By Forum Staff
A new study found New York is the No. 2 most expensive state to start a business in 2025.
The Simplify LLC report’s rankings were determined by analyzing nine key factors, including taxes, business filing fees, commercial rent and utilities, labor costs, regulations, and small business lending.
“New York struggles with 300,095 regulations (No. 50), high wages of $91,428 (49) and a $200 LLC fee (45 tied). A $907.99 monthly commercial electricity bill (44), and a 6.88 percent corporate tax (35) also drive up expenses. Labor force participation in New York is 61.2 percent (37), and SBA lending is $7.2 million per 100,000 (33), but it’s not enough to raise the state out of its spot at No. 50,” the study found.
California ranked as the No. 1 most expensive state to start a business followed by New York and Hawaii.
For California, operating costs are the main factor — average wages are $87,490 (#47), electricity bills are $1,273.73 (#49) and regulations measure 420,434 (#51). California also has a relatively high 8.84% corporate income tax (#49) and a $31.78 (#50) rent per square foot. SBA lending hits $10.2 million per 100,000 (#11), and the LLC filing fee is $70 (#12), but high operating costs still place California last overall. New York faces the same issues
Hawaii has the highest average commercial rent at $36 per square foot (#51) and the second-highest monthly electricity cost at $1,514.20 (#50). Wages sit at $64,207 (#26) with the lowest SBA lending per 100,000 residents at $3.8 million (#51).
Two southern states, not often thought of for being expensive locations, ranked in the top five most expensive states. Tennessee came in at No. 4 and Alabama at No. 6 most expensive.
Tennessee’s 6.5% corporate income tax
(tied for #31) pairs with a $300 LLC filing fee (tied for #49). Labor force participation in the state is low, at 59.4% (#41). SBA lending is only $5.8 million per 100,000 (#42). Wages average $64,718 (#27), and the average commercial electricity bill is $648.87 (#25).
Alabama’s corporate income tax is 6.5 percent (tied for #31) with a $200 LLC filing fee (tied for #45). Like Tennessee, the state has a low labor force participation of 57.6% (tied for #47). SBA Loans are $5.7 million per 100,000 people (#43).
Starting your own business comes with a bright red caution: A lifelong entrepreneurial dream can become a vicious nightmare—relatively quickly.
“Starting a business is one thing, but succeeding is another matter altogether and can be extremely difficult,” the report noted. “According to the Bureau of Labor Statistics, in the period from 2014 to 2024, 20.3 percent of startups were out of business within one year, and after 10 years only 34.9 percent remained in business.”
Still, for prospective entrepreneurs who have the ability to pick and choose where they want to start their business, it’s clear that certain states will allow them to save money, while others will add to debt.
