Tax havens

Want to keep more of your profits? Check out these 5 states from our Best Places to Launch list, where taxes are low -- and in some cases, nonexistent.

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South Dakota
South Dakota
Tax breaks: No personal or corporate income tax
Best Places to Launch: Rapid City, Sioux Falls

For the first time, South Dakota edged past Wyoming to capture the top spot in the Tax Foundation's annual state-by-state ranking of business tax climates.

What makes the state such a tax haven? There's no personal or corporate income tax -- and South Dakota is one of a shrinking number of states that doesn't levy a "gross receipts" business tax on revenue. Anything you ring up in sales or profit, you get to keep.

South Dakota also has a comparatively modest sales tax. The statewide rate is 4%, though some municipalities tack on their own toll, taking the rate as high as 6%.

In Sioux Falls -- #5 on our list of the best small metro areas in which to launch a business -- low taxes are helping the city diversify its economy and drive business growth, says Amy Smolik of the Sioux Falls Chamber of Commerce.

Health care is the state's largest industry, and in its wake South Dakota is nurturing technology and biotech startups. Sioux Falls incubates them in its hometown South Dakota Technology Business Center. The favorable tax climate is a draw for penny-pinching startups.

"We also have a large work force that has a very strong work ethic," Smolik says. "We always tout that as a Midwest thing or a South Dakota thing, but we're known for having hard workers." -Jennifer Lawinski

NEXT: Texas

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LAST UPDATE: Oct 20 2009 | 9:27 AM ET
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