It would probably be fine for most businesses, but not for a nightclub or bar -- the SFPD, ABC, and city government have lots more ability to arbitrarily shut the place down (by pulling the liquor license) than they do with other businesses. Read jwz's blog for the entire saga.

Someone (Ron Conway? Mark Pincus? Jack Dorsey? Drew Houston?) should talk to Ed Lee about how the nightclubs and entertainment industry are WHY startups choose to be in SF vs. down in Silicon Valley.