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 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.'

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.

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.

Previously, tenants would have to pay out of their own pocket to put branding on a building exterior. Now landlords are agreeing to pay for the buildout on a 'gray shell' space that's essentially a blank slate with cement floors, bare walls, and an empty building façade. If you can secure financing from a bank, find out how far landlords are willing to go to make you a contented tenant.

Starting a Business in Las Vegas: Pick the Right Location

When Herlovich started her firm, she knew she had to get out of the house. 'I need an office to go to, people to inspire me,' she says. For $100 a month, a local agency rented her a desk in the warehouse that was used to store Elvis's clothing. Ultimately, having people around the boxes of the King's attire made the agency too nervous, so she set out to find a new location.

The city is so varied that in order to find an ideal place, it's key to look closely at every community to find the right fit. Howard Hughes planned the 22,500-acre Summerlin community 20 years ago and now the area is full of upper middle class residents. It ranks as one of the best places to live in the country.

'Obviously you want an amazing location,' Jenkins says. 'There are certainly places in Vegas where you'd put one of our shops and it wouldn't work.' To identify which areas would, she did her research and selected locations with higher income demographics and strong retail anchors that could bring in customers willing to pay several dollars for cupcakes. The Cupcakery has a shop to the east in Henderson and one in Summerlin.

Herlovich settled on office space two blocks from one of her clients, the Hard Rock Hotel and Casino. When John Entwistle, the bass guitarist for The Who, died at the hotel of a cocaine-induced heart attack in 2002, Herlovich could get there quickly. 'Time was of the essence in keeping that story under control.'

Choosing the right spot in Vegas can also translate into valuable exposure. The Nevada Development Authority has a permanent booth at local trade shows. 'This year we'll have a million and a half people walk by that booth,' Hollingsworth says.

Starting a Business in Las Vegas: Identify and Retain Qualified Employees

This summer the unemployment rate in the metro Las Vegas area soared to 14.5 percent, outpacing the national rate. Such a devastating statistic means the area has a large talent pool, including graduates from local colleges and universities.

'That's cost advantageous for employers,' Drury says. 'They've got a workforce of people who are ready, willing, and able to work for them.' The lack of a state income tax makes that pay go further, meaning new businesses can find high quality people for less than what it would cost in another state. Most of the population is extremely computer literate, too. Even the maid carts in hotels are computerized.

Still, Vegas is a transient town. When recruiting, employers need to take the city's culture into account. Vegas tends to draw opportunists who come to make money and get out quickly. 'There are a lot of people doing bizarre, crazy things,' Jenkins says. 'You have to have surveillance cameras, do background checks, and be careful about the people you let into your lives.'

Starting a Business in Las Vegas: Protect the Office with Strong Amenities

Vegas is in the desert, so anyone relocating there absolutely has to have air conditioning that works -; inside and, depending on the business plan, outside as well.

Jenkins says her car just registered 112 degrees on the interior. 'You don't leave cupcakes in an unattended car for two minutes,' she says. 'Those puppies are liquefied. You could eat them with a straw.' To keep her business from melting away, she installed blackout shades and uses refrigerated vans.

The heat can affect workers, too. Herlovich remembers a former office location that had air conditioning go on the fritz. 'It was excruciating. It gets so hot you literally can't have people working in the office. We had to let people go home for the day.' Because Vegas is such a comparatively new city, however, even the 'old' buildings usually have reliable amenities. No need to worry about Internet access. The city has dark fiber in spades.

Sin City draws all kinds of characters. Keeping offices safe has been a priority for Herlovich ever since thieves broke into her old office three years ago, stealing valuable memorabilia. The alarm on the door was supposed to automatically make an emergency call, but it failed.

'It could have been the safest place and you move in, and some crazy crack addict breaks through your door,' Herlovich says. To find a safe location she recommends looking at the crime stats for that area, as well as the demographics. Selecting a reputable alarm company to protect the office is also crucial.

Fifteen years ago, a major road called Rainbow still had unpaved sections that were basically dirt, Drury points out. Since then, those stretches have been brought into the 21st Century at a rapid pace. 'Vegas has really been a boon,' she says.

The city places in the top 10 fastest growing metropolitan areas in the country. New residents moving in on a daily basis are looking for everything from cleaning supplies and clothes to healthcare services and haircuts. And just think: your business could be there to welcome them.

Starting a Business in Las Vegas: Additional Resources