Connecticut was ranked the second worst state to start a business in 2025 by WalletHub, besting only its next-door neighbor Rhode Island, according to the data website.
Connecticut ranked low for its business environment – which included variables like how enthusiastic workers are about their jobs and the growth of small business and startups — and its business costs, which included labor costs, office space availability and taxes. Connecticut did rank well – 13th – for “access to resources,” which includes human capital and financing.
A small business is defined as a business that employs fewer than 500 people and small business accounts for roughly 97 percent of business in Connecticut, employing 50 percent of the workforce, according to the Department of Economic and Community Development.
While lawmakers have touted Connecticut’s education system as producing top-notch employees, the state’s tax and regulatory environment has long been a source of criticism. Connecticut has struggled to recover the jobs lost during the 2008 pandemic, and Connecticut’s workforce remains below 2019 numbers, according to the Department of Labor, leaving tens of thousands of job openings in key economic sectors.
In response to a tepid job growth report in November, the Connecticut Business and Industry Association noted the state had 73,000 job openings and the labor force remained 1.5 percent below pre-pandemic levels, with CBIA President Chris DePentima saying, “November’s small increase of 300 jobs again reflects that Connecticut’s job growth is trapped in a frustrating holding pattern.”
While job growth may remain somewhat flat, the U.S. Census Bureau showed that Connecticut experienced a 5.6 percent increase in business applications between 2023 and 2024. While that increase paled in comparison to Rhode Island (10.5 percent), Massachusetts (8.5 percent), and Vermont (9.2 percent), other Northeastern states like New Hampshire and Maine saw negative growth.
The U.S. Small Business Administration at the Office of Advocacy found that between March 2020 and March 2021, Connecticut saw a net increase of a little over 2,000 small businesses. The following year, Connecticut saw a net increase of 6,265, for a total of 354,013 small businesses in the state.
Gov. Ned Lamont touted Connecticut business startups in his 2025 State of the State speech, saying he wants “state government to be the foundation which opens the door to an amazing career through apprenticeships and free job training or sets you up to start your own business, be your own boss.”
“Over the last few years, we have had more new business startups than ever before,” Lamont said. “Maybe it’s your neighbor with a solar installation company, or a home-based childcare center, right down the street from you, all with support from the Connecticut Boost Fund.”
The Boost Fund is a state-funded program through the Department of Economic and Community Development that provides loans with low interest rates to businesses and nonprofits.
According to WalletHub’s figures, however, Connecticut remained near to bottom nationally when it came to the average growth in the number of small businesses, ranking 46 in the country.
CBIA’s annual survey of businesses in 2024, found the cost of labor, goods, and state taxes to be the biggest cost increases for businesses, while access to a skilled workforce remained their biggest challenge – something the governor and lawmakers have been working to address at the high school and college level, implementing educational pipelines to graduate students with sought-after skills.
But those same hindrances for established businesses can affect business startups, too. According to WalletHub’s analysis, Connecticut ranked in the bottom ten not only for small business growth, but also office space affordability, labor costs, cost of living, and average length of work week hours.
“State policies, particularly corporate tax rates, significantly influence where entrepreneurs decide to start businesses,” said Texas A&M Associate Professor Stephanie Black, PhD. “However, tax rates aren’t the sole factor; infrastructure, workforce availability, and access to markets are equally crucial. States that combine low taxes with supportive ecosystems (e.g., business grants, and workforce development programs) often attract more startups.”
Florida, Georgia, and Utah ranked as the top three states to start a business, according to the report.
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We had a pandemic in 2008???
The market tanked in 2008 with a republican in the White House!!!
Again in 2019 there was a republican in the White House and he refused to confront the PANDEMIC in a timely manner!
It’s exhausting to see republicans constantly evading things they were responsible for!!!
Gtkavanaugh has major trouble with chronology and facts. We became aware of Covid in Feb 2020, not 2019, and Trump set in motion the drive to develop vaccines faster than anyone could have imagined, not to mention respirators, facilities, and other necessary forms of medical equipment as only a businessman like Trump could have managed. If you want to catalog Democrat disaster response, one only has to look at the monumental failures of Biden and Harris in southern Appalachia (Ga, NC and TN) and Newsom in southern California. We should all be thrilled there’s a new sheriff in town after the historic disaster of the last four years.