The Small Business Jobs and Credit Act of 2010, or “SBJCA” was signed into law by President Obama in September of 2010. The law creates new benefits for entrepreneurs to create small business endeavors. It also provides various incentives for existing small businesses to remain operational and hire new employees.

What are some of the basic provisions of the SBJCA?

The SBJCA creates several new benefits for small businesses in many areas. A full list of the provisions can be seen by viewing the Act in its entirety. In short, some of the new benefits that the law creates are:
  • Tax Breaks: SBJCA creates two major tax breaks for small business owners-
    • Health Insurance Premiums: For self-employed business owners or sole proprietors, a tax deduction is available for health insurance premiums you currently pay. It also lowers self-employment related taxes. The Act covers premiums paid for the owner, their spouse, and any dependents up to the age of 26.
    • Start-up Costs: There is an extra $5,000 tax deduction for costs related to small business start-up. This moves the limit up to $10,000.
  • Higher Limits on Loans: The Act launches the Small Business Lending Fund Program, which designates billions of dollars to local banks for the purpose of lending small business loans. Also, the Lending Fund Program increases the limit that the Small Business Association (SBA) can lend to small businesses. Finally, the act eliminates many of the fees associated with most SBA-approved loans.
  • Various Section 179 Deductions and Expensing Provisions: Small business owners can now invest more in their company equipment and expense up to $500,000 (an increase from the previously allowed $250,000). Now certain items can be expensed such as real property, computer software, and even cell phones
Thus, the new Small Business law is advantageous in many respects for small business owners and those who wish to start up their own small business. Consult with a lawyer for the various details of the law, as it is complex and contains many other provisions.

What are some of the drawbacks of the SBJCA?

As with any new law, the Small Business Jobs and Credit Act carries with it a few drawbacks. The main concern regarding the SBJCA is the new IRS reporting requirement it contains. According to the Act, small business owners would have to file an IRS Form 1099 for goods costing more than $600. In the past, Form 1099 only needed to be filed for services costing more than $600, such as appraisal fees.
Under SBJCA, however, whenever the small business owner purchases machinery or equipment over $600, they will be required to file a form 1099. This has been criticized as an unnecessary waste of resources for small business owners, because they will have to allot more time and money to fill out the forms.
Again, check with an attorney to identify which provisions may have negative impacts on your small business.

How do I take advantage of the benefits offered by the SBJCA?

In order to maximize the benefits under SBJCA, you will need to take action relatively quickly. Some of the provisions have time limits associated with them.
For example, small business owners will only have one tax year to claim the tax breaks for health care premiums. In addition, the expensing provisions with regards to Section 179 deductions are only being offered up until 2011.
You may also wish to make your significant purchases soon, as the Form 1099 reporting requirement for goods over $600 will take effect in January of 2011. If you can afford to do so, make these purchases before then so that you will not have to expend time and money to file the Form 1099.

Do I need a lawyer for issues related to SBJCA?

If you are considering starting up a small business, or are currently operating one, you should consult with a lawyer to see how the Small Business Job and Credit Act of 2010 will affect your ventures. It is a good idea to have a lawyer go over the new law with you. They will be able to make sure you are following proper principles of accounting and business management. Also, a small business attorney will be able to advise you on how you can benefit from SBJCA provisions.