Featured Post

30 Do’s And 20 Don’ts In Starting A Small Business

Small scale businesses are easier to set up compared to the middle or large scale businesses that require more time, feasibility reports, ad...

Monday, June 21, 2010

Can Small Businesses Afford Section 413 Of The Jobs Bill Before Congress (HR4213)?

Can Small Businesses Afford Section 413 of The Jobs Bill before Congress (HR4213)?
Section 413 of the amendments to HR4213, the Jobs Bill, is currently making its way through Congress. Section 413 of the amendments Section 413 of the amendments appears to cripple anyone who can't find a job from going into business for him/her self by removing CRITICAL TAX ADVANTAGES for starting small businesses.

Section 413 of this bill, buried on pages 282 through 287 of the amendments (link below) are provisions that will have an almost immediate and detrimental effect on service-based businesses currently structured as "S" corporations, and could provide the catalyst for Congress to attack all other enterprises (retailers, wholesalers, manufacturers, construction) operating under the tax code's Subchapter "S."

The proposal's sponsors want to treat all ordinary, non-compensation income derived by owners of service-based "S" corporations with three or fewer employees as being subject to self-employment taxes, EVEN PROFITS RETAINED BY THE BUSINESS TO PROVIDE WORKING CAPITAL, TO PAY DOWN DEBT, TO EXPAND CAPACITY, & TO GROW THE BUSINESS. In today's economic climate, such retained profits (if there are any profits at all) could be the saving grace that prevents small businesses from going under!

Many businesses I know of WOULD NOT HAVE SURVIVED had ALL RETAINED EARNINGS for future capacity of the business been subject to self employment taxes as this bill proposes to do. This proposal specifically discriminates against small, start-up firms and gives larger, established businesses an unfair competitive advantage. If passed, this will affect several professional service sectors including health care providers, lawyers, accountants, consultants, engineers, realtors, and even self-employed actors, artists, and artisans!

Here is a link to the bill's amendments (Section 413 begins on page 282, line 11):

Amendments To Congress Jobs Bill

1 comment:

Anonymous said...

Who added this to the bill?