How to Start a Business in Las Vegas
The city that gaming built is open for business. Here's how to balance the risks.
Las Vegas presents an odd challenge for the Nevada Development Authority, a nonprofit agency that encourages economic development the southern part of the state. The trouble is that Sin City's fun reputation often outshines its entrepreneurial cred.
'You've probably been here and had a heck of a time,' says Somer Hollingsworth, the agency's president and CEO. 'Our challenge is to show that there's a business side to this community.'
Vegas sweetens the deal for new business with more perks than a penthouse suite. The city competes head-on with business hubs in California, and has successfully spurred relocations with a potent combination of competitive real-estate prices, affordable services, solid amenities, a ready workforce, and scant taxes. The Small Business and Entrepreneurship Council's most recent Small Business Survival Index, which ranked each state by their policy climates for small businesses and entrepreneurs, put Nevada at the top right behind South Dakota. California came in 49th.
Five years ago Pamela Jenkins opened a cupcake shop in Las Vegas called The Cupcakery. She had cut her teeth in the corporate world and jumped at the chance to start her own company. Noticing that there weren't that many mom-and-pop operations in town at the time, she took advantage of a wide open marketplace.
'I felt that there was a need to build something with some heart and soul, and really good products,' she says. Her cupcake shop has since expanded to multiple locations. 'Now we have this crazy cult following out here in Vegas.'
Vegas can be the perfect place to hang a shingle, but it can also be the recipe for a hot mess. Before setting up shop there, weigh the options.
Starting a Business in Las Vegas: Get to Know the Financial Incentives
Although Nevada has been facing a budget gap, the notable lack of taxes makes it an inviting place for starting a business or opening a branch. There is no corporate income tax, no personal income tax, no franchise tax on income, no inheritance tax, no gift tax, no unitary tax, and no estate tax. Instead, the state relies on a gaming tax.
Kevin Lustig is the director of tax services in Las Vegas for the business consulting firm RSM McGladrey. 'I'm looking at something I put together for businesses that are considering moving here versus other states,' he says. 'In California, the income tax is anywhere from 1 to 9.3 percent. For corporations it's 8.84 percent. Here it's zero.' Sales and property taxes are competitive with other states.
The result is that businesses relocate here. Tony Hsieh originally started Zappos.com in San Francisco, for example, but moved the operations to Las Vegas because the pool of workers was already oriented around customer service, and the city was so much more affordable.
Diversifying the business community in Las Vegas is such a top priority for economic development that a nongaming operation will likely qualify for an array of free or low-cost services. The Nevada Small Business Development Center, a business assistance program located at the University of Nevada, offers free services that include help developing a business plan, getting licensed, and incorporated. Hollingsworth says the Nevada Development Authority can set up roundtables to help new businesses get oriented. 'An incredible company with jobs and high wages — if necessary we can get the governor to show up.'
Dig Deeper: The Zappos Way of Managing
Starting a Business in Las Vegas: Prove Legitimacy With a License
Nevada is where gaming grew up. Las Vegas's colorful history has left a lasting imprint on the licensing process. Businesses considered 'privileged' go well beyond ones that sell liquor to include pawn shops, secondhand dealers, and adult services.
'Some 40 years ago the state decided that no organized crime would be involved in gambling and liquor and then officials extended that scheme to other businesses,' says Mary Drury, an attorney with the full-service law firm Marquis and Aurbach, which is based in Las Vegas. Drury is chair of the transactional group, which works on the formation of companies. 'It's not to keep people out, but just to make sure that the people running those businesses don't have felony backgrounds and are financially suitable, that they're not a front.'
Even 'gold parties' — sort of like Tupperware parties — are heavily regulated, Drury says, because they nearly fall into the secondhand dealer category. Be prepared to prove that a clean record is actually clean.
Dig Deeper: Lessons From a Pawn Star
Starting a Business in Las Vegas: Take Advantage of the Buyer's Market
The recession has swept through Vegas, creating tremendous deals on commercial real estate. Property owners are more flexible than ever. During headier times, landlords were reluctant to consider rent negotiations. Now, securing several months of free rent on a five-year lease has become a possibility.
'When it was boom times, the square foot cost was $4 to $6 per square foot,' says Larry Vierra, director of the Nevada Small Business Development Center in Las Vegas. 'That same property now you can get for $1, $2 a foot.'
Laura Herlovich owns the Las Vegas public relations firm PR Plus, whose clients include the pawnshop owners on the History Channel show Pawn Stars, the Grammies, the Hard Rock Hotel and Casino, and the Cupcakery. When Herlovich started the firm in 1991, it was the first one in Vegas that wasn't being operated out of a spare bedroom, she says. One of her early offices was situated in a garage.
Not long ago PR Plus upgraded to an office complex close to the Strip and highway 215, a circular route around the city. 'We're paying less for our space per month than we were in the garage,' Herlovich says. The price tag is 99 cents a square foot.
