This story appears in Forbes Entrepreneurs
September 7, 2015
Volume 196, Issue 3, Page 62
Since opening her own practice in Cookeville, Tenn. in 2003, estate lawyer Joy Buck Gothard has hired four employees. She considers them family, she says, and has encouraged each to get health insurance by paying a subsidy straight from her office checking account to the insurer of the worker’s choice. But early this year Gothard, who also owns a cattle ranch, read some alarming news in The Progressive Farmer: The Affordable Care Act, a.k.a. Obamacare, would make arrangements like hers illegal and subject to fines of up to $100 per day per employee, or $36,500 per year, effective July 1, 2015. Shortly thereafter her CPA called to warn her she could no longer pay insurance subsidies from her checking account. That call got her moving.
Gothard, 56, started pricing group plans on the ObamaCare small business exchange–just what the law’s drafters intended. But she couldn’t find an affordable plan. Since she has fewer than 50 employees, she isn’t subject to ObamaCare’s employer mandate. So, on the advice of her CPA, Gothard has temporarily bumped up workers’ salaries to help them pay for individual policies. It’s not ideal; she must fork over payroll taxes, and the employees must pay payroll and income taxes on the extra compensation. But at least she’s not running afoul of the law.
It’s frustrating,” Gothard says. “People have no idea how easy it is to be punished for trying to do the right thing.”
Complain about ObamaCare if you like, but it’s only the newest on a long list of legal, tax and regulatory traps that can drain an entrepreneur’s energy and pocketbook. From a startup’s first day, there are consequential questions. Should you operate as a corporation or partnership? Hire employees or use independent contractors? Choose wrong and a distraction can turn into a disaster. How to avoid mistakes?
–Act quickly. It’s tempting to push off administrative tasks. Waiting
too long, however, limits your options and can result in significant penalties.
–Outsource. Entrepreneurs, by nature, find it hard to let go. But payroll, health insurance and retirement plan administration are all areas where regulations and paperwork can overwhelm a small enterprise. Since her search for an affordable health insurance plan turned into an unsuccessful time sink, Gothard says she’ll probably hire an insurance broker.
–Find advisors you trust. The call she received from her longtime CPA spurred Gothard to action. Find a tax and accounting team you like, and stick with them. There are way too many tax deadlines and changes for anyone but a pro to keep track of, and even they have problems sometimes.
–Don’t rely on pros alone. Miss a deadline or break a rule and it’s your money at risk. Stay up on changes most likely to affect you by reading trade publications and websites for your industry. The Small Business Administration and Internal Revenue Service both offer convenient e-mail alerts for small businesses. –Kelly Phillips Erb
More advice on small biz and startup gotchas:
