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Minnesota ranked 5th in nation for small business friendliness

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In a new national survey, Minnesota scored as a "top place" to start or grow a small business.

Thumbtack.com, a San Francisco-based service that links individuals to small businesses, conducted its third annual survey evaluating the business climate in every state. More than 12,000 entrepreneurs nationwide participated in the survey, conducted in partnership with the Ewing Marion Kauffman Foundation.

"After a two-month survey of thousands of small business owners nationwide, Minnesota has emerged as a top place for starting a business," says Jon Lieber, Chief Economist of Thumbtack.

In the 2014 survey, Minnesota earned a B for its overall friendliness for small businesses. In the 2013 Thumbtack.com survey, the state scored an A-. Overall, Minnesota rated 5th when it came to ease of starting a business, but received a C or C+ for its regulations, including health and safety, labor, licensing, regulations and the friendliness of the tax code.

The survey also reviewed how cities rank. Minneapolis scored as the 11th friendliest city for small businesses out of the 82 rated, and Minneapolis small business owners had the 3rd brightest outlook on the national economy. The city scored an overall grade of A.

The Thumbtack.com Small Business Friendliness Survey is the only survey that use data from a nationwide sample of small business owners to rank the most business-friendly locations. The top three states considered friendliest to small business were Utah, Idaho, and Texas. The three least friendly states were California, Rhode Island, and Illinois.

Businessweek noted that the Thumbtack.com friendliness survey is not a predictor of where people will start a business, noting that California, which scored an F, had one of the nation's highest startup rates.

In reviewing the findings, the website Heartland.org noted that the small business operators who responded in the survey said the complexity of a state’s licensing regulation was a main stumbling block for small businesses. Those surveyed said this factor was twice as important as the level of taxation.

The website story concluded that the survey shows "...it is not taxation that is really killing small businesses; it’s all the red tape," and went on to say that "this...very interesting finding...could have some real implications for policy-makers."

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