For small business owners, choosing the right location is crucial to success. In 2025, certain states and cities in the U.S. stand out as particularly favorable for small businesses due to their supportive tax policies, access to talent, infrastructure, and economic growth. Here’s a detailed look at the top U.S. locations for small businesses in 2025, along with statistics, facts, and reference links.
Key Factors for Small Business Success
To determine the most favorable states and cities, we evaluated several factors:
• Tax policies: Lower tax rates can reduce operating costs, increasing profitability.
• Cost of living: A more affordable cost of living benefits both business owners and employees.
• Access to skilled workforce: A larger talent pool supports business growth and innovation.
• Economic growth and market size: States with robust economies provide more opportunities for local businesses to thrive.
These factors create an environment where small businesses can flourish and grow sustainably.
Top 5 States for Small Businesses in 2025
1. Texas
Texas continues to be a top choice for small businesses in 2025 due to its favorable tax environment, robust economy, and strong labor market. The state does not impose a personal income tax, which benefits both entrepreneurs and employees. Texas is home to several high-growth cities, making it a hotbed for diverse small business opportunities.
• Best Cities: Austin, Dallas, Houston, San Antonio
• Notable Industries: Tech, energy, healthcare, and construction
• Statistics: Texas has a GDP of over $2 trillion, making it the second-largest state economy in the U.S. (Bureau of Economic Analysis)
2. Florida
Florida’s lack of personal income tax and business-friendly policies make it one of the most attractive states for small businesses. The tourism industry boosts the state’s economy, providing business opportunities across retail, hospitality, and service sectors. Additionally, Florida’s population growth continues to drive demand for small businesses.
• Best Cities: Miami, Orlando, Tampa, Jacksonville
• Notable Industries: Tourism, healthcare, real estate, and technology
• Statistics: Florida’s population growth rate was among the highest in the nation in 2024, with an estimated 21.7 million residents (U.S. Census Bureau)
3. North Carolina
North Carolina offers a lower cost of living compared to other popular states, along with an increasing number of skilled workers from local universities. This state also boasts a relatively low corporate income tax rate, which attracts new businesses.
• Best Cities: Raleigh, Charlotte, Durham, Greensboro
• Notable Industries: Finance, biotechnology, research, and manufacturing
• Statistics: North Carolina’s GDP growth rate was 4.3% in 2024, higher than the national average (Federal Reserve Bank of Richmond)
4. Tennessee
With no personal income tax and a central location in the Southeast, Tennessee is another strong contender for small businesses. The state’s cost of living is low, and it has become an attractive hub for industries like logistics and healthcare.
• Best Cities: Nashville, Memphis, Knoxville, Chattanooga
• Notable Industries: Healthcare, music, logistics, and manufacturing
https://marketingweather.com/business-management-consultant/• Statistics: Tennessee saw a 5.1% increase in new business formations in 2024, reflecting a thriving entrepreneurial environment (U.S. Bureau of Labor Statistics)
5. Arizona
Arizona has become a rising star for small businesses, particularly in cities like Phoenix and Tucson, where the cost of living remains affordable and taxes are moderate. The state also has a high rate of population growth, providing a growing customer base for small businesses.
• Best Cities: Phoenix, Tucson, Mesa, Scottsdale
• Notable Industries: Technology, tourism, healthcare, and manufacturing
• Statistics: Phoenix is one of the fastest-growing metropolitan areas, with a growth rate of 3.3% in 2024 (World Population Review)
Top 5 Cities for Small Businesses in 2025
1. Austin, Texas
Austin continues to thrive as a business-friendly city, especially in the tech industry. With no state income tax and a strong entrepreneurial community, Austin remains a top destination for small business owners.
• Industries: Technology, entertainment, professional services
• Statistics: Austin’s population grew by 2.9% in 2024, adding thousands of new residents annually (U.S. Census Bureau)
2. Miami, Florida
Miami is emerging as a top destination for small business owners, especially in fields like tourism, finance, and technology. The city’s global business environment, lack of state income tax, and growing population make it an attractive location.
• Industries: Finance, tourism, tech startups, trade
• Statistics: Miami’s startup density has increased by over 10% annually since 2020, with the city now ranking among the top U.S. cities for entrepreneurial growth (Crunchbase)
3. Raleigh, North Carolina
Raleigh is known for its high concentration of educated professionals, thanks to institutions like North Carolina State University. This makes it an ideal location for businesses in research, healthcare, and finance.
• Industries: Biotechnology, finance, healthcare, education
• Statistics: Raleigh’s GDP grew by 3.5% in 2024, largely due to the expansion of the biotechnology and tech sectors (Bureau of Economic Analysis)
4. Nashville, Tennessee
Nashville’s diverse economy and low cost of living make it ideal for small businesses. With its growing healthcare and music industries, Nashville attracts both local and out-of-state entrepreneurs.
• Industries: Healthcare, music, manufacturing, retail
• Statistics: Nashville’s small business growth rate was 7% in 2024, one of the highest in the Southeast (U.S. Small Business Administration)
5. Phoenix, Arizona
Phoenix has been experiencing rapid growth, which has fueled the demand for goods and services. With relatively low taxes and an affordable cost of living, the city is ideal for small businesses.
• Industries: Real estate, healthcare, education, technology
• Statistics: Phoenix’s employment growth rate reached 4.2% in 2024, higher than the national average (U.S. Bureau of Labor Statistics)
Why Location Matters for Small Business Success
While online sales and remote work are more common, location remains crucial for certain small businesses, particularly those in retail, service industries, or specialized sectors that require local networking. States and cities that offer business-friendly regulations, lower taxes, and strong economies help create an environment where small businesses can survive and thrive.
Key Takeaways
For small businesses in 2025, choosing the right location can significantly impact profitability, access to customers, and long-term success. As seen, states like Texas, Florida, and Arizona lead in creating favorable conditions, while cities such as Austin, Miami, and Raleigh offer thriving environments with skilled workforces and diverse market opportunities.
Entrepreneurs can leverage these insights to make strategic decisions about where to set up or expand their operations. By analyzing each location’s tax policies, cost of living, access to talent, and market growth, small business owners can find the ideal environment to foster growth and success in 2025.
