The fifth-best: Washington
The only state named after a president is home to a number of well-known corporations, including Microsoft ( MSFT), Boeing ( BA), Starbucks ( SBUX) and Costco ( COST), but it has plenty to offer small businesses.

Washingtonians and their businesses enjoy a lack of taxes for personal income, individual income, corporate income and corporate capital gains. It also boasts low electric utility costs, according to the SBE Council's report.

That being said, Washington has high unemployment taxes, "very high" consumption-based taxes, a large number of health insurance mandates and a high state minimum wage.

Yet Washington has a renewed focus toward business, particularly small businesses. Democratic Gov. Chris Gregoire signed an executive order in October to facilitate small-business recovery in her state.

Among other things, the order directs state departments to "review current practices, tax and rate structures with the goal of reducing state imposed costs for small businesses," as well as find ways to reduce the complexity of the state's sales tax system.

"I want our business owners spending less time understanding what tax rate they should pay and more time ensuring their business succeeds," Gregoire said in a statement.

Additionally, Gregoire is looking to consolidate small-business licensing, registration and certification guides into one resource and develop strategies to streamline regulatory processes.

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