Small Business Then and Now

Although the entrepreneurial spirit remains strong among small business owners, a lot has changed over the past six decades. Here are some of the major differences between present day small businesses and those from the 1960’s and 70’s.

This post is a part of a series celebrating National Small Business Week. If you’re a small business owner using Shoeboxed for your business and would like to share your experience, we’d love to hear from you.

Although the entrepreneurial spirit remains strong among small business owners, a lot has changed over the past six decades. Here are some of the major differences between present day small businesses and those from the 1960’s and 70’s:

  • During the 1960’s, big business dominated the domestic economic landscape which made it difficult for small firms to compete. In the 1950’s, small business output accounted for roughly 58 percent of total domestic output.This number dropped to around 48 percent in the early 60’s and, by 1977, small businesses with fewer than 500 employees produced only 46.5 percent of business output in the United States. Today, small business’s contribution is starting to grow again, and the SBA estimates that the output percentage of GDP is back up to 50 percent.
  • In 1965, the top five industries for startup companies were: housing, computer technology, chemicals, electrically powered consumer durables and automobile services/parts. Today, the top five fastest growing industries are: candy, mobile apps, accounting services, fast casual dining and green construction.
  • In the 1950’s and 60’s, the SBA only classified companies employing less than 250 employees as small businesses. This number was raised to less than 500 employees in the 1970’s. Today, firms with fewer than 500 workers account for 99.7 percent of employer firms. There are currently 28 million small businesses in the United States and they outnumber large corporations 1162 to 1.
  • In 1960, roughly 10 percent of small businesses in the United States were owned by minorities. As of 2007, one-fifth (21.3 percent) of the nation’s 28 million small businesses were minority-owned.
  • In 1972, women owned only 4 percent of all American businesses. Today, 38 percent of American businesses are owned by women.

Other Interesting Figures from 2013

  • 70 percent of small businesses survive past two years while only 50 percent make it past five.
  • Small businesses employ 57 percent of the country’s private workforce.
  • 50.8 percent of small business owners have college degrees.
  • Immigrants make up 12.5 percent of small business owners in the United States.
  • 54 percent of small businesses are operated from home. Only 2 percent are franchises.

What changes do you think are on the horizon for small businesses in the next 50 years?

Image via Flickr

Are You Missing A W-2?

W-2 Form: Did you get yours?
W-2 Form: Did you get yours?

Did you get your W-2? These documents are essential to filling out most individual tax returns. You should receive a Form W-2, Wage and Tax Statement, from each of your employers each year. Employers have until February 2, 2009 to provide or send you a 2008 W-2 earnings statement either electronically or in paper form. If you haven’t received your W-2, follow these steps:

1. Contact your employer. If you have not received your Form W-2, contact your employer to inquire if and when the W-2 was mailed.  If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address.  After contacting the employer, allow a reasonable amount of time for them to resend or to issue the W-2.

2. Contact the IRS. If you still do not receive your W-2 by February 17th, contact the IRS for assistance at 800-829-1040. When you call, have the following information:

  • Employer’s name, address, city, and state, including zip code;
  • Your name, address, city and state, including zip code, and Social Security number; and
  • An estimate of the wages you earned, the federal income tax withheld, and the period you worked for that employer. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.

3. File your return. You still must file your tax return on time even if you do not receive your Form W-2. If you have not received your Form W-2 by February 17th, and have completed steps 1 and 2 above, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible.  There may be a delay in any refund due while the information is verified.

4. File a Form 1040X. On occasion, you may receive your missing documents at a later date and some may have conflicting information. You may receive a Form W-2 or W-2C (corrected form) after you filed your return using Form 4852, and the information differs from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.

Form 4852, Form 1040X, and instructions are available on the IRS Web site, IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

  • Form 4852, Substitute for Form W-2, Wage and Tax Statement (PDF 29K)
  • Form 1040X, Amended U.S. Individual Income Tax Return (PDF 123K)
  • Instructions for Form 1040X (PDF 43K)

Tax Question: Independent Contractors or Employees?

Many small business that are getting ready to file their taxes wonder whether their workers should be counted as employees or as independent contractors. I wanted to quickly point you to information from the IRS on the subject.

Enjoy!

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Are your workers independent contractors or employees? The answer can have a profound impact on how much tax you pay as a small business owner. Knowing whether your workers are or are not employees will affect the amount of taxes you must withhold from their pay. It will affect how much additional cost your business must bear, what documents and information they must provide to you, and what tax documents you must give to them.

Employers who misclassify workers as independent contractors can end up with substantial tax bills as well as penalties for failing to pay employment taxes and failing to file required tax forms. Workers can avoid higher tax bills and lost benefits if they know their proper status.

Both employers and workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS.

Generally, whether a worker is an employee or an independent contractor depends upon how much control you have as a business owner. If you have the right to control or direct not only what is to be done but also how it is to be done then your workers are most likely employees. If you can direct or control only the result of the work done, and not the means and methods of accomplishing the result, then your workers are probably independent contractors.

Three broad characteristics are used by the IRS to determine the relationship between businesses and workers – Behavioral Control, Financial Control, and the Type of Relationship. Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training, or other means. Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker’s job. The Type of Relationship factor relates to how the workers and the business owner perceive their relationship.

Knowing the proper worker classification can be critical to your business. Don’t guess. Act now to make certain you know for sure.

You can learn more about the critical determination of a worker’s status as an Independent Contractor or Employee at IRS.gov by selecting the Small Business link. Additional resources include IRS Publication 15-A, Employer’s Supplemental Tax Guide, and Publication 1779, Independent Contractor or Employee. Both of these publications and Form SS-8 are available on the IRS Web site or by calling the IRS at 800-829-3676 (800-TAX-FORM).

Links:

* Contractor vs. Employee
* Publication 1779
* Publication 15-A