Full Article here: http://www.ocregister.com/articles/shop-287761-business-wine.html
No Small Feat:
By Jan Norman
After several decades working in corporate America, Laguna Niguel residents Heidi and Bob Fisher started looking for a business to buy.
On a lark, Bob Fisher started selling wine for some friends who owned a winery in Paso Robles, so they thought a wine shop would be fun and lucrative. They bought the Salt Creek Wine Company, a retail shop that carries 300 types of wine, in Laguna Niguel two years ago
But even before the deal was finalized, they discovered that buying and running a business in California is entangled in red tape.
Fees, taxes and bureaucracy make it tough to turn a profit, Heidi Fisher said. California isn't the only place where government rules and regulations tie up small businesses, according to the Office of Advocacy within the U.S. Small Business Administration. Federal regulations alone cost U.S. businesses $1.75 trillion a year, 59 percent higher than in 2005, a new study for the agency claims. And the burden is heaviest on the smallest businesses, it adds: $10,585 per employee for firms with fewer than 20 employees, compared to $7,454 per employee at businesses with 20 to 499 employees and $7,756 at companies with more than 500 employees.
That study doesn't include state and local paperwork, the Fishers learned.
Among the forms and reports they encountered upon buying the Salt Creek Wine Company:
•One form had a hundred boxes to check or leave blank. "If you don't check the right box, you get the whole thing back but they don't tell you want you missed."
•An S corporation must file its officers every year. "If you file too early, it's rejected; if you do it too late you jeopardize your corporate standing."
•A wine shop collects sales tax and reports to the Board of Equalization
• The Fishers pay property tax to the county for all the equipment inside the shop
•Even though the shop only has a couple of employees who work just a few hours a month, it is cheaper for the shop to get these employees through a temporary staffing agency than to do the paperwork for payroll taxes and buy workers compensation insurance that is required for even a single part-timer.
•The city of Laguna Niguel doesn't require a business license but it does charge a fee to post temporary signs, such as for a sale. It cut the fee in half last year, she said. "It all adds up and it's time consuming to figure out. I have a college education, had a corporate career and knew a lot about business," Heidi said, "but the forms and processes you go through are not easily understandable." When the Fishers were in the process of buying an existing wine shop, Heidi was directed to go online to download mandatory government forms. The information was contradictory, confusing and overlapping, she said.
She doesn't recall the website, but California has CalGold.ca.gov, whose motto is "business permits made simple." (More recently, Gov. Schwarzenegger set up the Governor's Office of Economic Development, GoED.ca.gov, to help businesses navigate various layers of government. That website is still live but it's unclear whether new Gov. Jerry Brown will keep it as he has already cut his office's budget by 25 percent.)
The CalGold website is somewhat generic. Although it promises to list all the permits needed to start any type of business, a search for "wine shop," returns six possibilities including a smog test shop and a print shop. For a winery, which might be more complex than a retail outlet, the website lists six pages of city, county, state and federal agencies to contact for possible requirements. Some are obvious, such as occupancy permit and alcoholic beverage license; some questionable such as wastewater discharge permit and pesticide licensing.
Heidi said, "It has always been obvious to me that California has more onerous regulations for business, but after buying this shop a little over two years ago, I see it from a different perspective. Everything from the liquor license to the hoops you have to jump through add up."
She's quick to add that she agrees with some requirements. "I would hate to see someone with a criminal background running such a business as ours," she said.
She's a native Californian who finds it hard to imagine living anywhere else, but given her experience with buying and running a small business here, "I understand now why businesses leave," she said.
Contact the writer: 714-796-7927 or jnorman@ocregister.com
I like the commentary as much as the article. only issue is what needs to be done to expand small businesses in California - realistically I mean. the state can't give up this tax base, but at the same time, we don't collect taxes if company's move to different areas.
ReplyDeleteI am not a politician or state accountant, so I do not pretend to understand the financial woes that are affecting California, but it seems to me that a tax break for beginning small businesses would be in order - something that would inspire growth in local economies, which would, in turn, spark more growth, by it's very nature and a trickle down effect. If a company finds it impossible to make a profit because of taxes and regulations, then they won't last, and the state has lost one more tax paying entity and the burden is shared by less of the economy.
ReplyDeleteAnother issue is the red tape. A lot of the government beaurocracies out there are bloated mechanisms that serve only to stifle growth and innovation. Brown has already enacteed a hiring freeze within the state government in order to stay within budget, I would say that revamping state regulations and slashing some of the "duties" of these organizations (and yes, therefore their budgets, and maybe some of their superflous employees) would save millions. Any jobs lost through this act would be more than made up for in the increased jobs due to better functioning businesses.