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The one simple thing small businesses can do, to not lose out to big firms in fight for talent

(This post originally appeared on Philly.com)

Most economists agree that last Friday’s job numbers were very, very strong. Unemployment remains at a historic low and businesses across the country and in this area added hundreds of thousands of new workers in December alone.

The reports were great economic news for just about everyone… except for those of us that employ more than half of the U.S. workforce: small businesses. In fact, two studies released this past week revealed a different, more concerning job picture among these firms. Read More…

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How the federal shutdown is affecting small business

(This post originally appeared on Philly.com)

I guess if you’re going to partially shut down the U.S. government, now is the best time of year to do it.

The shutdown, which is officially entering its second full week, has cut back on the services offered by federal agencies including the Departments of Transportation, Interior, Agriculture, Commerce, and Treasury. Many small businesses not only rely on the services provided by these agencies but from the revenues that they indirectly generate. Already, some of these businesses are feeling the impact.

“This is the holiday season. I understand this,” Sam Samhori, who owns a small deli and pizzeria that caters to the lunchtime crowd near a federal office complex, told a local television station near San Francisco. “But right now it’s lunchtime and I have nobody.” Read More…

Will New Jersey’s ‘IRS-proof’ workaround to deduct high state and local taxes work?

(This post originally appeared on Philly.com)

One of the more controversial parts of the 2017 federal Tax Cuts and Jobs Act had to with state and local taxes. The bill, which became law a year ago, limits the annual deduction, which applies to property, sales and other similar taxes paid by individuals, to $10,000.

For people living in states with a lower tax burden this was not such a big deal. But for residents in states where taxes are higher — such as New Jersey — it’s a very big deal. According to one study, the average New Jersey resident pays in excess of $10,000 in state and local taxes a year. That’s compared with about $4,100 for both Pennsylvania and Delaware residents. Read More…

2018 taxes: Here’s how small businesses can save big

(This post originally appeared on Philly.com)

There are less than two weeks left in 2018. But, if you’re running a small business, you still have time to make a few moves that could reduce your tax bill. Here are a few that you should consider:

If you’re like me and most other business owners, you probably own a pass-through business, like an S-corporation, limited liability company, or partnership. If so, then you may be able to take advantage of a hefty new deduction that will exclude up to 20 percent of your business income from taxation. Also, if you’re earning up to $200,000 individually or $400,000 married filing jointly a year, you may also be looking at lower personal income tax rates. So, have you adjusted your estimated payments?

Now that we’re almost at year’s end, you probably have enough information to have your accountant do a forecasted income statement and tax return. Depending on how your year went, and combined with new deductions and lower rates, you may find that your taxes decreased in 2018. Which means that you may be able to reduce your last estimated tax payment for the year that’s due Jan. 15. Why give the government money when you don’t have to?

Buy capital equipment

Changes to the tax law this year will allow most small businesses to deduct up to $1 million for the purchase of qualified new or used capital equipment. That includes machinery, computers, software, and office furniture for your business. There are also new and increased deductions for buying autos. And here’s the great thing: You don’t need to pay for it all in 2018. All you need to do is put the equipment into service by the end of the year and you’ll likely be able to qualify for the deduction.

If you’ve got your eye on a piece of machinery or technology for your business, especially if you’ve been having a profitable year and need more deductions to offset income, buy it now. Speak to your banker or a leasing agent and finance it before interest rates go up further. Get it delivered and up and running by the end of the year and take the full deduction.

Max out your savings

Your retirement plans are still the best way to save money on your taxes. If you’re self-employed, then contribute as much money as you can into a SEP IRA. The rules allow you to put up to 25 percent of your net earnings up to $55,000.

If you have a 401(K) in your business, then encourage your employees to contribute as much as they can — or consider making bonus payments directly to their retirement accounts. That way you can contribute more to your 401(K) account without failing any of the discrimination tests that prohibit owners or other higher-paid managers from saving more money than lower-paid workers. Don’t have a 401(K) in your business? Under the new tax law — and as long as you have fewer than 100 employees — you can get a $500 credit against the taxes you owe for the next three years just by starting one.

Also, consider starting or contributing more to a 529 Plan. Yes, these contributions are made after-tax, but the rules will allow your savings to not only grow tax-free, but be withdrawn without any penalties as long as it’s used for higher education, including — and this is new — private- and religious-school tuition.

Bonus tip …

Hire your kids over the holiday break. You’ll get to spend some quality time together and teach them the value of an honest day’s work. Now that the standard deduction has been doubled you may also be able to pay them — and take a tax deduction — for up to $12,000 and, assuming they have no other income, they won’t owe federal taxes on that amount. Just remember to take that paycheck out of their hands and stick it in a savings account before they spend it on an Xbox.

Small Business Administration could be reaching more people. Here’s a bill that could help and some tips to hook up

(This post originally appeared on Philly.com)

Small Business Investment Companies, or SBICs, are specially licensed by the U.S. Small Business Administration to provide federally insured financing to – yes, you guessed it – small businesses. Typically, a small business could receive a few hundred thousand dollars of financing from an SBIC that would include matching federal funds.

The program – which celebrated its 60th anniversary this year – has been an undisputed success. According to a 2017 report from the U.S. Library of Congress, more than $80.5 billion in capital has been deployed by SBICs into about 172,800 financings from 1958 through 2015, and these investments helped create millions of jobs during that period. There are dozens of firms in the Philadelphia area who are licensed for SBIC financing.

But even with all its success, the SBIC could be doing better. One of its biggest challenges is that many small businesses are being left out. Why? Geography.

The numbers show that six states (California, New York, Illinois, Texas, New Jersey and Massachusetts) accounted for almost half of the $5.5 billion of SBIC financing doled in fiscal 2018. Only 31 businesses across Pennsylvania received financing last year, and that amount – $130 million (or 2.3 percent of the total) – was significantly lower than the $317 million raised in 2017 and the lowest in the past five years. New Jersey is doing better, with 46 deals and $241.9 million in financings last year, up from 37 and $208.7 the year before.

As low as Pennsylvania is, many states are doing worse. Alabama and Wyoming each only had one SBIC financing in 2018. Vermont had two. Delaware, Puerto Rico and South Dakota each had three. The reason is obvious: follow the money. There are more financial firms in Los Angeles, New York and Chicago and they tend to spread the wealth locally. This lack of diversity has caught the eye of a few lawmakers, who introduced a bill last year to address the problem.

That bill – called The Spurring Business in Communities Act – unanimously passed the U.S. Senate last week and is awaiting Presidential approval.

Co-sponsored by U.S. Sen. Marco Rubio (R-FL) and U.S. Rep. Cathy McMorris Rodgers (R-WA), the proposed legislation would loosen the rules for forming an SBIC in their home states of Florida and Washington but also in Pennsylvania and other states that have been under-performing.

The bill would exempt firms from “under licensed” and “under financed” states that apply to become SBIC-approved from the law’s full capital requirements and give first priority to new applications from those states. The bill would also establish annual reporting requirements for the Small Business Administration that would show their progress towards reaching these goals.

Want to get SBIC money for your business? For starters, figure out if you want the financing to be debt, equity or a combination of both. If you can, lean to debt because, in my opinion, just getting a loan, as long as you can service it, is much better than giving up a piece of your company.

Also, make sure you’re eligible. Your company must have 51 percent of your employees and assets in the U.S. and to qualify as a “small business,” you generally need to employ fewer than 500 people.

Be careful too – some industries, like farming, real estate and finance, don’t qualify. Finally, get your historical numbers and files in order and work with an accountant or financial advisor to put together a sound business plan that will convince a potential SBIC that their return on investment is worth the bother. You can start searching for a local firm that provides this type of financing here.

How necessary is this? Very.

According to a recent Wells Fargo study, 47 percent of small businesses said that obtaining credit was “somewhat or “very easy” for them in the past 12 months. That’s certainly good news for the companies that can pass a bank’s credit requirements.

But what about the other 53 percent? The additional financing that could be available through SBICs in Pennsylvania with the signing of this bill could make a large difference for the majority of businesses that aren’t finding it as easy to raise capital.

Philly employers are leery about asking applicants about their wage history

(This post originally appeared on Philly.com)

If you’re an employer in Philadelphia, then you better be careful when you interview a prospective employee.

That decision is being appealed and now there’s a new twist. Last week the National Federation of Independent Businesses — a national trade group representing more than 12,500 businesses in Pennsylvania, along with both the Pennsylvania Chamber of Business and Industry and the U.S. Chamber of Commerce — joined together to file an “amicus” brief to support the Philadelphia Chamber’s appeal (an amicus brief is a legal document filed by non-litigants with a strong interest in the subject matter). Read More…

EEOC complaints for sexual harassment are booming thanks to Harvey Weinstein and other factors

(This post originally appeared on Philly.com)

It’s not only been a great year for many U.S. businesses, but an equally good one for the Equal Employment Opportunity Commission too.

According to their just-published Performance and Accountability Report, employers paid more than half a trillion dollars ($505 billion) to resolve disputes affecting almost 68,000 victims of discrimination in the workplace with the commission, a rise of 4.3 percent from the $484 million reported last year. For this you can blame Harvey Weinstein and the impact of the #MeToo movement.

Cases that involved sexual harassment have become the most active areas of enforcement, jumping more than 50 percent year over year. More than 554,000 calls and emails as well as 200,000 inquiries were handled by the commission this year regarding sexual harassment and other potential discrimination claims. Read More…