Which States Provide the Most Hospitable Ground for Female Entrepreneurs?

Before starting a business, prospective entrepreneurs use many metrics to judge the friendliness of the local landscape toward business owners. One of their primary considerations is typically the restrictiveness of laws affecting their specific operations. 

Different business models have different requirements, and the female entrepreneurs, who start nearly half of new businesses, have unique needs to consider. Which liberties are particularly noteworthy to them, and which states are most likely to afford businesswomen those freedoms? 

Start-up Fees

State costs for licensing and registering businesses vary widely, as noted by the U.S. Small Business Administration (SBA). LLC filing fees range from $35 in Montana to $500 in Massachusetts. Follow-up periodic report fees, not even applicable in some states, are $500 annually in Massachusetts. 

In just one aspect of paperwork and fees, owners in Massachusetts immediately fall almost $1,000 behind operators in business-friendly areas. Little wonder it ranks only 33rd on the Forbes list of best states to start a business, whereas Montana ranks 13th. 

Women tend to have less capital and more difficulty getting loans than their male counterparts. Therefore, they are particularly likely to be priced out of entrepreneurship before they begin. However, women’s businesses are roughly twice as profitable as men’s per dollar invested once they begin, indicating the weakness lies in the system rather than in female business acumen. 

These mandates and fees are not necessary or logical, and lowering or abolishing them offers a simple way to ease restrictions. 

Occupational Licensing 

Female entrepreneurs gravitate toward ventures involving personal caregiving, such as esthetician services, child and elder care, and massage therapy. These businesses often have disproportionately high regulatory burdens, with the time and cost of occupational licensing sharply higher than corresponding requirements for more safety-intensive fields.

States overwhelmingly control this burden, and they can make or break entrepreneurs. Nevada mandates occupational licensing for 75 of 102 lower-income industries, with average fees of $727, and an average of 883 calendar days of compulsory education and/or experience. By comparison, Vermont requires only 31 of these industries to obtain such a license, resulting in an average fee of just $194 and 266 average days of prerequisite instruction. 

Like other fees, occupational licensing costs are arbitrary and often unnecessary, and many are easily removed.

Taxes

Corporate, individual, sales, and property taxes all impact entrepreneurs. Raising rates effectively punishes hard work and success in order to subsidize failure, despite tax-happy legislators framing the practice as compassion. 

Taking from savvy proprietors disincentivizes effort and risk-taking. This potentially affects women more heavily than it does men, due to their more cautious risk/benefit analyses. This conservative approach, whatever the reasons behind it, provides a healthy balance to more adventurous entrepreneurial behavior. Legislation should not penalize it.

Evaluating state tax rates as a whole entails some challenges, since multiple categories exist. Alaska—which has the lowest average tax rate when all factors are included, and also has no personal income tax—also has some of the highest marginal corporate income tax rates. This undeniably discourages some women from establishing businesses there.  

Lowering every category provides benefits to business owners, and the overall economy benefits by creating a welcoming environment for them. Despite any seeming advantages of raising taxes, it comes with negative outcomes that needlessly drive away entrepreneurs. 

Overall Comparison 

Different media outlets reach varied conclusions regarding the best states to found a business. But examining all collectively, patterns emerge. Heavily regulated and taxed states see worse outcomes for entrepreneurial ventures, without commensurate improvement in the overall economy or safety. 
Once again, getting the government out of the way maximizes efficiency, and women may gain even more than their male counterparts from doing so.