December Business Formation Report

As Q3 came to a close, national business formation trends reflected a mix of resilience and challenge, with notable regional disparities. States like California and Colorado are showing impressive (if not surprising) numbers, fueled by their strong, diverse markets, while Utah (which started the year hot) has cooled down, largely due to rising costs and shifting regulations. While all states are making clear moves to support new businesses, some initiatives have been more successful than others, especially where the costs of doing business are concerned. Taking a deeper dive into the trends, it’s clear that places with a solid mix of niche industries and workforce incentives are seeing the best results. Think Vermont, Maine, and Texas: states that are actively making it easier for entrepreneurs to thrive with fewer regulations, better programs, and greater growth opportunities in industries like renewable energy and tech. Meanwhile, states like Georgia, Alabama, and Minnesota are feeling the pressure, with high costs and tougher regulations slowing down their business formations.

States like Montana and Vermont are playing a winning game with targeted policies and incentives that make them attractive to entrepreneurs, especially in sectors like tech, renewable energy, and tourism. These states are seeing notable growth in niche industries, from California’s renewable energy push to Alaska’s fishing and tourism opportunities. With quality-of-life perks like low crime rates, affordable housing, and natural beauty, the states in the lead offer more than just a good business environment—they’re also about living well. Add in strong labor force programs addressing skills gaps, and you’ve got success even in states with reputations for high costs of living.

States like Minnesota, Louisiana, and Florida are feeling the crunch with rising operating costs in housing and labor, making it harder for businesses to get started and stay afloat. Adding to the pressure, Florida and Louisiana face frequent environmental risks, including recent hurricanes and flooding, which create added uncertainty for potential entrepreneurs. With labor shortages and an aging workforce, some states are struggling to find the skilled talent needed to fuel business growth. And many under-performing states saw increases in pollution and emissions ordinances (UT, LA, and MN), while others increased requirements related to labor costs (GA, FL, MN) that could give new business owners cold feet. Combined with high taxes, complex regulations, and stiff competition from neighboring states, it’s no wonder these states are seeing fewer new businesses in the mix.

Looking at the big picture, quarterly and yearly trends show the impact of national challenges, like rising inflation and labor shortages, on state-level growth. States that can balance high costs with strong industry support (like California’s thriving tech scene) are still finding success, while states with less economic diversity or more red tape (like Louisiana and Alabama) are struggling to keep the momentum going.