The reason? Economy, plain and simple. California is too expensive and its taxes and regulations are too high. The Tax Foundation ranks California 48th in terms of business climate. California also ranks 48th in terms of regulatory burdens.
And California's cost of living is 50 percent higher than the national average. Not surprisingly, California businesses tend to move from counties with the highest taxes, highest regulatory burdens, and most expensive real estate, such as San Francisco, and tend to move to states where it's easier to thrive. If you do, they can go after the business owner for things like back wages and other benefits that employees must receive in California. The question is inspired by the publication of another survey that places California in the basement among states, measured by its receptivity to business.
While the answer is always “it depends, the truth is that most of the time for these people, forming their business in California is almost inevitable.