CHARLESTON, WV (WOWK) – Many people dream of starting their own local business, but how difficult is it to start your own business in the Mountain State?
According to a new study from Simplify LLC, West Virginia ranks seventh in the country for the most expensive state to start your own business. This study comes after the U.S. Census Bureau reported an unprecedented number of new businesses forming in recent years, including 429,800 across the country in February 2023 alone, the organization says.
The study also found that according to the U.S. Bureau of Labor Statistics, approximately one in five of the new businesses that opened across the country in the past 20 years failed within the first two years of operation. By those same numbers, approximately 22% of businesses that opened in the past 20 years still have their doors open.
Simplify LLC says with inflation and rising interest rates, a key factor for business owners to make sure their new business survives for the long term is to make sure they know what it costs to operate a business in their state before getting started.
The organization says they analyzed multiple metrics including the costs of labor, corporate tax rates, available commercial real estate and commercial electric bills, as well as the health of the business environment in all 50 states and Washington D.C. to compile data and create a point system for the study results.
For the Mountain State, the study found the average corporate income tax rate to be 6.50% with the cost of LLC filing fees averaging at $101 and the average monthly cost for a commercial electric bill at $382.04.
For the LLC filing, the study found that Kentucky has the lowest cost at an average of $40 and Massachusetts has the highest average cost at $500 for the filing.
The study also included factoring in salaries for employees, including manager positions, would cost about $49,817 per annual wage. Granted, this number could change depending on the type of business, position being filled and average wages in the area. The study also found that West Virginia also has the lowest number of working-age people available for the workforce at about just 65.9% of the state’s population. The Mountain State also has the lowest number of post-college-age workers with at least a bachelor’s degree at 24.1% of the population, according to the study.
Simplify LLC also says they took the health of the business environment into account for their scores. To do this, they looked at annual small business lending, adjusting for population of the state at per 100,000 people, and the net “business births,” or the number of new businesses vs. businesses that closed in that same year.
For the small business lending data, the organization says the most recent data available was for 2020. For the net business births, the most recent available data is for 2021.
The organization says the study found that West Virginia has the second to lowest amount in small business lending at $21,946,663 total for the year 2020. The state had a net of 1.04 new businesses in 2021.
According to the study, the six states where it is more expensive to start a business than it is in West Virginia, from least to most expensive, include Wisconsin, Alaska, Alabama, Louisiana, New York and Minnesota.
Nevada comes in at the least expensive state to start a business, followed by Colorado, Arkansas, Montana and North Carolina to round out the top five least expensive states to start your own business, the study says.
The full list of rankings from least expensive to most expensive states to start a business according to the study is available here. In this list, the states surrounding West Virginia rank in the following order: Kentucky at 10th least expensive, Ohio at 14th, Pennsylvania at 33rd, Virginia at 37th and Maryland at 38th.