Tag Archives: small business

Only One Third of Census Bureau Number for Small Businesses are Truly Small Businesses

Of the 32,570,855 small businesses the US Census Bureau says are small businesses, only about one-third of them are what most people think of when they think of a small business, one that has employees.

Its even worse than that. The 76.2% of small businesses that do not have employees only account for 4% of sales of all small businesses. So what is the explanation? Who are these non-employers?

According to Alan Grundy of the Census Bureau, they are

“self-employed individuals operating a very small unincorporated business which may or may not be the owner’s principal source of income.”

Simply put, these “small business owners” are not business owners at all.

A lot of them are people making some money “on the side.” Maybe they sell a few thousand dollars a year of stuff on Etsy. Or a student that babysits to support his education. Or a professional that occasionally rents out his apartment on Airbnb. These people most likely have a full-time job with health insurance and other benefits. They are certainly not entrepreneurs. They are just earning a few extra dollars that they report on Schedule C.

Then there are other types of businesses skewing the numbers. For example, a person who owns ten rental properties, each one with its own separate tax return. Yes, he is a real business owner, but of one business, not ten. There can also be several partners that own one business, but each one files his own tax return.

Another source of the inflated figures are “independents.” These are also real businesses, but without employees. Many of these “businesses” are the main livelihood of service providers such as stockbrokers, cleaners, delivery people. A hairstylist who is independent and just works in someone else’s salon; an accountant or lawyer who works from home; or a consultant or real estate agent who works from a work-share space are all small businesses without employees. The owner and worker is the same person.

A more accurate way of knowing if someone is a small business owner is to ask whether he or she has employees. Real employers sign paychecks, have vacation policies, break rooms, hires and fires.
More precisely, there are closer to 7.8 million true small businesses in the USA. The rest of the 32 million are just people reporting extra income on their tax returns.

Small Business and Health Insurance

Small Business Owners Have a Lot to Think Over When it Comes to Healthcare Benefits for Employees

Many factors need to be considered by small business owners when deciding what exactly they should do about equipping their employees with health insurance benefits. Here are several issues to consider when contemplating this costly decision.

1.    What type of business do you run? According to healthcare consultant Robert Laszewski small companies which are made up mostly by the owners, such as doctors’ offices, dental practices, architectural and accounting firms should most likely provide health insurance for their employees.  “I expect they’ll continue to offer insurance through the group model because that’s the way to get tax-deductible health insurance. They also have to compete for skilled workers,” says Laszewski. However, he adds, family owned restaurants or dry cleaning shops that hire minimum wage or unskilled workers might not find it in their best interest to provide group insurance for their employees.

2.    Consider the tax benefits of providing healthcare insurance to your workers: The federal government gives tax breaks to most companies with less than 25 low-wage employees. Today the benefit can come to 35 percent of health costs, but will go up to 50 percent in 2014 for businesses that purchase their insurance through their state’s online health insurance market.

3.    Take into account what your employees actually want: Now that employees are going to be required to own health insurance, they might prefer to get that coverage from their employers, therefore encouraging their bosses to supply that coverage.

4.    Don’t forget about subsidies when deciding to offer health coverage or not: It is possible that your employees might be better off buying their healthcare coverage at a subsidized rate from the newly formed state exchanges. (Families of four with income of $92,000 annually or less will qualify for such subsidies. Low-income workers in California may be eligible for even bigger subsidies under Medi-Cal.)

5.    Do not make your decision under pressure: Laszewski says, “Do absolutely nothing until this shakes out,” he says , adding that there is a dearth of information at the moment. “I might wait a year, because what the exchanges look like and what the prices look like the first year may not be what they look like the second year,” he adds.

Small business owners should try not to panic. Although it is certain that we are entering a brave new world of healthcare culture, it is certainly not going to be as bad as you may think.