The Best (and Worst) States to Incorporate In: A Guide (2020)

1. Wyoming

Wyoming continues to be the gold standard of business tax-friendliness, with its twin #1 rankings in corporate and personal income tax. However, the state did slip back modestly in the unemployment and property tax areas. This continues a 3-year pattern of modest change in either direction in these areas, but never affecting the state's overall status.

2. South Dakota

Two years ago, South Dakota's unemployment tax ranking was 40th. It nudged to 39th last year and then made a big leap to 22nd this year. That's the biggest change that allowed South Dakota to nudge past Alaska for the #2 spot nationally.

3. Alaska

Unemployment taxes were a factor in Alaska's modest slip from the #2 spot. The Last Frontier took a tumble from #25 all the way to #46 in this area. But no income tax is still a pretty nice advantage and it's the main reason why Alaska remains one of the best states to start a business.

4. Florida

The Sunshine State is #4 for the third straight year, but its position gets progressively stronger. In recent years, Florida has sought to cut corporate taxes. After 2 straight years at #19 in this area, it jumped into the top 10.

5. Montana

Montana is noteworthy for not having strong rankings in the corporate and individual income tax areas, a trait shared only by Oregon among those in the top 10. But the state's low sales tax and overall position in each individual area is relatively unchanged over a 3-year period.

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.

7. Oregon

A lot of Oregon's numbers don't necessarily look good on the surface, but the state's strong sales tax ranking and a solid property tax position means Oregon is a friendly state to set up a physical store.

8. Utah

Utah's presence in the top 10 obviously means it's a good state to do business in, but the trend is not positive for the Beehive State. Specifically, it's losing ranking on corporate taxes, falling from a high of 3rd place just 2 years ago.

9. Nevada

Nevada used to be one of the states that shared the top spot for individual income taxes. Some ground has been lost there, while a ranking share has been gained in corporate taxes, which were 34th just a year ago.

10. Indiana

The Hoosier State did a lot of shuffling to remain in the top 10. Indiana made sharp improvements on ranking for corporate and sales taxes, while declining on unemployment tax. Still, the overall ranking moved from just 9th to 10th.

41. Louisiana

Louisiana has made strides, moving off the dreaded 50-line for sales taxes. The state also made some modest moves upward in corporate and unemployment taxes. But it remains at #41 for the third straight year, unable to escape the last 10.

42. Iowa

Iowa's overall position hasn't changed much over the last 3 years. Those high taxes on corporate income, individual income and property are difficult to overcome. But the sales tax ranking is steadily improving, from 21st (2018) to 19th (2019) to 15th (2020).

43. Maryland

Much like Iowa, Maryland's overall position in the national rankings is stable. Unlike Iowa, the Terrapin State is moving in the wrong direction beneath the surface, losing significant ground on corporate and property taxes.

44. Vermont

Vermont has nudged up 3 spots overall, from 47th the last 2 years to 44th this year. Even though it lost ground on corporate taxes, it was countered with an improvement in its income tax ranking.

45. Minnesota

Very little has changed in the Minnesota tax climate over the last 3 years and that means the overall ranking continues to lag. Businesses can expect high corporate and personal taxes to go with the cold weather.

46. Arkansas

Arkansas is a new addition to the bottom 10, although it barely escaped the last 2 years with national rankings of 38th and 39th. A further weakening of its position on income taxes, property taxes and unemployment taxes is the reason why this state ranked so low in 2020.

47. Connecticut

Connecticut is known as the Land of Steady Habits and that's proven regrettably true for businesses looking to incorporate. The state continues to hold its spot in the bottom 10, even securing last place for property taxes this time around.

48. California

California is making some progress with its corporate tax rates and the unemployment insurance tax. But the needle isn't being moved significantly because of the income tax problem. Last year, California fell from 33rd to 50th in this area and really didn't improve over the last 12 months.

49. New York

The relatively lower corporate tax rate is clearly where the Empire State is trying to be attractive for business. But even that comes with a gray cloud—it used to be in the top 10. New York's unemployment insurance ranking is also slipping.

50. New Jersey

If you're looking for a positive here, it's that New Jersey has made substantial improvement in its unemployment tax ranking. But that comes in conjunction with already-poor rankings for corporate and income taxes getting worse.