Small business owners are the backbone of America’s economy. The U.S. Administration of Small Business Office of Advocacy says the nation has 36.2 million small businesses, which account for almost 46% of private sector employment. From March 2023 to March 2024, these small businesses created about nine out of every 10 jobs.
In 2025, they’re facing an unpredictable landscape shaped by inflation, shifting workforce dynamics, changing policies on tariffs and new technologies.
Differences in state policies matter as well, with some states creating a better business environment than others, based on tax climate and regulatory structure. The Patriot Software 2025 Startup Index ranked all 50 states on business-friendliness, using three measures: one-year survival rates for new businesses (Bureau of Labor Statistics), LLC filing fees (LLC University) and state tax climate rankings (Tax Foundation’s 2024 State Business Tax Climate Index).
According to this data, New Jersey ranked as the eighth-hardest state to start a business, with an index score of 33.7.
New Jersey’s 78.5% survival rate, tied for the sixth-highest among the 50 states, suggests many businesses get through their first year. But the state’s tax climate ranks No. 50, the worst in the country, according to the Tax Foundation. Heavy income, property, and corporate tax rates (at 11.5% and also the highest in the nation) create long-term barriers to scaling.
New Jersey is one of seven eastern states that rank among the 10 worst to start a business in the United States.
In other findings, national survey data from small and medium-sized business owners show that inflation, staffing shortages, and AI adoption are reshaping day-to-day operations. These challenges tie directly to state-level conditions. A state with high survival rates and modest startup costs may help offset inflation pressures. A state with burdensome fees or taxes can magnify them.
Patriot Software is a Canton, Ohio-based provider of accounting and payroll software.
