For Small Business…It Never Stops
Published by Bob Foster· Comments Off
Breezing through the mass of federal laws that are constantly being introduced in Congress, I came across this piece of work that was introduced on July 6, 2011:
H.R.2411 – Reduce America’s Debt Now Act of 2011
To provide for an employee election on Form W-4 to have amounts deducted and withheld from wages to be used to reduce the public debt.
This bill is a perfect example of how far out of touch the members of Congress really are when it comes to small business. Here are the key parts of the bill, as they now stand.
SEC. 2. VOLUNTARY WITHHOLDING FROM PAYROLL FOR REDUCTION OF THE PUBLIC DEBT.
(a) In General- An employee may elect for an employer to deduct and withhold upon the payment of wages by such employer amounts to be used to reduce the public debt.
(b) Requirement of Withholding- Every employer making payment of wages shall deduct and withhold upon such wages any amounts so elected, and shall pay such amounts over to the Secretary of the Treasury at such times and in such manner as the Secretary shall by regulation prescribe.
So, if you are a small business owner and any of your employees decide it is their patriotic duty to help pay off the government’s debt—a debt they did not help to create—it becomes your responsibility to provide the means for them to do that.
That will require your small business bookkeeping department to handle all the paperwork, deduct the money from the employee’s wages, account for the money, maintain the records, send the payment to the Treasury department, and adhere to all the filing requirements that always come with bureaucratic boondoggles.
Since the IRS would obviously become involved, you can be sure that there will be a number of regulations and penalties for improperly filling out the forms, late filings, or other technical mistakes. Just what every small business owner needs right now.
Oh yeah, one more point of interest…the contribution is not tax deductible.
The Secretary [of the Treasury] shall include on such [withholding] certificates a reasonably conspicuous statement that any amounts deducted and withheld from wages under subsection (a) are not deductible as charitable contributions for Federal income tax purposes.
Here is the sponsor of this bill (his first creation since being elected to Congress):
Rep. Rick Crawford
Republican • 1st District, Arkansas • 1st Term • Sworn In 2011
Current Term 2011 – 2012
The National Restaurant Assn was one of the largest contributors to Crawford’s election, and now every restaurant owner in America (with employees) may have more bookkeeping to do, money to withhold, government forms to fill out, and regulations to follow if this bill passes. This may impact, directly or indirectly, every restaurant owner’s decision to hire more people, and/or hold down prices.
Crawford’s district is largely agricultural, so every farmer (with employees) who voted for him could be subjected to more government rules, regulations, and bureaucratic paperwork.
Of course, this is also the case for all farms, restaurants, and every other small business in America. It could hit the smaller firms, with 100 or fewer employees, the hardest, which is 98.2% of all employer firms in the U.S. Smaller firms usually have smaller staffs that are already overworked.
I cannot believe that the good folks in Arkansas would allow someone so out of touch with reality to represent them for another term in Congress.
More importantly, are there any small-business people in the U.S. who even care that people like this are constantly writing laws that make running their business more difficult??
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A New Demand for an Old Industry
Published by Bob Foster· Comments Off
This subject would not have caught my attention had I not just read about how rich the executives of big companies were becoming…while everyone else was moving backwards. A recent article in the Huffington Post pointed out that the executives of S&P 500 publicly traded companies had pay increases of more than 28 percent in 2010, over 2009, while rank-and-file workers are at the same place they were in 1980. This doesn’t count all the other new millionaires made within partnerships, and non-S&P 500 big businesses.
So, I guess it should be no surprise that a nearly extinct (at least according to media attention) industry has been resurrected and made fashionable again. I’m talking here about “professional domestic service.” All of a sudden the domestic service industry in the U.S. is taking off to try and meet the demands of the new wealthy.
Of course, the “domestic service industry” has a long and prestigious history dating back centuries. The industry is steeped in pride, because not just anyone can be a professional butler, chauffeur, housekeeper, governess, personal assistant, houseman, laundress, or chef (emphasis on “professional”).
That is why Christopher Ely, former butler and estate manager for the powerful figure of Brooke Astor, teamed up with Manhattan’s “French Culinary Institute (FCI)” to form the “Estate Management Studies” program. This new program is now a part of the FCI overall curriculum, and is directed by Christopher Ely.
The training is not cheap. They currently have five different special curriculums set up and they cost about $1,750 for each class. More detailed culinary training is more costly. However, Ely doesn’t think his school will have any problem attracting students, since the demand for “trained” people is rising so fast, because, in the words of professional butler, Charles MacPherson: “The rich just want to live like rich people.”
At the same time, the rewards can be substantial, Professionally trained domestic staff can make a very good wage. Ely says a “good” butler should make about $80,000 per year in base salary.
So, for everyone out there who is unemployed, maybe this is something to consider. Professional domestic service is an industry that prides itself in a long history of integrity, professional service and financial success.
For specific information on “Estate Management Studies” at “The French Culinary Institute,” click here. They have classes in both New York and California.
Small Business To Be Hit…Again!
Published by Bob Foster· Comments Off
A short time ago, Federal Reserve Chairman, Ben Bernanke said the job market was gradually improving. Since then, unemployment has increased, causing Bernanke to admit he was “stumped” (my word–Bernanke’s words were: “We don’t have a precise read…”).
It is obvious that no one in Washington has a “precise read,” because the politicians are once again looking to the small business community to pony up more taxes to pay for a bloated federal budget.
The following video clip is of a short discussion between Treasury Secretary Tim Geitner, and Representative Renee Ellmers (R-N.C.), which should cause every small business owner in America to be concerned:
(email subscribers view video on my blog)
So, why shouldn’t we increase taxes on small businesses making over $250,000 per year? That’s a lot of money to most of us. Well, other than the fact that the U.S. already has the highest corporate tax rate in the world (even higher than socialist France) here are a couple of things to consider:
- The combined federal and state corporate income tax rate averages very closely to 40 percent of corporate profit. That means that a small business owner making $250,000 for the year pays about $100,000 of their profit to federal and state governments. Of the remaining $150,000, the small business owner must pay on the principal of any loans the company has. Basically, interest is deductible–principal is not. That is why, in many cases, small business owners take home less money than many of their employees–yet they pay more taxes. And if Geitner has his way, they will pay even more.
- The second thing to consider, is where is the money going to come from to grow a small business and make more jobs? Since the banks are not loaning to small businesses, the only place the money can come from today is out of profits, that is; the reinvestment of profits. That means that of the remains from the example above, a certain portion must be reinvested back into the business before any new jobs can be created. In many cases, this means that a small business owner showing $250,000 in corporate profits on their tax return may actually be living below the poverty level…before additional taxes.
Yes, it really makes sense to increase taxes on small business owners making $250,000 in corporate profits. In other words take away the money they may normally use to create new jobs. I just love the way politicians think.
You may note that Geitner said that they had no alternative to raising taxes, because otherwise “…you have to shrink the overall size of government programs.” Duh! Regarding Geitner’s statement, here are a couple of interesting statistics:
- Federal spending has climbed from $2.89 Trillion in 2008, to $3.82 Trillion this year–almost a Trillion dollar increase.
- For those concerned about federal funds for education, please note that although the amounts have steadily increased since the Clinton years, federal funding still only accounts for 8.2 percent of overall spending on education. The other 91.8 percent is provided by state and local government.
So, once again, the politicians are trying to kill the goose that lays the golden job opportunities. With little access to capital, crippling government regulations, the looming cost of the new healthcare law, and now a new small business taxation plan taking shape, is it any wonder that small businesses are not charging full-speed ahead with expansion plans and the creation of new jobs.
On the other hand, there is very little in the mainstream media about small business activism. Is this a case where the small business community is going to just sit back and hope that things will eventually improve by themselves?
What about you?
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Funding For Startups
Published by Bob Foster· 2 Comments
When talking about funding for startups, I continually find it interesting (and disheartening) that the business community so closely (exclusively?) associates “startups” with Venture Capital. In fact, a young entrepreneur recently told me that a business should not be called a “startup” until they begin searching for venture capital.
The Reality
That was a very naïve comment, and here’s why: According to the Kauffman Foundation, there
were over 6.5 new businesses started in the U.S. during 2010. Also, according to PriceWaterhouseCoopers reports, there were 3,277 venture capital deals made during 2010. Not very good odds.
So, where did the funding for startups come from to start the remainder of the 6.5 million new businesses?
Angel Investors
Certainly some financing came from Angel Investors, but their requirements are not that much different from the VCs. Angels usually precede VCs and get a company started before the VC becomes involved.
The data is elusive, but It appears that (certified) Angel investors may not have made substantially more deals than the VCs did. Even if they made 10 times as many deals as the VCs, that would only account for about one-half of one percent of the total startups for 2010.
Angel investors are actively coming together as “groups” that act on new venture deals as investing partners, just like the Venture Capitalists. The lone wolf angel investor is a dying breed.
Banks
Of course, no bank is going to provide funding for startups (other than, perhaps, a personal loan to the entrepreneur…if they have substantial collateral). There is also no indication that banks will begin more aggressive lending to businesses, especially small businesses, anytime in the foreseeable future.
Banks certainly are not the answer now, or any time soon.
SBA Loans
We need to remember that SBA loans are made by banks, not the government. SBA loans are only partially guaranteed by the government, and I have been told by many bankers that their SBA loans must meet the same borrower requirements as a non-SBA loan. Therefore, in reality, the SBA is not the answer either.
Grants
There is no such thing as a U.S. government grant available for the purpose of starting a for-profit company. There can be local “incentives” like tax postponement, subsidized property or facilities, etc., but finding grant money to start a for-profit business in the U.S. is like finding the Holy Grail.
While many of the economically emerging countries are offering strong incentives to entice American entrepreneurs to start businesses in their country, the U.S. seems paralyzed about doing anything to keep those businesses here, let alone expand our own business community.
Who’s Left?
Well, that still leaves something over 6 million new startup businesses without any realistic form of outside funding. That means the primary sources of funding for startups available in the U.S. are: (1) the entrepreneur’s personal borrowing capacity, (2) family, and (3) friends.
Unfortunately, for nearly all of the over 6.5 million new U.S. businesses that will start up during 2011, the only investor decision that can be made is which family member or friend to approach first. Very sad.
How did you fund your startup business?
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Entrepreneur Definition
Published by Bob Foster· 2 Comments
Many people are looking for a valid entrepreneur definition, but the very term “entrepreneur” is being challenged by the “bully” of the entrepreneurial world–Entrepreneur Media, Inc. (EMI), publishers of Entrepreneur magazine. EMI is one of the largest resources of information for entrepreneurs around the world…as long as you don’t use the word ENTREPRENEUR in your business. It seems that EMI owns the U.S. trademark on the word “entrepreneur.” Yup, even though the word is 100′s of years old, commonly used, and derived from the French–EMI holds the trademark. Worse yet, they vigorously defend their trademark as evidenced by just a few of their threats and prosecutions, as follows:
EMI goes after a broad spectrum of businesses with the help of Latham & Watkins, a 2,000 attorney corporate law firm with 31 offices around the world. No one is spared, from the one-person website business, to Universities and non-profit organizations, as well as large businesses. There is no tally available, but EMI has sued, or threatened to sue scores of businesses and organizations since the early 1980′s.
Interestingly, the founder of Entrepreneur magazine, John Leonard Burke (aka Chase Revel), was a convicted felon (attempted bank robbery) who also, sometime later, had notes delivered to bank tellers saying their children had been kidnapped and to leave canvas bags of money for him, and the children would be returned. Actually, he did not kidnap the children, nor did he receive any money. However, attempted extortion still carries a penalty.
After his release from prison he started Entrepreneur and then registered the trademark “entrepreneur” in 1979. He eventually sold his enterprise to the current owners in the late 1980′s…and continued to have brushes with the law.
The irony I see in this whole issue of entrepreneur definition is the fact that the people who are at the forefront of promoting entrepreneurship (EMI & Entrepreneur) are the very people who are running roughshod over the entrepreneurs who use the word “entrepreneur” in the definition or promotion of their business. So be very careful how you use the word “entrepreneur” in your business
It also makes me question whether I will ever recommend any product or activity sponsored by EMI or Entrepreneur magazine in the future. I think I will distance myself from this enterprise from here on.
What do you think?
Note: This post is an excerpt taken from an article in Businessweek, (May 23-May29, 2011) authored by Paul M. Barrett.
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No Worker Left Behind?
Published by Bob Foster· Comments Off
It appears that the concept of “no worker left behind” is a mythical term, at least according to a recent article in the New York Times. This article discussed what is happening to the American labor force, and here are some interesting statistics from that article:
- In 1954, around 96 percent of American men between the ages of 25 and 54 were in the workforce.
- Today, only 80 percent of American men in the same age group are in the workforce.
- One-fifth of all American men in their prime working years are not even in the workforce today.
- The U.S. has a lower percent of prime age men in their workforce than any other G-7 nation.
Please note that this does not include those who are in the workforce, but are currently unemployed. The numbers above are only for those men who cannot work, or do not want to work…they are out of the workforce entirely.
So, why are so many American men dropping out of the workforce? What has happened to the concept of “no worker left behind” on the national level? Here are some additional statistics that may shed some light on the reasons:
- Ten years ago there were 5 million Americans receiving Disability payments, primarily from federal funds.
- Today, there are 8.5 million Americans on disability—and the number is growing like wildfire. Today’s annual cost to U.S. taxpayers is $115 Billion, or around $1,500 per household.
- There are now more non-working men in the U.S. than at any time since the “Great Depression.”
All of these statistics are interesting in view of a post I wrote last week—Places That Are Hiring—about how large tech firms cannot find qualified people to work for them, and so they are buying up their smaller brethren just to acquire the talent.
In addition, it seems that many companies are not outsourcing work for monetary gain, they outsource because they can’t get the work done in the U.S. They move their business to where the qualified labor force is located. What a sad commentary on the quality and capabilities of America’s workforce.
America is losing its vigor. People in the U.S. today no longer exhibit the energy that made us great. Worse yet, no amount of stimulus money from the government is going to help—in fact our government has become so obsessed with programs that provide “comfort,” they have ignored programs to reinvigorate our country.
Capital is unavailable to small businesses, regulations are crushing, incentives are non-existent, there are no effective training programs that help people develop the skills they need to enter the workforce, and on, and on…and no one in Washington seems to care. All we hear today are rants on Social Security, Medicare, and war. What happened to the concepts of “no worker left behind” and “full employment?”
Isn’t it about time we looked at the big picture and tried to figure out how best to reinvigorate America, so we can provide good paying jobs for well-trained people in our workforce, and help that workforce grow back to be the best in the world—again. With more successful businesses, there would be more taxes paid, and we could stop the “slash and burn” approach to trying to balance budgets.
Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has. —Margaret Mead
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