While Americans have argued for years over whether or not multi-national banks require more government intervention, little time in mass media has been utilized to argue for the small businesses that make up the vast majority of our economy. Despite small businesses representing 99.7% of all private-sector employers, many continue to face government regulations that limit their ability to achieve healthy, sustainable growth. In order to allow for small businesses and start-up companies to build lasting momentum in our troubled economy, US legislators must be willing to create policies that support small business creation and management.
An Overabundance of Licenses
Over the course of the last 50 years, the industries requiring a government permit increased by 28%. A freight transport company, for example, employs drivers who must have four different licenses to travel a mere four miles between New York City and Port Newark, New Jersey.
A recent Institute for Justice study found that in 1950, only 1 in 20 US workers needed the government’s permission to pursue a chosen occupation, while today, the ratio has risen to approximately 1 in 3. In many instances, researchers described the regulations as “severe, arbitrary and irrational.” The additional license requirement is something that can “pose substantial barriers for those seeking work, particularly those most likely to aspire to these occupations- minorities, those of lesser means and those with less education.”
For Small Companies, Taxes are a Big Task
The US economy would benefit significantly from a three-year incubation period during which they would face lower taxes, fewer regulatory requirements and fewer penalties for first-time and harmless paperwork violations.
Until legislators can agree on when this incubation period can begin, entrepreneurs should be deducting all “ordinary and necessary” business expenses. This can be interpreted to mean anything from work-related travel and client dinners to rent and utilities if an individual works from home. It also means that making smart purchases at the end of the year can reduce the tax burden.
Another easy way to reduce the tax burden is to hire a tax specialist. “Your job is to get your company up and running,says “David Ehrenberg, CEO of Early Growth Financial Services. “The last thing you want to think about is taxes. Its essential to hire a tax advisor to accept liability and make sure you follow all regulations.”
Even Assistance Comes with Fine Print
While in the midst of difficult economic conditions, it is perhaps understandable that many seek out further government regulations designed to “jumpstart” the economy. However, the Institute for Justice researchers asserts “When Mississippi replaced its cosmetology-license requirement for African hair-braiders with a modest registration requirement, 300 new braiders registered with the state.”
Instead of focusing energy and resources on multinational banks and corporations, perhaps by freeing small businesses and especially start-ups from unnecessary regulation, we could finally see the sort of innovation in the market that leads to lasting economic growth.
Getting out of the safety of school and the hypothetical case studies where students learn to deal with unintended consequences before they have to pay for them is a scary time. However, with the help of experts and making some smart tax decisions, entrepreneurs should be able to survive the coming tax season.
Julianna Davies, a business writer with expertise covering such things as how an entrepreneurship MBA prepares students for life in the small business world, joins MyCorporation to discuss some of the things new start-up owners should know about tax policies and hidden costs. Particularly in the tech world, new ventures have been cropping up almost daily. Julianna’s article tackles another angle by looking at ways legislators could–and perhaps should–do more to make the entrepreneur’s path a slightly easier one.