California’s progressive leaders regularly celebrate small businesses. Family businesses. Mom-and-pop shops. Immigrant-owned restaurants. LGBTQ-owned bookstores, salons, and neighborhood gathering places. These businesses represent the diversity, independence, and economic opportunity that progressives say they want to protect.
Yet when those same owners ask for relief from taxes, fees, and regulatory burdens, the conversation often changes. Suddenly, reducing the cost of doing business becomes a concession to “corporate interests.”
Somewhere along the way, the neighborhood business owner gets lumped together with the multinational corporation—and handed obligations that the corporation is much better equipped to absorb.
That is California’s small-business paradox: policies promoted in the name of fairness can make independent ownership less accessible, leaving more of the market to the large companies their proponents criticize.
Forty Percent Is a Policy Responsibility
The immigrant entrepreneurship figure alone should force a serious conversation. Governor Gavin Newsom’s June 2025 Immigrant Heritage Month proclamation states that immigrants account for 40.3 percent of California’s entrepreneurs. That is roughly two out of every five.
Supporting immigrant communities therefore requires attention to the practical conditions of business ownership. It means asking whether someone can afford to open a restaurant, secure a permit, hire a first employee, or survive the months before the business becomes profitable.
The same principle applies to family businesses and LGBTQ-owned businesses. Celebrating the owner’s identity does little to resolve a permit delay or an unaffordable compliance bill.
An inclusive economy needs an accessible entrance.
The Same Rule Can Produce a Very Different Burden
A large company can spread the cost of legal advice, accounting, licensing, and compliance across many locations and substantial revenue. A neighborhood shop may have one owner handling everything after closing.
The U.S. Small Business Administration’s Office of Advocacy has expressly recognized this problem: regulatory compliance can impose greater costs per unit on small firms because they lack the economies of scale available to larger businesses.
Consider a hypothetical $10,000 compliance expense. For a business with $200,000 in annual revenue, that equals 5 percent of revenue—before payroll, rent, inventory, and the owner’s compensation. For a company with $20 million in revenue, the same expense equals 0.05 percent.
The amount is identical. The burden is profoundly different.
California’s annual LLC tax illustrates the problem. The Franchise Tax Board describes a general $800 annual obligation for LLCs doing business or organized in California, subject to applicable exceptions. It can remain due even when the LLC is not conducting business. A fixed obligation like that arrives without first asking whether the owner has built a viable enterprise.
For an established company, it may be routine overhead. For someone trying to turn a side business into a livelihood, it competes with every dollar needed to get started.
Legalization Does Not Necessarily Mean Access
When California legalized adult-use cannabis, a friend of mine wanted to open a small business in Sacramento. His idea was straightforward: grow his own plants and sell them through his own shop.
Sacramento’s rules obstructed that model. The city’s 2017 ordinance prohibited cultivation on medical dispensary property, except for immature nursery plants, and prohibited retail sales from permitted cultivation sites. He settled on pursuing retail instead. (Sacramento Ord. No. 2017-0046, §§ 5.150.450, 5.150.630.)
The city later changed course. In November 2018, Sacramento adopted a microbusiness permit allowing businesses to combine at least three qualifying activities at one site, including cultivation, certain manufacturing, distribution, and retail. But in December, the city established an initial microbusiness operating-permit fee of $36,800, with a $35,100 renewal fee. (Sacramento Res. No. 2018-0485, §§ 2–3.)
My friend still could not afford to proceed. The change made his business model legally possible, but the initial fee kept it financially out of reach.
That is the distinction lawmakers need to understand. Removing a prohibition does not create meaningful access when the price of entry remains beyond an ordinary entrepreneur’s means.
California’s State Auditor has independently identified cannabis permitting fees as potential barriers to market entry, particularly for populations harmed by cannabis criminalization.
For someone with substantial capital, a five-figure permit fee may be a manageable startup expense. For someone trying to build an independent livelihood with personal savings, it can end the project before the first sale.
An industry can be legal while remaining financially inaccessible to many of the people who hoped legalization would create an opportunity.
How Small-Business Burdens Can Strengthen Big Business
The competition problem follows from that imbalance.
When entering a market requires substantial money before the first sale, fewer people can attempt it. When staying in business requires costs that do not meaningfully scale with the operation, smaller firms have less room to withstand a bad year.
Some owners never open. Others close, sell, or abandon expansion.
When that happens, surviving competitors may gain customers and market share without improving their product or lowering their prices. If independent employers disappear, workers may also have fewer alternatives to the larger companies that remain.
This is a risk created by the economics of entry and survival, rather than proof that every regulation causes consolidation. Rules can protect competition, prevent fraud, and stop irresponsible businesses from undercutting responsible ones. But poorly designed requirements can also favor businesses with the capital and infrastructure to navigate them.
A policy intended to restrain corporate power can end up protecting established companies from their next competitor.
Supporting Small Businesses Means Designing for Them
Workers deserve safe workplaces and lawful wages. Consumers deserve honest products. Communities deserve protection from pollution and dangerous operations. Those goals require effective standards.
They also require lawmakers to examine how those standards are implemented.
Fees should reflect legitimate administrative costs and, where appropriate, the scale of the business. Permit processes should offer clear requirements, predictable timelines, and meaningful opportunities to appeal. Policymakers should examine the cumulative burden of overlapping requirements instead of treating each new obligation as though it arrives alone.
Small-business analysis should also ask who can afford to comply, who can afford to wait, and who never gets through the door.
Progressive leaders who oppose concentrated corporate power have a reason to take these questions seriously. Independent businesses give consumers alternatives, workers additional employers, and families a chance to build something they own.
California cannot measure its commitment to those businesses by how often officials celebrate them. It must measure that commitment by whether ordinary people can afford to start and sustain them.
If we want immigrant-owned businesses, LGBTQ-owned businesses, family businesses, and mom-and-pop shops to thrive, our policies have to leave room for them to exist.
Have a story or insight to share? CBA members and partners are welcome to contribute.
