Too often, the regulatory requirements of starting a business are unclear for entrepreneurs and can be more difficult for immigrants navigating cultural and language barriers. This is especially the case when starting a brick-and-mortar business. Conflicting information from various local regulatory bodies can cause delays that are far costlier than just the added time to become compliant. To entrepreneurs, it may mean more time paying rent on a commercial space with no revenue or income, and it can often be the difference between a successful enterprise and one that is forced to close its doors far too early. Even seemingly insignificant fees and forms can add up to have a detrimental effect. Government should support the following solutions:
- Create federal and state monetary incentives for local authorities to reduce barriers to starting businesses, including reducing paperwork and restrictive fees. Funding could be made available, for example, to local governments to create and distribute a single resource or website listing all requirements to start a variety of businesses, with easy-to-understand guides that walk entrepreneurs through the permitting process.
- Incentivize coordination across agencies to simplify all federal, state, and local procedures, forms, licenses, and permits required to start a business.
- Shift policymaker focus to think in terms of age of a business, not size. Accordingly, the federal government should measure business performance and outcomes by age cohorts in addition to size, reporting this data publicly and using it to guide policymaking. Codifying the distinction between the age and size of a business and providing policy support for new businesses across each stage of the entrepreneurial journey will better enable everyday Americans to start businesses and, in the process, employ mill
Supporting Evidence
- According to the Peterson Institute for International Economics, in countries that had a more efficient business formation process (the amount of time it took to start a new business), entrepreneurship was more likely to increase.
POLICY IN PRACTICE: In response to the COVID-19 pandemic, San Francisco adapted their local rules and regulations around starting a business. This includes allowing all applications for storefront use to be reviewed within 30 days (compared with the months it would previously take), ensuring parallel cross-department application reviews to speed up the application process, and relaxing zoning ordinances and regulatory rules. San Francisco is also modernizing zoning restrictions to allow businesses to open more quickly by making more businesses eligible for streamlined approval in neighborhood commercial zones.