Study Shows California Bay Area Tougher For Business Formation

On behalf of The Law Office of Lynnette Ariathurai, A Professional Corporation on Friday, November 2, 2012.

A study just released shows evidence that business formation may be more difficult in the Bay Area portion of California than elsewhere. Research points to some of the difficulties as higher housing costs, high costs of living and operating a business in the Bay Area. The research urges the need for improvements to the area's "burdensome regulatory climate." People beginning a business formation may need to have eased regulations to be successful.

An economist in the Bay Area stated that people who want to start a new business in a particular area but are required to pay an exorbitant amount for a new home will likely look elsewhere to begin their business venture. Job creation from startup companies in the Bay Area lag behind cities like Los Angeles and San Diego. In contrast, the area does have its strong points including household income and specialized industries.

This could help support those wanting to begin a business in the local area and also draw others who wish to relocate. The area supports the tech industry, and venture capitalists. However, 55 percent of new jobs in the area result from companies that already existed and not from new startups. 66 percent of job losses in any given year also resulted from companies already in the area.

Critics of the area's atmosphere for startups believe that money that is outgoing to other states or countries would be better utilized to make the environment "'more hospitable'" to the companies already there and for those interested in California business formation. With the current state of the economy and the financial troubles many businesses are experiencing, a good environment is something everyone needs to help get their new business of the ground. Although the area has several good qualities, a couple of tweaks may help new business owners gain success within the California Bay Area.

Source:, "Bay Area's business climate is less friendly to startups than other parts of California, says study," George Avalos, Oct. 18, 2012

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