Kentucky is the 19th-best state to start a business

While many individuals dream of owning their own business, the fact is that starting a new business is never easy, with over one-fifth of all startups typically not surviving past year one of operation, and nearly half never reaching their fifth anniversary, according to the U.S. Bureau of Labor Statistics.

And in these challenging times, staying afloat is harder than in stable times, amid elevated inflation and persistent labor market tightness.

If you are thinking about starting a new business in 2026, Kentucky is the 19th-best state to do that, according to a new report from WalletHub. In the study, WalletHub compared the 50 states across 25 key indicators of startup success to determine the most fertile grounds in which to launch and grow an enterprise.

"Around half of all new businesses don't survive five years, so the idea of becoming a business owner can be daunting, especially with the current high cost of living," said WalletHub analyst Chip Lupo. "That's why it's crucial to establish your business in a state that will maximize your chances of success. The best states have low corporate tax rates, strong economies, an abundance of reliable workers, easy access to financing, and affordable real estate. On top of that, you'll need to make sure you start in a place with an engaged customer base, if you're operating locally."

According to the study, the best state to start a new business is Florida, with a total score of 56.30. The Sunshine State ranks second in Business Environment, 12th in Access to Resources, and 27th in Business Costs. They are followed by Utah, Texas, Oklahoma, Idaho, Mississippi, Georgia, Indiana, Nevada, and California to round out the Top 10.

Kentucky had a score of 48.02, ranking 26th in Business Environment, 17th in Access to Resources, and seventh in Business Costs. It was also ranked 46th in Educated Population. The worst state to start a business was Rhode Island, with a score of 33.79.

Idaho had the highest average growth in the number of small businesses, while West Virginia had the lowest. North Dakota, Utah, South Dakota, Iowa, and Nebraska were all tied for first with the most accessible financing, while Arizona was ranked 50th. Mississippi had the lowest labor costs with Maryland having the highest, while California had the highest availability of human capital, with Vermont having the lowest.

The cheapest state to rent office space is Iowa, while New York, Alaska, and California were tied for the most expensive.

When it comes to tax breaks and other incentives for states to encourage new businesses, Frank V. Cespedes said the devil is in the details for tax breaks.

"The tax subsidies for sports stadiums, for example, are generally a notoriously bad investment for most states and municipalities," said Cespedes, MBA Class of 1973 Senior Lecturer of Business Administration - Harvard Business School. "The tax breaks for many 'green' cars and initiatives have distorted resource allocations at many companies without most of the promised benefits for the environment."

On the other hand, he said, some policies are good for long-term business development.

"For example, in the late 1970s, amendments to the Employee Retirement Income Security Act (ERISA) gave pension funds more leeway to invest in riskier asset classes, creating a large and sustained boost to venture capital for the next 40 years," he said. "In addition, lower capital gains rates in the late 1970s and 1980s, coupled with more startup capital, increased the number of people willing to get involved in entrepreneurial activities and the opportunities that early-stage investors could invest in. There are, as always, issues, but those tax breaks and incentives have been a big net positive for states, for our society, and for the life possibilities available to many people in our society."

To view the report, visit https://wallethub.com/edu/best-states-to-start-a-business/36934