Obama’s Small Business Plan: Friend Or Foe?

Today as I was scrolling through my usual small business bookmarks and headlines, I came upon an article from Kimberly Weisul at Inc. com. I wanted to share this article with you and weigh in on your thoughts. As a business owner myself I know I, too, am frustrated with our current regulations and the difficulties placed upon America’s entrepreneurs. These days opening up a business doesn’t seem as appealing as it once was given our ecnomic climate and the various taxes placed upon business owners that are no doubt a big hinderance to our growth and development as a nation.

Drop me a line at aaronyoung@laughlinusa.com and let’s discuss your thoughts on the article, ”The Lowdown on Obama’s Small Business Plan.”

I posted the body here so you can read it now and post your thoughts on our Laughlin Associates blog or connect with us on Facebook also at www.facebook.com/LaughlinAssociates. This is a big issue for all of us that own a small business…let yourself be heard and let’s get some changes made in 2012.

“Yesterday, President Obama presented the details behind one of his State of the Union initiatives: to make it easier for small businesses to raise money and to grow. Most of the president’s initiatives fall into two camps: those that change the nature of what it means to be a public company, and nick-and-tuck adjustments that aren’t going to make a huge difference for small businesses. 

The first set of rules, which would make it easier for small companies to raise money, is by far the most promising. These efforts already have some bipartisan support, but this Congress is hardly known for its ability to cooperate. And while some entrepreneurs will no doubt welcome the tax cuts, they’re not going to make a huge difference.

Making fundraising easier

Sites such as Kickstarter and Indiegogo have proven that crowdfunding is a viable way for small companies to raise money. But existing regulations make it almost impossible for entrepreneurs to offer shares to individuals who aren’t wealthy. Entrepreneurs who use Kickstarter to launch their company instead offer t-shirts, ad space, discounts, and whatever else they can come up with. Making it easier for entrepreneurs to actually sell shares could change the ecosystem. The Obama administration is calling for a ‘framework’ to allow this–but that’s something that’s not going to happen immediately.

Similarly, big regulations can take effect when companies raise more than $5 million. The president would raise that ceiling to $50 million. And after companies do go public, the president wants to have public-company regulations kick in gradually rather than all at once, to make going public a bit less onerous. All of these initiatives could really help small companies raise the money they need to grow.

Tax cuts that won’t matter

Then there are the tax cuts. The first, which is actually a tax credit for job-creation, is highly unlikely to persuade any business owner to make additional hires that they wouldn’t have already made. It’s just too much work to bring a new hire on board, never mind letting them go if it doesn’t work out. And financially, the tax credit doesn’t help that much: The president wants to give employers a 10 percent tax credit for new hires, but then the business will have to pay about 7.5 percent in payroll taxes for that same employee (not including unemployment tax). The only thing that will make business owners start hiring is stronger demand for their goods and services.

The president also wants to expand the range of “key” investments in small businesses that are exempt from capital gains tax. This would make a similar provision, enacted in 2010, permanent. This will only be meaningful if the range of eligible investments is dramatically expanded. Currently, the investment has to be in a business structured as a C corporation. Given that all 50 states have passed LLC legislation, that excludes a lot of businesses. Businesses that rely upon the skill of the owner don’t make the cut either, which means entire industries such as financial services, consulting, and engineering are excluded. Plus, the exemptions from capital gains apply to those who invest in small companies–which is not necessarily the entrepreneur.

The other tax cuts are more straightforward: Letting business owners deduct $10,000 (rather than $5,000) in start-up expenses, and allowing business-owners to take 100 percent depreciation on some equipment in the first year.

Then there’s the president’s proposal to add $1 billion to the amount of federal funding available to SBICs, or Small Business Investment Companies. SBICs invest money in small companies, and do a pretty good job of channeling that funding to low-income areas or minority or women entrepreneurs. In 2011, 34 percent of SBIC investments went to companies that fit one of those descriptions. These investments have a great track record of repayment. Why argue with this one?

Helping entrepreneurs right from the start

To really help entrepreneurs get a fair shake from the tax code, the president should seriously consider a long-time proposal from the National Association for the Self-Employed: Stop penalizing self-employed people (and entrepreneurs who have just taken the leap to start out on their own). They can’t deduct their healthcare expenses the way big companies can and they pay both the employer and the employee share of the payroll tax. Ideally, self-employed people will eventually build their companies and hire others. It’s tough enough for them to get health insurance, credibility, and everything else needed to run a business. Instead of giving them a hand, we’re handicapping them right from the start.”

*Thanks to Inc.com and Kimberly Weisul for this content.

President Appoints SBA Administrator As Cabinet Member

Last Friday, President Obama announced that SBA Administrator, Karen Mills’, position was moved to Cabinet status. Reports state that, “President Obama actions are a reflection of the importance he places on small business, economic growth, and job creation.”

The SBA explained that the President,  “Asked Congress for the authority that Presidents like Hoover and Reagan have had to reorganize and modernize the federal government.  This authority lapsed in 1984, but, today, the federal government needs to be updated to ensure that it meets the demands of entrepreneurs and small business owners in the 21st century.”

Karen Mills went on to say in an article on www.sba.gov that,  “The President’s first proposal under this authority would be to create a unified department focused on economic growth and job creation, so that we can be more effective at helping businesses do what they do best – create jobs.”

“For the entrepreneurs and small business owners that SBA and other agencies serve, this is very good news.  A more integrated approach would ensure that small businesses would have access to all of the federal government’s programs in a more seamless, coordinated, and coherent way.”

Mills continued, “I’m honored to become a member of the President’s Cabinet, and I’ll continue to provide input to the President on how we can grow the economy and empower entrepreneurs and small business owners.  At the SBA, we will work to build on the accomplishments we’ve made over the past three years, such as the record $30.5 billion in SBA lending support we provided to over 60,000 small businesses last year.”

So what are your thoughts on the President’s move to make the SBA a higher priority?

Is this a strategic effort on his part to gain votes from skeptical Americans who’ve continued to see consistent job loss and economic downturn?

Or is this is a geniune effort to get America back to work?

Give me your feedback here or drop me a line at aaronyoung@laughlinusa.com  and tell me what you think.

Small Business Owners Are Backed In Capitol Hill’s Debt Ceiling Resolution

Yesterday Congress finally came together and passed legislation to raise the debt ceiling. Regardless of your politics, this move needed to be made. Failure to do so would have resulted in higher interest rates for everyone in America. While the 24 hour news wonks are all talking about how this law has warts on it, at least there seems to be one winner…the small business owner. Take a look at this article from Fox Business News for more details.

The debt ceiling resolution ultimately amounted to a $2.4 trillion increase in the debt limit, so long as lawmakers can cut that same amount or more in spending. If a committee, set up by the debt proposal, cannot come up with spending cuts, a “trigger” in the plan will enact cuts in the government’s budget. (http://smallbusiness.foxbusiness.com.)

The biggest victory here for the small business owner is the aversion of any new tax increases. While some authorities remain uncertain about future tax hikes and the implications that this bill may hold for small business owners, at the moment things look optimistic. 

As reported in the article, Ray Keating, chief economist for the Small Business & Entrepreneurship Council, said, ” They didn’t just increase the debt ceiling as we have in the past—it is linked to what is actually going on, on the spending side. “The president and the majority in the Senate had to move away from their position that tax increases had to be a part of the deal. That is a huge win for small business owners.”

The upside to the article is that once again small business owners are seen as the backbone of America and the one thing that is keeping the economy afloat. While we didn’t ask to play Superman, that is our job. I offer my gratitude to you for always showing up and powering through.  

Drop me a line with your thoughts to Congress’ resolution to the debt ceiling and how you feel it will affect business owners like you.