According to NIFB, businesses are slightly more confident in plans to expand than a year ago. This is on the backdrop of a bottoming out of sales declines experienced in the past two years.
The question one must ask, as a small business owner, is: when should I initiate my plans to expand? You could wait for your competitors to expand and move with the herd. You could expand too early or too late. Or you could expand at exactly the right time. Ideally, that time would be: (a) when the cost to expand is lowest, and (b) immediately before the demand for your products and services increases.
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The President’s budget proposes contains initiatives that are both good, and bad, for small business owners. We explore these and conclude on balance that most small businesses will be helped slightly.
With the release of President Obama’s FY2011 Federal Budget on February 1, 2010, we can now track the proposed changes that will affect every business and citizen of the United States. The final budget will change between now and whenever Congress finishes their work, but there are a few noticeable proposals that will have good and bad affects on American small businesses.
The Budget Document that describes the actual monetary proposals is 192 pages long (download here http://www.gpoaccess.gov/usbudget/fy11/index.html ) and can be, well frankly boring.
We have identified 4 proposals that we find are both good and bad for small business.
4 Good Proposals
• Eliminating capital gains tax for investments in small businesses. This should attract considerable amounts of new investment capital.
• Immediately implement a small business job and wage tax cut in 2010. This should give you confidence to hire and expand your business with a $5,000 tax credit for each new employee.
• Immediately implement a small business investment tax credit. This will allow you to write off up to $250,000 in qualified investments in 2010.
• Making the research and experimentation credit permanent. This will continue to attract investment for start-ups and investors in innovative businesses.
4 Bad Proposals
• Re-instate the 36% tax rate for individuals making over $200,000 and families over $250,000. Successful small business owners and families will pay more income taxes.
• Changes to IRS worker classification regulations. This will expand the definition of employee and reduce the independent contractor status leading businesses to hihger the benefit costs.
• Changes to accounting rules on inventories. This will lead to increase in taxes on inventories.
• Changes to accounting rules on transactions. There will be increased reporting requirements on deals over $600, increasing the number of transactions being taxed.
In general, we feel that these changes will help the small businesses that need financing now. These are changes that encourage you to hire and expand your business. We can provide the small business loan, cash advance for your business to grow in 2010.
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Imagine this – you work hard at your business. You’ve put in all kinds of hours and it has been a grind the past year. Wouldn’t it be nice to take a vacation? Well, if you read between the lines, President Obama’s State of the Union address proposed giving small business owners an all expense paid vacation some time during the year 2010. You may say, that is crazy. Why would he do that? Well, here is how….
- The $33 billion hiring tax credit proposal would offer small business owners a $5,000 tax credit for each new employee hired.
- You could hire this new employee to work for you while you work on other projects – and importantly take some time off.
- If you need to get some of the $5,000 credit cash in your accounts now to hire this person, you could get get some short term working capital in place very quickly, counting on the credit in the future.
While it is true, this may not have been precisely the intent of the President’s proposal was meant for, let’s face it – when you are burnt out from working too hard, your productivity is much lower than after a nice relaxing vacation.
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