In a significant hearing on the role of franchising in small business, Chairman Roger Williams (R-TX) led the House Committee on Small Business in a discussion that underlined the vital contribution of franchises to the economy. Titled “A Small Part in a Big Company: Examining the Power of Franchising in the American Economy,” the hearing addressed both the opportunities and challenges that franchisees face.
Chairman Williams opened the session by reinforcing the importance of small businesses. “Small businesses spur job creation, community growth, and economic success,” he stated. “But starting and operating a small business takes hard work, risk, and sacrifice. The franchise model offers support and guidance to entrepreneurs.” This acknowledgment of franchising as a viable pathway for small business owners serves as a compelling reminder of the structure’s benefits.
One of the key takeaways from the hearing involves the ongoing legislative efforts aimed at easing the tax burden on entrepreneurs. There was a strong emphasis on the Tax Cuts and Jobs Act (TCJA), particularly its provisions that could significantly benefit small business owners. Rep. Downing highlighted the goal of minimizing tax liabilities and reducing red tape for franchisees, a sentiment echoed by various panelists during the session.
For instance, Mr. Wright spoke passionately about the TCJA Section 199A deduction, which allows pass-through business owners to deduct 20% of their business income. “The more capital that can be interjected into the business… it’s going to fuel growth,” he said. This deduction allows franchise owners to reinvest in their businesses, facilitating expansion and enabling them to provide higher wages and benefits to employees. This kind of capital infusion could be game-changing, particularly for small business owners looking to scale their operations.
However, alongside incentives, challenges remain prevalent. Ms. Beaudoin described the administrative burdens and concerns around estate taxes as obstacles to passing family businesses down through generations. She noted, “One of the concerns… is with the estate tax and what that’s going to mean for her taking over our business.” For small business owners with family legacies, navigating these financial obligations can be daunting.
The hearing also examined additional tax relief proposals, including 100% bonus depreciation and research and development tax credits. The general consensus among the panelists was that such provisions are critical for growth and sustainability. Mr. Cross underscored this point, emphasizing that any financial leeway would have a significant positive impact on reinvestment opportunities. “Any additional funds that we can have to reinvest back into our businesses… are always much appreciated,” he said.
For small business owners, particularly those operating in the franchise model, this information serves as more than mere background; it lays a framework for understanding how current legislation could shape their futures. Advocating for favorable tax treatments not only benefits franchisees but also creates a ripple effect in the broader community by generating jobs and stimulating local economies.
That said, it is essential for small business owners to remain vigilant. The complexities surrounding tax legislation mean that while many proposals offer significant advantages, they also come with challenges that require careful navigation. Potential changes to estate taxes or proposed regulations could significantly affect how business transitions take place within families.
This hearing illustrated a proactive effort by lawmakers to engage with franchise owners and address their needs, juxtaposed against the realities of operating a small business in a fluctuating economic landscape. As the conversation about supporting the backbone of America’s economy continues, small business owners should remain informed, engaged, and ready to advocate for their interests.
For a detailed look at the hearing, you can watch the full session here and read more insights from the House Small Business Committee here.
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