Spur Job Growth By Making Business Registration Easier

Americans love small businesses and admire the job-creating doggedness and independence of entrepreneurs and dreamers.  Then why aren’t we making it easier to start a business?  Aspiring business owners face a daunting amount of red tape and hassle.  With job creation at the top of the national agenda, the time has come to do better in making it easier to start a business

The OECD, which measures barriers to entrepreneurship (including administrative burdens to open a business, legal barriers to entry, bankruptcy laws, property rights protection, investor protection, and labor market regulations), ranks the U.S just 14th of 29 OECD countries.

We know that small businesses are the engine of job growth in the United States, accounting for 2/3 of new jobs over the past 15 years, according to the Small Business Administration. That’s why one way to spur desperately needed job creation in the United States would be to make the business registration process faster, more comprehensive and thoughtful about the needs of small businesses, and thoroughly integrated with the state business registration process.

We propose the Administration task the Federal CIO, Vivek Kundra, with redesigning and undertaking a strategic design review of the federal and state small business registration process, redesigning it to create an integrated business registration website encompassing both federal and state requirements and contemplating the entire lifecycle of needs for small business start-ups, thus creating a one-stop shop for business registration in the United States.

The portal would incorporate all states’ business registration requirements into an integrated one-stop system. The registrant would need to only visit a single website to register his or her business both with the Federal government and the relevant state government. (This would have to be done with federal leadership, with the federal government providing a framework and platform to let states add their requirements to it.)

The website would have interactive components, modeled along the lines of TurboTax, with wizards/dialogue boxes, and with the registration process asking questions, demonstrating intelligence, and providing constructive guidance and advice. It should be smart enough to recognize, “You’re registering an electricians business in Arkansas with 10 employees. We recommend a sole proprietorship as the corporate form of governance.” That is, it wouldn’t have just a bunch of links where one can learn more about different corporate forms. It could give advice based upon the information the registrant is entering—in part by tapping into a database with insights on how other similar businesses are structured.

The redesigned business registration process would also contemplate the entire lifecycle of needs and concerns for the small businesses. For example, it would bring information forward to the registrant about whether there are loan programs the business is eligible for, such as relevant Small Business Administration (SBA) or Economic Development Agency (EDA) loans, or information about lines of credit from local commercial lenders. (And the system should actually go in and automatically use the already-entered data to populate the information on that loan form – almost getting to the point where all the registrant needs to do is click “Submit.” Indeed, the system architecture would have a principle that the registrant never needs to enter the same information more than once.)

If the entrepreneur signals the company will be in the business of making products, the website should proactively present any export promotion programs the company might engage with through the Department of Commerce. Again, not just providing links to the Department of Commerce website, but recognizing, “You’re producing custom machine tools and the Department of Commerce has Program X to support it.” Thus, the business registration process would directly support the Administration’s goal to double U.S. exports in five years.

Also, the system should tie directly into the country’s statistical agencies so they can recognize, “We have a small business that just registered,” and that data should go directly and immediately to Bureau of Economic Analysis and the Census Bureau so that we get a much more real-time view of the state of the economy. Of course, implicit in this vision is the need to connect disparate and siloed federal and state databases and information technology systems so that they communicate with one another and bring to bear information in real time to support the small business.

Finally, the small business registration process should be made on an open application platform, in such a way that it could allow competition in the marketplace. So a Citibank or Bank of America, for example, could co-brand it as a “Small Business Starter Kit.” Thus, if an entrepreneur goes into a BofA location to apply for a line of credit, BofA could say, “We’ve got everything you need to start your business right here. Get set up online here now.” The point is the government should make the web interfaces to the registration process open and accessible, so other companies can integrate them with other value-added services they provide to small businesses.

One model is Portugal, where the new “Firm Online” program has completely digitalized the process of registering a business, streamlining the process from it taking 20 different forms and roughly 80 days to launch a business to creating a single website through which new businesses can register in as little as 45 minutes. Within months of launching the new service, more than 70,000 new businesses registered. Portugal’s system uses electronic (digital) signatures (which the U.S. system does not) when authentication is required. It is also responsive to the life cycle needs of a start-up business, providing suggestions for sources of capital, talent, etc. Portugal now ranks 2nd of the 30 OECD countries in online business sophistication. Other countries like South Korea enable entrepreneurs to create firms through their mobile devices.

The modern economy is marked by incredibly intense competition, both globally and domestically. American businesses need every single advantage they can get—and making the process of new business registration in the United States the very best in the world would be an excellent place to start.

Photo Credit: Muffet’s Photostream

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