Despite lip service to the undeniable fact that small business is the creator of American jobs, most of the effort in 2009 has gone to behemoths deemed “too big to fail” and to emergency relief for the individuals thrown out of work by these institutions. Meanwhile, the approval rating of Congress has dropped to 21 percent, and the President’s to 50 percent. What is going on?

Is it possible that our elected officials are so inundated by lobbyist and special interest groups in Washington that they are not hearing the voice of their constituents back at home, many of whom own or work for a small business? Can they really be thinking that what they have been doing creates real value for America’s engine of economic growth?

NSBA is the nation’s oldest advocacy organization representing small business, but what’s unique about NSBA is that it truly is OUR organization and it takes direction from real small-business owners.

NSBA’s government affairs staff members serve as ambassadors of the small-business community at large, advancing our small business agenda. They provide day-to-day contact with elected officials and their staff, reminding them that there is nothing small about small business, and that it is the economic engine that fuels our economy. It is an uphill battle against unions, consumer groups, foreign businesses and big, but failing American companies.

In spite of all the great advocacy work that NSBA does on behalf of the small-business community, I can’t help but wonder if we – small business owners and employees – are doing all we can to help further elevate small business issues and concerns in our nation’s capital. We are numerous, and we can be much more powerful-but only if we join our voices together.

That is why I am challenging each and every member of NSBA to take action when NSBA issues a legislative action alert; to regularly visit and familiarize yourself with the priority issues posted on the NSBA website; and to utilize NSBA’s online advocacy system to connect with your elected officials to share with them your passion and concern on issues important to your small-business.

As you flip through the pages of this issue of the NSBA ADVOCATE you will find numerous resources that will help you become fully effective at getting your point across; find out what Congress did to advance the small-business agenda; and hear from a few members of Congress who are working hard for small business. We may not get paid like Beltway insiders, but we live with the consequences of what Congress does, and we can provide the dose of reality that Congress needs. When Congress listens to us, it might even see its approval rating break 30 percent!

Will pending legislation in Congress help ease the traditional barriers  small-business owner’s face in providing health care to their employees, and get them back on track to living the American Dream?  Or will America’s small businesses find themselves stuck in a perpetual American Nightmare?

Members of Congress began the fall stretch of the congressional agenda where they left off before the August recess by addressing NSBA’s number one priority: health care reform. Lawmakers have carried their tumultuous town hall experiences back to Washington, D.C.  While President Obama’s primetime joint address to Congress posited an unwavering course for health care reform this fall, there is undeniably a bumpy road ahead.

Congress recessed for August with four out of five committees with jurisdiction over health care having passed four different versions of legislation. One of those four committees, the Energy and Commerce Committee, could potentially address several amendments that were put aside before the House recessed. At some point, House leaders and committee chairmen will combine their various versions into one bill to be voted on by the full House chamber.

The Senate Finance Committee just recently introduced a bill reflecting the efforts of three Democrat and three Republican Committee members who worked over the recess to find common ground. Their work is largely seen as the only hope for a bipartisan bill. Nevertheless, Senate Finance Committee Chair Max Baucus (D-Mont.) returned from recess with a framework for legislation for the Committee to consider.  Sen. Baucus said he expects the Senate Finance Committee to consider legislation the week of September 21. A final version from the Senate Finance Committee will then be combined with the Senate Health, Education, Labor, and Pensions Committee bill that was passed in July and sent to the Senate floor.
Speculating on the timing of health care reform for the remainder of 2009 is not worthwhile; there are as many opportunities for progress as there are for obstructions. The chaotic health care reform deliberations of the summer are certain to carry over into the fall. Threatening the timing and chances of a bipartisan compromise further are controversial budget reconciliation instructions inserted into the FY2010 budget resolution that would likely end with a partisan and partial health care reform outcome.

Needless to say, NSBA will continue to fight for reform that will provide small businesses with quality, affordable health insurance. Continue to check back with NSBA’s Health Care Reform Today Web for action alerts and more information as it is made available.

By U.S. Representative Wally Herger

We are in the midst of serious economic difficulties, and American workers and small businesses are bearing the brunt of the recession.  To hasten a recovery, we need to make it easier to run a small business and do away with unnecessary and unfair burdens created by government policies.  We have already seen too many businesses close up shop or cut back on employees and expenses. We need to level the playing field to give all businesses the best chance to compete.

Millions of Americans are self-employed entrepreneurs who have decided to take a risk and pursue their dreams.  But unfortunately, due to an unfair clause in our tax code, the self-employed are excluded from benefits larger businesses enjoy.  To level this playing field, I have joined with Representatives Kind (D-WI), Reichert (R-WA), and Kosmas (D-FL) to introduce the Equity for our Nation’s Self-Employed Act.

Under current law, corporations are able to deduct the cost of health insurance premiums as a business expense and forgo payroll (FICA) taxes on these costs.  But self-employed workers are barred from doing the same, costing them an additional 15.3 percent on their health insurance premiums.  While health insurance costs are a major concern of all employers, this tax inequity forces the self-employed to pay an extra $1,940 annually.  Coming from a small-business background myself, I am well aware that these types of costs can it difficult to operate a business.  They can also make the difference in whether or not business owners are able to obtain coverage for themselves and their families.

With United States on the verge of a health care crisis and millions of people are already without insurance because of rising health care costs, we need to rise above partisanship to overcome these obstacles.  The Equity for Our Nation’s Self-Employed Act would correct part of the problem by helping to level the playing field for small businesses.  It’s patently unfair that sole proprietors, a vital engine of job creation and our economy, are penalized with additional taxes because they are not granted the write-offs that larger businesses receive.  Our legislation would correct this inequity and help make health insurance more affordable for millions of Americans.

We ought to champion fairness in our tax code and pass this legislation. Economic growth and a level playing field should not be partisan issues, and I am looking forward to working with my fellow Members to correct this unfair provision.  In doing so, we will strengthen both our economy and the bold innovators and entrepreneurs who drive its progress.

Run Your LLC on Your Own Terms
The Operating Agreement governs the operation and management of the LLC. It describes the business and economic arrangement of the members.  LLCs need to document important and material issues that could impact the members, such as profit-sharing and decision-making rules as well as their procedures for handling the departure/addition of members, and the dissolution/termination of the LLC. Without an Operating Agreement, the owners will be poorly-equipped to settle misunderstandings over the operations, finances, and management of the LLC. In addition, without an Operating Agreement, the LLC will be subject to the default operating rules created by state law.

The LLC Operating Agreement generally specifies, among other things, the business name, the official business address, the identities of the members, the way in which cash is distributed to the members, the way in which profits and losses are to be divided between the members, and how the company will be managed. The Operating Agreement should also reflect each member’s financial contributions to the LLC and the member’s ownership interests.

Even Single Owner Companies Need an Operating Agreement
Even though the LLC Operating Agreement is not required to be filed with any state agency, it is unwise to operate an LLC without an LLC Operating Agreement, even if you’re the sole owner of your LLC. It is extremely important that you create an Operating Agreement to separate yourself as an individual from your LLC, even if you are the sole owner of your LLC. Without the formality of an Operating Agreement, the LLC can closely resemble a sole proprietorship, which does not limit your personal liability for business debts of the LLC. Without an LLC Operating Agreement, the basic operation of the LLC would then be governed by state law, which may not be advantageous to the LLC, it members, or the business it conducts.

LLC Operating Agreements on the Web
Entrepreneurs and start-ups today look to the internet for cost effective methods of getting legal documents to govern their business practices and start their new ventures.   www.MyLLCAgreement.com is one example of a legal self help website that specializes in customizable LLC Operating agreements that are law firm quality without the law firm cost.  You won’t have to worry about what provisions to include in your agreement or whether it will comply with state law.  Simply complete the Customization Questionnaire and in a matter of minutes you will have a well drafted customized LLC Operating Agreement tailored to the needs of your business.

Your LLC Operating Agreement – Helpful Tips
The LLC Operating Agreement does not have to be filed with any state agency.  All states will enforce valid Operating Agreements entered into among LLC members. The Operating Agreement will only be enforced against the persons who are parties to the agreement. Therefore, it is extremely important that all members of an LLC sign the Operating Agreement.
1    Make sure the LLC operating agreement is signed by all the members.  The operating agreement will only be enforced against the people who have signed it.
2    Make sure each member has a signed copy of the LLC operating agreement.
3    Try keeping an electronic copy of your LLC agreement so it is easily accessible.
4    Make sure to “Amend” your LLC operating agreement when making a change to your business arrangement, such as, adding a member, changing the manager, making additional capital contributions to the LLC.

About the Author:
Adam Bergman is the president and creator of MyLLCAgreement.com, the market’s leading online legal website that offers customized LLC Operating Agreements.  Mr. Bergman has worked as a corporate and tax attorney at White & Case LLP, Dewey LeBoeuf LLP, and Thelen LLP, three of the most prominent corporate law firms in the United States where he advised thousands of entrepreneurs and business owners on a wide range of corporate and tax issues involving limited liability companies for the past seven years. Adam Bergman is recognized as a leading partnership tax expert and has lectured attorneys on the taxation of LLCs.

Below are a few strategies that small-business owners can employ as they aim to keep employees motivated and businesses profitable while navigating the tough economic climate.

Identify, develop, and retain your best people
Leaders who are performing under pressure will know which employees are their best assets and essential to survival. Business owners must support them to manage stress and maintain self-belief in order to ensure their engagement with the company’s goals. These employees will also be critical to growing a business once the recession is over.

Avoid staff lay-offs by focusing on the future when making decisions
Real leaders will continue investing in people when times are tough because that’s precisely when competitors can steal a march and gain advantage. Small-business owners will inevitably be very focused on the short-term, but those who keep planning for the future as well will come out of tough times stronger than others.

Communicate openly and honestly with your people
High performing leaders will disclose something of themselves to their employees. They will be honest about the organization’s challenges and be open to challenge and questions from their teams. A strong and meaningful vision that employees can connect with emotionally will be key to survival strategies.

Create a ‘mentally tough’ environment
Real leaders develop mental toughness by staying in control under stress, maintaining self-belief, and focusing on the things that really matter. Mentally tough leaders will be resilient to the current challenges and create conditions where their employees can thrive under pressure.

Small businesses might feel especially disheartened by the current volatility and anxiety in the business world, as they see their company faced with unfamiliar challenges.  However, small business owners can turn these economic tough times into a period of sustainability and even growth for their companies if they can build their and their employees’ mental toughness.

Use tough times as an opportunity to become better leaders
In tough economic environments, too many leaders focus on the constraints on performance rather than the supports and opportunities available. By focusing on the controllables, real leaders will be able to sustain performance and develop resilient teams around them.

Overall, small-business owners must continue to walk the balance beam. They must ensure that clients are supported, and employees are motivated so that their businesses can survive the current economic challenges.

Graham Jones is Co-founder and Director of Lane4, a performance development consultancy working in the fields of organizational change, leadership development, and executive coaching and a co-author of “Developing Mental Toughness; Gold Medal Strategies for Transforming Your Business Performance”. Lane4 incorporates sports psychology to challenge staid thinking, while positively influencing business mindset leading to increased performance.

It is clear that America is at a crossroads and leaders in Washington must seriously consider new and innovative policies that promote a better, more confident, prosperous, and secure America in the 21st century.  The only question is how do elected officials accomplish such a broad reaching mission?

The answer is simple: provide small business with favorable policies that allow them to worry less about politicking and more about doing what they are good at – running their businesses, creating jobs and fueling the economy.

So where should Washington’s leadership start in crafting a pro-small business agenda?  In February small-business leaders gathered from across the nation to attend the Small Business Congress hosted by the National Small Business Association (NSBA).  During their time together, small-business owners talked with one another, received briefings on crucial small-business issues, and drafted and voted on the top ten issues facing small business that require immediate attention of lawmakers and the administration.  The issues are as follows:

Broad Health Care Reform
The small-business community needs substantial relief from escalating health insurance premiums.  This level of relief can only be achieved through a broad reform of the health care system with a goal of universal coverage, focus on individual responsibility and empowerment, the creation of the right market-based incentives, and a relentless focus on improving quality while driving out unnecessary, wasteful and harmful care.

NSBA’s plan to accomplish universal coverage can be simply summarized:  1) require everyone to have a basic level of coverage; 2) reform the insurance system so no one can be denied coverage and so costs are fairly spread; and 3) institute a system of subsidies, based upon family income, so that everyone can afford coverage. NSBA’s plan calls for a basic benefit package that includes only truly necessary benefits and recognizes the need for higher deductibles for those able to afford them. The basic benefit package would be subject to federally-established rating rules based on modified community rating, adjusted for geography, with defined rate bands within which all federally-defined packages must be priced. Insurers would operate on a guaranteed-issue basis and would be allowed to give limited discounts or benefit enhancements for wellness programs.
Tax incentives would be capped at the premium level for the required package, and additional coverage could be purchased using after-tax dollars. This will curtail over-insurance and ease demand for health benefits in-lieu of other compensation. These reforms would help return a greater share of health insurance to its role as a financial backstop, rather than a reimbursement mechanism for all expenses, and provide a greater focus on individual responsibility and empowerment to drive more robust consumer behavior.

NSBA also believes more must be done to improve quality and keep costs in check. Delivery system reforms that shift reimbursement from a volume-based purchasing model to a value-based purchasing model would appropriately reimburse providers on actual health outcomes and standards, rather than procedures.

Health care infrastructure investment will provide the framework for the implementation of electronic records and procedures including digital prescription writing, individual electronic medical records, and universal physician IDs. Greater transparency of medical procedure costs and outcomes would incite competition and motivate consumerism.
Greater access to primary care through medical homes and other alternatives to traditional doctor’s offices should provide near-term relief. In addition to limits on medical malpractice awards, NSBA supports the implementation of Health Courts to handle medical injury disputes. These reforms can reduce unnecessary procedures, increase efficiency, and improve the quality of health care.

It has become clear to NSBA that, to bring meaningful affordability, access, and equity in health care to small businesses and their employees, a broad reform of the health care and health insurance systems is called for.

Fair Labor Practices in the Workplace
One of the biggest threats to small business is potential changes to labor practices in the workplace. The top priority for organized labor in the 111th Congress is legislation that would change long-standing labor laws that have been on the books for over 60 years to allow for increased union membership. Organized labor’s agenda includes legislation that could have significant impact on the employer-employee relationships in small businesses, including the deceptively named Employee Free Choice Act and the RESPECT Act.

Employee Free Choice Act or ‘Card check’
The Employee Free Choice Act would take away a worker’s right to a federally supervised private ballot when deciding whether or not to join a union. Instead, the proposed bill would require the National Labor Relations Board (NLRB) to certify a union that brings in signed authorization cards from a majority of employees in the company bargaining unit. The card check system makes it easier and less expensive for unions to target and organize small businesses of any size, using any means available—false or misleading promises, threats or coercion. Employees who sign just to get persistent organizers out of their living rooms will now be stuck with the union in their workplaces indefinitely. As if this weren’t bad enough, the Act could then impose a contract on the employer, based on what a government-selected arbitrator decides. Even if a wage increase can’t get passed along, or a union pension plan is underfunded, the arbitrator could force it on an unwilling small business.
Furthermore, NLRB jurisdictional standards used to identify organizing-eligible businesses are outdated and not indexed for inflation. Some of these jurisdictional standards are shockingly low, including any non-retail company with more than $50,000 annually in direct or indirect inflow or outflow of goods or services across state lines. To be considered a small business for nearly every government program according to the U.S. Small Business Administration’s Size Standards, however, the range in total annual sales starts at $750,000 and goes up to $34 million—far above NLRB’s threshold.

RESPECT Act
Under current federal law, unions cannot organize supervisors. However, a top priority of organized labor is to dramatically limit which workers the National Labor Relations Act (NLRA) classifies as “supervisors.”

The NLRA, the nation’s primary law determining the rights of employees to join unions and bargain collectively, excludes supervisors from the definition of employee. Currently, a supervisor is defined by the NLRA as an employee with the authority to “hire, transfer, suspend, lay-off, recall, promote, discharge, assign, reward, or discipline other employees or to responsibly direct them, or to adjust their grievances, or to effectively recommend such action” so long as this authority requires the use of “independent judgment.”

The Re-Empowerment of Skilled and Professional Employees and Construction Tradeworkers (RESPECT) Act would remove from the definition of “supervisor” the duties of assigning and responsibly directing other employees. The legislation also specifies that supervisors must “hire, transfer, suspend, lay-off, recall, promote, discharge, reward, or discipline other employees” for a MAJORITY of their work time. This proposes a significant change in the NLRA resulting in a disproportionate impact on small businesses where almost no supervisor spends their time conducting any activity a majority of the time. The RESPECT Act would make virtually all employees non-supervisors for NLRA purposes.

SBIR Reauthorization, Expansion, and Strengthening
By using the proven innovative power of small, technology-based companies to meet America’s technology needs, the Small Business Innovation Research (SBIR) program is a key means of access to capital for small R&D companies and the nation’s largest source of early-stage research and development (R&D) funding.

SBIR has delivered thousands of innovations in its 25-year history through a competitive and transparent contracting process. It has provided more than 60,000 patents and now generates new patents at the astonishing pace of seven per day, on average—far more than all U.S. universities combined, at less than one-twelfth their level of federal R&D funding.

Despite the remarkable achievements of SBIR, federal R&D funding is still skewed against small businesses. Today, small R&D companies employ 38 percent of all scientists and engineers in America. This is more than all U.S. universities and more than all large businesses. Furthermore, these small companies produce 20-25 percent of the nation’s most important technological innovations and five times as many patents per dollar as large companies and 20 times as many as universities. Yet small companies receive only 4.3 percent of the federal government’s R&D dollars. The SBIR program provides more than half of this amount.

SBIR has been successful because it is based on a rigorous three-phase process that allocates contracts according to promise. Phase I funds the critical early development stages of technological innovations that have scored the most highly in responding to public “requests for proposals” by federal agencies. Phase II contracts, limited to the most effective Phase I awardees, bring innovations to the full prototype or market-ready stage. And Phase III (which utilizes non-SBIR funding, generally from the private sector) commercializes the technology. NSBA believes that SBIR Phase III should be further strengthened by Congress, utilizing best practices from the most successful SBIR commercialization efforts in the past.

To participate in the SBIR program, a small business must employ the principal researcher and not more than 500 employees in total. It also must be American-owned, independently operated, and for-profit. Despite calls from some quarters for a relaxation of these criteria, NSBA remains a staunch advocate of their continued application—believing that SBIR was intended as a means to advance the R&D efforts of actual small businesses and not larger or nonprofit entities, which already have access to far greater sources of federal R&D funds.

SBIR is a fully competitive program, imitated by countries around the world and praised by every independent third-party evaluation it has received—including the U.S. Government Accountability Office, the National Academy of Engineering, and the National Academy of Sciences.
NSBA urges Congress to build upon the tremendous success of the SBIR program by reauthorizing and strengthening the program.

Mandatory Employee Leave
NSBA urges Congress to oppose any move that would hinder an entrepreneur’s ability to create jobs—something an expansion of the Family Medical Leave Act (FMLA) of 1993 surely would do. A number of proposals to add to leave, both paid and unpaid, have surfaced in the 111th Congress. All of these would slow or stop job-creation and growth of small businesses at precisely the time when we need it the most.

Currently, FMLA requires employers to provide employees with up to 12 weeks of unpaid leave in a 12-month period. FMLA leave provides employees extended time off for the birth or adoption of a child; care for a spouse, parent or child with a serious health condition; or when the employee is unable to work due to a serious health condition. FMLA applies to employers who have at least 50 employees.

Senate Health, Education, Labor and Pensions Committee Chair Edward Kennedy (D-Mass.) and Rep. Rosa DeLauro (D-Conn.) introduced legislation, the Healthy Families Act, in the 110th Congress which would require employers with 15 or more employees to provide seven paid sick days to all employees working 20 hours or more per week. An employee’s sick time would be accrued as of the date of hire, and awarded on a pro-rated basis just three months after the date of hire. Under the Healthy Families Act, 28 percent of business owners fear that productivity would decrease. Furthermore, 25 percent of respondents expect the per-employee cost of complying with the Healthy Families Act to exceed $1,000—for a business with just 15 employees, that would mean at least $15,000, not counting lost productivity. That is at least one full time job that can’t be added.

Rep. Pete Stark (D-Calif.) has introduced legislation, the Family Leave Insurance Act (H.R. 1723), which would expand the FMLA threshold to 20 or more employee, and provide up to 12 weeks of paid leave. The legislation establishes an FMLA fund financed by employers and employees through a new fee/tax equivalent to 0.2 percent of each employee’s earnings, tiered progressively according to income level. That fund would then pay for individuals’ paid FMLA leave. This legislation could prove to be an added expense to employers and employees at absolutely the wrong time.

Paperwork and legal requirements have overwhelmed small-business owners, who, prior to FMLA, often allowed employees time off without the government telling them how to do it. Perhaps the most troublesome outcome of FMLA expansion is stifling job growth, or the potential that small-business owners would hesitate to grow, especially if it means having to give paid leave to all employees.

Access to Capital
The U.S. finds itself in the midst of the worst financial crisis since the Great Depression and America’s entrepreneurs—existent and aspiring—are suffering through a crippling credit crunch. Given that accessing capital is one of the largest and most persistent obstacles facing America’s small-business owners, this is especially worrisome.
According to a nationwide NSBA survey of small- and mid- sized business owners, 55 percent of small- and mid- sized business owners had difficulty securing credit in the previous six months—and this finding was consistent across firm size and revenue.

One of the biggest barriers to small-business financing is the requirement that debt be secured by equity in fixed assets. Many small and startup businesses lack the kind of equity necessary for traditional bank loans. This gap in debt-equity financing especially hinders startup and growing businesses, as these entrepreneurs typically do not have the assets necessary to acquire sizeable loans.

Another barrier to capital for small businesses is that banks too often shy away from the small-business community. Smaller loans generally are less-profitable for banks and typically have higher default rates. Additionally, the proper valuation and credit worthiness of small businesses are notoriously difficult to determine. Ongoing bank consolidation has lead to fewer community banks and fewer character-based loans as well.

Aggravating this state of affairs is the recent tightening of lending standards by banks. The Federal Reserve recently reported that the number of banks reporting having tightened their lending policies in the past three months remained “very elevated.” Nearly 70 percent of domestic banks reported that they had tightened their standards for commercial and industrial loans to small businesses. It should not be surprising then that the number of small-business owners who reported using traditional bank loans, was at a 15-year low in NSBA’s 2008 annual survey.

In addition to tightening their lending standards, hundreds of banks have dropped out of the lending programs offered by the U.S. Small Business Administration (SBA) or have simply stopped making—or drastically reduced the number of—SBA loans. Between 2001 and 2007, there was a 47-percent decrease in the number of banks making at least one 7(a) loan.

Meanwhile, there has been a massive decline in the amount of SBA lending. There were 57 percent fewer 7(a) loans in the first quarter of 2009 than during the same period in 2008. Additionally, total dollars loaned fell by 40 percent, to almost $2 billion. The number of loans made through the 504 program was down 46 percent from 2008.
It is vital that Congress and the administration recognize the economic benefits of fully-funded SBA programs. For every $33,000 lent through the 7(a) program, one job is created or retained. In 2002, 7(a) loans created or retained 370,000 jobs.

Alternative Minimum Tax
Although it is typically thought of as a tax on individuals, the Alternative Minimum Tax (AMT) strikes harder at small-business owners than at wage earners. Why? For starters, successful entrepreneurs tend to earn more, and 90 percent of small businesses have their profits taxed as personal income, regardless of whether the firm is organized as an S Corp., LLC, or unincorporated business. In addition, when an entrepreneur’s income carries him or her into AMT land, some business deductions are not allowed.

The AMT, which was created 40 years ago to ensure that high-income taxpayers would pay at least some tax, has failed at its original mission and now snags growing millions of middle- and upper-middle-income Americans. The income threshold that qualifies one as wealthy was never pegged to inflation, so today taxpayers earning as little as $75,000 can run afoul of the AMT. Congress has approved patches, but has yet to tackle a long-term solution.

NSBA supports full repeal of the AMT, or alternatively, supports changes to lessen the impact on middle-income taxpayers. Because many small businesses are pass-through entities, their business income is reported as personal income, subjecting increasing numbers of small-business owners to this complex tax.

Credit-Card Reform
According to a recent NSBA member survey, 59 percent of small-business owners identified credit cards as a source of financing they had used in the previous 12 months—up from 49 percent just four months earlier. Small-business owners use credit cards to finance their business more than any other source, including business earnings. In 1993, this number was only 16 percent.

NSBA data also shows that nearly three-quarters (71 percent) of the small-business owners who use credit cards as a source of funding are carrying a balance month-to-month. Twelve percent of small-business owners are carrying a balance of more than $25,000, and 38 percent are carrying a balance of more than $10,000.
Although they are increasingly turning to credit cards to finance their business ventures, 79 percent of small businesses surveyed report that the terms of their cards are worsening.

America’s small-business owners are not in the habit of advocating the passage of increased federal regulations, preferring free enterprise and market solutions, but the current practices of the credit-card industry defy the principles of a free market.

One of the basic tenets of free-market capitalism is the sanctity and insolubility of contracts, but somehow the credit-card industry has managed to insulate itself from adherence to this principle, retaining the right to unilaterally change the conditions of their contracts at any time. A free-market system also relies on actual competition, but there is no longer real competition in the credit-card industry. In 2004, the top 10 issuers controlled 88.1 percent of the market (understood as their proportion of outstanding credit-card debt).

Free market competition also is based on informed consumers, but the business practices of the credit-card industry appear geared more toward obfuscation than illumination.  Although improved disclosure—which must not be construed as simply more disclosure—is of paramount importance to the small-business community, it is not enough.

NSBA supports the following credit-card reforms:

• Prohibit the practice of universal default,
• Prohibit the practice of double-cycle billing,
• Prohibit the retroactive application of interest rate hikes—interest rate increases only should be applied to future card usage,
• Limit the interest rate percentage increases that card issuers can impose on holders,
• Require card issuers to apply a customer’s payments to the card balance with the highest interest rate first,
• Prohibit extra interest charges on card debt that the cardholder already paid in full,
• Prohibit interest charges on transaction fees,
• Prohibit late fees if an issuer’s action caused a delay in crediting a payment, and
• Establish an industry-wide practice regarding the time on which a payment must be received or sent to be considered on time.

Despite NSBA’s best efforts, language to specifically include small businesses in credit-card reform legislation debated early in the 111th Congress failed to make its way into the final legislation. NSBA will continue working with lawmakers to ensure that the protections extended to credit-card consumers also protect America’s small businesses. Small businesses are not opposed to the credit-card industry. In fact, they are increasing reliant on it. Small business simply asks it play by the same rules.

Energy Policy
The time has come to actively address America’s oil dependence and the shortcomings of its national energy policy. As small businesses produce more than half of the private sector output and consume nearly half of all of the electricity and natural gas used for commercial and industrial purposes in the U.S., it is imperative that America’s small businesses be comprehensively involved in this effort.

This national endeavor must not only protect small businesses, it must make full use of them. At the forefront of the effort to provide energy solutions, drive economic growth, create jobs, and protect the environment are innovative, entrepreneurial, and growing small businesses known as “green gazelles”. NSBA supports increased federal incentives and funding to advance the research and development efforts of these small-business innovators.
NSBA urges Congress and the administration to increase domestic energy production, construct a predictable and long-term framework of rules and incentives for the development and use of renewable and alternative energy—with a focus on technological innovation—and implement a national program to drastically enhance the nation’s energy efficiency, especially as it relates to the transportation sector.

Expand Domestic Production
Although expanding U.S. domestic oil production will do little to reduce the long-term strategic vulnerability caused by its oil dependence, it is an important, short-term action that may help stabilize volatile energy costs and assist American consumers and small businesses with their immediate energy needs.

Diversify Domestic Production
It is imperative that the U.S. establish clear, long-term goals for small businesses and consumers to use alternative and renewable energy. It is equally if not more important that the federal government fund research and create incentives, such as investment tax credits, for renewable and alternative energy innovation—including the cutting-edge work of the nation’s Green Gazelles.

Revolutionize U.S. Transportation and Automotive Industries
Transportation is the crux of America’s oil dependence: 97 percent of the oil used in the U.S. is consumed for transportation. NSBA supports incentives for the use of more fuel-efficient vehicles and the continued exploration of alternative-fuel vehicles. NSBA views hybrid vehicle technology, especially the plug-in hybrid variety, as exceptionally promising, and believes that this potential merits further exploration.

Improve Energy Efficiency
Improving America’s energy efficiency must be a central component of any national effort to confront its energy dependence. NSBA also supports efforts to expand current On-Bill Financing regulations—a proven method of providing improved capital access to small firms seeking improved energy efficiency—and other access-to-capital innovations. NSBA also supports the enactment of measures to increase the reach and visibility of the ENERGY STAR Small Business program, including the reallocation of existing EPA and DOE agency funds to increase its budget.

Estate Tax Reform
One-third of small-business owners today will have to sell or liquidate part of their business to pay estate taxes, and half of those who liquidate to pay estate taxes will have to eliminate 30 or more jobs.

A study by Greenberg Quinlan Rosner finds that a broad majority of Americans support reforming the estate tax to protect small business owners and family farms.
While the much-maligned estate tax rate has gradually decreased since 2002 and the exemption level has increased—giving small and family-owned businesses some temporary relief—more needs to be done to protect small business. Although Congress recently extended the current estate tax levels for 2009, unless futher action is taken, the estate tax is set to increase significantly, back to its 2001 levels, stripping from small businesses any sense of confidence in their ability to hand-down the family business.
While NSBA continues to support full repeal of the estate tax, NSBA members have agreed to a five-point compromise plan that would permanently repeal the estate tax on small and family-owned businesses—including farms. It would exempt estates of $7.5 million with a tax rate set at 15 percent tied to the capital gains tax rate to ensure a more fair method of passing-down a business—regardless of what event triggered the transfer. The estate tax exemption would be fully indexed for inflation and calculation of estate tax owed would include a step-up in basis, allowing heirs to use the higher basis to figure their gain when the property is ultimately sold. This compromise is necessary to make sure that small businesses can invest in the future and not in estate planning.

Self-Employment Tax on Health Care
NSBA supports measures to allow the self-employed to fully deduct their health insurance premiums on their income tax and their self-employment tax (FICA tax). Under current law, corporations are able to deduct the cost of health insurance premiums as a business expense and forego payroll (FICA) taxes on these costs. The self-employed, however, are unable to take the same deduction. As a result, they pay an additional 15.3 percent tax on their health insurance premiums.

This is a heavy burden for this group of small businesses, who already pay on average over $12,680 annually on health insurance premiums for family coverage. Eliminating this tax would reduce the average cost of health care for the self-employed by more than $1,940 annually.

This is why, Representatives Ron Kind (D-Wis.) and Wally Herger (R-Calif.) along with Reps. Suzanne Kosmas (D-Fl.) and Dave Reichert (R-Was.) have introduced the Equity for Our Nation’s Self-Employed Act (H.R. 1470) a measure that would allow the self-employed to fully deduct their health insurance premiums for the purposes of their income tax and self-employment tax (FICA tax). Senators Jeff Bingaman (D-N.M.) and Orrin Hatch (R-Utah) have introduced companion bill S. 725.

NSBA is actively working toward passage of this legislation in order to remove a significant inequity within the tax code that penalizes self-employed Americans and makes it increasingly difficult for them to afford quality health care coverage.

More on the Issues
While these are the top priorities, as identified by small-business owners, it is crucial that the 111th Congress and the Obama Administration begin to take a 360-degree view of everything that impacts small businesses in addition to these issues. As a staunchly nonpartisan organization, and America’s oldest advocacy organization for small business, NSBA looks forward to the opportunity to work with lawmakers to help craft a more friendly small-business agenda.  For a comprehensive view of NSBA’s Priority issues please click here.

If passed and signed into law, it would dramatically change the way unions organize workers and how unions and employers negotiate initial collective bargaining agreements.  So what steps should your small business take to prepare for EFCA?

No more secret ballots
The EFCA would eliminate the current secret-ballot process by which employees choose to be represented by a union. In its place would be what’s known as a card-check system.  Employees who sign cards would not have a right to vote if the union got a majority of employees to sign up.  Now, unions can use cards to get elections, and employees can hear all sides of the issue and then vote in secret.  If EFCA passes, elections will become things of the past.  Employers will find themselves with a union before they even know a union is approaching their employees.

One step you can take is to correspond with your employees and their spouses regarding the meaning and importance of authorization cards, including identification of misleading tricks used by organizers to get signatures.

Additionally, meet with your employees regarding authorization cards, and identify techniques they can use to deal with aggressive union organizers without compromising their personal views or actually giving in to a request to sign cards or petitions.

Employers face stiffer penalties
Under the EFCA, employers would face stiffer penalties for unfair labor practices, including what are essentially triple damages for conduct determined to be unlawful during the bargaining process for the first labor agreement.

A few things that you can do to protect your small business include:

• Clearly communicate your company’s stance regarding unions in handbooks and policies to counter the potential union argument that the employer does not care or would welcome a union.
• Take steps to ensure that existing rules are adequate to manage the workplace; make necessary changes in the rules if they are not. Make those changes before a union appears on the scene.
• Carefully enforce rules even-handedly, and do not let problem employees evade appropriate discipline.
• Handle workforce changes thoughtfully, whether increasing or decreasing numbers.
• Follow established procedures regarding resetting wages and benefits generally and consider changing your system if it no longer suits your workplace.

Surviving a union strike or corporate campaign
While it’s impossible to predict whether or when or in what exact form the EFCA will be enacted, it is smart for employers to get ready now in case it does. If the EFCA becomes law, there may be little time to train your managers and supervisors on how to communicate properly with employees, or to have a backup plan in place if your business faces a strike.  In fact, in many areas of the country, unions are already getting cards signed and are “stockpiling” them in case EFCA passes.
A few measures you can take to make sure your small business is prepared to handle a union strike or corporate campaign include:

• Exercise great vigilance regarding union activity in your workplace or in the local area or in your industry, or with particular customers, suppliers or competitors. This is an indication that you may already be a target.
• Review contracts and work arrangements so as to be sure the company is structured to withstand a union strike or corporate campaign, including discussions with customers and suppliers about their view of the potential for strikes and other disruptions. If your best customer will stand by you if you suffer a strike, that’s important to know; likewise, you (and your employees) need to know if that customer will permanently pull all its work on the first day of a strike.
• Consider establishing alternative means of producing or providing the company’s products and services and communicate the general existence of such alternatives to employees.

There are many other steps you might take, depending upon your individual, unique circumstances and the advice of your employment counsel.  Now-before your employees make a decision that has dire consequences for their work lives and your business– is the time to educate yourself and your employees on the realities of working in a unionized environment.

Keith Ashmus is a co-founding partner of Frantz Ward LLP, an entrepreneurial law firm formed in 2000 and recently named one of Ohio’s top 50 law firms.  Frantz Ward is one of Ohio’s top-tier employment firms as rated by Chambers USA.

The IRS has it's site set on a target - small business. Could you be caught in the crossfire?

The IRS has it’s site set on one target – small business.  Could your business be the next target to succumb to the long and painful IRS audits? The IRS has it’s site set on one target – small business.  Could your business be the next target to succumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?

The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?

The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?

The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?The IRS has it’s site set on one target – small business.  Could your business be the next target to subcumb to the long and painful IRS audits?

The Council of Smaller Enterprises (COSE) a 17,000+ small business membership organization based in Cleveland, Ohio servicing the businesses of Northeast Ohio was out early against this issue in late 2007.  In addition to requiring seven days of paid sick leave, the ballot issue further allowed sick time to be taken with no notice and in the smallest increment of time an employer’s payroll system tracked.  For many employers that was a ten minute increment, and an hour was the highest increment allowed under the proposed law.

There were a myriad of other issues with this flawed legislation. One of the most significant was a prohibition in the law of the use of sick leave as a factor in any wage action, performance review or termination process.  This clause essentially opened employers to lawsuits over any perceived slight that could be linked to an employees’ use of paid sick time.

The proponents of this issue were both well funded and had the benefit of a populist appeal—featuring ads of sick children headlined by phrases like “Paid Sick Leave: We’ve earned them.  Our families need them.”  Even though 88.5% of small business employees already had some type of paid leave available, the issue came out of the gates polling with 70%+ support and over the course of the campaign dropped no lower than the low 60’s.  However, polling data indicated that if we could help voters understand the negative impact on small business in Ohio and could educate them about the resulting loss of jobs in our state, we could beat Issue 4.

Over eight months, COSE worked with a statewide coalition of business concerns that mobilized grassroots educational efforts with employers and employees.  From an employer resource kit to academic research (http://delicious.com/COSESmallBiz), to videos featuring employees as well as radio and television ads, the business community worked hard to educate voters on the negative economic consequences for our state.

Just a day or so before the filing deadline for the November ballot, the Governor of Ohio—a  popular Democrat—under enormous pressure from business interests, was  successful in his request to the Service Employees International Union (SEIU), the main proponent behind this issue, to pull the issue from the ballot.  In an election year with a nominee for President who was in full support of the measure, Governor Strickland understood that though popular, this initiative would hurt Ohio’s competitiveness nationally and disadvantage our state.  His rationale, with Democratic Senator Sherrod Brown at his side, was that he and the Senator would fight for passage at the national level where a national “level playing field” could be created.

So – Ohio and its small business community dodged a bullet.  But, the fight will continue on the national stage with the Healthy Families Act.  We’ll see you there!