Five States With Best Policies for Small Business

South Dakota The Small Business & Entrepreneurship Council ranked South Dakota as the best state for small business owners in 2010. The state does nearly everything right in terms of being friendly to small businesses, according to the index. It has no personal income tax, no death tax and no corporate capital gains tax, all of which are major advantages for business owners.

Nevada Nevada came in second place as the most policy-friendly state for small business owners. The factors included in the index are: taxes, regulatory costs, government spending, property rights health-care policies and energy costs, among others.

Texas Texas was ranked the third best location for small business owners. The SBE council also throughout the year releases a "Health Care Policy Cost Index," "Business Tax Index" and "Energy Cost Index," all of which spin off of the main Survival Index.

Wyoming Wyoming was the fourth friendliest state for small business owners, according to the 2010 index. The index ranks states by measuring the costs and burdens of government on small businesses, as well as policies that either boost or deter growth. 

Washington Washington state rounded out the top five best states for small business in 2010, with its business-friendly policies. The city with its namesake, however, did not fare as well in the index; Washington, D.C. came in as the least policy-friendly location for small business owners.