According to Entrepreneur magazine Phoenix, Arizona is the best city to start and grow a small business.

Entrepreneur teamed up with the National Policy Research Council to create an index that measures business formation and business growth over an extended period of time. According, to Arizona State University scholars, one of the main reasons for this distinction is the fact that Phoenix offers extremely low operating costs and a solid base of diverse employees. Having a relatively low business tax burden doesn’t hurt either.

You can read more about this distinction here:
http://www.statepress.com/issues/2005/11/29/news/695105

What impressed me most as I read through the article was the fact that 97% of companies in the state of Arizona are considered “small businesses”.