Navigating Obamacare and the IRS Common Control Law

Starting in 2014, the United States’ healthcare system will undergo a transformation unlike anything that has occurred in this nation’s history. Small businesses throughout the country will have to come to terms with the Affordable Care Act requirement that they provide adequate healthcare to virtually all employees. One unique issue that small business owners must deal with is the aggregation rule, which presents significant small business law issues.

 What is the Aggregation Rule?

Under the Affordable Care Act, small businesses with 50 or fewer employees are exempt from most of the requirements. These companies are not required to provide healthcare to employees. However, many small business owners who own or have stakes in multiple business entities are finding that the healthcare requirements do in fact apply to their businesses.

This is because under the Internal Revenue Code, Common Control Clause, the amount of employees for a business entity is aggregated. This means that all employees of partnerships, sole proprietorships, and corporations are counted as employees of one single business entity for the purposes of federal law. In fact, in some situations multiple firms that have common equity investors can be counted as one single employer. Thus, employees from various businesses are pooled together for the sake of tax purposes.

  The Affordable Care Act requires many small business to provide healthcare to employees. What Effects Will the Aggregation Rule Have on My Business?

Small business owners in both Illinois, as well as the rest of the country, must be aware of the effects that both the Common Control Clause and the Affordable Care Act will have on their obligations to provide healthcare for their employees. If you own an interest in more than one business it must be determined if the total sum of employees from these different entities is greater than or fewer than 50 employees.

The National Federation of Independent Business estimates that at least four out of 10 firms that have 20 employees or more are run by employers who have a 10 percent or more stake in another separate business.

Understandably, maneuvering within the Affordable Care Act is a challenge for many small business owners. Even the basics of the law can be confusing, and matters are only made worse when trying to deal with issues like the Common Control Clause. In most cases, following the new rules will require the assistance of skilled professional tax and business law attorneys. For help in Naperville and surrounding communities, please contact the Illinois business law attorneys here at Gierach Law Firm to discuss whether the aggregate sum of your employees creates significant healthcare burdens for your small businesses.