self-employment rates in 2018 was focused in the northern part of the state. The biggest industries for small businesses in New Jersey were healthcare and social assistance services, accommodation and food services, and professional, scientific and technical services. The industries with the lowest small business employment rates were mining, quarrying and oil and gas extraction, agriculture, forestry, fishing and hunting, and utilities.



5. North Carolina (tie)

north carolina state icon
  • Total number of small businesses: 934,604
  • Percentage of small businesses: 99.6 percent
  • Number of small business employees: 1.7 million
  • Percentage of small businesses employees: 45.3 percent

With an overall economic growth rate of 2.3 percent, North Carolina grew slightly faster than the overall U.S. economy in 2019. The Tarheel state saw a net increase of 62,614 small businesses jobs in 2019, primarily among businesses with 20 to 99 employees. A majority of growth in self-employment rates in 2018 was focused along the state's western and eastern borders. The biggest industries for small businesses in North Carolina were accommodation and food services, healthcare and social assistance, and construction. The industries with the lowest small business employment rates were mining, quarrying and oil and gas extraction, utilities, and agriculture, forestry, fishing and hunting.



5. Ohio (tie)

ohio state icon
  • Total number of small businesses: 965,576
  • Percentage of small businesses: 99.6 percent
  • Number of small business employees: 2.2 million
  • Percentage of small businesses employees: 45.3 percent

Ohio's economic growth rate of 1.7 percent was just under the overall U.S. economic growth rate of 2.1 percent in 2019, and slightly down from the state's 2018 growth rate. Nevertheless, the Buckeye state saw a net increase of 44,523 small businesses jobs in 2019, primarily among businesses with 20 to 99 employees. The biggest industries for small businesses in Ohio were healthcare and social assistance, manufacturing, and accommodation and food services. The industries with the lowest small business employment rates were agriculture, forestry, fishing and hunting, utilities, and mining, quarrying and oil and gas extraction.



5. Pennsylvania (tie)

pennsylvania state icon
  • Total number of small businesses: 1.1 million
  • Percentage of small businesses: 99.6 percent
  • Number of small business employees: 2.5 million
  • Percentage of small businesses employees: 46.2 percent

Pennsylvania's economic growth rate of 2.3 percent was right around the overall U.S. economy in 2019, but slightly down from the state's 2018 growth rate. The Keystone state saw a net increase of 57,377 small businesses jobs in 2019, primarily among businesses with 20 to 99 employees. A majority of growth in self-employment rates in 2018 was focused on the northern and southern state borders. The biggest industries for small businesses in Pennsylvania were healthcare and social assistance, accommodation and food services, and manufacturing. The industries with the lowest small business employment rates were utilities, agriculture, forestry, fishing and hunting, and mining, quarrying and oil and gas extraction.






Bottom states with WORST small business rate


42. New Hampshire (tie)

new hampshire state icon
  • Total number of small businesses: 136,535
  • Percentage of small businesses: 99.0 percent
  • Number of small business employees: 300,628
  • Percentage of small businesses employees: 49.8 percent

New Hampshire saw an overall economic growth rate of 2.7 percent in 2019, which was higher than the state's 2018 growth rate. The Granite state saw a net increase of 7,216 small businesses jobs in 2019, primarily among businesses with 20 to 99 employees. A majority of growth in self-employment rates in 2018 was focused on the northern counties. The biggest industries for small businesses in New Hampshire were healthcare and social assistance, accommodation and food services, and retail trade. The industries with the lowest small business employment rates were mining, quarrying and oil and gas extraction, agriculture, forestry, fishing and hunting, and utilities.



42. New Mexico (tie)

new mexico state icon
  • Total number of small businesses: 156,996
  • Percentage of small businesses: 99.0 percent
  • Number of small business employees: 339,731
  • Percentage of small businesses employees: 54.2 percent

Despite ranking towards the bottom of the pack in terms of the state's percentage of small businesses, New Mexico had a relatively good year in 2019 with an overall growth rate of 3.7 percent, well above the national average. Our nation's 47th state saw a net increase of 7,058 small businesses jobs in 2019, primarily among businesses with fewer than 20 employees. A majority of growth in self-employment rates in 2018 was focused around Albuquerque, Sante Fe and Taos. The biggest industries for small businesses in New Mexico were healthcare and social assistance, accommodation and food services, and construction. The industries with the lowest small business employment rates were agriculture, forestry, fishing and hunting, utilities, and management of companies and enterprises.



42. South Dakota (tie)

south dakota state icon
  • Total number of small businesses: 88,191
  • Percentage of small businesses: 99.0 percent
  • Number of small business employees: 209,403
  • Percentage of small businesses employees: 58.2 percent

With an overall economic growth rate of 0.7 percent, South Dakota fell far short of the overall U.S. economic growth rate in 2019. The Mount Rushmore state saw a net increase of 2,082 small businesses jobs in 2019, primarily among businesses with fewer than 20 employees. Of the growth that did occur in 2018, most happened in the north and northwest counties. The biggest industries for small businesses in South Dakota were healthcare and social assistance, accommodation and food services, and retail trade. The industries with the lowest small business employment rates were agriculture, forestry, fishing and hunting, mining, quarrying and oil and gas extraction, and utilities.



42. Vermont (tie)

vermont state icon
  • Total number of small businesses: 78,759
  • Percentage of small businesses: 99.0 percent
  • Number of small business employees: 157,322
  • Percentage of small businesses employees: 60.8 percent

Vermont saw a decent overall economic growth rate of 2.5 percent in 2019, which was up from the year before and above the national average. The Green Mountain state saw a net increase of 1,635 small businesses jobs in 2019, primarily among businesses with fewer than 20 employees. A majority of growth in self-employment rates in 2018 was focused in the state's 2 southernmost counties. The biggest industries for small businesses in Vermont were healthcare and social assistance, accommodation and food services, and retail trade. The industries with the lowest small business employment rates were mining, quarrying and oil and gas extraction, utilities, and agriculture, forestry, fishing and hunting.



46. Rhode Island (tie)

rhode island state icon
  • Total number of small businesses: 103,986
  • Percentage of small businesses: 98.9 percent
  • Number of small business employees: 229,212
  • Percentage of small businesses employees: 52.6 percent

Boasting an economic growth rate above the national average at 2.7 percent, Rhode Island grew slightly faster than the year before. Little Rhody also saw a net increase of 3,186 small businesses jobs in 2019, primarily among businesses with fewer than 20 employees. Despite these facts, the state ranked among the worst states for attracting small businesses. A majority of growth in self-employment rates in 2018 were focused in South and Southeastern Rhode Island. The biggest industries for small businesses in the state were healthcare and social assistance, accommodation and food services, and manufacturing. The industries with the lowest small business employment rates were mining, quarrying and oil and gas extraction, utilities, and agriculture, forestry, fishing and hunting.



46. West Virginia (tie)

west virginia state icon
  • Total number of small businesses: 113,779
  • Percentage of small businesses: 98.9 percent
  • Number of small business employees: 269,789
  • Percentage of small businesses employees: 49.1 percent

With a fourth-quarter 2019 growth rate of -0.1 percent and an overall growth rate of just 1.0 percent, it's no wonder that West Virginia placed towards the bottom of the pack. Nevertheless, the Mountain state saw a net increase of 4,270 small businesses jobs in 2019, primarily among businesses with fewer than 20 employees. A majority of growth in self-employment rates in 2018 was focused in the western and central regions of the state. The biggest industries for small businesses in West Virginia were healthcare and social assistance, accommodation and food services, and retail trade. The industries with the lowest small business employment rates were agriculture, forestry, fishing and hunting, utilities, and management of companies and enterprises.



46. Wyoming (tie)

wyoming state icon
  • Total number of small businesses: 68,641
  • Percentage of small businesses: 98.9 percent
  • Number of small business employees: 128,883
  • Percentage of small businesses employees: 63.8 percent

Despite ranking as one of the worst states for attracting small businesses, Wyoming had a relatively good year in 2019 with an overall growth rate of 3.3 percent, beating out the national average. The Cowboy state saw a net increase of 5,762 small businesses jobs in 2019, primarily among businesses with fewer than 20 employees. A majority of growth in self-employment rates in 2018 was focused around central and western Wyoming. The biggest industries for small businesses in the state were accommodation and food services, healthcare and social assistance, and construction. The industries with the lowest small business employment rates were agriculture, forestry, fishing and hunting, management of companies and enterprises, and utilities.



49. North Dakota

north dakota state icon
  • Total number of small businesses: 74,202
  • Percentage of small businesses: 98.8 percent
  • Number of small business employees: 195,312
  • Percentage of small businesses employees: 57.4 percent

North Dakota saw an overall economic growth rate of 2.3 percent in 2019, which was down from the year before. The Flickertail state saw a net increase of 4,857 small businesses jobs in 2019, primarily among businesses with fewer than 20 employees. The biggest industries for small businesses in North Dakota were accommodation and food services, healthcare and social assistance, and retail trade. The industries with the lowest small business employment rates were agriculture, forestry, fishing and hunting, management of companies and enterprises, and utilities.



50. Delaware

delaware state icon
  • Total number of small businesses: 84,675
  • Percentage of small businesses: 98.4 percent
  • Number of small business employees: 187,221
  • Percentage of small businesses employees: 46.7 percent

Considering that Delaware is known as one of the best places to incorporate due to various corporate tax benefits, it's not too surprising that it ranked as the state with the worst small business rate. In 2019, the Diamond state saw a growth rate of just 0.8 percent, which was up from the previous year's rate of less than 0.1 percent but well below the national average. Delaware saw a net increase of 4,776 small businesses jobs in 2019, primarily among businesses with 20 to 99 employees. The biggest industries for small businesses in Delaware were healthcare and social assistance, accommodation and food services, and construction. The industries with the lowest small business employment rates were mining, quarrying and oil and gas extraction, agriculture, forestry, fishing and hunting, and utilities.



51. District of Columbia

district of columbia state icon
  • Total number of small businesses: 78,313
  • Percentage of small businesses: 98.2 percent
  • Number of small business employees: 250,345
  • Percentage of small businesses employees: 47.5 percent

With an overall growth rate of 1.6 percent, D.C grew more slowly than the rest of the country in 2019. While not technically a state, our nation's capital was noteworthy in that it saw a net increase of 5,480 small businesses jobs in 2019, primarily among businesses with 100 to 499 employees (the biggest category of small businesses). The biggest industries for small businesses in West Virginia were other services (except public administration), professional, scientific and technical services, and accommodation and food services. The industries with the lowest small business employment rates were utilities, management of companies and enterprises, and manufacturing.



Where does your state rank?

BEST
(99.6% and above)

ABOVE AVERAGE
(99.4 - 99.5%)

MODERATE
(99.2 - 99.3%)

BELOW AVERAGE
(99.0 - 99.1%)

WORST
(Below 99.0%)





State

Rank

Number of small businesses

Percentage of small businesses

Alabama

20 (tie)

401,717

99.4%

Alaska

39 (tie)

73,298

99.1%

Arizona

20 (tie)

592,485

99.4%

Arkansas

29 (tie)

255,004

99.3%

California

1 (tie)

4,100,000

99.8%

Colorado

12 (tie)

653,639

99.5%

Connecticut

20 (tie)

350,376

99.4%

Delaware

50

84,675

98.4%

District of Columbia

51

78,313

98.2%

Florida

1 (tie)

2,700,000

99.8%

Georgia

5 (tie)

1,100,000

99.6%

Hawaii

29 (tie)

135,567

99.3%

Idaho

36 (tie)

169,151

99.2%

Illinois

5 (tie)

1,200,000

99.6%

Indiana

20 (tie)

521,656

99.4%

Iowa

29 (tie)

272,555

99.3%

Kansas

39 (tie)

256,950

99.1%

Kentucky

29 (tie)

355,998

99.3%

Louisiana

12 (tie)

457,636

99.5%

Maine

36 (tie)

149,355

99.2%

Maryland

12 (tie)

604,176

99.5%

Massachusetts

12 (tie)

700,646

99.5%

Michigan

5 (tie)

886,557

99.6%

Minnesota

12 (tie)

526,350

99.5%

Mississippi

29 (tie)

262,272

99.3%

Missouri

20 (tie)

530,380

99.4%

Montana

29 (tie)

123,419

99.3%

Nebraska

39 (tie)

179,509

99.1%

Nevada

36 (tie)

283,333

99.2%

New Hampshire

42 (tie)

136,535

99.0%

New Jersey

5 (tie)

908,209

99.6%

New Mexico

42 (tie)

156,996

99.0%

New York

1 (tie)

2,200,000

99.8%

North Carolina

5 (tie)

934,604

99.6%

North Dakota

49

74,202

98.8%

Ohio

5 (tie)

965,576

99.6%

Oklahoma

20 (tie)

358,647

99.4%

Oregon

20 (tie)

387,819

99.4%

Pennsylvania

5 (tie)

1,100,000

99.6%

Rhode Island

46 (tie)

103,986

98.9%

South Carolina

20 (tie)

431,835

99.4%

South Dakota

42 (tie)

88,191

99.0%

Tennessee

12 (tie)

620,125

99.5%

Texas

1 (tie)

2,800,000

99.8%

Utah

29 (tie)

301,265

99.3%

Vermont

42 (tie)

78,759

99.0%

Virginia

12 (tie)

766,826

99.5%

Washington

12 (tie)

630,819

99.5%

West Virginia

46 (tie)

113,779

98.9%

Wisconsin

20 (tie)

456,884

99.4%

Wyoming

46 (tie)

68,641

98.9%

SOURCE: U.S. Small Business Administration, Office of Advocacy, 2020 Small Business Profiles (released to the public on May 20, 2020)

DISCLAIMER: MaxFilings assumes no responsibility for inaccuracies or for changes in such information that may occur after publication.

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