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Franchisees Gain New Financial Benefits Under the Small Business Act

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The Small Business Jobs and Credit Act which was just signed by President Obama provides benefits for franchisees and particularly those franchisees in the restaurant sector. Here is a short summary of the benefits.

The recently enacted Small Business Act provides an incentive for franchisees to make capital improvements to their location. This especially favors franchisees in the restaurant sector. The new bill allows small businesses to deduct the full cost of equipment purchased outright or financed during the 2010 and 2011 tax years in an amount up to $500,000. In addition, the bill provides incentives for community banks to lend to small businesses.

The Small Business Act, by helping businesses reduce their taxable income, enables them to use the savings for other parts of the businesses, such as adding new employees.

Up to $250,000 of the $500,000 invested can be deducted for structural, new construction, and leasehold improvements. The Small Business Act also allows businesses to claim a bonus depreciation whereby they can immediately deduct 50% of the remaining cost of new equipment through 2011. The Act altered Section 179 of the Tax Code which set expensing limits. This means more businesses qualify for the tax break than before.

In total, the bill includes $12 billion in tax cuts for small businesses and a new $30 billion lending fund to give banks more incentives to lend to smaller companies.

2010 FranchiseKnowHow, LLC

Ed Teixeira is the President of FranchiseKnowHow, LLC. He can be reached at franchiseknowhow@gmail.com

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