State governments affect startup businesses in a myriad of ways, including licensing requirements, tax rates, zoning, environmental rules, labor laws and more.

That’s why entrepreneurs must choose with care when they select a state in which to locate their new enterprises.

A 2016 survey by Thumbtack, a home repair services shopping website, invited small business owners to grade their states on their small-business friendliness.

The overall winners were Texas, Utah, Tennessee, Georgia and Colorado.

#1 – Texas

Entrepreneurs looking for an easy place to start a business should consider Texas.

The state has business-friendly employment, labor and hiring rules, zoning and licensing requirements, and it offers business-friendly health and safety regulations, environmental rules and training and networking programs.

Five of the 11 fastest-growing U.S. cities from July 2014 to July 2015 were located in Texas, according to the U.S. Census Bureau.

The state ranked third, after South Dakota and Nevada, on the 2016 Small Business Tax Index. Published by the Small Business and Entrepreneurship Council (SBE), this index measures how friendly state tax systems are to small businesses.

#2 – Utah

Utah is also an easy place to start a business and offers a business-friendly tax code, placing 15th on the SBE Council’s index.

Utah also offers moderately business-friendly health and safety regulations, employment, labor and hiring rules, and licensing requirements.

On the downside, Utah isn’t an easy place to hire employees and its zoning and environmental rules aren’t small-business friendly.

#3 – Tennessee

Tennessee offers entrepreneurs a business-friendly tax code, licensing requirements and zoning rules. Like Texas and Utah, it’s an easy place to start a business.

Tennessee’s health and safety regulations, employment, labor and hiring rules, and environmental regulations are moderately friendly to small businesses.

#4 – Georgia

Georgia ranked high on almost every metric in the survey: ease of startup, licensing requirements, employment, labor and hiring rules, zoning and more. The only exception was training and networking programs, which may be fewer or harder to find there.

#5 – Colorado

Colorado is an easy place to start a business and offers training and networking programs, though its environmental regulations and zoning rules are not as business-friendly.

This state ranked ninth on the SBE Councils’ tax-friendliness index.

Denver recently joined the list of the 20 most populous U.S. cities, according to the Census Bureau.

More states

Rounding out the top 10 states for overall business friendliness are Kansas, Virginia, Arkansas, Oregon and South Carolina.

Three states—California, Connecticut and Illinois—flunked the survey, receiving poor marks on multiple metrics.

The 12,000 survey respondents were over-weighted in waste management and remediation services, scientific and technical services management and construction and under-weighted in retail, real estate leasing and rental, and health care and social assistance.

References:

https://www.thumbtack.com/blog/2016-methodology/

https://www.thumbtack.com/survey#/2016/1/states

http://sbecouncil.org/2016/06/28/new-report-sbe-councils-small-business-tax-index-2016-ranks-state-tax-systems/

http://www.census.gov/newsroom/press-releases/2016/cb16-81.html