The Vanishing Entrepreneur

Release Date
March 14, 2011

Topic

Free Markets and Capitalism
Description

Law professor Donna Matias knows how difficult it can be to start a new business. In her work as director of a legal clinic at the University of San Diego School of Law, she helps low- and moderate-income entrepreneurs navigate the legal hurdles they encounter. She tells the story of one client who wanted to operate a transportation service, and faced a mountain of challenges as a result.

The Vanishing Entrepreneur
I run a legal clinic for low- and moderate-income entrepreneurs. And we provide free legal services to those entrepreneurs that are seeking to start up or expand their businesses. And what we will do is make an assessment of all the legal challenges that they’re going to face, and we will try to walk them through those challenges.
We had a client come to us, and she wanted to start a van service that would transport families of people who are incarcerated in the state prison to the prison to visit their loved ones. This population tends to be a very low-income group of people who have difficulty finding transportation on their own. She would purchase a 15-passenger van. She would have specific pick up points throughout the county and a schedule at certain days of the week where she would pick up customers and enter into a contract with them for the day to be transported to the prison and then transported back.
She started out gung ho. We were really impressed with her as a client because she had a business plan. She had the passion. She was really in contact very frequently and wanting to know where the next step was for her. Because this client was in an industry that is highly regulated, that is the transportation industry, she was subject to, of course, a huge array of regulations and restrictions on top of the standard restrictions that she would face as a business.
And we really tried to help the client with it. It took years to get through all of the different stages of the process that she would have to comply with to start the business. One of the most difficult ones, and the one that we ultimately never made it around, was for her to be approved by the California Public Utilities Commission, the CPUC. She had to send a notice out to all entities, whether government or private that were operating transportation in any of the areas that she would be operating in. Notify them that she was applying for this license, and they would have the opportunity to come in and make an argument about why her services were not necessary. In other words, she was forced to invite her competitors in to make an argument about why she should not be in the marketplace.
Ultimately she was deflated, and you could see in the last few months that she was really not returning calls and sort of dejected about how much money she might have to pay and what if it doesn’t fly. I felt like we approached this mountain together. We all stood looking up at it and she was really willing to scale it. And so it’s disheartening to think that ultimately we never even made it to the top. And what that meant was not only an entrepreneur that never got started with a good idea, but employees that never got hired, support staff that never got hired, and families and friends of an underserved population that didn’t get the services they could have used.
I think absent these regulations we’d see a lot more low-income entrepreneurs pulling themselves up by the bootstraps and becoming self sufficient and at the same time employing other people. I think there are several things that we can do to sort of support them and give them an opportunity to get their businesses off the ground. One is to maybe alleviate their tax burden in the first year, or alleviate it until they make a certain amount of money. They’ve got to have enough to be able to run their business.
The other area that I think is really burdensome to an entrepreneur generally, and certainly low-income entrepreneurs, is all of the obligations that kick in as soon as they hire their first employee. If there were some way to exempt them from some of the laws that make sense perhaps with bigger businesses but don’t quite make sense and in fact impose a huge burden on them as small business owners, that would go a long way toward helping entrepreneurship thrive.