Crains New York - January 21, 2013 - (Page 13)

SMALL BUSINESS INSIDE The Lists New York area’s top SBA lenders New York area’s largest SBA-guaranteed loans PAGE 16 REPORT PAGE 15 Getting squeezed from all sides Entrepreneurs get set for higher taxes, bigger health care bills and more regulation ‘FISCAL CLIFF’ COMPROMISE 39.6% 35% BY JUDITH MESSINA buck ennis WORRIED: Attitude New York’s Rosina Rubin worries that her limousine company’s health care costs for its 68 workers will rise threefold under the Affordable Care Act. Rosina Rubin, who operates a limousine service in the city, is bracing for increased health care costs under the Affordable Care Act. Williamsburg restaurant owner George Weld worries that the expiration of the Obama payroll tax cut will hurt his employees. Meanwhile, systems consultant David Ricciardi is concerned that clients will pull back on technology investments thanks to federal lawmakers’ long-running battle over a tax deal. “Companies have gotten very good at putting the reins on spending,” said Mr. Ricciardi, president of Proximo Consulting Services, a profitable 20-person firm in Manhattan that generates about $2 million in annual revenue. Now that President Barack Obama has started a second term and an income-tax deal with Congress has been sealed, small businesses finally have some of the certainty many craved in 2012. But many are getting agita from changes TOP TAX RATE for personal income above $400,000 (for individuals) or $450,000 (for married couples filing jointly) in 2013 TOP TAX RATE for personal income above $388,351 (for individuals or married couples filing jointly) in 2012 Source: IRS that are in the offing, from the implementation of Obamacare to higher taxes for some and a raft of new regulations. Many business owners are resigned to paying more in taxes, and some believe that wealthier people, including themselves, should foot more of the bill, but they’re worried that any higher costs will harm their businesses. “What are the implications of being obliged to pay for health care?” asked Ira Davidson, director of Pace University’s Small Business See SQUEEZED on Page 14 The DIY approach to small business insurance Owners set up ‘captive’ companies to protect from risks and get tax benefits BY ALEC FOEGE Restaurateur and club owner Ken Sturm vividly recalls how a crane that collapsed in Times Square a few years back forced him to close one of his restaurants, the now-defunct Stardust Dine-O-Mat. His existing insurance policy covered only losses incurred after the first 72 hours the restaurant was shuttered. Mr. Sturm estimates the incident cost him tens of thousands of dollars. It wasn’t the only case where Mr. Sturm’s insurance failed to cover losses at his restaurants. He owns Ellen’s Stardust Diner, P.J. Clarke’s and the Iridium Jazz Club, all in Manhattan, through separate corporate entities, and employs around 150 people in each establishment, bringing in a total of “low eight figures” in revenue annually.“We had a situation a few years ago where a wine bottle fell out of a rack and hit a guy’s hand,” he said. Because restaurant staff failed to report the Large companies and nonprofits incident in a timely manner, the in- have long set up captives to protect surance company declined the themselves from risks stemming claim. “We had to pay $7,500,” Mr. from lawsuits and workers’ compenSturm said. sation issues,but experts The solution for Mr. in the field say that a Sturm to guard against growing number of PERCENTAGE of future losses was to set up New York-area small captives set up to a captive insurance combusinesses are setting up insure employee pany, a private insurer their own captive insurbenefits alone owned by the business it ance companies to augSource: Captive Insurance protects. He turned to ment their existing inCompanies Association Tribeca Advisors, now surance or to cover risks Artex Tribeca, to do so in that don’t qualify under 2008 and now tucks away about their current policy or are prohibi$500,000 every year to self-insure tively expensive to cover through his companies. traditional routes. 4.2% A survey on the use of captives conducted by Aon Risk Solutions in 2011 determined that, among nearly 1,000 large and midsize companies surveyed, the leading risks were economic slowdown, regulatory and legislative changes, and increasing competition. Industry experts anticipate the captive insurance companies of the future will be expanded to mitigate such risks. The benefits of captives extend beyond moderating risks. Since 2003, section 831(b) of the Internal Revenue Code has permitted individuals to put up to $1.2 million per See DIY on Page 14 January 21, 2013 | Crain’s New York Business | 13

Table of Contents for the Digital Edition of Crains New York - January 21, 2013

Crains New York - January 21, 2013
In the Boroughs
In the Markets
The Insider
Business People
Corporate Ladder
Opinion
Greg David
Real Estate Deals
Report: Small Business
Classifieds
New York, New York
Source Lunch
Out and About
Snaps

Crains New York - January 21, 2013