Small business owners often find themselves in a Catch-22: They are ready to grow their business because the demand for their product or service exists, but tight financial circumstances make it difficult to expand. Fortunately, there are several state and federal tax credits, grants, and incentives available that can encourage business growth. These small business incentives can help you create jobs, train staff, and even open a new location.
The Small Business Health Care Tax Credit benefits companies that have fewer than 25 full-time equivalent employees and pay at least half of employee health insurance premiums. To qualify for the credit, businesses must pay premiums for employees enrolled in a qualified health plan offered through a Small Business Health Options Program Marketplace (or qualify for an exception).
While the requirements are a little particular, the credit can be worthwhile. For example, the Internal Revenue Service notes that qualified businesses that pay $50,000 a year for employee health care premiums could save $7,500.
There's also the federal Work Opportunity Tax Credit (WOTC), which applies when you hire people from certain groups, such as veterans, ex-felons, or food stamps recipients. There is no limit on the number of qualified employees you can claim, and companies can receive a credit of up to $9,600 per employee.
Unfortunately, the WOTC currently only applies to the 2014 tax year, though some legislators are hoping to extend it another two years. In August, the Senate Finance Committee reported its version of The Tax Extension Relief Act of 2015, which would authorize WOTC retroactively beginning Jan. 1, 2015. This is a developing issue that you might want to keep an eye on.
State and federal grants can help cover your employee training expenses, often for both new and existing employees. Each training grant program is different — some will reimburse companies for a percentage of their trainer fees while others will also cover space rental expenses. A few programs will even cover the wages of the employees being trained.
Reach out to the U.S. Department of Labor's Business Relations Group and state economic-development agencies to find out what opportunities might be available for your business.
If your company is ready to grow, state hiring incentives can help offset your expenses. Before you decide definitively how many employees you will be hiring, contact the state to discuss your incentive options. Be ready to answer specific questions about the potential jobs: Are they part-time or full-time? Will you be providing benefits? What is the expected wage?
You'll also likely be required to negotiate the number of jobs your company will create in the community versus how much incentive money the state will give you in return. The government's goal, of course, is not necessarily to help you out but to stimulate the local economy — so make sure you understand all the requirements of the incentives before you sign on the dotted line. For instance, what happens if the economy falters and you aren't able to create the agreed-upon number of jobs?
Expansion incentives can help you decide where to open your next location. If you are trying to decide between two states, for example, you should take your deliberation to government officials in each state and make the case for your business's positive impact on a community. Government officials may bid for the chance to have your company open a location in their state, especially if you are willing to set up shop in a distressed community.
Tracking down small business incentives can be tricky, so be prepared to make a lot of calls and fill out a stack of paperwork. But the rewards are often significant — saving you thousands and even millions of dollars, which can help your business grow even more than you may have dreamed.