Arkansas Ranked #3 Least Expensive State to Start a New Business

Arkansas is one of the least expensive states to start a small business.

According to a new study from SimplifyLLC, Arkansas is the third-least expensive state in the nation to launch a new business.

To determine how expensive it is to start a business in each state, the SimplifyLlC study looked at nine business cost factors in the following categories: basic business costs, labor costs and worker availability, cost of space and utilities, and health business environment.

“Starting a new business is a challenging undertaking, but in Arkansas, we aim to make it easier for small business owners to succeed,” said Esperanza Massana Crane, director of the Arkansas Economic Development Commission’s Small Business and Entrepreneurship Development Division. “With our state’s low costs, affordable utilities and collaborative spirit, small business owners can launch their business ventures for less money – enabling them to start earning a profit faster.”

Arkansas has some of the lowest basic expenses for small businesses in the nation. In the report’s “Basic Expenses” breakdown, Arkansas was ranked as one of the best states for average corporate income tax rate and for startup cost. The report ranked Arkansas as the #2 best state for startup costs with a $45 LLC filing fee and the #3 best state for average corporate income tax rate.

Corporate taxes have been cut even further since the report was released. In early 2023, the Arkansas Legislature, working with Governor Sarah Huckabee Sanders, cut the state’s top income tax rate from 5.3% to 5.1%. Governor Sanders called a special session in September 2023 to lower taxes even further. The state Legislature reduced the state’s top personal income tax rate from 4.7% to 4.4% and the corporate income tax rate from 5.1% to 4.8%.

Commercial utilities also provide businesses in Arkansas with an advantage. SimplifyLLC ranked Arkansas #9 for the best utilities for businesses, highlighting the state’s low average monthly commercial electric bills. On average, Arkansas businesses have a monthly commercial electric bill of $455.71, according to the report.

Arkansas also has one of the best business environments in the nation for individuals looking to launch a new business. The report ranked Arkansas no. 6 for its business lending, with the state having $42,962,552 in small business loans per 100,000 people based on data from the SBA data covering Community Reinvestment Act loans.

In addition to the SimplifyLLC report, the Ewing Marion Kauffman Foundation recognized Arkansas as having the highest opportunity share for entrepreneurs in its latest State Report on Early-Stage Entrepreneurship in the United States. In the report, the Kauffman Foundation showed that Arkansas  had a 93.1 percent opportunity share for entrepreneurs, indicating the number of individuals coming out of “wage and salary work, school, or other labor market status” to start a business, as opposed to individuals starting a business when they are unemployed.