Best Places to Start a Business

30 June 2020

Best Places to Start a Business

Although based in Australia, in our increasingly globalised world, it can be productive to consider different ways to maximise business benefits by selecting the very best place to start your business.

Factors to Consider When Evaluating a Local Business Climate

Licensing and Permitting Requirements

Some economic activities, such as producing and selling alcohol and firearms, are regulated by the Federal Government. The more hoops local authorities require you to jump through to obtain or renew a license, the less welcoming the local business climate will seem.

Licenses tend to apply only to industries with strict professional standards, such as medicine and law, or those that directly affect public safety, such as construction (which typically involves licensing and permitting). In other places, licensing is much more common.

If local authorities require entrepreneurs in your industry to obtain a business license, it’s one of the first things you need to do. Most licenses need to be renewed at regular intervals as well, anywhere from once per year to once per decade. And if your business does onsite projects in different cities and states, you need to keep up on licensing and permitting requirements in those locations too.

Tax rates and Business Incentives

No matter where they operate, businesses have to pay local (city or county), state, and federal taxes. Federal tax rates don’t vary from place to place, but local and state taxes certainly do. In high-tax areas, it’s not uncommon for individuals to pay state and local income taxes, businesses to pay state and possibly local corporate taxes, and both to pay local property taxes

Zoning Regulations

Cities with lighter zoning regulations generally allow more types of business activity in more places. For instance, Houston is infamous for extremely light-touch zoning that, in theory, allows pretty much any business to operate pretty much anywhere – and essentially any type of structure to be built.
If you’re a sole proprietor running a service business out of a home office or garage, zoning codes won’t affect you too much, even in less forgiving cities. However, they could quickly become an issue as your business grows – local authorities are likely to frown on the increased traffic, noise, parking hassles, and strain on local infrastructure. And if you’re starting a more intense business, such as a manufacturing or logistics operation, you’ll need to lease space in an industrial park right away.

Regulatory Environment

U.S. businesses must follow thousands of pages of local, state, and federal business regulations. Federal regulations, such as OSHA workplace safety rules and federal wage regulations, don’t vary from place to place – though specific federal regulations apply only to specific industries or businesses of a certain size.

Local and Regional Amenities
Different people value different amenities, with the precise mix for each person or family dependent on age, lifestyle, marital and family status, and a host of other factors.

Examples include the following:

•    Above-average public schools
•    Mild or sunny climate
•    Lots of open space and opportunities for recreation
•    Strong, welcoming social and community networks
•    Ample social services, whether public or nonprofit
•    Safe streets and communities
•    Good internal (roads, public transit) and external (airports, rail, interstate highways) transportation assets

Proximity of Mentors and Competitors

Markets with lots of like-minded businesses tend to have well-developed private networks and resources that benefit early-stage companies. Industry-specific business incubators, where new entrepreneurs collaborate with established companies and receive valuable mentoring from seasoned industry hands, are increasingly common.
In such supportive environments, leaders of mature firms naturally become mentors to promising early-stage companies, perpetuating a virtuous cycle.

Native Fundraising resources

While traditional banks exist everywhere, they’re unwilling to lend to entrepreneurs with untested ideas and limited revenues. In many cases, even established businesses struggle to find adequate credit.
The funding problem is particularly acute in cutting-edge industries such as software, biotechnology, and advanced manufacturing. If you’re in a cutting-edge field, you can benefit greatly from access to deep-pocketed angel investors and venture capitalists capable of funding costly but necessary pre- and post-revenue activities like research, development, and marketing.

Depth of the Local Talent Pool

Some areas are blessed with an ample supply of talented workers hungry to put their skills to work for ambitious entrepreneurs – or become entrepreneurs themselves. The presence of major research universities and laboratories, a long history of specialization in a particular industry, and strong professional networks all contribute to deep regional talent pools.
Some areas are known for attracting talent of a particular nature. If you’re starting a business that requires a particular type of expertise, local labor force characteristics could well determine where you choose to locate.

Cost of Living

Though cost of living is more often viewed as an issue for individuals, it directly affects the cost of starting and running a business too. For instance, CNBC’s annual Top States for Business ranking typically finds a close correlation between cost of living and cost of doing business.
Most notably, your area’s cost of living affects how much you need to pay your employees to keep them well-fed – and encourage them not to seek higher-paying work at a nearby competitor. In high-cost areas, business supplies and inventory can be more expensive as well, particularly in areas with high transportation costs

Labour Union Membership and Activity

Most Business Friendly Countries & Cities

There are a multitude of ways to assess the business environment of a country and many countries rank high depending on the factors and the priorities entrepreneurs place on different aspects of incorporation.

Priority: Easy Banking

Solution: The British Virgin Island

The British Virgin Islands (BVI) is the best place to incorporate if you are an internet entrepreneur with worldwide income that you want to park offshore. BVI has the most reputable company formation setups of all offshore jurisdictions.
One of the most advantageous aspects of a BVI International Business Company is that you can pair this incorporation with a bank account in a reputable jurisdiction, such as Hong Kong or Singapore. Asian banks are particularly willing to work with BVI companies.

In general, banks are so willing to work with BVI because:

    the country takes the requirements for filing companies seriously,
    they have been established as an offshore centre
    there are additional forms that are required to set up an International Business Company in BVI, namely the beneficial owners declaration. Banks feel comfortable with this jurisdiction.

Downsides to BVI:
• Not as cheap to incorporate as some other places (f.e. Belize).
• Registered office fees and government fees are also somewhat higher.

Priority: Tax Efficiency and Flexible Hiring and Firing

Solution: Denmark

Denmark is seen as one of the easy countries in Europe to incorporate a business in, and it really has some great pros going for it:

•    With “flexicurity” you get the most flexible hiring and firing rules in the world, reducing the costs of scaling business operations up or down.
•    You are able to register and finish your incorporation in days, not weeks.
•    There are no resident requirements for the management, including CEO and Board of Directors.
•    No notarial deeds.
•    It’s tax efficient to establish your business in Denmark compared to other Nordic countries.
•    Danish company law is modern and in conformity with the current EU legislation.

Priority: Digital Communication

Solution: Norway

Norway has a strong economy and most communication with the government can be done digitally.
Registering a property is fast, and complying with tax laws is relatively straightforward. Resolving insolvency in Norway is also low-cost, with fees averaging 1% of the bankrupt entity’s value.

In general, benefits include:

•    Great for digital nomads, as all communication is done digitally
•    Focus on tech based business
•    Highly skilled workers in IT, finance, design and music tech
•    Entrepreneurs have access to industrial expertise, investors and talent
•    Economic and governmental stability
•    Long-standing trade ties with the EU
•    Well-developed communication and transport infrastructures

However, downsides include:

• Getting construction permits can be lengthy
• Labour regulations are quite rigid

Priority: Fast Setup

Solution: New Zealand

New Zealand is considered one of the easiest countries to do business in, because:

•    incorporating a business takes only a day,
•    registering a property can be done in two days,
•    the workforce is skilled and educated,
•    labor costs are low,
•    in terms of taxes, there are no payroll, social security or capital gains taxes, and
•    it sets up LLCs that are their own legal entity, separate from shareholders.

Priority: No Capital Gains Taxes

Solution: Singapore

Singapore is known for the many international businesses that station their headquarters there. Due to strong trade and investment opportunities, the city attracts global entrepreneurs and leaders, and has been named the most competitive Asian country to start a business.

Singapore has long been considered one of the best places to do business in the world because it

•    is one of the wealthiest nations in the world,
•    is politically stable,
•    is an easy location to do business,
•    has a strong labor force, and imposes no dividend or capital gains taxes.

Priority: Internet Entrepreneurship

Solution: Belize

Belize is a good place for an internet entrepreneur to incorporate because:

    Banks allow you to set up an account without being on site in Belize
    Great for merchant accounts
    Can be used for a variety of different businesses
    No taxes
    Low setup costs
    Banks allow high-risk merchant accounts (f.e. gambling, pharma- or adult industry)

The main con is that it does not have the most reputable jurisdiction.

Priority: Asset Protection

Solution: Nevis

Nevis is one of the best places to incorporate from an asset protection standpoint. If you are running a business that is fraught with liability, it makes sense to go to a place where the claimant has to post a bond in order to bring a suit against you. In order to sue your company, a person will have to file a suit in Nevis and pay for the court proceedings.

Further Nevis Pros:

•    Privacy, since there is no country-wide register
•    Good asset protection
•    Lawsuit protection
•    Government and prime minister willing to discuss passports with entrepreneurs

Despite these advantages that Nevis has going for it, there is one caveat: like Belize, it doesn’t have the most reputable jurisdiction – yet?

Priority: Tax Breaks and Business Dynamisn

Solution: The United States

There are several factors that make the United States a good country to start a business in:

•    The workforce is diverse and skilled.
•    It is a recognized leader in research and development as well as innovation.
•    You can also find a wide variety of funding sources: investment firms, banks, venture capitalists and angel investors.

But the US is a big country with 50 states to choose from. The key factors mentioned above can vary from state to state. Then there’s the question whether you’re a US-resident wanting to incorporate a business in the US or a foreigner – does that make a difference?

It does, but don’t worry. There’s a general rule of thumb you can follow:

• If you’re a US-resident, you should incorporate your business in the state you live in.
• If you’re a non-US-resident, you should incorporate your business in Delaware.

Priority: Fast Company Registration

Solution: United Kingdom

Incorporating a company in the United Kingdom (UK) is both fast and affordable, making it one of the easiest countries in Europe to set up and run a business in, for the following reasons:

    Incorporating a company can be completed in an hour – for £14.
    The tax authorities understand that new companies generally aren’t profitable in their early years.
    The British government offers various tax benefits for investors, founders and employees.

Some of the best places to start a business in the UK include Derby, Stoke, Belfast, Stirling and Durham.

Starting a Business in Australia

Starting a business in Australia can also be simple, and can be done in various ways, depending on your tax, liability and cost requirements.

ABN Registration

Starting from the most cost-effective route, new business owners can choose to register an ABN under their name as a sole trader and begin trading within minutes.

Sole trader ABNs can be registered here.

Business Name Registration

Slightly more expensive than the ABN registration, you can choose to register a business name for one or three years and trade under this name.
An ABN is required to register a name to trade under, so many different types of entities can own a business name. You can choose to register your business name under your sole trader ABN or set up a company and have multiple trading names under its ABN.

Business Names can be registered here.

Company Registration

At a higher cost, you can register a company to run your business through. Generally, this can be considered the best option, as it comes with company tax rates, limited liability and a greater legal protection and structure.

Companies can be registered in five minutes here.

The Most Dynamic Countries for Business

Globally, the World Economic Forum uses the indicator of ‘business dynamism’ to rank countries according to its business environment and innovation.

In these business dynamism rankings, the US was ranked No. 1, scoring a global high of 86.5 points out of 100 in the category. The business dynamism ranking factored in several metrics, such as the cost and speed of starting a business in each country, the attitudes of entrepreneurs toward risk, and the willingness of companies to embrace disruptive ideas.

"An agile and dynamic private sector increases productivity by taking business risks, testing new ideas, and creating innovative products and services," the report said.

"In an environment characterized by frequent disruption and redefinition of businesses and sectors, successful economic systems are resilient to technological shocks and are able to constantly re-invent themselves."

Overall, the following are the highest scoring countries important to consider when selecting a country for your next business venture:

1.    Unites States : 86.5
2.    Germany: 81.6
3.    Netherlands: 80.3
4.    Sweden: 79.8
5.    Israel: 79.6
6.    Denmark: 79.1
7.    United Kingdom: 79
8.    Finland: 78.3
9.    Norway: 77
10.    Ireland: 76.9
11.    Iceland: 76.6
12.    New Zealand: 76.4
13.    Canada: 76
14.    Japan: 75.7
15.    Australia: 75.2
16.    Singgapore: 74.7
17.    Hong Kong: 74.5
18.    Belgium: 73.8
19.    Malaysia: 73.8
20.    Switzerland: 72.6
21.    Taiwan: 72.4
22.    South Korea: 71.6
23.    Thailand: 71
24.    Slovenia: 70.3
25.    Czech Republic 70.2

Most Business Friendly Cities

With America scoring high in business dynamism, it can be an important locale to consider at least expanding to.
For an American focus, Personal finance website WalletHub looked at 100 cities in the U.S. and compared them based on three different categories: business environment, access to resources and business costs:

The top 20 top cities are:

1.    Orlando, FL
2.    Oklahoma City, OK
3.    Miami, FL
4.    Austin, TX
5.    Tampa, FL
6.    Charlotte, NC
7.    Durham, NC
8.    Raleigh, NC
9.    Atlanta, GA
10.    Denver, CO
11.    Fort Worth, TX
12.    Jacksonville, FL
13.    Houston, TX
14.    St. Petersburg, FL
15.    Dallas, TX
16.    San Antonio, TX
17.    Irving, TX
18.    Laredo, TX
19.    Oakland, CA
20.    Irvine, CA

All are highly business friendly cities, however, depending on the value you’ve placed on the previously discussed factors, you may find some cities more suitable than others.

Some cities are more popular with start-ups than others. The survey found that number three on the list, Miami, Florida, is home to the most startups per 100,000 residents at 234.72, which is 3.2 times more than in Winston-Salem, North Carolina, which is the city with the fewest at 74.40 per 100,000 residents.

If cost of living is a top concern, you might consider number 18 on the list, Laredo, Texas, which has the lowest cost-of-living index according to the study. It’s probably not a surprise that tech hub San Francisco has the highest cost-of-living index.

San Francisco has the highest annual rent for office space at $80.22 per square foot, while Toledo, Ohio, has the lowest annual average rent at $11.93 per square foot.

Lincoln, Nebraska, has the most accessible financing while San Bernardino, California, has the least. Detroit, Michigan, has the lowest labor costs with a median annual income of $27,838, which is 4.4 times lower than in Fremont, California, which has the highest labor costs with a median annual income of $122,191.