How Will an Obama Presidency Impact Entrepreneurs?

With President-elect Obama getting ready to take office in two months, small business owners are trying to figure out just what an Obama presidency will mean for them over the next four years. Turns out they don't seem to agree (imagine that).

Those who are concerned about Obama's presidency cite:

• Potentially higher taxes. Obama has stated that he will increase taxes (or rather, roll back the Bush 2003 tax cuts and return to 2001 rates) for individuals making over $250,000 a year. Since 75% of business owners structure their business to pass the income through, they will be paying taxes at the individual level.
• Increased benefits costs. Many fear Obama's plan for universal health care will include increased requirements on small employers to provide coverage at employer expense.
• Restriction of free trade, which has boosted exports for small retail and manufacturing businesses.

However, Obama and his team have addressed all of these issues, and more, in some way. He has pledged to:

• Cut taxes for small businesses with less than $250,000 net income. It's worth noting that less than 3% of taxpayers deriving more 50% of their income from a business or farm will pay taxes in either of the top brackets. That drops to less than 2% when you include those who earn less than 50% of their income from their business. In other words, 98% of business owners will not be paying more taxes under the Obama plan.
• Exempt start-ups from capital gains taxes. While this may not affect bootstrapped companies, it will be a major boon for those that require larger amounts of capital, either from the founders or outside investors. This ends up in business owners' pocketbooks because they can keep greater ownership of their company when taking on investors.
• Lower the self-employment tax rate for the self-employed. This will affect not only those who identify themselves as self-employed, but also the 75% of business owners who pass the income through from their business entities.
• Provide health insurance tax credits to small businesses that provide health benefits to their employees. While it may not completely offset the expense for those who end up having to (or choosing to) add those benefits, it will come as a welcome relief to those that are already doing so.
• Temporarily offer a $3,000 tax credit for every new job created. This is intended not only to help reduce unemployment, but also to help small businesses obtain the manpower they need to grow.
• Expand the Small Business Administration lending programs. You may not be aware that the Bush administration slashed the SBA's budget by more than 50% over the course of eight years, more than any other agency! Every dollar the SBA uses to make guarantees to lenders supports ten dollars in loans to small businesses.
• Create a national network of public-private business incubators. Obama has committed $250 million per year to create business incubators that provide physical space, design business plans, give advice on business practices and more.
• Increase access to capital to women-owned and minority-owned businesses. Women are majority owners of more than 28% of U.S. businesses, but less than 4% of venture-funded firms. Less than 1% of venture capital dollars go to minority-owned firms. And women and minority business owners are more likely to have their loan applications denied.

For more details, you can download the Obama-Biden Small Business Plan.

The fact of the matter is that with the economy like it is, times are going to be tough for everyone, including entrepreneurs, for many months, perhaps even years, to come. But entrepreneurs who can be nimble and take advantage of current trends and government policies are probably in far better shape than those whose jobs are dependent on the large, corporate financial, manufacturing and real estate sectors that are struggling worst of all. I'm optimistic, but I don't expect it to be an easy ride.

One other observation... I know that those few entrepreneurs who are making over $250K a year, or approaching it, are concerned about higher taxes, but frankly, given the state of the economy, I think we ought to be a lot more concerned about how we're going to make money, period, than about a few percentage points in taxes. Small businesses don't just deal with other small businesses. If Fortune 500 companies fail, so do the small businesses that serve them.

My point is, the economy is systemic. Yes, the small business sector is the lifeblood of the economy and needs help. But helping the entire economy will help your personal economy. "A rising tide raises all ships." Always keep the big picture in mind.

Watch for upcoming posts about how entrepreneurs can best take advantage of these changes, as well as new business opportunities that will be hot for the next four years.

Elsewhere on the Web:

• Obama's Impact on Small Business - BusinessWeek
• On Main Street, Buckling Up for a Bumpy Ride - New York Times
• Obama's Agenda Could Affect Small Business - USA Today
• President-Elect Obama: What Will Change Really Mean? - Inc.
• What the Obama Presidency Will Mean For Small Businesses - Wall Street Journal blogs
• What the Obama Presidency Means for Growing Businesses - bMighty.com