California named one of the top US states to start a business. Here’s why
Calling all entrepreneurs: If you’re looking to start a business, the location you choose matters a great deal.
That’s according to a new study by WalletHub.
The personal finance company recently went looking for the best and worst states to start a business, based on factors ranging from the number of startups per capita to labor costs and the affordability of office space.
According to the U.S. Bureau of Labor Statistics, more than one-fifth of all startups don’t survive the first year of operation, and about half don’t make it to five years.
One of the most common reasons startups fail is “bad location,” according to data from CB Insights.
“That’s why it’s crucial to establish your business in a state that will maximize your chances of success,” WalletHub analyst Chip Lupo said in an article published Jan. 19. “The best states have low corporate tax rates, strong economies, an abundance of reliable workers, easy access to financing and affordable real estate.”
Here’s where California ranked on WalletHub’s list, and why:
Why is California one of best states to start a business?
California is the 10th best state for starting a business “because it combines exceptional resources with notable cost challenges,” Lupo told The Fresno Bee via email.
“The state tops the nation in venture investment per capita, human capital availability, higher education assets and digital infrastructure,” Lupo said.
The Golden State ranks ninth in the nation in terms of startup companies per capita, and eighth in terms of businesses with the best five-year survival rates, according to the WalletHub analyst.
California businesses have the best overall access to resources in the nation, the WalletHub study found, and third in terms of business environment.
However, the state came 49th in the United States in the business costs category.
“Office space affordability, labor costs, the cost of living, and limited small business financing make it more expensive and challenging to launch and scale a business,” Lupo said. “These factors together help explain why California ranks well overall but is not in the top five for startup success.”
Where are top 10 states for new business owners?
“Choosing the right state for a business is ... crucial,” WalletHub financial writer Adam McCann wrote in the Jan. 19 article.
“A state that offers the right ecosystem — access to capital, skilled talent, affordable real estate, for instance — can give new ventures a leg up not just to start, but to scale,” McCann said.
According to WalletHub, these were the top 10 states for starting a business in the United States in 2026:
- 1. Florida
- 2. Utah
- 3. Texas
- 4. Oklahoma
- 5. Idaho
- 6. Mississippi
- 7. Georgia
- 8. Indiana
- 9. Nevada
- 10. California
How did WalletHub determine best states for entrepreneurs?
To determine the best places to start a business, WalletHub said it compared all 50 U.S. states across three dimensions:
- Business environment: Share of engaged workers, startups per capital, business survival rates and more.
- Access to resources: Including financial accessibility, venture investment amount per capita and workers’ education levels and ages.
- Business costs: Office space affordability, labor costs, insurance premiums, corporate taxes and more.
The company’s analysts then evaluated those dimensions using 25 metrics, gave them corresponding weights and graded them on a 100-point scale.
A score of 100 represented “the most favorable conditions for new-business creation,” WalletHub analysts said in the study.
WalletHub used data from sources including the U.S. Census Bureau, Bureau of Labor Statistics, Center for Digital Government, National Venture Capital Association, Tax Foundation and Indeed.com.
