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Small business optimism growing

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Small business owners are slowly growing more confident about their companies and the economy — but they're also still cautious about hiring and expanding.

American Express surveyed small business owners from late February through early March, and found that 34 percent expect their businesses to grow during the next six months regardless of how the economy fares. That's up from 31 percent last fall. Meanwhile, the number of owners who expect the economy to hurt their business in the next six months fell to 27 percent from 34 percent.

But close to half the owners surveyed — 44 percent — said they have no plans to hire or may cut their staff in the next six months. The good news is that's down from 61 percent last fall. Thirty-five percent said they would be hiring, up from 31 percent.

Using their companies' performance as a guide, 35 percent of the survey participants said the economy is recovering, up from 24 percent last fall. The number of owners who said we're still in a recession fell slightly from the fall, to 34 percent from 38 percent.

Small business owners have taken a number steps to keep afloat. Forty-one percent said they had stopped hiring, and the same amount said they had frozen staffers' salaries. Thirty-six percent said they dipped into their own savings or other personal assets to help the business. Twenty-eight percent brought a family member into the business without pay to help out.

The growing tax burden

Taxes are a painful subject for small businesses. It's not just paying them that hurts — record-keeping, visiting accountants and preparing tax forms pose an administrative and financial burden for companies. And it's a burden that's growing.

The National Small Business Association, a group that represents small business owners, surveyed its members and found that 64 percent of the survey's participants spent more than 40 hours a year working on taxes last year, up from 57 percent in 2010. Working on taxes includes calculating them, filing reports and returns and meeting with an accountant.

Income taxes pose the biggest administrative burden for small businesses, followed by payroll taxes and sales tax.

The survey also found that 53 percent of participants spent more than $5,000 on accountants' fees, legal fees and the internal costs of handling tax issues. A huge majority — 85 percent — had an accountant or other paid preparer handle their returns. Another 5 percent did the returns themselves using a PC and software, while 4 percent did it the old-fashioned way, sitting down with a calculator and paper forms. Another 3 percent gave the forms to a staffer to fill out.

Are you covered?

Wildfires and tornadoes in many parts of the United States are serving as a reminder to business owners that they need to be sure they have adequate insurance coverage in case disaster strikes their company.

Many companies buy property and casualty insurance that will cover damage to a company's premises. The Insurance Information Institute, an industry group, says companies also need business interruption insurance in case a disaster shuts them down. This type of insurance will reimburse a company for lost profits and also covers operating expenses like payroll, mortgage payments and utilities.

There doesn't have to be physical damage to a building for a company to collect under business interruption insurance; it can cover losses that are due to a power failure or a road that's washed out. The coverage usually starts after a company has been unable to operate for 48 hours. This type of insurance is usually included in a standard business owner's insurance policy. But if you bought a policy that covered only property and casualty damage, you wouldn't have business interruption coverage.

People who operate companies out of their homes also need to be sure that their businesses will be covered in a disaster. A homeowners' policy might not cover business equipment or inventory stored in a home.

The Insurance Information Institute also recommends business owners be sure that the amount of their insurance will be enough to cover their physical losses. If your building and equipment are worth $1 million, having a policy that pays only $500,000 would leave you with heavy unreimbursed losses.

You can find out more about business insurance at the institute's website, iii.org.

Mark your calendar

The IRS is holding an online seminar to help employers understand the tax issues about hiring independent contractors. Many small companies hire workers as contractors rather than employees because they can save money on benefits. But the government believes that many of the workers should be classified as employees, which means companies would need to pay Social Security and Medicare taxes for them. The seminar will focus on the difference between the two types of workers. It will be held Thursday, May 10 at 1 p.m. Eastern time. You can register at gotomeeting.com/register/253489554

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