DOING BUSINESS 2009 - JOHN J. HADDAD, Ph.D.

DATA NOTES 63Table 12.2What does starting a business measure?Procedures to legally start and operate a company (number)• Preregistration (for example, name verification or reservation, notarization)• Registration in the economy’s largest business city• Postregistration (for example, social security registration, company seal)Time required to complete each procedure (calendar days)• Does not include time spent gathering information• Each procedure starts on a separate day• Procedure completed once final document is received• No prior contact with officialsCost required to complete each procedure (% of income per capita)• Official costs only, no bribes• No professional fees unless services required by lawPaid-in minimum capital (% of income per capita)• Deposited in a bank or with a notary before registration beginsSource: Doing Business database.• Performs general industrial orcommercial activities, such as theproduction or sale to the public ofproducts or services. The businessdoes not perform foreign tradeactivities and does not handleproducts subject to a special taxregime, for example, liquor ortobacco. It is not using heavilypolluting production processes.• Leases the commercial plant andoffices and is not a proprietor of realestate.• Does not qualify for investmentincentives or any special benefits.• Has at least 10 and up to 50employees 1 month after thecommencement of operations, all ofthem nationals.• Has a turnover of at least 100 timesincome per capita.• Has a company deed 10 pages long.ProceduresA procedure is defined as any interactionof the company founders with externalparties (for example, government agencies,lawyers, auditors or notaries). Interactionsbetween company founders orcompany officers and employees are notcounted as procedures. Procedures thatmust be completed in the same buildingbut in different offices are countedas separate procedures. If founders haveto visit the same office several times fordifferent sequential procedures, each iscounted separately. The founders are assumedto complete all procedures themselves,without middlemen, facilitators,accountants or lawyers, unless the useof such a third party is mandated bylaw. If the services of professionals arerequired, procedures conducted by suchprofessionals on behalf of the companyare counted separately. Each electronicprocedure is counted separately. If 2 procedurescan be completed through thesame website but require separate filings,they are counted as 2 procedures.Both pre- and postincorporationprocedures that are officially requiredfor an entrepreneur to formally operate abusiness are recorded.Procedures required for official correspondenceor transactions with publicagencies are also included. For example,if a company seal or stamp is requiredon official documents, such as tax declarations,obtaining the seal or stamp iscounted. Similarly, if a company mustopen a bank account before registeringfor sales tax or value added tax, thistransaction is included as a procedure.Shortcuts are counted only if they fulfill 4criteria: they are legal, they are availableto the general public, they are used bythe majority of companies, and avoidingthem causes substantial delays.Only procedures required of allbusinesses are covered. Industry-specificprocedures are excluded. For example,procedures to comply with environmentalregulations are included only whenthey apply to all businesses conductinggeneral commercial or industrial activities.Procedures that the company undergoesto connect to electricity, water,gas and waste disposal services are notincluded.TimeTime is recorded in calendar days. Themeasure captures the median durationthat incorporation lawyers indicate isnecessary to complete a procedure withminimum follow-up with governmentagencies and no extra payments. It is assumedthat the minimum time requiredfor each procedure is 1 day. Althoughprocedures may take place simultaneously,they cannot start on the same day(that is, simultaneous procedures starton consecutive days). A procedure isconsidered completed once the companyhas received the final document, such asthe company registration certificate ortax number. If a procedure can be acceleratedfor an additional cost, the fastestprocedure is chosen. It is assumed thatthe entrepreneur does not waste timeand commits to completing each remainingprocedure without delay. The timethat the entrepreneur spends on gatheringinformation is ignored. It is assumedthat the entrepreneur is aware of all entryregulations and their sequence from thebeginning but has had no prior contactwith any of the officials.CostCost is recorded as a percentage of theeconomy’s income per capita. It includesall official fees and fees for legal or professionalservices if such services arerequired by law. Fees for purchasing andlegalizing company books are includedif these transactions are required by law.The company law, the commercial codeand specific regulations and fee schedulesare used as sources for calculatingcosts. In the absence of fee schedules, agovernment officer’s estimate is takenas an official source. In the absence of a(c) The International Bank for Reconstruction and Development / The World Bank