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Let's Get Political

Taxing Matters

Start-up entrepreneurs are often overwhelmed by a tax code that is complex, confusing and disproportionately biased against small businesses. Not to mention, paying for the right tax advice can be costly; according to the NFIB, firms with fewer than 50 employees spend close to 5 percent of their annual revenues on tax compliance.

The prices can be even greater if you factor in costs at the state and local level. "We do business in California, where taxes are disproportionately high," says Erica Wertheim-Zohar, 28, founder and CEO of American Groove, a women's and children's sportswear business in Los Angeles. "We're competing with companies in all parts of the country, and it's really hard to make the same margins they do."

In addition to taxes, there's the cost of compliance with state and federal regulations, which can be particularly onerous for small companies. According to the NFIB, the regulatory cost per employee to small firms is approximately 50 percent more than the cost to large firms.

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This article was originally published in the January 2000 print edition of Entrepreneur with the headline: Let's Get Political.

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