According to OECD chief media officer Matthias Rumpf, the restrictions examined in this report can be a deterrent to starting a business: “if you have to spend all the time to cope with red tape, you can’t spend that time to work on your business plan, to ship your products, and to reach out to clients.”
Just because it is easy to start up a business does not mean that small businesses are being started or that they comprise a large part of the economy. While New Zealand is one of best countries to start a small business, it ranks 21 out of 29 countries (where data was available) in the percentage of people working for small businesses. Meanwhile, the country ranks third in the percentage of people who work for large companies.
24/7 Wall St. also looked at the countries’ total gross domestic product and GDP per capita, anticipating a correlation between the ease of starting a small business and the strength of the economy. However, no relationship was apparent. While several of the best countries for entrepreneurs are among the largest countries in the world, such as the U.S. and France, smaller economies such as Chile and New Zealand also made the top 10.
The OECD also looked at the perception of entrepreneurship among citizens, including perceived opportunities to starting a business, the percentage that believe they have the skills to start a business, those who believe the fear of failure would prevent them from attempting to start a new venture and the high status of successful entrepreneurs.
Based on the OECD report, perception does not necessarily produce good opportunities. For example, while Switzerland has the eighth-worst score for starting a new business, residents had the seventh-highest perception about opportunities. Meanwhile, South Korea is the seventh-easiest country to start a small business, but only ranked 25th in perception out of 34.
These are the 10 countries that are best for entrepreneurs.
10) Chile
> No. of procedures necessary to start a business: 7
> No. of days to start of business: 7
> 2010 GDP: $203 billion
> Pct. employment by companies with 250+ employees: n/a
Chile, the only South American nation in the OECD, has one of the least-restrictive systems for starting a new business. The entire process can be completed in as little as a week. The average disposable income in the count ry is only $8,618, the lowest reported for all OECD countries. However, 73% of Chileans aged 18 to 64 believe entrepreneurship is a good career option. The notion that business ventures can be successful in the country appears to be taking root with foreign entrepreneurs as well. Start-Up Chile is a program created by the government to promote innovation and entrepreneurship by providing “$40,000 of equity-free seed capital and a temporary 1-year visa,” according to the website. Chile also has a total tax rate of 25%, according to the World Bank, the lowest of all the OECD countries.
9) Portugal
> No. of procedures necessary to start a business: 5
> No. of days to start of business: 5
> 2010 GDP: $230.6 billion
> Pct. employment by companies with 250+ employees: 20.9%
In Portugal, it takes just a few days and a few steps to start a business. However, most Portuguese citizens aged 18 to 64 do not believe good entrepreneurial opportunities exist in their country. Their concerns may be valid. Between 2005 and 2008, more jobs were lost from companies going out of business than were created by start-ups. Additionally, in both 2007 and 2008, company failures occurred more frequently in Portugal than in any other country.
8) France
> No. of procedures necessary to start a business: 5
> No. of days to start of business: 7
> 2010 GDP: $2.6 trillion
> Pct. employment by companies with 250+ employees: 39.5%
Starting a business in France costs about $345, slightly more than half that of the U.S, according to the World Bank, and the process can be completed in about a week. In January 2009, the French government started auto-entrepreneurship, a plan aimed at increasing entrepreneurship by decreasing the taxes, paperwork and social charges for people looking to start small businesses. According to the OECD, there was a 55.5% increase in the number of businesses started in France in the second quarter of 2009, demonstrating that people will create businesses if the government eases costs and work associated with starting a company. France has a total bank loan success rate of 83.3% and more than 94% of businesses are microenterprises — businesses with fewer than 10 employees.
7) South Korea
> No. of procedures necessary to start a business: 5
> No. of days to start of business: 7
> 2010 GDP: $1.03 trillion
> Pct. employment by companies with 250+ employees: 26.1%
Starting a business in Korea takes seven days and five procedures. The fixed initial costs of these procedures, including making a company seal and paying a corporate registration tax, is just $36. Although it is cheap and quick to start a company, few Koreans feel inclined to do so. In 2011, just 11% of Koreans perceived that there were favorable opportunities to start a company, while just 27% felt they had the capabilities to do so. Additionally, 45% of respondents indicated a fear of failure would deter them from starting a business. Despite this, 34.8% of Koreans worked for companies with between 10 and 49 workers — more than any other country within the OECD.
6) United Kingdom
> No. of procedures necessary to start a business: 6
> No. of days to start of business: 13
> 2010 GDP: $2.2 trillion
> Pct. employment by companies with 250+ employees: 48.6%
It takes about two weeks and at least $257, according to the World Bank, for an entrepreneur to start a business in the UK. Almost 50% of the UK workforce is employed by a company with 250+ employees, the second highest among the OECD countries that reported, while only about 20% work for businesses with fewer than 10 employees. With a bank loan success rate of only 64.6%, it may be hard for Brits to get the necessary starting capital for their businesses. According to Wired News, the government has been trying to lure entrepreneurs and investors by introducing “an entirely new type of visa, created for ‘prospective entrepreneurs’” in 2011. Foreign entrepreneurs and investors can now settle in the UK in as little as two years, depending on how much money they can inject into the economy, compared to the minimum five years for other visas.
5) Ireland
> No. of procedures necessary to start a business : 4
> No. of days to start of business: 13
> 2010 GDP: $205.7 billion
> Pct. employment by companies with 250+ employees: 26.2%
Starting a business in Ireland only requires four procedures, a total of 13 days and costs between $100 and $165. The country rewards its most successful businesses by giving them special access to financing. Start-ups incorporated in the past five years, which have had at least 20% growth in three-consecutive years, had a 69% success rate in getting loans and a 100% success rate in receiving financing from existing stockholders. To compare, in the OECD 63.4% of start-ups that are growing quickly receive loans and just 77.6% receive shareholder financing. In 2011, 83% of people surveyed said successful entrepreneurs had high social standing. But the Irish Times estimates the number of people starting a new business each month has declined from around 2,800 in 2008 to 800 in 2010.
4) United States
> No. of procedures necessary to start a business : 6
> No. of days to start of business: 6
> 2010 GDP: $14.7 trillion
> Pct. employment by companies with 250+ employees: 52.8%
In the U.S., innovators and entrepreneurs are highly praised in the media, according to 68% of those surveyed by the OECD. There are very few procedures and $675 in fees necessary to start a business. There is, however, a high incidence of company failures, at 10.43% per year, which suggests that it may be difficult for small and medium-sized companies to stay in businesses. According to the Bureau of Labor Statistics, almost half of new companies fold after just five years of operation.
3) Canada
> No. of procedures necessary to start a business: 1
> No. of days to start of business: 5
> 2010 GDP: $1.6 trillion
> Pct. employment by companies with 250+ employees: n/a
In Canada, there is just one step involved in starting a business: filing for incorporation through the online Electronic Filing Center. Filling out the necessary forms and paying all associated fees takes about five days and costs about $195. This process is relatively cheap, costing just 0.4% of Canada’s income per capita while requiring no minimum paid-in capital. Also, Canadian businesses were taxed in 2011, at just 28.8% of profit — far less than nations such as the U.S. and France, which taxed profit at rates of 46.7% and 65.7%, respectively. However, not many Canadians have taken full advantage of the ease of starting a business. In 2008, Canada had one of the lowest percentages of start-ups of any OECD country for which information was available.
2) Australia
> No. of procedures necessary to start a business: 2
> No. of days to start of business: 2
> 2010 GDP: $1.1 trillion
> Pct. employment by companies with 250+ employees: n/a
Entrepreneurs can enjoy the quick process of starting their businesses in two days for just over $400 in Australia. Of those residents surveyed by the OECD, 48% perceive Australia as being a good place for business opportunities, the fifth highest out of 27 OECD nations surveyed. Australian business owners have a total tax rate of 47.7% — five percentage points higher than the average OECD tax rate, which may deter potential business owners.
1) New Zealand
> No. of procedures necessary to start a business: 1
> No. of days to start of business: 1
> 2010 GDP: $134 billion
> Pct. employment by companies with 250+ employees: 42.1%
Starting a business in New Zealand only requires applying online with the New Zealand Companies Office. It takes one day and costs just $127, after which a certificate of incorporation is issued via email within minutes. Further, there is no minimum paid-in capital needed for starting a company in New Zealand. Despite the ease of starting a business, 42.13% of New Zealanders work for a company with more than 250 employees — more than any nation other than the U.S. and UK. Still, New Zealand has maintained a high percentage of new companies created each year: 12.1% in 2007, 12.1% in 2008 and 10% in 2009.
Michael B. Sauter, Alexander E. M. Hess, Lisa Nelson and Samuel Weigley
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