For small business owners or for those thinking of starting a business, location can make all the difference.

According to the Small Business & Entrepreneurship Council's Small Business Survival Index for 2007, the top five states to base your business in are South Dakota, Nevada, Wyoming, Washington, and Florida. The states with the least favorable conditions for a small business are New York, Maine, Rhode  Island, California, New Jersey and the District of Columbia.

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Raymond Keating, chief economist with the Small Business & Entrepreneurship Council, said the states are ranked by 31 different government-related issues, considering public policies and climates for entrepreneurship.

"We've ranked them mainly by tax measures, including capital gains taxes, because these are all important considerations for risk taking and investing. [Taxes] are measures that impact businesses across the board, whether you've got three employees or three hundred," said Keating.

According to Keating, the gas tax is now a big issue with the rising price of commuting adding to the staff's cost of living. "Not every one has a hybrid," he said. "And even if they did, gas is still a consideration."

States were ranked with a focus on personal income tax, corporate and individual capital gains tax, corporate income tax, property tax, and estate tax.

According to the Small Business & Entrepreneurship Council's Small Business Survival Index, corporate income taxes were considered because they, "obviously make a difference in the bottom line returns of corporations."

Personal income taxes were also taken into consideration because an estimated 90% of small businesses-- including partnerships and S Corporations--file taxes as individuals. The death tax was also factored into the list because it can "force many businesses to be sold, borrowed against or closed down," according to the study.

Other costs, including health insurance and electricity, were also factored in to determine a state's status. Health care costs represent a significant burden on the average small business owner, according to Keating.

"Health care is a huge hit to the little guys," he said.

With electricity, it depends on the type of business as to how much electric power is used per month or per year.

John McDowell, a spokesperson at the Small Business Administration, cautioned that although the rankings were comprehensive, states would "pop up to the top, filter to the middle, or settle on the bottom depending on what criteria you use."

For example, when it comes to electricity,  it may only matter to some businesses. "Maybe you are in construction, so that (electricity)  won't matter so much to you.'' said McDowell. "Before you use a list like this as a guide, relate it to your own business, your own employees, and your own customer base." Just because property taxes may be high in, say, New York, that may be the state where your product will sell the best, so don't eliminate a state just because of an unfavorable ranking, he said.

Martin Lehman, a counselor at SCORE New York: Counselors to America's Small Business, agrees that a small business owner must first know the market for their goods and services.

"Everyone knows location is important, but in addition to asking yourself, 'Is this the right place for my company?', you have to ask, 'Am I opening a Bergdorf Goodman's or a Wal-Mart?'" Lehman said.

No matter what state a business owner chooses as a location, the most important thing is to go to the town's Chamber of Commerce and "ask for their advice and suggestions, and let them know you're coming to town and want to be a good neighbor," said Lehman.

He said "knowing the rules," of a business' hometown, including finding out the problems, restrictions and laws is key.

"Maybe you're not allowed to open on Sundays. These are all things you need to find out before you put your key in the door. Don't just say, 'I'm going to move in.' It's the same thing as renting an apartment," Lehman said.

Although the study factored taxes in as the most important consideration for small business owners, Lehman said that wasn't the biggest problem.

"We live in a world of taxes today. Tax is only one portion of running a business. Location is the biggest factor, and having the right merchandise," said Lehman. " First of all, make sure you're based in the right place. Secondly, evaluate. You have to know what you are doing."