New Tax Code Spells Good News for Franchise Owners
The recent passage of the Tax Cuts and Jobs Act, which was signed into law late last year, makes 2018 an exciting time for franchising. By lowering the tax rate on businesses, the new tax code enables small business owners—including a majority of Kiddie Academy® franchisees—to expand, hire more workers and potentially take on more units this year.
Kiddie Academy President Greg Helwig recently told the Wall Street Journal that growth is not only possible but actually incentivized by the new law because most franchisees operate as “pass-through businesses, whereby they pass their business income through to their individual tax returns.” He adds, “The tax reform legislation equates to an approximately 20% reduction in their taxable income.”
This means good news for current franchisees that have their eye on expansion. It may help any prospects who are considering investing in a franchise for the first time to finally get up and running. Devinder Singh, a multi-unit owner who currently operates four locations throughout the Greater Seattle area, is already making plans for more Academies. “We were one of the first in Washington State… Now we get calls from banks that want to lend us money, and developers tell us about new developments before they are built.”
The substantial tax break will enable small business owners and franchisees to compete with larger businesses and global competitors that have a smaller tax burden. The law also incentivizes them to grow and invest in equipment, allowing full expensing for five years and increasing the small business expensing cap from $500,000 to $1 million.
For existing franchise owners specifically, the new tax law provides greater impetus to grow and add units, enabling them to apply tax savings to hire new employees, increase employee wages and incentives, invest in new equipment, expand workspaces, and even pay down debt.
There is no better time than the present to explore franchising with Kiddie Academy. With the educational child care industry thriving, it’s a smart choice that can help those interested to achieve professional goals while making positive impact in the community.