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Chicago Daily Law Bulletin
City, state laws can hold businesses back, report finds
by Amanda Robert, Law Bulletin Staff Writer
As the Institue for Justice Clinic on Entrepreneurship neared its 10th anniversary, Elizabeth W. Milnikel decided it was the right time to educate people on common challenges faced by Chicago entrepreneurs.
Milnikel serves as director of the IJ Clinic, a program at the University of Chicago Law School that pairs law students with low-income entrepreneurs to provide them with free legal counsel as they start their businesses. In November, she co-authored and released an updated barrier study that describes city and state laws that discourage and deter these entrepreneurs.
“As we serve lower-income entrepreneurs in the community, we see first-hand the challenges they sometimes face just in getting approval from local government to operate,” Milnikel said. “That’s the last thing we think should hold entrepreneurs back from contributing to their communities and making and honest living.”
Several business categories, such as child play centers, computer centers and landscape companies, require special applications, fees and permission from city and state authorities. Milnikel said this red tape make it expensive and difficult — and sometimes impossible — for people to open businesses.
According to one example in the study, barbers must attend 1,500 hours of classes, or graduate from cosmetology school and them complete 1,000 more course hours at barber school. They also need to pass a written examination.
African hair–braiders face similar requirements and must be licensed in order to practice a trade that usually passes between family members, Milnikel said.
“Most people learn generation to generation,” she said. “They practiced at home, and if they’re good at it, customers are willing to come to them for braiding services. The dirty secret is that cosmetology schools have influence on the legislature, so they fought tooth and nail when people tried to relieve braiders of all of these education requirements.”
The study referred to moving companies as another business category regulated by strict laws. The owner of a new moving company must appear before a government officer and present potential clients who swear that they need the new company to move their property. They must also prove that they possess the cash and equipment needed to start their company.
“It’s a way for the existing moving companies to elbow out potential competition,” Milnikel said.
The IJ Clinic study features the stories of several entrepreneurs who opened their businesses “under the radar” to avoid these regulations.
While many achieve success, Milnikel said she advises entrepreneurs to never evade the law. The state can’t collect taxes or monitor their business, while their business can’t earn credibility or receive freedom to grow.
Law students who assist these new entrepreneurs learn valuable lessons as they counsel clients on how to comply with the law as they build their businesses, Milnikel said.
“The ambiguity of a particular law is often only evident when you’re trying to apply it to a new situation,” she said. “It’s not clear when the law is being written, and it’s not always clear if you’re simply reading the law to yourself or studying the code.
“But when you’re trying to help someone who has a beneficial business plan, and it’s impossible to give a confident explanation of what the law even means for them, law students realize how difficult it is to draft the legislation and how risky it is for people to plan their affairs when there is no certainty in the law.”
After babysitting for nearly 15 years, Eileen O’Neill started her own babysitter placement agency in Chicago in 2009.
As the 27–year–old began matching babysitters with families that needed part–time care, the state classified her business as an employment agency and required her to apply for a special license.
O’Neill found the state’s regulations confusing and reached out to the IJ Clinic for help. Law students assisted her with state licensing, and also evaluated her babysitter and client contracts to ensure that she complied with the law.
“Their approach is creative in the sense that they’re detectives,” O’Neill said. “They’re looking at what you have in place, what you need and what steps you need to get there.
“When you’re doing anything on your own, there is a lot of room for error,” she said. “It’s important to have a system of checks and balances.”
Kenneth Coats launched Kentech Consulting Corp., the parent company of a website that allows customers to conduct background checks on themselves, in 2007.
“Post 9/11, Homeland Security really scrutinized the information in background checks for employment, education and also for renting homes,” Coats said. “I wanted to help people identify those problems that they might have in a background check.”
He called on the IJ Clinic to keep him apprised of various state laws and licensing requirements. The clinic also assisted with his contract reviews and plans for future join-ventures with other small businesses.
“They’ve been a great asset, and I really rely on them to help me navigate the heavily regulated industry that I’m in,” Coat said.
When asked what more can be done to help new entrepreneurs, Milnikel said city and state officials that review applications for new businesses should approach these businesses with an open mind and innovative spirit.
“But apart from attitude adjustment, Chicago and Illinois need to strip away the rules that restrict businesses without having any kind of direct protection of customer health and safety,” she said. ◊