It costs roughly 1.5 times more to open the same business in California ($210,030 in year one) than in Mississippi ($137,570). The gap in mandatory state fees alone is even wider: registering a business costs $50 in Arizona and $1,000 in Massachusetts, a 20-fold difference before you spend a dollar on rent, equipment, or payroll.
We modeled the first-year cost of one representative storefront business across all 50 states using state-specific rent, labor, tax, and filing-fee data. Below is the full ranking, the fees that surprise most founders, and the four factors that move the number most.
The 10 most expensive states to start a business
High rent and labor costs drive the top of this list. California, Hawaii, and New York combine premium commercial rent with the highest wage floors in the country.
| Rank | State | Modeled first-year cost | Year-one state fees |
|---|---|---|---|
| 1 | California | $210,030 | $870 |
| 2 | Hawaii | $205,145 | $65 |
| 3 | New York | $202,529 | $209 |
| 4 | Massachusetts | $196,000 | $1,000 |
| 5 | Alaska | $186,590 | $350 |
| 6 | New Jersey | $185,360 | $200 |
| 7 | Washington | $185,070 | $270 |
| 8 | Connecticut | $181,040 | $200 |
| 9 | Maryland | $178,360 | $400 |
| 10 | Oregon | $176,480 | $200 |
The 10 cheapest states to start a business
Mississippi and West Virginia lead the country on affordability, with commercial rent and labor running well below the national average and minimal state filing fees.
| Rank | State | Modeled first-year cost | Year-one state fees |
|---|---|---|---|
| 1 | Mississippi | $137,570 | $50 |
| 2 | West Virginia | $137,645 | $125 |
| 3 | Arkansas | $141,195 | $195 |
| 4 | Oklahoma | $142,685 | $125 |
| 5 | Alabama | $144,200 | $200 |
| 6 | South Dakota | $144,685 | $205 |
| 7 | Kentucky | $144,895 | $55 |
| 8 | Kansas | $145,055 | $215 |
| 9 | Iowa | $145,760 | $80 |
| 10 | Louisiana | $146,770 | $130 |
All 50 states ranked
The complete dataset, ranked from cheapest to most expensive by modeled first-year cost. Year-one state fees, 2026 minimum wage, and whether the state levies personal income tax are included for each.
| Rank | State | Modeled first-year cost | Year-one state fees | Min wage | State income tax |
|---|---|---|---|---|---|
| 1 | Mississippi | $137,570 | $50 | $7.25 | Yes |
| 2 | West Virginia | $137,645 | $125 | $8.75 | Yes |
| 3 | Arkansas | $141,195 | $195 | $11 | Yes |
| 4 | Oklahoma | $142,685 | $125 | $7.25 | Yes |
| 5 | Alabama | $144,200 | $200 | $7.25 | Yes |
| 6 | South Dakota | $144,685 | $205 | $11.85 | No |
| 7 | Kentucky | $144,895 | $55 | $7.25 | Yes |
| 8 | Kansas | $145,055 | $215 | $7.25 | Yes |
| 9 | Iowa | $145,760 | $80 | $7.25 | Yes |
| 10 | Louisiana | $146,770 | $130 | $7.25 | Yes |
| 11 | Missouri | $147,530 | $50 | $15 | Yes |
| 12 | New Mexico | $147,650 | $50 | $12 | Yes |
| 13 | Indiana | $147,732 | $132 | $7.25 | Yes |
| 14 | Nebraska | $147,845 | $125 | $15 | Yes |
| 15 | North Dakota | $148,025 | $185 | $7.25 | Yes |
| 16 | Wyoming | $149,560 | $160 | $7.25 | No |
| 17 | South Carolina | $149,750 | $110 | $7.25 | Yes |
| 18 | Michigan | $150,195 | $75 | $13.73 | Yes |
| 19 | Ohio | $150,219 | $99 | $11 | Yes |
| 20 | Tennessee | $150,840 | $600 | $7.25 | No |
| 21 | Idaho | $151,060 | $100 | $7.25 | Yes |
| 22 | Montana | $151,495 | $55 | $10.85 | Yes |
| 23 | Wisconsin | $152,075 | $155 | $7.25 | Yes |
| 24 | Georgia | $154,960 | $160 | $7.25 | Yes |
| 25 | Texas | $155,340 | $300 | $7.25 | No |
| 26 | North Carolina | $155,725 | $325 | $7.25 | Yes |
| 27 | Maine | $157,580 | $260 | $15.1 | Yes |
| 28 | Utah | $158,717 | $77 | $7.25 | Yes |
| 29 | Pennsylvania | $161,172 | $132 | $7.25 | Yes |
| 30 | Arizona | $161,450 | $50 | $15.15 | Yes |
| 31 | Vermont | $162,550 | $190 | $14.42 | Yes |
| 32 | Minnesota | $163,475 | $155 | $11.41 | Yes |
| 33 | Illinois | $164,625 | $225 | $15 | Yes |
| 34 | Florida | $165,263.75 | $263.75 | $14 | No |
| 35 | Delaware | $165,390 | $390 | $15 | Yes |
| 36 | Nevada | $166,055 | $575 | $12 | No |
| 37 | Virginia | $169,230 | $150 | $12.77 | Yes |
| 38 | Rhode Island | $169,760 | $200 | $16 | Yes |
| 39 | New Hampshire | $170,480 | $200 | $7.25 | No |
| 40 | Colorado | $172,875 | $75 | $15.16 | Yes |
| 41 | Oregon | $176,480 | $200 | $15.05 | Yes |
| 42 | Maryland | $178,360 | $400 | $15 | Yes |
| 43 | Connecticut | $181,040 | $200 | $16.94 | Yes |
| 44 | Washington | $185,070 | $270 | $17.13 | No |
| 45 | New Jersey | $185,360 | $200 | $15.92 | Yes |
| 46 | Alaska | $186,590 | $350 | $13 | No |
| 47 | Massachusetts | $196,000 | $1,000 | $15 | Yes |
| 48 | New York | $202,529 | $209 | $16 | Yes |
| 49 | Hawaii | $205,145 | $65 | $16 | Yes |
| 50 | California | $210,030 | $870 | $16.9 | Yes |
Year-one state fees: a 20x gap
Before rent or payroll, every business pays to register. These figures come straight from Secretary of State filing schedules. The spread is dramatic. Massachusetts charges $1,000 in year one, while Arizona charges $50. California's $800 annual franchise tax applies even if the business earns zero revenue.
| State | LLC formation | Annual report / franchise tax | Year-one total |
|---|---|---|---|
| Massachusetts | $500 | $500 | $1,000 |
| California | $70 | $800 | $870 |
| Tennessee | $300 | $300 | $600 |
| Nevada | $425 | $150 | $575 |
| Maryland | $100 | $300 | $400 |
| Delaware | $90 | $300 | $390 |
The lowest-fee states:
| State | LLC formation | Annual report / franchise tax | Year-one total |
|---|---|---|---|
| Arizona | $50 | $0 | $50 |
| Mississippi | $50 | $0 | $50 |
| Missouri | $50 | $0 | $50 |
| New Mexico | $50 | $0 | $50 |
| Kentucky | $40 | $15 | $55 |
| Montana | $35 | $20 | $55 |
The four factors that move the number most
Commercial rent. The biggest single variable. The same retail space costs about 2.4 times more in Hawaii than in Mississippi. Rent is also the cost you can most control by choosing a secondary market or a smaller footprint.
Labor. Minimum wage ranges from $7.25 in Texas to $17.13 in Washington. For a business with three or four employees, that difference compounds into tens of thousands of dollars a year.
Taxes. 9 states levy no personal income tax: Texas, Florida, Alaska, Nevada, New Hampshire, South Dakota, Tennessee, Washington, Wyoming. State income tax tops out at 13.3% in California. Sales tax, which affects pricing and compliance, ranges from 0% in five states to over 7% in several others.
State fees. The 20x fee gap above. A few hundred dollars a year sounds small next to a six-figure launch budget, but in a state like Massachusetts or California the recurring franchise tax is a fixed cost you pay before earning anything.
States with no income tax
If keeping more of your profit matters more than market size, these 9 states levy no personal income tax: Texas, Florida, Alaska, Nevada, New Hampshire, South Dakota, Tennessee, Washington, Wyoming. Several also rank among the cheaper states for rent and labor, which is why they show up repeatedly on founder shortlists.
How we calculated this
We modeled one representative storefront business (a small retail or service operation with a leased space and two to three employees) and held the business identical across all 50 states. National baseline costs were scaled by each state's commercial rent multiplier, labor multiplier, and cost-of-living index. Year-one state fees (LLC formation plus the first annual report or franchise tax) come from current Secretary of State filing schedules. Minimum wage figures reflect 2026 state law. The modeled total is a comparison tool, not a quote: your real number depends on your industry, city, and footprint. Use our startup cost calculator to model your specific business, and total budget planner to map the full first-year capital you need.
What this means for where you launch
The cheapest state is rarely the right answer on its own. Mississippi is the most affordable place to launch, but a business that depends on foot traffic or a dense customer base may earn far more in a pricier market. The point is to launch with the real number in front of you. A founder who assumes national-average costs can be off by 50% in either direction.
Next steps: browse startup costs by state for the full breakdown on your state, compare specific businesses like a coffee shop or a restaurant, or see every business we track in the startup cost index.
Frequently asked questions
What is the cheapest state to start a business in 2026? By modeled first-year cost, Mississippi is the cheapest at $137,570, driven by low commercial rent, below-average labor costs, and $50 in year-one state fees.
What is the most expensive state to start a business? California at $210,030 for the same business, roughly 1.5 times the cheapest state, mainly because of high rent and the highest labor costs in the country.
Which states have the lowest business registration fees? Arizona, Mississippi, Missouri, New Mexico all charge $50 or close to it in year-one state fees. Massachusetts and California are the most expensive at $1,000 and $870.
Which states have no income tax for business owners? 9 states levy no personal income tax: Texas, Florida, Alaska, Nevada, New Hampshire, South Dakota, Tennessee, Washington, Wyoming.