Are you the type of person who is willing to take the entrepreneurial plunge, even if the economic waters are choppy? If so, Entrepreneur’s Corner, a new feature of In Business magazine, is for you. This month, we asked experts about the options available in three areas — health care, taxes, and information technology
Health Care
Thanks to provisions in the Patient Protection and Affordable Care Act, this might be an ideal time to start a business. Tami Quiram, vice president of the small business segment for Humana, Inc., noted the new health care law includes a small business tax credit for employers with fewer than 25 employees and an average wage of less than $50,000. The credit, which is offered on a sliding scale, starts at 35% and increases to 50% in 2014.
That is but one option, and Quiram advised entrepreneurs to start by understanding all options based on whether or not you have employees. If not, the first question is, do you, as a sole proprietor, have access to health insurance through a spouse? If the entrepreneur is under the age of 26, coverage is available under a parent’s plan.
Then decide how much you can spend. “There are options in the market at different price points, and cash flow is of primary concern for a start-up, so understand what your limitations are,” Quiram said. “My advice would be to understand your personal tolerance for risk.”
If you don’t have employees, options include individual insurance. Today, individual insurance is not “guaranteed issue,” meaning it’s subject to medical underwriting, but it’s also guaranteed renewable. It’s typically less expensive than group coverage due to the underwriting involved, and the average cycle time — the time from application to a decision on qualifying — usually is only a few days.
If you do have employees, consider the tax advantages of group insurance. There is a tax advantage by paying the cost with pre-tax dollars. While small business insurance is guaranteed issue, the risk is priced.
“So review those options and then figure out, in your personal situation, which one makes the most sense,” Quiram said. “I also advise looking at some of the lesser-known benefits because sometimes individual insurance includes discounts on glasses or vision care. That is not readily known.”
On the group side, a lot of health insurance coverage includes in the price employee assistance programs and other benefits.
Other state options are the Badger Care program, which provides health insurance coverage to eligible self-employed people based on income. However, the popular but perpetually underfunded program could be further affected by attempts to balance the state budget.
In addition, Gov.-elect Scott Walker has called for an end to taxing Health Savings Accounts, which would make HSAs a more affordable options for entrepreneurs. Walker estimates that not taxing HSAs could save consumers $4 million to $8 million.
Taxes
Just two months ago, small businesses faced a potential tax avalanche, but the federal government has decided to extend the current federal tax rates and enact some additional goodies, prompting Wipfli Partner Jim Butler to call them “the best investment and tax incentives in U.S. history.” The recently enacted bill also includes:
- 100% expensing for machinery and equipment acquired and placed in service after Sept. 8, 2010 and before Jan. 1, 2010.
- A 50% bonus first-year depreciation allowance for property placed in service after Dec. 31, 2011 and before Jan. 1, 2013.
- A two-year extension of the R&D tax credit.
- Reinstating the estate tax, but with more favorable components than scheduled ÃÂÂÂ a $5 million exemption and a 35% top tax rate for an estate valued above that threshold.
- A two-year patch for the alternative minimum tax that would ensure that an estimated 21 million households would not be hit with a tax increase.
Of all those tax benefits now available, Butler cited the small business tax credit. He noted that since the health care law passed, insurance carrier Blue Cross and Blue Shield says it has enrolled more than 9,000 new members covered by 400 employers, 38% of which have never provided health insurance before. “I think this is going to be hugely successful for businesses,” Butler stated. “It’s going to be a great incentive, and it’s going to encourage business people to provide health care benefits that did not provide them before.”
Information Technology
If you’re worried about the expense of acquiring basic information technology tools, Jackie Martini Mortell, president of Smart Solutions, has some reassuring news: it’s less expensive than ever to acquire modern communications for your business. In Martini Mortell’s view, people want to communicate with you online, by e-mail, or by phone, and they want to, at any time of the day or night, go to the online world and find information about your business. “They want to contact you in multiple ways at any hour of the day,” she notes, “so that is what you’re really trying to get from your IT resources.”
Your online presentation has to be polished and professional, and these days it’s much more important than an office. “You can get a very good-looking website for as little as $1,000, depending on how complex your business model is,” she noted. “If you’re trying to present a shopping cart, it’s still worth investing some money and have it look very professional and reputable. So I’d say for $1,000 to $5,000 can get you a very nice, professional looking e-commerce website.”
In terms of e-mail and word processing, they can be had for a song — about $50 per person, per year — with Google apps or other services. For that price, you can bundle shared calendar, shared e-mail, word processing documents, and spread sheets.
Business systems for accounting or payroll are a different story. They should be placed on your business computer, preferably a quality laptop in the range of $2,000. You might need software unique to your industry for things like payroll or invoicing.
It will cost a little bit to purchase a mobile device and a monthly voice and data plan for the iPhone 4 ($199, plus about $100 for voice and data) or an Android smart phone (free with U.S. Cellular plan, plus $70 to $100/month). Instead of a landline phone, a small businesses can select a Voice over Internet Protocol system for lower cost and the convenience of integrating phone and computer. For example, accessing voice messages in an e-mail system. Martini Mortell recommends having both phone systems, unless you have a virtual company, which is possible with a laptop and a cellular data plan.
Sign up for the free IB Update — your weekly resource for local business news, analysis, voices and the names you need to know. Click here.
