For small business owners, not all states are created equal.

When it comes to taxes and regulations, some states are significantly friendlier to entrepreneurs trying to run and grow their businesses. The Small Business & Entrepreneurship Council’s 18th annual Small Business Policy Index ranks the 50 states, from best to worst.

  • 1South Dakota


    South Dakota is ranked no. 1 overall, and ties for first with eight other states in terms of its low personal income tax rate.

    “Policy reforms that bolster small business startup and growth are mostly being implemented at the state level … But states vary widely in terms of their policy approaches,” says SBE Council President and CEO Karen Kerrigan. Kerrigan says the best states for SMBs are streamlining government, removing excess taxes and regulations and passing responsible budgets.

    “The worst ranked states keep treating small businesses and entrepreneurs as piggy banks to fund higher spending and bankrupt programs,” says Kerrigan.

  • 2Nevada


    Nevada, which is ranked no. 2 overall, is no. 1 in the country when it comes to its number of state and local employees.

  • 3Texas

    Texas, which is no. 3 on the list, ties for first when it comes to personal income tax rates, individual capital gains tax rates, individual dividends and interest tax rates and corporate income tax rates.

  • 4Wyoming


    Wyoming, which is at no. 4, ranks highly when it comes to crime and government debt.

  • 5Florida


    The Sunshine State, which is in the fifth spot, ranks no. 1 when it comes to five-year spending trends for its state and local government.

    The complete ranking can be viewed at the SBE Council’s website.

Follow Gabrielle Karol on Twitter @GabrielleKarol