The latest small business figures released by the Census Bureau are an encouraging sign for the economy. As President Biden mentioned in his State of the Union Address, the record-setting 10.5 million new small business applications filed over the past two years suggest American entrepreneurship is roaring despite economic uncertainty.
This growth is exciting, but it’s not guaranteed to last, and a variety of headwinds are still slowing it. Some of the strongest–and least recognized–are the bureaucratic barriers to starting a business quickly.
Many roadblocks to entrepreneurship exist at the starting line. Over thousands of conversations with Stripe, small business owners remain optimistic in the face of rising inflation and interest rates. But they consistently point out practical, uncontroversial changes government could make to help them get started and grow their businesses more quickly.
The IRS has long argued for better funding to address technology deficits and customer service–and more resources at the IRS should be devoted to helping small businesses with their tax questions. Agencies must coordinate more closely to ensure that the Inflation Reduction Act is administered in a way that helps small businesses.
In a survey, entrepreneurs pointed to several barriers.
Take EINs, or Employee Identification Numbers, which are issued by the IRS and serve as a unique tax identifier for businesses. A business needs to have one before it can open a bank account, apply for a license, buy inventory, hire employees–or, really, perform just about any business function you can think of.
Despite their importance, they’re cumbersome to acquire. With additional resources, the IRS could update the EIN application process to allow all entrepreneurs to apply quickly online, not via fax. It could also allow all entrepreneurs to check the status of their applications online, making the process less cumbersome for founders and the IRS.
Since 2021, the IRS has allowed entrepreneurs to submit electronic signatures when filing 83(b) elections, a frequently recommended tax election when entrepreneurs create stock ownership in a company.
This common-sense reform to make the process more streamlined was uncontroversial–but is due to expire on Oct. 31, 2023. The IRS should make e-filing and e-signing of 83(b) elections permanent so that founders and early employees at startups can more easily understand and comply with their taxes.
Small changes like these can produce big results for small businesses across the country–and have an outsized effect on the U.S. Economy as a whole. Nearly seven years ago, Stripe launched a product called Atlas, which aims to make incorporation easier by eliminating the lengthy paperwork and legal complexity that historically slows the process. Of companies incorporating using Stripe Atlas, 43% are led by first-time entrepreneurs, and 92% are based outside the technology hub of Silicon Valley.
We think those numbers could be even higher if businesses faced fewer administrative roadblocks to getting up and running.
New software platforms have sprung up to help entrepreneurs navigate the complexities of company formation, filing fees, and paperwork–but government could help eliminate even more of these issues.
Amy Roberti is the head of public policy for the Americas and global tax policy at Stripe.
The opinions expressed in Coins2Day.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Coins2Day .
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