The Small Eusiness Election Guide 1

The battle for the US Presidency is raging. Arguments in mainstream media are as wide ranging as they are mostly irrelevant to small business. In the end, the bailouts of major companies and the war in Iraq will affect small business owners much as they affect everyone. Unless you are in the lipstick or Bridge Building industries, most of the discussion housed on TV has been of little concern to you at all.

But there are issues that do make a difference to small business owners and hopefuls. Although they are not as interesting to the media as lipstick and who was for or against a bridge that was never built are.

Let’s make an effort to examine some of the policies presented, and determine what they are going to do for the ever important small business owner and their ability to create jobs.

Battle 1 – Startup Costs and Asset Management – Job Creation 101

1. Sen. Obama is proposing a Capital Gains tax cut to small and startup companies

Now, as nice as this may sound, it is largely irrelevant. Most small and startup companies don’t have capital gains to worry about. Asset ownership has never been one the major posts to startup businesses. And is really counter productive since it pertains to the liquidation (and thereby closing of business in many cases) For those that this affects, it is definitely nice. But it has little if any real impact on small and startup businesses and zero effect on the running and growing of a business.

CG taxes affect non-inventory assets and is assessed at the sale of the asset. So this tax is really only relevant at the liquidation of a company or parts of its assets. Most assets held by small businesses never appreciate they depreciate, so the tax is actually not creating much if anything for small businesses.

In essence, this law is beneficial for those that don’t want to run their business, but build and sell it to bigger entities. Dealing in the proprietary assets such as inventions and accompanying patents that can increase in value. But be aware, it will have a negative effect on those that want to sell it with a vested future interest. (Royalty payments are taxed as income not appreciated assets. The benefit only occurs to those who outright sell their patents and investments to a major company. It will also be beneficial to those that want to have small investment and speculation companies. But this will be of little interest to most small business hopefuls until the market stabilizes.

This law is counter productive to small businesses who are actually interested in keeping and growing their business as a going concern. Therefore it does little to nothing for job creation and business growth.

Small Business Ownership Grade: C-
Startup and Job Creation Grade: F

2. Sen. McCain is proposing First year Expensing of Capital Investments

This is an interesting position. Eliminating the multi year expensing of capital goods will improve the cash position of small businesses to quickly expand, especially businesses that are creating manufacturing jobs and are in need of machinery etc. before they can increase staff.

This proposal however does very little for businesses who run on intellectual capital. The expensing of an office desk chair and a computer is not what is stifling the small business growth.

This proposal will have a beneficial effect to those that are considering startups that require large investment, but not much for the shoestring startup in intellectual goods. Much of the small businesses today are using the internet to be competitive with big businesses just because they are able to run small initial investment companies that can outsource and utilize little capital for asset investment. So a large part of the startup will remain unaffected.

The applied job creation effect however will be more beneficial since the companies that do benefit from capital investments (mainly base manufacturing and goods production) are often the ones that hire staff in conjunction with the investment.

Small Business Ownership Grade: C+
Startup and Job Creation: B

Battle 1 Summary

McCain/Palin proposes the most beneficial ideas for startups and job creation. However, direct expensing will not do much for the shoestring startup and sole proprietor with small initial investment, its design is intended to build businesses that create jobs.

Obama/Biden proposes a solution that not only will not enable startups, but has no beneficial effect in job creation since it only pertains to liquidating assets. This does however post an interesting position for small property investors, providing that investment assets are included, which isn’t clearly stated by the proposition at this point.

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