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.

My Interview on Women’s Radio

A few days ago I got a great opportunity to speak with fellow entrepreneur and business owner, Pat Lynch, of WomensRadio.com. Pat is the host of “Speak Up,” a radio show that hosts a wide range of speakers and topics, providing insight into today’s economic issues, business leadership techniques, and how to better manage your business ventures.

Pat and I spoke on a number of topics during the interview, but most importantly the value of incorporating your business as a small business owner. In today’s economic climate, it is more important than ever to protect yourself, your assets, and the mounting liabilities that today’s small businesses face.

Learn more by listening to the interview here.

I love hearing your feedback! Drop me a line on Facebook and Twitter.

9/11 Anniversary Prompts Remembrance of What Makes America Great

 

On the eve of the 9/11 anniversary, I have taken time, as I’m sure many of us have to reflect on the details of that tragic day 9 years ago.

 I can vividly recall that on the morning of September 11, 2001 I was getting ready to head to the Portland International Airport. The activity of our young children getting ready to leave for school had my wife and I hurriedly trying to get all the loose ends tied up in time for the kids to get on the bus and me to get to the airport. As usual the Today Show was on in the background. All attention was pulled away from our morning routine as we saw the pictures of the first World Trade Center tower on fire caused by a plane crash and then watched in disbelief as a plane hit the second tower. We stood holding each other around the TV as we watched the horrifying pictures coming from “Ground Zero”.

I was scheduled to fly to Northern Nevada that morning in anticipation of a Laughlin Associates 3-day workshop due to begin the next morning. Of course all air traffic was halted. There would be no flight that morning. Also, in light of the unprecedented tragedy, the question was raised by some of whether or not we should hold the event at all. We had over 100 business owners scheduled to attend and many of them were already enjoying some late summer time at Lake Tahoe where the event would be held. I decided that we would proceed with the workshop and quickly called the 6 speakers that were supposed to present. They were from all over the Western United States and all had families to be concerned about. Without exception each one confirmed that they would get in the car and head for Nevada.

The drive from Portland, Oregon to Lake Tahoe takes about 11 hours. I was having issues with my car’s audio system and so had no radio with which to keep track of the details unfolding on the East Coast. Rather, what I saw spoke volumes about the resilience of small business owners. Throughout my long day’s drive I saw people working in their stores, cooking burgers in the restaurants, working on road crews, and driving 18 wheelers. As much as it had seemed on television that the world had stopped, it had, in fact, not.

When I arrived at the resort at Lake Tahoe, I was impressed to find that virtually every person who had registered for the 3-day event had shown up. Despite the ongoing tragedy perpetrated by individuals wanting to shut down America, these 100+ business owners were determined to not let anything keep them from building their companies, taking care of their families, and ensuring that “no terrorist was going to shut them down.”

One of the most humbling moments of my life was standing before that group to open the first session. I can still feel the swelling pride in my chest that I felt for these people, most of whom were strangers to me. Nevertheless, in that moment I felt connected to them in a deep and poignant way. I knew right there that no matter what might come at us in the future, the small business people of America would continue to take steps of faith into the darkness. I knew that despite the challenges the world threw at them, their resilience would not be slackened. This is as true today as it was 9 years ago. We face big challenges and we see that government and huge companies are all looking toward the small businesses to keep the economic ball rolling, without bailouts and without much top down help at all.

As we go into this weekend, let’s make sure that we never forget what makes this country great. It is its people. Let’s never forget what makes our economy work. It is small business. And let us not forget the source of the blessings we each enjoy in this great land.

Thoughtfully,

Aaron S. Young, CEO

Laughlin Associates, Inc.