The Small Business administration defines “a small business as a concern that is organized for profit; has a place of business in the U.S.; operates primarily within the U.S. or makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor; is independently owned and operated; and is not dominant in its field on a national basis.” “The business may be a sole proprietorship, partnership, corporation, or any other legal form.” In determining what constitutes a small business. (Unknown Author, Small Business Administration, What is a Small Business, Retrieved from www.sba.gov), but unfortunately many others do not hold this kind of definition when it comes to small businesses.
An example of which is on display in the new financial reform regulation which allows “100% exclusion of capital gains to qualifying small businesses.” “To qualify, a small business must be a C-Corporation (no LLC’s, S-Corp’s or Sole Proprietorships) with assets of less than $50 million.” “The investor must buy the shares directly from the company at “original issue” and must hold it for at least five years. ” Unknown Author, Small Business Jobs Act, Retrieved from www.firststarcapital.com).So in order to qualify for this, Mom and Pop companies will have to become investors which may not be realistic for many start-ups. While I can see the benefit of this new rule, I can not see it as advantageous for real small businesses.
Another example is when a business earns a profit; it pays income taxes on its earnings. However, if a business then shows a loss in later years, tax rules allow the business to “Carry Back” its loss and deduct the profits from earlier years. “By filing an amended tax return for the earlier profitable year, the business can claim an immediate refund on the taxes that were previously paid.” “This is what they refer to when they say loss carry back and it has been extended from two (2) years to five (5) which is good.” Unknown Author, Small Business Jobs Act, Retrieved from www.firststarcapital.com). I can see this as a good thing for the real small businesses but can not see it as a true benefit for those who can not afford a Certified Public Accountant (CPA) to do their books every year and take on the responsibility of filing amended returns on the years when the business suffers a loss.
But the best example is the requirements from traditional lending institution to require perfect credit scores or pristine background in order to assist many real small businesses from achieving the goal of growth and expansion. Before any one of the Mom and Pop companies to receive the help that they need to succeed, they must first meet the requirements set down by these institutions and many real small businesses will never qualify to even be considered. The traditional lending institutions will seek out those who qualify and those happen to not be those who are dominant in its field on a national basis. This defies the definition of a small business but it is exactly what happens on Main Street everyday. Great ideas and outstanding business plans abound means little if your donations are not large enough to garner the assistance needed for real small businesses to grow.