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What the Biden Administration Means for Your Small Business

Joe Biden Inauguration

On January 20, Joseph R. Biden was officially inaugurated as the 46th President of the United States. While everyone is wondering what this change means for our country, there’s probably one question lingering at the front of your mind: what does the Biden administration mean for your small business?

As with any new president, the Biden administration is sure to bring changes. 

Knowing what’s coming can help you prepare for it and set your business up for success.

So what can you expect?

Amendments to the Paycheck Protection Program

paycheck protectionThe Biden administration has promised that getting the coronavirus under control is priority number one. 

That’s good news because small businesses have been hit hard by COVID-19.

Between shutdowns and dramatic drops in revenue, it is estimated that one in six small businesses have not been able to survive the pandemic.

Because President Biden has promised to be stricter on health policy, many small business owners fear being shut down again. 

While any more potential shutdown may be difficult to stomach, more covid-related restrictions are better for the long-term. Hopefully, these restrictions will help get the virus under control more quickly, meaning businesses will be able to operate normally sooner.

Plus, there will be help in the meantime.

Under the previous administration, the Paycheck Protection Program (PPP) offered loans to small business owners. But many people were not sure how forgiveness works. 

Instead, the Biden administration plans to offer grants, not loans, for small businesses that have lost substantial revenue.

They have guaranteed that every business with fewer than 50 employees can get relief.

You can read about these and more of the Biden’s administration’s proposed COVID policies here.

Changes in Tax Policy

Beyond a COVID-response, small business owners can expect changes in tax law.

Here’s how a few of these changes compare to current policy.

tax rate changesLet’s break a few of these down and see how you can plan for the proposed changes.

Corporate Tax Rate

If you structure your business as a corporation (C-Corp), you have to pay the corporate tax rate on company earnings.

The Biden Plan would increase the corporate tax rate to a flat rate of 28%.

That means a C Corp with a net income of $3,500,000 would expect to pay an additional $245,000 in income tax under the Biden Plan.

To plan for this, consider changing your legal entity from C Corp to S Corp to avoid double taxation at 28% and 39.6%.

Capital Gains Top Rate

Capital gains tax is levied against the profit gained from the sale of a non-inventory item like stocks, bonds or real estate.

Currently, there are three rates for Capital gains: 0%, 15% and 20%.

The Biden Plan would increase the Capital Gains rate for high-income individuals (making over $1 million).

With the $1 million threshold, Capital Gains would be taxed at the highest individual tax rate (i.e. 39.6%).

While we don’t yet have details on how this tax increase would be implemented, here’s what it could look like if we keep the 0%, 15% and 20% rates and add a 39.6% rate that starts at $1 million in income.

capital gainsHere’s how these changes could impact you.

If you sold a business for a net profit of $2.5 million, the gain from the sale will be taxed at the Capital Gains rate.

Under the Biden administration that would result in a $294,000 increase in capital gains tax.

raising capital gainsThese are just a few of the changes the Biden administration has proposed to tax policy.

When will these changes take place?

So what does the Biden administration mean for your small business?

Increased help battling the coronavirus pandemic and some changes to tax policy.

You might be wondering when all these changes are going to be put into effect.

Unfortunately, there’s no way to know for sure.

At this time everything is a campaign promise. It remains to be seen what will actually make its way into policy.

It’s important to remember that no president can significantly change fiscal policy on their own. Lawmaking is up to Congress and any changes to your money cannot come from the Biden administration alone. 

If you want to take charge of your business and earn profits you can depend on, no matter what happens with the administration, schedule a call with Bottom Line today. With our 6-figure profit blueprint you can build a smarter, healthier business.

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