Ever since the recession started, politicians have said that the key to recovery is the success of small business. It is no secret that politicians are two-faced; it is a skill necessary for getting, and staying, elected. But this hypocrisy is getting worse. Here is an example: state and local governments are very aggressively targeting small businesses (as well as big businesses) with overtime and independent contactor audits (among other things). In fact, they are increasing the number of auditors. And if you have been on the receiving end of an audit, you know that the auditors are not playing fair. But it probably isn’t the auditors' fault as cash-strapped governments are looking for revenue wherever they can. So the directives come from the top. (By the way, we have a workshop coming up on how to avoid the catastrophic legal employment pitfalls. For info, see nyreport.com/HRworkshop.)
Increased taxes hit small businesses very hard. Why? Because most small businesses are passed through entities like LLCs (taxes like partnerships), S corporations and sole proprietors. This means they are taxed at the individual level, not at the company level. It also means that they are taxed on the income their company earns, whether or not the profits are distributed. So higher taxes mean that the company has less cash to reinvest back into the business (and less opportunity to create more jobs).
These are just a few ways that government (state, local and federal) are not our friends. In my next post, I will tell you my simple suggestion to eliminate the need for government to dig in our pockets (and prevent us from helping the economy).
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