Budget cuts have hamstrung the ability of the CA government to give approval to businesses quickly. (Photo: zigazou76)
California has a reputation and, depending on who you talk to, it may be good or it may be bad. For those in the business community, one part of the Golden State’s reputation is not one they’d like the state to be known for: having an unfriendly business environment.
“I had a chance to move my businesses to Delaware. Delaware, for corporations, is a lot easier for taxes. But I didn’t move because this is where I live. This is where my kids go to school and the things that matter to me, are here,” said Frank Flores, founder and partner of Exacta Media. Flores is also founder and partner of ReVamp Interactive.
Changing that reputation appears to be a priority for State Assembly Speaker John Perez and his Assembly colleagues who recently passed AB 113 to ensure the business filing processing time at the Secretary of State’s (SOS) office is cut down from a current 63 days to no more than five business days by November by giving an additional $2 million in funding.
“Every day that a business owner must wait on paperwork to be processed is a day that they are not selling to customers, hiring workers, or contributing to our recovery,” said Speaker Perez. “No longer will new businesses need to wait weeks or even months for the simple paperwork to be processed in order to begin to hire employees, sign contracts, and open for business.”
Flores knows all too well about the backlog and how bad it’s gotten over the years. In 2001, it only took one day to get his business filings processed for Exacta Media. In 2010, it took the Secretary of State’s office two days to process his business filings for ReVamp Interactive. He recently filed paperwork for another corporation, MomentM, Inc.
“We were told the Secretary of State’s office is working on business filings for the week of February 4th, so they’re way behind. We’re told it’ll take 6 to 8 weeks to process my paperwork on MomentM,” said Flores.
“Waiting six to eight weeks is ridiculous, especially when you’re up against time-to-market, trying to get your product out to the market as fast as you can, the last thing you need is the state holding you up from doing that.”
Flores is not alone. According to the SOS office, “prior to the major budget cuts in fiscal year 2008-2009 and fiscal year 2009-2010, business filings took an average of 20 days to process,” said Shannan Velayas, press secretary for the SOS.
“After the budget cuts were imposed for the 2009-2010 fiscal year, the processing time nearly quadrupled-the average time was about 80 days in October 2010. By June 2012, the backlog had been cut in half and the time to process business filings dropped to 27 days.”
“Turnaround times are always higher in January, February, and March because there is a flood of formation and dissolution documents from businesses that file by December 31. We are pulling staff from other units to work overtime and on weekends to decrease the backlog,” said Velayas.
The new funding is supposed to eliminate the backlog and help California compete, once again, with other states like Texas, which takes less than five days, and New York, taking no more than seven days.
“I appreciate the legislature working with me and my staff to provide one-time funding for overtime and temporary help. I will continue to work with the legislature to secure permanent funding that will enable Secretary of State staff to process business documents faster on an ongoing basis,” said Debra Bowen, Secretary of State.
“Anything to help in California’s recovery,” added Flores.
Leroy Chiao, CEO of Diomics, agrees that cutting down the backlog will be a step in the right direction for the state’s reputation and economic turnaround.
“Over the years, the state has become known for being somewhat less than friendly to business, and I know, that entrepreneurs often think twice about starting businesses in California. So, anything to make it more attractive to do so would only help the state.”