States woo with low-tax promises Many states offering incentives to businesses to get them to relocate.

Succeeding in small business

May 13, 1991|By Jane Applegate | Jane Applegate,1991 Los Angeles Times Syndicate Times Mirror Square Los Angeles, Calif. 90053

No corporate income tax. No personal income tax. No personal property tax. No business inventory tax.

Such words may be music to the ears of a struggling small-business owner. And, if you are thinking of moving your business to South Dakota, they also happen to be true.

Low taxes are just one of the advantages that states are using to promote themselves as business locations. And South Dakota is one of the states spending millions of dollars to entice small- and medium-sized firms to pack up and move in.

State marketing representatives -- or recruiters -- are constantly on the road, meeting with business owners, trade associations and just about anyone who will listen to their pitches. A few years ago, they wined and dined corporate executives. Today, with the recognition that small businesses create two-thirds of new jobs and drive the U.S. economy, states and counties are wooing companies that may have only a handful of employees but good growth potential.

"The traditional approach was to go after the Fortune 500 companies that appeared to be growing and expanding," said Bob Henningsen, chief marketing representative for the state of Iowa. "But the truth is, the small- and medium-sized businesses are the ones with all the growth."

Iowa, which touts itself "The Smart State for Business," offers a range of financial incentives for small-business owners. The state's venture capital resources fund has $11 million available for young, growing businesses. Iowa also has $4.6 million in its community economic betterment account -- for companies that come in and create jobs.

To make things easy for newcomers, the state operates a business information center in Des Moines. The center, which fielded 6,000 calls from business owners last year, helps people interested in moving their companies to Iowa as well as those simply trying to do business there.

On a recent morning, Mark Hermes, project manager for Weathercraft Inc., a Cedar City, Mo., roofing company, visited the center to find out what was necessary to do business in the state.

"In these times, we are traveling further to find work," Hermes said. "While other states have put up obstacles, over here they are falling all over themselves to respond to our needs."

Nevada, South Carolina and Pennsylvania are also wooing business, according to Andrew Shotland, a marketing consultant for Development Counselors International in New York.

"States realize that one way to diversify their economy is to attract small businesses," he said.

Nevada is one of the more aggressive states when it comes to small-business recruitment.

"We target businesses with about 10 employees," said Jim Spoo, executive director of the Nevada Economic Development Commission in Carson City. "Moving small companies is easy. Moving big companies is very hard; you might as well try to move a branch of the federal government."

Spoo said 40 to 60 percent of Nevada's new businesses are coming across the border from California. In the past year, about 65 newly relocated firms created 2,549 jobs in Nevada.

"They are coming here largely because of what Nevada is, not because of the goodies we dangle in the air," Spoo said. Lack of a personalincome tax, corporate tax or inventory tax has turned Nevada into a mecca for warehouses and distribution centers, Spoo said.

Every week, a dozen recruiters from other states are traveling across California, enticing business owners to move out. The out-of-state recruiters emphasize that California's steep workers' compensation insurance rates, high taxes and stringent air-pollution control laws make it difficult to make a profit.

"We don't take these recruiters lightly," said Warren Rashleigh,

spokesman for the California Department of Commerce. "California has its work cut out for it."

Rashleigh said California, which had no formal marketing program until 1984, is focusing on retaining businesses already here. The state has 19 enterprise zones that offer businesses tax incentives to locate in certain areas.

Although California officials don't keep track of how many businesses move out, Rashleigh said expansions by companies that stay make up for the losses and keep the economy strong.

States aren't the only ones embracing small-business owners on the move.

Vice President Marian Gibson said the Joliet/Will County Center for Economic Development is working with about 200 companies that have expressed interest in moving to the area.Will County,about 35 miles southwest of Chicago,is one of Illinois' fastest-growing areas for business, Gibson said.

" When a company wants to move here we help them find a site or a building and help them work with the local officials," Gibson said.

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