Actually this is probably because start-process can't find your git
executable. Try doing something like this in your Emacs configuration
(adjust the path if needed):
(setenv "PATH" (concat (getenv "PATH") ":/usr/local/git/bin"))
(setq exec-path (append exec-path '("/usr/local/git/bin")))
If you're trying to use magit in emacs, and you can't figure out why it's not recognizing your git repos, it's probably because it can't find git. And it can't find git, because it's not in the path.
Just set the path, as it's show above, and add your own directory, wherever git is being held. If you're on a mac, you can add /opt/local/bin for the rest of your utilities.