5 issues small business owners will face in 2013

Published on NewsOK Modified: December 26, 2012 at 2:12 pm •  Published: December 26, 2012
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NEW YORK (AP) — In 2013, small business owners will contend with many of the same issues that made it hard to run their companies over the last 12 months.

They're also heading into the new year with a lot of uncertainty. It's unlikely that negotiations in Congress will resolve all of lawmakers' disagreements over tax and budget issues that affect small businesses. And there are still many questions about the implications of the health care law for small companies.

That points to continued caution — and perhaps slow hiring — among the nation's small companies.

"Uncertainty is the bane of every small business," says Scott Shane, a professor of entrepreneurship at Case Western Reserve University's Weatherhead School of Management in Cleveland. "Their only rational response is to pull in their horns and slow down."

Small businesses aren't likely to get much encouragement from the economy. It's expected to grow by no more than 3 percent in 2013, according to the Federal Reserve. That's a moderate pace, better than the 1.7 percent that the economy grew during the first three quarters of 2012. But it's also far from robust.

Here's a look at some of the issues facing small businesses in the coming year:

TAXES

Lawmakers are still haggling over what's called the fiscal cliff, the combination of billions of dollars in tax increases and budget cuts. Even if Congress reaches an agreement, small business owners won't have the certainty they need, according to Todd McCracken, president of the National Small Business Association, a group that lobbies on behalf of small companies.

"It almost surely won't be comprehensive enough that we won't be revisiting it next year," McCracken says. He's concerned that there'll be another fiscal cliff in six months — which would mean more negotiations and more uncertainty.

Many small business owners are worried about their personal tax rates. Sole proprietors, partners and owners of what are called S corporations, all report the income from their businesses on their individual Form 1040 returns. That means their companies are in effect taxed at personal rates, which can be higher than corporate rates.

One of the most important tax provisions for small businesses, what's known as the Section 179 deduction, will shrink to $25,000 next year from $125,000 in 2012. The deduction, which applies to equipment purchases, was $500,000 in 2011. Congress can increase the deduction at any time, even after 2013 has begun. But for the time being, business owners can't count on getting a big break.

"It's a huge change for companies planning on making investments," McCracken says.

It's not known if Congress will extend the 2 percentage point payroll tax cut that workers have had for two years. If it doesn't, consumers will have less money in their paychecks to spend, and that is likely to affect retailers and any other small businesses that sell directly to the public.

HEALTH CARE

Health care has been another source of uncertainty for small business owners. The new year will bring some, but probably not all, of the answers to questions about how the new health care law will affect them. Many will have to devote some time to understanding the law — or hire someone to help them do it.

"They'll have to get their arms around the law, look at their options, learn more about the exchanges," says John Arensmeyer, CEO of Small Business Majority, a lobbying group.

Under the law, companies with 50 or more employees will be required to provide affordable health care insurance for their employees starting Jan. 1, 2014. During 2013, federal and state health insurance exchanges will be set up, and owners will be able to see how much it will cost them to buy insurance. As the year begins, however, many small business owners don't know whether their states will be creating exchanges, or whether they'll have to go into the national system — and they don't know what that will mean for their costs.

For some owners, that information will help them decide whether they will buy insurance, or whether they'll decide it's cheaper to not provide coverage and just pay the government a $2,000-per-employee fine. For those who have close to 50 workers, they may decide to not hire more workers in order to remain outside the law's jurisdiction.



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