Here’s the Average Entrepreneur Salary in Every State
One complicated issue that many an entrepreneur overlooks as they start their business is what their salary will be. Small business owners, like their employees, need take-home money to live day to day. But that doesn't mean an entrepreneur should dip into the business’s money and muddy the separation between personal and business accounts — there is a right and wrong way to take an entrepreneur's salary. Thus, determining your salary as an entrepreneur is an important part of running a business. But there are a variety of factors that will affect how an entrepreneur’s salary is determined. One of the most prevailing factors is geography. States in the U.S. have major variations in costs of living, tax rates and policies, economic strength and incomes of their residents. All of these factors, combined with the financial success of a business, impact how much entrepreneurs make in the U.S. Something as simple as where you start your business — be it among the worst or best states to start a business — could mean the difference between a tiny entrepreneur salary and a generous one. Read on to find out what the average entrepreneur salary is in every state.
How Much Do Entrepreneurs Make?
Entrepreneur salary is defined here as the income for individuals employed at their own incorporated business — for example, an LLC or corporation. According to the Small Business Administration (SBA) , the median income for individuals self-employed at their own incorporated businesses was $51,419 in 2017, according to the most recent data available. While there is variance in salary for every job, there is a much larger gap in what entrepreneurs make due to the variance of how successful one's company is. Related: What Is an LLC?
10 States With the Highest Average Entrepreneur Salary
As with nearly all other occupations and salaries in the U.S., an entrepreneur's average salary varies significantly depending on which state in question. Geography is a major factor that affects incomes because conditions like cheaper cost of living often entail lower incomes, in part because your money goes further, but also for other reasons. To determine the average entrepreneur salary in every state, Seek Capital analyzed SBA data via the U.S. Census Bureau’s median income for individuals self-employed at their own incorporated business. Here are the 10 states with the highest average entrepreneur salary:
Rank
State
Average Entrepreneur Salary
1
Rhode Island
$65,580
2
Massachusetts
$65,084
3
Connecticut
$63,883
4
New Jersey
$61,313
5
California
$60,641
6
Alaska
$60,106
7
Maryland
$56,474
8
Nevada
$55,579
9
Utah
$55,477
10
Washington
$54,732
It’s interesting to note that four out of the top five states are in the Northeast, and New England in particular, a classic center of “old money” in the U.S. Much of the rest of the top 10 states are those in the West, with three states — Alaska, Nevada and Washington — charging no state individual income tax. This mainly affects owners of LLCs since these types of businesses are classified as pass-through entities by the IRS, meaning that the owners report profits and losses on their personal tax returns rather than the company paying corporate income taxes.
10 States With the Lowest Average Entrepreneur Salary
The 10 states where entrepreneur salaries are lowest are mainly a mix of states in the South and West. Notable exceptions to this are Vermont, in the Northeast, and Indiana, in the Midwest. Here are the 10 states where average entrepreneurs salaries are the lowest:
Rank
State
Average Entrepreneur Salary
50
New Mexico
$41,098
49
Mississippi
$41,378
48
Idaho
$41,775
47
Florida
$41,926
46
Montana
$42,114
45
Vermont
$44,051
44
West Virginia
$45,060
43
Oklahoma
$45,387
42
South Carolina
$45,564
41
Indiana
$46,733
The list of the 10 lowest paying states includes one that doesn’t levy an individual income tax, Florida. But bear in mind that Florida also has a median household income that is less than the national median: $50,883 in Florida versus $ 57,652 for the U.S. overall, according to the Census Bureau . Though the average entrepreneur salary may be on the lower side in these states, don’t get too discouraged by them. Some of these states rank among the best states to start a business , especially Florida, which boasts a robust population and economic growth as well as a friendly business tax climate. Idaho too has seen impressive growth in working-age population and jobs created by startups.
The Average Entrepreneur Salary in Every U.S. State
The average entrepreneur salary can vary substantially from state to state. In Rhode Island, the state were entrepreneurs earn the most, their incomes are over $14,000 more than the national average. In New Mexico, on the other end of the spectrum, the average entrepreneur income is over $10,000 less than the national figure. Here’s the average entrepreneur salary in every U.S. state, listed alphabetically, including each state's rank overall:
Rank
State
Average Entrepreneur Salary
18
Alabama
$52,212
6
Alaska
$60,106
25
Arizona
$50,801
40
Arkansas
$46,889
5
California
$60,641
12
Colorado
$53,872
3
Connecticut
$63,883
38
Delaware
$48,363
47
Florida
$41,926
31
Georgia
$50,049
11
Hawaii
$54,510
48
Idaho
$41,775
19
Illinois
$52,020
41
Indiana
$46,733
30
Iowa
$50,148
37
Kansas
$48,470
36
Kentucky
$48,527
26
Louisiana
$50,633
32
Maine
$49,992
7
Maryland
$56,474
2
Massachusetts
$65,084
34
Michigan
$49,302
17
Minnesota
$52,316
49
Mississippi
$41,378
35
Missouri
$48,758
46
Montana
$42,114
21
Nebraska
$51,624
8
Nevada
$55,579
24
New Hampshire
$50,829
4
New Jersey
$61,313
50
New Mexico
$41,098
13
New York
$52,490
39
North Carolina
$47,498
23
North Dakota
$51,012
22
Ohio
$51,557
43
Oklahoma
$45,387
28
Oregon
$50,585
16
Pennsylvania
$52,358
1
Rhode Island
$65,580
42
South Carolina
$45,564
29
South Dakota
$50,173
27
Tennessee
$50,611
14
Texas
$52,460
9
Utah
$55,477
45
Vermont
$44,051
15
Virginia
$52,404
10
Washington
$54,732
44
West Virginia
$45,060
33
Wisconsin
$49,744
20
Wyoming
$51,861
Regionally, entrepreneurs earn the most in the Northeast and West, with only one Southern state, Maryland, ranking among the top 10 states. That being said, three Western states rank among the worst 10 states, but in general, the South leads the way among states with low entrepreneur salaries. Entrepreneurs in the Midwest earn incomes that hover above and below the national average. See: The 20 Fastest Growing Industries for 2020 and Beyond
How Entrepreneurs Can Set Their Salary
Creating your own salary might sound fantastic, but it’s a bit more complex than you might think. When you see cash flow into your business, you cannot think that you can simply cut out a chunk of it and pay yourself. You need to pay yourself out of your profits only, not your company’s revenue. Taking your salary out of your profits means you’re accounting for expenses such as taxes, payroll, fixed and overhead costs. An issue that may arise is that, if you’re just starting a business, you might not see profits during at least your first year. In this case, you should take what you need from business revenue without causing problems for your business and personal life. However, don’t simply grab the money you need out of your business’s funds. Add yourself to your company’s payroll like any other employee. Another important factor entrepreneurs and business owners need to think about is what is considered reasonable compensation. According to the government, reasonable compensation is what they expect you to take from your business as a salary. The government assesses this on a variety of factors, including the size of your business, market sector, level of turnover and profit. One straightforward way to figure out how much to pay yourself is to talk to other entrepreneurs and founders of established businesses, especially those similar to yours. They can help you get a good salary comparison to help you determine what yours should be. What’s more, this can double as a means of networking with other business owners. Up Next: How Hard Is It to Get a Business Loan?
The Bottom Line
While the median income for entrepreneurs in the U.S. overall is just over $51,000, geographic variation in salaries are significant. In several states, entrepreneurs earn salaries in the $40,000-range, which is well below the U.S. median household income of $57,652, according to the Census Bureau . At the same time, the states where entrepreneurs make the most have markedly higher cost of living than other states, which means more of your salary is eaten away. In the end, the biggest determining factor on your salary is the success of your business, which is ultimately in your hands. More From Seek
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