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Washington Mulls Small Business Stagnation

Adam A. Haberer, Managing Attorney

18 February 2014

There was a very interesting WaPo article detailing the stagnation in the growth of small businesses, particularly in the technology sector, which got me thinking.  Asked by policymakers to outline potential remedies to the problem, experts pitched several ideas, from creating new visa regulations to help bring in talent from overseas, to re-vamping governmental regulation of start-ups, and creating a safety net for entrepreneurs leaving their companies and re-entering the traditional job market.

In my practice, what I see as a barrier to many would-be entrepreneurs, is the confusion - both real and imagined - surrounding entry.  Between unknown costs, seemingly arbitrary regulatory requirements, sometimes Byzantine guidelines for filings and correspondence, the potential small business owner doesn't even know what he or she doesn't know.  In fact, the most common question bringing people to my office is "what entity do I select?"  This is a natural question, and an important one, but the confusion wrought by this simple, basic question - the initial question one needs to answer before taking any other steps serves as a telling example of the confusing nature of start-ups.  I had a client who summed-up this quandary rather well: "If I'm so confused by the first thing I have to consider, am I even cut out for this?"  The client and I took time to discuss her needs, plans, financial goals, and growth plans, and by the end of our meeting she had chosen an entity and felt confident about building her dream company.  She now has a successful business, but had she remained stuck on that initial bout of self doubt, who knows if she would have taken the plunge into business ownership.

Stream-lining this process of entry into the business landscape, making it more accessible, and reducing the time one needs to spend on the confusing minutiae of organization seems the natural remedy.  Numerous companies keep themselves in business by promising to do the work for the entrepreneur, but they depend on that entrepreneur to know what they want going in to the process.  What good does streamlining the process of organizing an LLC do when you later learn that you should have filed as an S-Corp?  It's knowledge that's the barrier, and states would do well to disabuse themselves of hodge-podge websites and difficult-to-find information.  Simply put: if you build it, they will come.  Build a system of information delivery, so that the potential entrepreneur can have a better grasp of what they need to do make their dream a reality.  Empower them with knowledge, and the question changes from "How does anyone do this?" to "Why not me?". 

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