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Comment by m0llusk | Hacker News Reader

That isn't true at all. Most small businesses start out extremely lean and at risk.

$800 to obtain the privilege of operating in one of the world’s largest economies seems like a bargain to me. Were I one of those small businesses I would find some way to get that funding. A loan, a credit card, something. There are plenty of reasons people want to be in CA to do business, and that’s not that big of an expense for the value of operating there, in my opinion.

And by the way I’m not in agreement with most taxes; I am almost a Libertarian. I’m also not a Californian. I’m just saying, I think it’s not that big a deal in the grand scheme.

Calling "starting a business" a privilege completely moves you very far away from the libertarian space.

It’s the world we live in. Ask me personally what I think and I’ll tell you it’s a God-given right to start a business with little government mettling. In the real world, especially one largely run by statists, it’s considered a privilege.

I'm using the language of statists because most people today are statists. It doesn't necessarily follow that I also personally agree with the idea, though I can see why you'd draw that conclusion.

From personal experience: Hiring your designer buddy who lives in San Diego while the two other guys in your company lives elsewhere entitles you to pay $800 a year in somewhat unexpected tax, even though you're not selling any services to any CA companies. Yea, jumped in feet first, but really did not enjoy the $800 bill that came with it.

> From personal experience: Hiring your designer buddy who lives in San Diego while the two other guys in your company lives elsewhere entitles you to pay $800 a year in somewhat unexpected tax, even though you're not selling any services to any CA companies

No, it doesn't, you can do that as a sole prop or (non-LLP) partnership, and not pay the $800 tax applied to corporations, LLPs, and LLCs.

Asking the public at large to absorb for you (by granting you a personal liability shield) the risk that that the resources you give to the business plus those it is able to earn will not be able to meet the businesses liabilities is what you pay the $800 for. Which is why only the limited liability entities pay the tax.

> $800 to obtain the privilege of operating in one of the world’s largest economies seems like a bargain to me.

It might be, but that's not what the tax is for. The $800 tax applied to LLPs, LLCs, and corporations isn't a tax on the privilege of operating a business in California: sole props and non-limited-liabilty partnerships can operate as businesses in California and don't pay the tax.

The privilege you pay for with the tax is that of offloading business failure risk onto the public while protecting your own personal assets with a publicly granted corporate liability shield.

Many small businesses start out as sole proprietorships or general partnerships that don't pay the tax for the privilege of a corporate-style liability shield for investors that applies to LLCs, LLPs, and corporations.

They often convert to an LLC or corporation if they scale beyond a very small operation, because at any but the smallest scale $800/year is nothing (it's less than the wages—not total cost—of a full time minimum wage employee in the state for two weeks.) But, you only need to start that way when you have or are seeking early investors that are protecting substantial assets outside the business; lots of people starting a small business sink most of their personal assets into them initially anyway, so the corporate liability shield isn't protecting anything: if the business fails, they are personally wiped out with or without it, and their exposure is limited more by personal bankruptcy than anything else.

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