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Study: Red Tape Bogs Down Women Entrepreneurs

Study: Red Tape Bogs Down Women Entrepreneurs

Government: Legislators Tend to Make Laws for Medium, Large Businesses


Staff Writer

Sandra Brock cashed in IRAs and maxed out her credit cards in 1987 to start First Class Packaging, a San Diego packaging firm that caters to aerospace, military and high-tech industries.

Although more resources exist for female entrepreneurs today, Brock thinks it was easier for women to start small firms then than now. Why? Legislative nightmares.

A recently released study seems to side with Brock.

According to Donna Matias’ study titled “Women and Entrepreneurship in California,” state laws and taxes disproportionately affect women-owned businesses and discourage female entrepreneurship.

The study did not decry a gender-based system that favors men. Instead, it said regulatory red tape and taxes burden women owners more because of the types of companies they tend to launch , small businesses and home-based enterprises.

Matias, director of the Entrepreneurship Clinic at the University of San Diego School of Law, conducted the study for the Pacific Research Institute, a San Francisco-based nonprofit organization that promotes a free-market economy and limited government. She said the group planned to use the study as a legislative guide.

Brock read Matias’ study and agrees with it.

First Class Packaging now employs 26 and grossed $2.3 million for the fiscal year ending March 31. Still, it falls into the small business category.

“Legislation is based on medium to large businesses,” Brock said. “(Legislators) don’t consider small businesses.”

Large corporations employ layers of people to handle all the paperwork governments require, she said. Small firms don’t.

California leads the nation in the number of women-owned firms , 700,513.

From 1992 to 1999, the state’s number of female-owned businesses grew by more than 40 percent. And women gravitate toward small businesses, which comprise about 80 percent of the state’s businesses.

“While not applying only to women, the regulatory regime constitutes a heavy burden on entrepreneurs,” Matias said in her study. “Indeed, no group, not even paroled criminals, is so encumbered by permits, taxes, fees and regulations.”

From mandates regarding ergonomic workplaces to the new overtime law, small businesses reel under rules crafted with large corporations in mind, Matias said.

“The costs and red tape (legislators have) created are actually hurting women who want to start their own home-based business,” she said.

Matias suggested many legislative reforms, including:

– Reduce or end the minimum franchise tax for small businesses;

– Reduce all corporate taxes for small businesses by 10 percent;

– Streamline tax reporting and payments to one agency;

– Create an exemption from ergonomic standards for small or home-based businesses.

“I’m very pleased to hear that this study has been done,” said Assembly member Pat Bates, R-Oceanside.

Bates’ family owns a small architectural firm in Laguna Niguel. A disconnect exists between legislators and small-business owners, she said. “It’s important that legislators address the issue of the impact of legislation, however noble in its intent, on the entrepreneurial community.”

Aside from state laws, Matias’ study also cited some city ordinances and permit processes that stalled female entrepreneurship.

Forbes magazine recently ranked San Diego No. 1 in the nation for businesses and careers, said Eric Symons, business and community outreach manager for the San Diego Community and Economic Development Department.

In the early 1990s, the city started regulatory-relief days, in which business leaders and city officials wipe out obsolete regulations and ordinances.

San Diego created the Office of Small Business and a business advocate position, Symons said. The city cut business license fees and permit processing times.

Symons declined to speak about ways in which state laws and taxes may negatively impact small and women-owned businesses.

San Diego is not a culprit, though, he said. “The city’s done a fantastic job of removing impediments for all small businesses.”


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