Are patent reforms good for small businesses?
– Cynthia Hsu is a contributor to FindLaw’s Free Enterprise blog. FindLaw is a Thomson Reuters publication. –
President Obama recently signed into law the America Invents Act, a patent reform legislation that does away with the old “first to invent” rule. What does the patent reform mean for small businesses?
Most notably, the new legislation pushes Americans toward a “first to file” system, meaning that those who file for a patent first will get awarded the rights.
So is this change in the patent rules really a boon for entrepreneurs – or is it a bust?
The new law aims to simplify the patent registration process, and in turn aid entrepreneurs and encourage innovation. Patent filers are often met with legal obstacles. And, the “first to invent” rule was fuzzy enough to invite litigation.
Under the old rules, patents could be awarded to those who were “first to invent” the product. Meaning these first inventors could be awarded patent rights even if they never filed for a patent with the U.S. Patent and Trademark Office. And, these first inventors could also take patent filers to court in an effort to gain rights, reports Entrepreneur.
Small businesses filing for patents in the past could get blindsided by a lawsuit that alleged someone else was actually the first inventor.
Small businesses need cash, not rhetoric
– George A. Cloutier, a graduate of Harvard Business School, is the founder and CEO of American Management Services, one of the Nation’s largest turnaround and management services firms specializing in small and mid-size companies. He is also the author of the bestselling book, “Profits Aren’t Everything, They’re the Only Thing”. The opinions expressed are his own. –
The lack of serious small business aid proposals, empty rhetoric, and general intransigence by the Republicans has anointed the Democrats by default as “The Party of Small Business.”
The Obama bill to inject $30 billion into community banks with the primary focus of expanding small business lending, is hardly a panacea. But Republican attempts to block the bill, for a variety of political (although not practical) reasons, amounts to more stumbling and bumbling by the opposition that has produced no worthwhile alternative.
Choosing not to increase taxes is not a stimulus, but an overused bandaid designed to gain votes. Republican candidate Carly Fiorina’s proposal to have a two-year tax holiday may create jobs for her and additional money in the system, but it’s not going to induce any small business owner to add new jobs that weren’t already planned.
Proponents say this bill could produce up to $300 billion dollars in expanded lending to starving small businesses. It will likely produce substantially less, but something is always better then nothing. Before Republican senators George Voinovich and George LeMieux recently announced they would vote for the bill, this revenue-neutral bill was astonishingly blocked by the party of “no.” So far proposals to help small business, from both parties, have lacked the fundamental understanding that small businesses need working capital (aka cash). This lack of cash is the biggest blockage to expansion in the small business sector.
The proposals to expand and speed up depreciation rules, increase R&D write-offs, payroll tax reductions or holidays, and other tax reduction programs are helpful to overall demand, but are far wide of the mark of immediately helping small businesses. The majority of small businesses barely have enough cash for the next two weeks, so programs that offer some help over the next two years are laughable.
Most small businesses are not be able to take advantage of accelerated depreciation because they barely pay any taxes anyway and these proposed tax savings would not be available until the 2011 tax year ends at the earliest. In early 2012 real tax benefits would be achieved, but precious few small businesses would gain. If a business buys a new computer system now for $5,000 and could depreciate it fully in 2011, it would not receive the benefit until 2012 assuming the company is making a strong profit. If not making a profit there is no benefit. Increased R&D expense write-offs are equally unhelpful for most small businesses. If an owner wants to buy new cars or hire more workers there is simply no benefit. A payroll tax holiday for a $40,000-a-year new hire would produce $3,000 in payroll tax savings (based on a payroll tax of 8 percent). Why would a small business owner invest $40,000 in a new employee to get $3,000 back?
All true. If Congress really wants to help small business, it needs to think a lot smaller. Tax credits/deductions are worthless without profit. Real tax reform for small business must recognize the essential differences between big and small. One thought…allow all small businesses with gross receipts of $10M or less, retain, without any tax, (at either the corporate or ownership level) earnings of up to $50,000, provided it is re-invested in the business.
Save the pelicans and small businesses
– George A. Cloutier is the founder and CEO of American Management Services and the author of the bestselling book “Profits Aren’t Everything, They’re the Only Thing”. The opinions expressed are his own. –
For the last two months we have been inundated with photos of oil-covered pelicans and other marine animals victimized by the oil spewing forth from the ruptured BP well in the Gulf of Mexico. The spill in the Gulf is obviously disastrous, but it pales to the economic “oil spill” that has destroyed small businesses over the last two years.
Pelicans and small business owners are faced with surprisingly similar situations: they are victims of disastrous events beyond their control. They are faced with a life-threatening struggle for survival, in which many have already passed due to lack of assistance, or are facing an uncertain future with promises of government intervention.
Both groups are facing tough odds, but right now I’d rather be a pelican.
For small businesses, the Administration and Congress (both parties) have done little to mitigate the disaster; talking a lot about how much they care, but implementing only half measures and largely ineffective programs that only helped a few. Lending levels from commercial banks have seriously declined and have created a lending squeeze for small businesses at a time when they desperately need more credit.
Washington politicians passed a healthcare bill with provisions to aid small businesses in the payment of premiums, but forgot to mention, according to the Congressional Budget office, that only 11 percent of businesses with 25 or fewer employees would get some help. The eligible businesses will receive approximately a third of the total annual premiums back in the form of future tax credits. Why, as a business owner, would I add healthcare benefits for my employees when I will receive only 1/3rd of the additional costs?
The recent jobs bill allows for businesses to receive a $5,000 tax credit next year if they create a $40,000 annual job. This makes no sense. Why would a small business spend $40,000 this year to receive a possible $5,000 tax credit next year?
I agree George. As a small business owner I’m an oily pelican and that isn’t going to change anytime soon.
The country as a whole is not on a sustainable path for solvency and growth and that hurts small business tremendously. 70% of the citizens of this country know it and that makes us anxious and apprehensive thus we don’t want to commit to anything. The remaining 30% of the citizens support the current self-destructive path we are on including the current federal administration which displays a stunning lack of leadership. Until the path is corrected, unemployment will remain very high.
What the healthcare bill means for small businesses
– Christa Rapoport is the chief compliance officer for independent benefits consulting and brokerage firm Corporate Synergies Group, Inc. The views expressed are her own. –
The House of Representatives last night passed the Senate’s Patient Protection and Affordable Care Act (H.R. 3590), as well as the Health Care & Education Affordability Reconciliation Act of 2010 (H.R. 4872).
While the final details are being ironed out, now the big question is: what does that mean for small businesses?
The biggest change is that employers with more than 50 full-time equivalents (FTE’s) will be considered large employers. Therefore, the most essential compliance step is for you to identify how many full time employees (about 40 hours) or FTE’s you have working for you. Employers near the magic number of 50 FTE’s will have to make sure you accurately count your employees. Keep records for each non-exempt worker, and certain identifying information about the employee and data about the hours worked and the wages earned.
Once you understand your employee count, you can determine your options or penalty calculations. You may want to analyze your employee count on a quarterly or monthly schedule based on how close you are to the federal goal post of 50 FTE’s.
Employer coverage mandate (“pay or play”)
Large employers will have to make available to all employees a minimum level of coverage or pay a per-employee penalty (fee). Employers will not be required to provide coverage for part-time employees, but these employees may be counted as partial employees for purposes of determining whether an employer has 50 employees. The bill is still unclear as to how employees will be counted and what formula will be used, but it looks like the real “number” to be counted will be a baseline of total hours worked by all employees. For that reason, keep accurate time records as described above. If the employer offers coverage but employees are forced to purchase insurance through the state-based exchanges because the employer’s coverage is not affordable, the employer must pay separate fees. This “Pay or Play” provision goes live in 2014 upon the creation of the state-based exchanges. Once the exchange is established, it can:
I have a friend who works for a small company. Less than 25 employees. Average wage about 25k They offer to pay 1/2 of employee insurance premiums. This is a Bluecare insurance with dental, medical, prescription, vision, & life. The coverage is good. However, when the employer worked up my freinds payment amount it is almost double what my he can purchase this same coverage for by himself. Therefore, we firmly believe the company doubled the amount just to say they were paying 50% when they weren’t. My friend also took information on this 2010 new health care tax credit of up to 35% of the premiums a couple of weeks ago and they have yet to reply with any information on what the new premiums would be. I have also visited numerous web sites on what this really means for my friends premiums and it is so complex that tax specialists are recommended and most employers will not want to deal with the credit. If employees are not told clearly and in detail how this changes their premiums, employers will not implement this. Who gets the “up to 35%” off their premiums???
The stimulus plan: A year later
– By Rosalind Resnick. This article originally appeared on Entrepreneur.com –
Veronica Rose, founder and CEO of Aurora Electric, a Jamaica, N.Y., electrical contracting company, has spent nearly 20 years successfully bidding on government contracts. One of the first women to obtain a master electrician’s license in a heavily male-dominated industry, Rose has worked on major projects at JFK International Airport and the World Trade Center. Her seven-person firm boasts a customer list that includes General Electric, NBC and Columbia University.
So how much of the $787 billion in stimulus money that the government approved last year has ended up in Aurora Electric’s bank account?
“We haven’t seen any of it,” Rose said. “The stimulus money went to the big infrastructure companies that build highways and bridges–the bigger, deeper, heavier part of our industry where you have to be a big company in order to compete.”
Aurora Electric is not alone. A year after the government rolled out the biggest economic stimulus plan in history, small businesses like Rose’s are wondering where the money went and why so little of it came their way. While VC-backed startups like Tesla Motors, the Palo Alto, California, company that makes electric cars, got a $465 million taxpayer loan, most of the stimulus dollars have ended up in the pockets of big companies that employ thousands of workers, not the millions of small businesses like Rose’s that each employ only a handful. In fact, much of the stimulus money has gone to government agencies, bypassing the private sector completely.
According to a recent analysis by The Wall Street Journal, $112 billion of the $179 billion in stimulus funds shelled out last year went to state governments to plug the gaps in education, Medicaid and unemployment benefits budgets or to boost funding for food stamps and other social services programs. An additional $700 million was spent on administration, and about $47 billion went toward transfer payments, such as $250 checks for Social Security recipients. Some $70 billion in social spending is in the pipeline already, the Journal reported, including grants for local organizations conducting job training programs.
What’s more, ground has yet to be broken on many projects that were touted as “shovel-ready” as government agencies in charge of high-speed rail construction and electric vehicle initiatives struggle to get organized. Only about $20 billion was handed out for infrastructure projects in the first year of the stimulus plan, the Journal reported. Widely touted “signature” projects–such as $20 billion for doctors to create electronic medical records, $4.5 billion for an energy Smart Grid and $7.2 billion for broadband networks–are still in their early stages.
A healthcare proposal too big to succeed
– A. G. “Terry” Newmyer is a serial entrepreneur and the former founding chairman of The Fair Care Foundation, a patient-advocacy group focused on health insurance. The views expressed are his own. –
In recent remarks to business leaders, President Obama declared himself an “ardent believer in the free market.” So, there is at least one person who is an ardent believer in that sentence.
Just this week, I had lunch with a very prominent, sane, and successful Wall Street executive who was CEO of a big-name firm. He left more than a decade ago, during an era when those folks did so with pride rather than with investigations and grand jury subpoenas.
While we ate, we worried aloud about what’s going on in Washington – the new financial capital of the world. My guest cautioned about “becoming too negative as we age.” I tend not to think of myself as aging, though I did note that last year’s inauguration marked the first time a U.S. president was younger than me. And I hardly think our lunch conversation qualifies us as “Grumpy Old Men.”
But if it does, the prospect of Medicare in a few years is looking better and better, particularly in comparison to the vagaries of the private health-insurance market. If the President truly wants us to see him as an “ardent believer” rather than a Socialist, he should be thankful that few have digested his latest healthcare proposal.
The Obama Administration has declared all sorts of institutions as “Too big to fail,” warranting its intervention. His health proposal, while trumpeted as being “scaled-back,” remains too big to succeed.
As an entrepreneur with management and governance roles in several ventures – and a typical small business health insurance plan – I can’t imagine who could understand or make projections based on the latest proposal. Even to those of us with backgrounds in health policy, the Obama plan is too opaque and complex to allow any forward planning.
Of course it’s big, but so was medicare and a lot of other massive bills in the past. Nothing is perfect in this imperfect world. They need to move ahead and give it their best shot, now, and refine and streamline it as needed in the futre. Nothing is written in stone. Nothing is not changeable if they need to make changes. Fear of change, changes nothing. Of course change for change’s sake isn’t going to work, but hey, everyone has had a chance to put their two-bits worth in for a year now – so my message is stop shaking in fear like a quivering, sniveling, whining bunch of chicken-hearts, and DO IT.
Entrepreneur designs own bailout package
A. G. Newmyer said slapping the slogan “Too Big To Fail” on the front of a pair of men’s underpants was not meant to mock the government bailout packages extended to the financial and automotive sectors.
“I did not do it in any way related to making a political statement of any kind,” said Newmyer, a longtime Washington, D.C. political consultant, who conceived of his risque idea last Thanksgiving and founded Silly Underwear LLC shortly thereafter. “As all of the discussion about too big to fail started to mushroom during the recent economic tsunami, I just kept thinking about the expression and it just occurred to me as a whimsical idea to put it on a pair of underpants and see what happens.”
The underwear retails for $20 and is primarily sold online at SillyUnderwear.com. Newmyer’s story first appeared in a Wall Street Journal blog, after which he said sales increased dramatically. However Newmyer refrained from releasing any sales figures.
“It’s been very very busy,” he said, noting he already sold out of one size. “We certainly can’t afford to advertise so it’s all viral and word of mouth.”
The company recently released a campy promotional video on YouTube that features a young couple in bed, in which the male is fretting about his job security and his girlfriend tries to boost his confidence by giving him some “Too Big To Fail” underwear.
Newmyer even went so far as to send complimentary briefs to President Obama, Treasury Secretary Tim Geithner and economic adviser Larry Summers, but hasn’t heard back yet.
Despite the gimmicky nature of Silly Underwear, Newmyer is treating it as a real business that he said has a “very limited” downside and an “enormous” upside, as he only processes orders as they come in and doesn’t carry much in the way of inventory.
The inscription’s on the wrong side. It needs to be on the back, closer to Wall Street’s commemorative body part.
The state of small business
After spending most of his first year in office focused on Wall Street, President Obama tried to reconnect with disenchanted Main Street voters in his first State of the Union address.
Mentioning “small business” at least 13 times in his speech (get the full text here), the president unveiled a two-pronged attack to get America’s “true engine of job creation” back on its feet and hiring again. Obama pledged to redistribute $30 billion in repaid bailout money from big banks to smaller community banks “to give small businesses the credit they need to stay afloat.” He also promised to eliminate all capital gains taxes on small business investment, to give tax breaks for small businesses who raise wages or hire more workers, and for those who invest in new plants and equipment.
Nydia Velazquez, the chairwoman of the House Committee on Small Business, said the president clarified the “central role small businesses play in our economy,” and added the tax initiatives “would spark growth by helping firms reinvest in their facilities.”
Washington, DC-based tax policy expert Clint Stretch, of Deloitte Tax LLP, said the president’s tax incentives would address the “cashflow issues” facing small businesses and added the tax credit on the purchase of new equipment is especially significant for companies looking to expand as the economy recovers. “If you’re looking at a recovery, you’re going to want to start updating your equipment or start bringing in new equipment in as you hire workers back. The quicker they can write it off for tax, the quicker Uncle Sam is picking up the bill.”
Stretch said Obama is on the right track by combining tax breaks with a program to increase small business lending.”At the end of the day if I’m going to go out and buy $250,000 worth of equipment for my little factory, the fact that the government is going to allow me to write most of that off so that I’m going to save 35 cents on the dollar, I’ve still got to finance the other piece.”
The tax incentives were welcomed by Duluth, Minnesota entrepreneur Dave Benson, who witnessed Obama’s speech in person as the guest of Democratic senator Amy Klobuchar, who has championed the bill to use TARP repayments to help small businesses.
“The less taxes we pay, that money can help continue to grow and build our business,” said Benson, who is back to 40 employees after laying off nearly half his staff a year ago. “We saw our numbers drop and things have certainly picked back up.”
Infusion of capital(even the borrowed one)is certainly helpful for businesses to stay afloat or just prolong its demise.reality is that the customer can only make it stay afloat and it being already overextended and loaded with debt, is shying away and no other measures can come close to making small businesses stay afloat.The managers of too big to fail ought to help create employment and reduce debt load with the money they think they have to so lavishly bestow bonuses to themselves.It is the overheads that we have piled upon ourselves and to sustain them costs money which could be used by us consumers to jump start the economy once again until the next bubble crisis.This cycle will continue with worsening effect if we continue with the status quo and quietly forget what has happened and is happening with our financial and political system.
Small Talk: Healthcare debate heats up
The healthcare debate is just starting to heat up for small business owners. FindLaw, a Thomson Reuters sister publication, has a nice blog post titled “Healthcare reform & small business: 3 bills explained,” in which they break down Obama’s “Affordable Health Care for American Act” legislation, that was approved by a slim majority of 220-215 by the House over the weekend.
In general the reaction by small business to the Obama legislation has been largely negative, with the most damning attacks coming from small business lobby groups, the National Federation of Independent Business and the National Small Business Association. In a Wall Street Journal story, titled “Small Business Crunches Numbers“, NFIB senior VP Susan Eckerly said the bill’s “punitive employer mandates and atrocious new taxes will force small business owners to eliminate jobs and freeze expansion plans at a time when our nation’s economy needs small business to thrive.”
Denver Business Journal reporter Kent Hoover examined the bill from a small business perspective in his article “How small business fares under health-reform bill“. In it Hoover said that while the majority of small businesses oppose the legislation, some support it because “they think the insurance market needs the bill’s reforms, such as barring insurance companies from denying coverage based on pre-existing conditions,” wrote Hoover, adding: “Plus, they think providing a government-run option in new health insurance exchanges would bring needed competition to the insurance market.”
Here’s a roundup of how politicians on both sides view the legislation:
- Democratic Congressman Jerry McNerney (Pleasanton, California) voted for the bill, because he explained that “as a former self-employed small business owner, I’ve personally experienced the effect of rising health care costs and the burden these costs place on our families and small businesses.” McNerney added the new legislation will “improve benefits and quality of care for seniors, help small businesses to stay open and operating, and stop insurance companies from denying coverage for pre-existing conditions or kicking sick people off their plans.” Read McNerney’s full statement here.
- Democratic Congressman Ben Chandler (Versailles, Kentucky) voted against the bill, telling the Lexington Herald-Leader: “I do not believe it is the best course of action for the people of Central Kentucky, specifically our working families, small businesses, and seniors.” Chandler said he was concerned that the new bill “would not adequately protect our rural hospitals and our small businesses — the engines of job creation.” Read Chandler’s full interview here.
- Democratic Congressman Anthony Weiner (New York, NY) released his own “Top 10″ list of reasons he voted for the bill, most of them tailored to his New York City constituents. In the Epoch Times story Weiner said the new Act helps small businesses that already provide health insurance, because they “will receive a tax credit over a two-year period, and small businesses with 25 employees or less with wages of less than $40,000 a year will qualify for tax credits up to half the cost of providing insurance.” Weiner added that 204,200 small businesses in NYC will be able to qualify for the tax credits.
Good informaiton. Here’s another article that parallels what you said. http://blogs.reuters.com/small-business/ 2009/11/09/small-talk-healthcare-debate- heats-up/
Small business gets its bailout
(Note: The Recovery Act did not directly assign $15.5 billion in funds to the SBA, but $730 million that has so far supported $13.4 billion in SBA-backed loans to small businesses, according to the SBA.)
After having watched Wall Street get a near $1 trillion bailout, America’s reeling small businesses will get their own relief package from Uncle Sam, in the form of the “Small Business Financing and Investment Act” that was passed by the House of Representatives last night by a 389-to-32 majority vote.
The new legislation, which increases the Small Business Administration’s lending budget by $44 billion, was announced on a day when President Obama met with small business owners to discuss his proposals to improve their access to credit in order to boost job creation. The bill will still have to be approved by the Senate and there is no timetable for when the money will get into the hands of small business owners.
“This bill is about choices. It’s about better options for the small businesses that didn’t get a bailout,” said Nydia M. Velázquez, the chairman of the House Small Business Committee in a prepared statement. “Small businesses with tight profit margins don’t have the luxury of simply ‘tightening the belt.’ When money is short, they’re often forced to lay off workers. But with unemployment at 9.8 percent, we just can’t afford more losses. That’s why this bill delivers critical capital to new ventures.”
The latest small business stimulus follows on the heels of the $730 million Obama included in the Recovery Act passed in February, which has so far supported $13.4 billion in SBA-backed loans to small businesses, according to the SBA.
Under the new legislation SBA loan maximums for both 7(a) and 504 loans have been increased to $3 million (up from $2 million) and to $25 million (up from $1.5 million) respectively. The 7(a) loan program covers most startups and existing small business, while the larger 504 program is geared to larger, manufacturing- or construction-type companies that need to purchase real estate, machinery or to build brick-and-mortar facilities for expansion or modernization purposes.
The Recovery Act raised SBA-backed loan guarantees from 75 percent to 90 percent, and to 100-percent in the case of emergency microloans of up to $50,000. However less than 30 percent of the roughly 8,000 U.S. banks offer SBA-backed loans. The new bill should help to address this concern by ultimately allowing the SBA to step in as the “lender of last resort” should small firms still be unable to receive credit from banks.
Small step to start helping build strong business credit, we have a long way to go.
Rina
Initial Underwriting Group
The answer to your question is here:
Why the “America Invents Act” is Bad for Startups and Bad for America by David Boundy (a patent attorney)
http://www.reformaia.org/news/why-americ a-invents-act-bad-startups-and-bad-ameri ca-david-boundy
For more info, see this: http://www.lauderpartners.com/PatentRefo rm