New York vs. San Francisco: The Cost of Operating a Business in the Valley and the Alley

NEW YORK v SAN FRANCISCO The Cost of Operating a Business in the Valley and the Alley Could there be any more iconic a location for a tech company Both SF and NYC have been cited as two of the most expen- to set up shop than San Francisco, home of the famed Silicon sive cities in America, and for new business owners trying to Valley? For some entrepreneurs, the answer might be New York City, home of the rising Silicon Alley start-up culture. build up their brand, money is not always plentiful. But if you need to be at the center of it all, which city is less expensive to operate a business in? S CORPORATE INCOME TAX RATE The primary expenses to consider when deciding where to do business are taxes. NEW YORK SAN FRANCISCO Even though NYC's state and local taxes could be higher than San Francisco's, the tax placed total payroll State can push the bill incredibly high. Local State Local Taxes for a business with 108 employees and a payroll of $5.4 8.3% 8.0% • $81,000/year in taxes in San Francisco. • $8,100/year in nearby San Jose where 8.8% 1.5% of TOTAL PAYROLL the tax does not exist. SALARIES FOR EMPLOYEES As your business grows, it will need to hire top notch talent to stay competitive in either city. AVERAGE ANNUAL SALARY OF COMMON START-UP JOBS NEW YORK SAN FRANCISCO NEW YORK SAN FRANCISCO $85,000 $97,000 $49,000 $56,000 Software Engineer Executive Assistant NEW YORK SAN FRANCISCO NEW YORK SAN FRANCISCO $60,000 $68,000 $82,000 $94,000 Graphic Designer Project Manager NEW YORK SAN FRANCISCO $83,000 $94,000 Web Developer 9 PERSONAL INCOME TAXES companies also need to consider personal income tax rates. Business owners who take personal income from their NEW YORK SAN FRANCISCO State State Local Assuming you take a salary of $100,000/year for five years, you will pay over $10,300 more in 0% Local taxes in New York City. 10.55% 8.97% 2.90 -3.65% E COST OF OFFICE SPACE Besides taxes, the cost of office rent is one of the main considerations a business must make. AVERAGE MONTHLY COST PER SQUARE FOOT NEW YORK SAN FRANCISCO New York office space costs around 50% more than San Francisco. In five years time, the same 1000 square foot office will cost: .-- ------ • $150,000 in San Francisco • $225,000 in New York City $3.75 $2.50 By settling in San Francisco, your business could save around $75,00. COST OF UTILITIES Productive work requires the basic office comfort that only electricity, water, and climate control can provide. AVERAGE MONTHLY BILL NEW YORK SAN FRANCISCO An office in San Francisco will spend an $288.26 $216.24 p average of $4,321 less on utilities in five years if operation. & sO WHICH CITY IS BEST? Between the Alley and the Valley, San Francisco remains a more reasonable location to operate a business. Unless of course you plan to take your company public. San Francisco's payroll tax includes gains from employees cashing out stock options. TechCrunch reports that if Twitter went public and raised $100 million--and had to pay this tax--they could lose as much as $75 million of it to San Francisco. Sources: sfexaminer.com · sftreasurer.org • online.wsj.com · sbecouncil.org . nyc.gov · techcrunch.com FOCUS