Chicago Community Ventures Blog

Small Business Can Cash In with Tax Cuts and Credits for Hiring

There are 2 tax acts currently in place that will allow employers to benefit from hiring new employees. The first is through the State of Illinois. We posted an article about it but its worth bringing up again.

 

Small businesses that create new jobs between July 1, 2010 and June 30, 2011 may be able to take advantage of a $2,500 tax credit for new hires. The Illinois Small Business Job Creation Tax Credit is a $2,500 tax credit is available to businesses with 50 or fewer employees (including all locations) as of June 30, 2010. New small businesses hiring their first Illinois employee(s) may also qualify for the credit. Those businesses that began hiring on July 1 may apply for the credit retroactively.

 

The Illinois Department of Commerce and Economic Opportunity created a
simple, easy-to-use online registration system for small business owners at
JobsTaxCredit.illinois.gov. Eligible companies should register new positions
online as soon as a new, full-time Illinois employee is hired and begins
providing services. After one year, companies can use the website to enter
substantiating data and apply for their tax credit certificate. Tax credit
certificates will be awarded beginning July 1, 2011. The total amount of
credits issued is capped at $50 million, which will support 20,000 jobs. – Press Release, Office of Governor Pat Quinn

 

The second is a tax cut and credit; its a federal program. The HIRE (Hiring Incentives to Restore Employment) tax exemption offers an IMMEDIATE benefit to employers that hire employees that have been out of work for 60 days or more are exempt from paying their share of social security payroll taxes, which is 6.2%. This exemption expires at the end of the year, so DO NOT DELAY.

 

In addition to exempting employers from these payroll taxes, the HIRE Act allows employers to claim a tax credit of up to $1,000 for each newly hired qualifying worker who is retained for one year. To read more about the HIRE ACT, visit the IRS here

 

With both tax breaks, on a salary of $40,000, that’s over $5,000 that could be saved. These efforts are with the hopes of stimulating hiring. What say you small business owners? Have you found these tax breaks and credits motivating enough to hire new staff?

 

 

The Importance of Access to Capital for MBEs

A recent article from Entrepreneur.com highlights the disparity between white and black owned businesses, discussing what drives this gap and what is being done to resolve this problem.

In general, the article sums up that the lack of access to capital is the primary reason driving the lack of minority entrepreneurs.  The article cites that “the culprit…is a low level of personal wealth, which translates into limited access to startup capital, and ultimately puts a stopper on the accumulation and transfer of riches to the next generation.”

Recognizing that this disparity in business ownership exists, one of CCV’s focus areas is assisting minority-owned enterprises (MBE).  In 2008 alone, 70% of the clients CCV served were minority-owned businesses.  Our counselors have unlocked millions of dollars of capital to not only assist start-up businesses, but also to ensure that existing minority-owned enterprises remain open.

The article also calls out that one of the most important reasons to support and grow MBEs is the fact that many of these businesses are integral to the development of underserved urban – mostly minority – communities.  Investing in a MBE, is investing in the community.

CCV is also expanding its services to focus more on community-based initiatives. In addition to assisting businesses on a one-off basis, CCV is providing financial and consulting services to a community of businesses.  The goal is to get the business owners in the community to work together and leverage one another’s resources to strengthen the business corridor as a whole.  You can read more about the project and how it has progressed in past CCV newsletters.

Although the percentage of MBEs is still disproportionately low, we here at CCV see encouraging signs of growth and energy that will continue to stimulate innovation.  As the Entrepreneur.com article points out, quoting Thomas Boston of EuQuant, “’The minority business sector is becoming a larger and larger market, and if the country is to continue to grow and be competitive, we have to make sure that this sector grows and is competitive as well.’”

Read the full article from Entreprenuer.com here.

The Small Biz Outlook for '09

Crain's author Meghan Streit takes a look at what small business should expect in 2009.  Amongst her predictions:

• Access to credit and capital will continue to tighten meaning preserving cash will be more important than ever for small business owners
• More start-ups will emerge with more focused business concepts.  A recent study found that 45% of today's fastest growing companies started during an economic downturn
• Competition will increase and only the fittest businesses will survive

Read more about Meghan's outlook for 2009 here. 

To learn how to be one of the survivors, check out yesterday's post. 

How Important is Small Business?

The answer is simple:  incredibly important.  As President Obama remarked recently:

“For in the end, it's businesses -- large and small -- that generate the jobs, provide the salaries, and serve as the foundation on which the American people's lives and dreams depend.”

The U.S. Small Business Administration’s website shares the facts on the size and importance of small business.

Small businesses:

• Represent 99.7% of all employer firms
• Employ half of all private sector employees
• Pay 45% of total U.S. private payroll
• Have generated 60% - 80% of net new jobs annually over the last decade

What role do women and minority entrepreneurs play in the economy?

• Of the 23 million firms in 2002, 17.8% were minority-owned:
  • 6.6% were owned by Hispanic Americans
  • 5.0% by African Americans
  • 4.6% by Asian Americans
  • 0.8% by American Indians and Alaskan Natives and
  • 0.1% by Native Hawaiian and other Pacific Islanders
• In 2002, minorities owned 4.1 million firms that generated $694 billion in revenues and employed 4.8 million workers
• In 2002, 6.5 million businesses were owned by women that generated $940 billion in revenues and employed 7.1 million workers

So what does this all mean and why should you care?  Well, first of all the numbers speak for themselves: small business is a huge driver of the U.S. economy.  By supporting and strengthening small business you are supporting and strengthening your local economy.  

Second, and more urgently, given the current financial situation these small business are under a great deal of stress.  Banks have tightened up their lending standards for loans and as a result businesses are unable to access credit needed to fund daily operations, let alone fund the expansion and growth needed to create more jobs.  Further, the first line of funding for many business owners – the equity in their homes – is no longer there. 

If this lack of access to credit were to persist the results would lead to business closure or, at best, a lack of expansion which will result in minimal job creation and layoffs.  These results would be devastating to our economy given the size of small business and its importance to growth in this country.

In October, President Obama called for a Small Business Rescue Plan.  The plan focuses on using tools available through the Small Business Administration to extend credit to struggling firms while simultaneously providing tax breaks to help create more jobs.  President Obama’s plan is quoted saying, “With small businesses responsible for more than two-thirds of new job creation, this plan is vital to stemming job losses and turning our economy around.” 

With President Obama in office for less than a month we will have to wait and see what will come of his proposed plan.  Fortunately, we know that Obama believes in small business just as much as we here at CCV do and understand that when small business is unhealthy our economy is unhealthy.  To learn more details about President Obama’s proposed plan click here.