09/01/2011 10:37 am ET Updated Nov 01, 2011

The 5 Best And Worst States For Entrepreneurs (PHOTOS)

Location, location, location: A new study confirms that where you start and run your business could affect your success -- even your survival. According to the latest State Entrepreneurship Index published by the University of Nebraska-Lincoln, states in the Northeast and Northwest are the most favorable for entrepreneurship, while a certain southern city that boasts a lot of charm, but not a lot of entrepreneurial activity, ranked last.

Whereas the recession was a big factor for entrepreneurs in some of the bottom five states, “the states where the traditional model of economic development has been starting companies -- such as in the Northeast [and] California and other states in the Northwest -- that tends to continue because they’ve got the investors, they’ve got a concentration of experienced entrepreneurs that allow them to create high-income entrepreneurship even in the difficult economic conditions,” Eric Thompson, director of the university’s Bureau of Business Research, told Bloomberg Businessweek.

Rankings were compiled according to five components: percentage growth in business establishments, per capita growth in business establishments, business formation rate, number of patents per thousand residents and gross receipts of sole proprietors and partnerships per capita. Thompson provided HuffPost Small Business with additional details as to why these states were hot or not hot for entrepreneurship.

Here are the five best and five worst states for entrepreneurship: