Blog Post

California the Worst State in Which to Start a Business

All you startup founders down in Austin for spring break SXSW, you should stay there. Texas, according to CEOs surveyed by Chief Executive magazine, is the most business-friendly state in the nation. In comparison, California is the worst. Unless of course, you’re in technology and/or looking to raise venture capital — when it comes to those two categories, the Golden State tops the charts. But in terms of “cost of business” and “business friendliness,” the magazine ranks it No. 48.

Granted, you might not want to take the magazine’s findings too seriously; there’s no information about what, exactly “business friendliness” or any other non-quantitative ranking criteria means. They’ve also left Washington, D.C., off their list this year (unlike previous years) — but still left a nice little hole for it at No. 42.

Still, startup founders, stay in Texas. We like that there’s no traffic on the 101 and you can actually sit in the coffee shop to enjoy your coffee this week!

35 Responses to “California the Worst State in Which to Start a Business”

  1. Chris H

    consider these other factors:

    Yep, Texas, you are doing just fine…

    Percentage of Uninsured Children – 1st
    Income Inequality Between the Rich and the Poor – 2nd
    Percentage of Population without Health Insurance – 1st
    Scholastic Assessment Test (SAT) Scores – 47th
    Percentage of Population over 25 with a High School Diploma – 50th
    Percentage of Non-Elderly Women with Health Insurance – 50th
    Rate of Women Aged 40+ Who Receive Mammograms – 44th
    Rate of Women Aged 18+ Who Receive Pap Smears – 47th
    Cervical Cancer Rate – 5th
    Women’s Voter Registration – 43rd
    Women’s Voter Turnout – 49th
    Percentage of Eligible Voters that Vote – 44th

  2. What this doesn’t take into account is the sheer joy of living here. In the bay area, we’re happier. We’re surrounded by success and that in itself is a driving factor. At the right SF coffee shop you’ll run into founders of a dozen startups that have had successful exits on any given day. Combine that with the number of world-class universities we have, the decent schools, and the large number of tech jobs, then you start to wonder, why would an entrepreneur want to go anywhere else?

  3. austinandrew

    Forbes had a commentary in the latest issue saying people will start fleeing California and New York for Texas, where there’s no income tax.

    The pols will eventually figure out that if you tax the heck out of the “wealthy”, they’ll just leave. But they’ll figure it out too late.

  4. California may make business hard for business people, but Texas is hell for consumers. Just Google Tremont Homes and see the horror stories that come up. I’d much rather live in a “business unfriendly” area were I know the government has my back.

    • Joshua, homebuilders are the same everywhere. To give just one CA example, google “Diablo Grande”.

      The CA state gov doesn’t have your back, it has your wallet.

      I’ve lived in states with low taxes (WA, FL) and high taxes (CA, NY, MD) and haven’t seen any difference, except in the taxes I paid.

      • Well according to an article about them in the SF Gate the state of CA is trying to resolve the complaints. In TX the state lets the same developer build shoddy homes over and over again. Stuff happens, but what matters is wheather someone can get away with it, Diablo Grande isn’t being allowed to get away with it.

  5. San Francisco would certainly be the worst city of the worst state. Lots of talk from our mayor about how important smbs are to the economy. But the main bubble industry around here is are taxing and red tape. We are now figuring the cost of proving that we comply with all of the fine print of the new health care and commuter laws. These are benefits that we have been providing for years.

    Earlier this year, the city wanted us to detail every piece of business equipment we have (that we already paid the highest sales tax in the nation on), just so they could tax it.

      • Jesse Kopelman

        I agree that many existing unions are bloated messes that do more harm than good, but you can say the same about any group of large organizations (including corporations). Collective bargaining is a powerful tool to do good for both the worker and the corporation. Isn’t it better to have workers actually have a stake in the success of the company rather than being mercenary free-agents? A lot of people who have never belonged to a union miss the fact that they are still receiving the ancillary benefits of unionization within their industry — non-union companies have to at least stay within the ballpark of compensation at union companies if they want to attract skilled labor. This has certainly been the case in telecom. The idea that somehow unions are useless is just as misguided as thinking markets will regulate themselves.

  6. Simply put, CA is expensive in general, not just with businesses or starting them. I don’t know…after living in CA, I could never live in ND or some other out of the way middle of nowhere place. Too many conveniences you get used to. Trading some bad for lots of good (pointed out by Michael T. above) is the watchword for living in CA.

  7. Leave. Please. Stop complaining. Yeah, there are some taxes in this state but it’s the price you pay to live here. If the argument is that those taxes should be funneled to better places, I’d agree. But there is a price to pay for living in a civilized society – hell, there aren’t many taxes, or child-labor laws abroad, go start your business there.

  8. What this doesn’t take into account is the sheer joy of living here. In the bay area, we’re happier. We’re surrounded by success and that in itself is a driving factor. At the right SF coffee shop you’ll run into founders of a dozen startups that have had successful exits on any given day. Combine that with the number of world-class universities we have, the decent schools, and the large number of tech jobs, then you start to wonder, why would an entrepreneur want to go anywhere else?

  9. As far as “Friendliness” goes, California simply charges among the high taxes, regulations, permits, insurance, etc. as compared to other states. For example, when running a Corporation, even a one person show, CA will assess an $800 minimum income tax even if no profit is realized, or if the company is dormant. Add to that the contribution employers must fork over for unemployment insurance, state disability insurance (payroll taxes), high business license fees, increasingly mandatory health insurance costs. Every victory for the residents/workers of California, for them to be given more benefits by their employer then in fact hurts the employer financially.

    • Mr. Greenberg,

      I could not agree with you more. I think the taxes and all the related stuff are a joke. As a start-up founder I only know this all to well. I think it is an insane state which is basically run by idiots who blow through tax collections by being dumb, stupid and inefficient. okay, now i am less angry. :-)

      • What’s sick time (to see a doctor) have to do with state disability insurance?

        And what’s wrong with trying to make CA a better place to live? Are you saying that the state government spends its money wisely?

  10. And that’s before Arnold’s big tax attack of this year’s budget starts to bite. Just wait until the huge state and local increases mount starting this coming year mass exodus, eh? Then you have to add in the issues of Lake Mead (water disappearing, chance of Hoover Dam not having enough to power SoCal) and So Cal will revert back to a desert.