Several weeks ago I was in a meeting with a small business owner at my office. She’d come by to talk about her plans to transition away from her business, as she is in her 50’s and getting burnt out. She’s built a successful enterprise over the years, and stands to make a nice profit on the sale of her equity stake.
Her biggest problem in this transition? Taxes, of course! Although she stands to receive a nice chunk of change from the sale, she’ll end up owing several hundred thousands of dollars between state and federal taxes. And as we worked through the mechanics of the transition and how she might reduce her tax burden, she asked a question I hadn’t thought much about: “aren’t there tax benefits I can claim as a woman owned business?”
I hate to admit this, but woman owned business tax benefits aren’t a subject I’d looked into before. I’d always assumed there were some tax benefits for women and minority owned businesses, but I’d never looked into what they were exactly.
So I researched it. And since I’m certain there are thousands of women entrepreneurs out there wondering the same thing, I consolidated my findings into this post.
Tax Benefits for Women Owned Businesses
Well ladies, I’ll cut to the chase. The federal government does want to promote underrepresented groups in entrepreneurship – mostly women and minorities. But unfortunately, it’s not through the tax code.
The internal revenue code doesn’t discriminate. Gender, race, political affiliation, favorite sports team, none of it matters according to the tax code. Everyone is subject to the same tax laws, and everyone has access to the same deductions. And from what I could find, states around the country take the same non-discriminatory stance.
That doesn’t mean there aren’t government programs out there that can help you. Business development opportunities, grants, and loans are all available to women & minority owned businesses. Federal, state, county, and city governments around the country each have their own programs, as do many large private enterprises. There are state & local tax credits and incentive programs available too, but they’re not limited to women.
What follows are the opportunities I ran across.
Business Development Opportunities
As I mentioned above, the government does want to help women & minority owned businesses. The federal government sets aside a certain number of contracts every year for qualifying women owned small businesses. The number and size of these contracts varies by industry based on how well women are represented. As you’d expect, more and better opportunities are available in industries with fewer women in leadership.
Right now, contracts are set aside in 83 different industries (by NAICS code). Awards can go as high as $5 million in manufacturing industries, and $3 million for services.
To be eligible for these contracts, your business needs to qualify as either a Women-Owned Small Business (WOSB), or an Economically Disadvantaged Women-Owned Small Business (EDWOSB).
To Qualify as a Women-Owned Small Business (WOSB), your business must:
- Meet small business size standard for your business’s primary NAICS code and contract
- Be at least 51% owned by women who are U.S. citizens
- Be managed day-to-day by women
- Have long-term decisions made by women
- Have a woman holding the highest officer position in the company
- This woman must work at the business full-time during normal working hours
- (Although, there’s no minimum amount of time the business must be operational)
To Qualify as an Economically Disadvantaged Women-Owned Small Business (EDWOSB), your business must meet all the requirements above, and all it’s owners must meet the requirements below:
- Your personal net worth must be less than $750,000, excluding:
- Your ownership in your business and your primary personal residence
- Income reinvested or used to pay business taxes
- Funds reinvested in an IRA or other retirement account
- Transferred assets within two years if to or on behalf of immediate family member for select purposes
- Adjusted gross income average over the last three years is $350,000 or less, excluding:
- Income reinvested or used to pay business taxes
- Fair market value of all your assets is $6 million or less
If you think your business qualifies as a WOSB or an EDWOSB, you’ll need to get certified. You have the choice of self certifying through the Small Business Administration, or being certified by a qualified third party. Here’s the rundown from the SBA’s site.
Government Sponsored Grants & Loans
In addition to the business development opportunities available through the federal government, there are some grants & loans available too. If you’re looking for one, the first two places I’d start are grants.gov and the US governments “Access Financing” site. Not everything you’ll find on these sites is specific to women, but there definitely some convenient opportunities. And as an aside, these are the two most exhaustive resources I found covering government sponsored grants and financing for small businesses.
There are state programs across the country, too. I found some of them, but I’m sure there are more. I’d suggest checking out what’s out there in your home state, just to make sure you’re not overlooking anything. Here’s what I found:
Small Business Loan Guarantee Program (California)
The California Small Business Loan Guarantee Program (SBLGP) helps businesses create and retain jobs while encouraging investment into low to moderate income communities. Basically, through a guarantee the program helps you obtain a loan you may not otherwise qualify for. The idea is that small businesses can create positive credit history, and eventually find financing without the program’s assistance. Learn more here.
Dependent Care Tax Credit (Oregon)
This is one of the few tax credits I ran across. It’s not specifically created for women, though. The credit allows employers to offset 50% of its child care expenditures against its state tax liability, up to $2,500 per employee.
is a state tax credit for dependent care assistance provided to employees. Oregon´s tax credit permits an employer to offset 50 percent of its child care expenditures against its state tax liability. The credit allows an annual limit of $2,500 per employee. Learn more here.
Research and Development Tax Credit (New York)
If you have an R&D facility in New York state, you could be eligible for a 9% corporate tax credit through this program. Additional credits are available too, in order to promote the creation and expansion of emerging technology businesses. There’s also a three-year job creation credit of $1,000 per employee, and a capital credit for investment in emerging technologies. Learn more here.
Life Sciences Tax Incentive Program (Massachusetts)
Massachusetts awards up to $25 million in tax incentives every year through the Mass Life Sciences Center. If your business engages in life science research and development, commercialization, or manufacturing, yours could be eligible. Learn more here.
Jump Start Philly (Philadelphia)
This program exempts qualifying businesses from paying the Business Income and Receipts Tax during the first two years of operation. Additionally, fees are waived for eligible new businesses for a variety of licenses and registrations, including the Commercial Activity License (which is the main license you need to operate in Philadelphia). The city also offers eligible businesses that create jobs in Philadelphia a credit of $25,000 per job created, or 2% of the annual wages paid. Learn more here.
New Markets Tax Credit (Nationwide)
The new markets tax credit is available to businesses investing in underserved communities. The amount of the credit can be quite large in some circumstances. For example, Invest Detroit has received three NMTC allocations totaling $98 million, and has invested in various projects in Detroit. Learn more here.
Private Grants for Women Owned Businesses
Although state and federal government tax codes don’t offer tax advantages to women, many private organizations do. Grants, challenges, and competitions are sponsored by a good number for profit and non profit organizations alike. Here’s what I found:
The Eileen Fisher Women-Owned Business Grant Program
Eileen Fisher offers five grants annually to women owned businesses focused on creating environment and social change. Your business must be majority owned and led by women (51% or greater), be beyond the startup phase, and have revenues of under $1,000,000. Learn more here.
Huggies Brand Mom Inspired Grants
This grant awards up to $15,000 to advance the development of innovative products inspired by moms. Awardees also receive resources to further develop their products and launch businesses. Learn more here.
InnovateHER: Innovating for Women Business Challenge
This business challenge is sponsored by the Small Business Administration (SBA) Office of Women’s Business Ownership. The challenge awards three winners $30,000 in prize money for businesses that have an impact on the lives of women. However, be aware of the recent fraud news around the SBA. Learn more here.
WomensNet Amber Grants
Amber Grants were launched in 1998 to honor the memory of a young woman (Amber) who died at the age of 19, before fulfilling her entrepreneurial dreams. WomensNet awards $500 to a different winner each month, and an additional $1,000 to one of the 12 finalists at the end of the year. There’s a $7 application fee as well. Learn more here.
Women Veteran Entrepreneur Corp (WVEC) Small Business Competition
This competition is organized by Capital One and Count Me In for Women’s Economic Independence, and lets participants present two-minute pitches for a chance to participate in a nine-month business accelerator program. The most recent update I can find on the competition is from 2014, and it’s unclear whether the program still exists. Learn more here.
Zions Bank Smart Women Smart Money Program
Zions Bank, based in Utah, awards $3,000 each year across six difference categories. This Utah-based bank’s grant annually awards $3,000 across six different categories, including business. You could be eligible if your business promotes the empowerment of women or low income/underserved populations in Utah or Idaho. Learn more here.
Wal-Mart Women’s Economic Empowerment Initiative
In 2011, Wal-Mart made a $40 billion commitment to improve the lives of women around the world. Through training, market access, and career opportunities, Wal-Mart is on the tail end of a five year commitment to the program. This could be a good opportunity if you’d like to sell to Wal-Mart. Learn more here.
Idea Cafe Small Business Grant
The Idea Café is a site that promotes various grants. Its current grant awards one $1,000 grand prize to a business with the most innovative solution to an every day problem. Learn more here.
FedEx Think Bigger Small Business Grant Program
Applicants are encouraged to share their visions to receive a portion of the $75,000 awarded in grants. Part of the judging involves the general public voting for the finalists, so participants can promote their businesses while garnering votes. Awards have already been doled out for this year, but it looks like FedEx opens the program consistently every year. Learn more here.
Chase Google: Mission Main Street Project
Chase and Google partnered to award $3 million in grants to small businesses around the country. In 2015, recipients were awarded $150,000 each to help take their businesses to the next level. It looks like 2015 was the last year the program gave out awards though. Learn more here.
Small Business Innovation Research
This research based program incentivizes small business to explore technological advancement. It’s run by 11 different federal agencies, and gives numerous awards that vary by industry and project. Learn more here.
Small Business Technology Transfer Program
The STTR program reserves a specific percentage of federal research and development funding to provide funding opportunities in research and development. The site claims that the program is very competitive, and the program is interested in helping solve the country’s technological & scientific challenges in the 21st century. Learn more here.
Aside from everything I’ve listed above, there are a few other resources women entrepreneurs should all know about. They’re not necessarily tax credit/financing/grant related, but are other avenues that could provide help where you need it.
Women’s Business Centers
The SBA sponsors about 100 Women’s Business Centers around the country, designed to help women entrepreneurs with business development and access to capital. Some lend money directly to small businesses (like the California Capital Financial Development Corp.), while others can help you find grants and loans. Learn more here.
Economic development agencies
Each state (and some cities) have economic development agencies to help promote their local economies. Your local agency might offer a small business grant. But if it doesn’t, it can probably tell you where to find one. There’s no national database I could find, so you’ll need to look up your local option.
Small Business Development Centers
There are hundreds of these SBA-sponsored centers around the country, typically housed at colleges and universities. SBDCs offer free, one-on-one business consulting. Advisors can tell you about grants and financing opportunities, as well as give you some general coaching support. Learn more here.