5 Factors to Consider When Deciding Where to Launch Your Startup

2 min read · 7 years ago


Sometimes entrepreneurs and small business owners have little say in where their business is incorporated. If you are still in school or if your spouse has a lucrative, location-based career, that can decide where you launch.

However, if you do have the freedom to choose where your business is incorporated or founded, it’s time to get savvy about location, location, location. You might immediately think “Silicon Valley” for a tech startup might, that’s not automatically the best location to start. Different states, and different countries, have various pros and cons. 

Related: 6 Ways Your Startup’s Location Can Boost Your Bottom Line

Do your research and choose a location that’s the best fit for you, taking into consideration your customers if you are a brick and mortar. For example, Silicon Valley gives you access to some of the top tech workers thanks to lavish benefits, but California is a notoriously expensive state with some of the highest tax rates. If you don’t have a strong foundation, the competition will eat you alive.

Here are a few other factors to consider when picking your business location:

1. Foreign exemption status.

Many countries have an “agreement” with the US that if you’re an ex-pat (living at least 330 days in your adopted country and outside the US), you qualify for federal tax exemption. There’s a limit, but in 2014 it was $94,500 before you had to start paying federal taxes. Of course, you’re also exempt from any state taxes. The purpose is to avoid double taxation.

2. Taxes by state.

There are some states, such as Washington and Nevada, which have no state income tax. Obviously, that is a great financial benefit compared to states like Oregon, which tack on nine percent on top of the flat federal tax you’ll be paying.

3. Sales taxes/cost of living.

When it comes to taxes as a business owner, you should also think about sales taxes, especially if you plan on equipping a brick and mortar office. Then there’s cost of living, which can put a huge hole in your budget, and will require paying employees higher wages to “make up” for the hit they’ll take living in such a costly area. Consider the lowest taxed states from this perspective for extra savings.

Related: Where Startups Are Matters More Than What They Pay

4. Property taxes.

This is important to consider whether you’re buying commercial property or not. If your property taxes are through the roof, that means your employees are likely paying higher taxes on their homes, which results in higher wages. There are also skyrocketing property values in some communities which you will need to consider. Many entrepreneurs choose a location for the long haul, so choose wisely.

5. Quality of employees.

There are two ways to ensure you snag the best employees: Setting up shop in a location that’s already rich with them, and enticing them to move with appealing benefits and salaries. Do some comparison and see which approach is best (and most affordable) for you. “Quality” will mean different things to different employers and industries.

Starting a business should always include an analysis of the location. If you just choose a spot because you’re already there or you’ve “always wanted to live on the beach,” you’re asking for trouble. Consider the factors above before you set up shop and you will be one step closer to success.

Related: Does the Company’s Location Affect Employee Engagement?