U.S. Senator Mark Pryor today said tax-free savings accounts would enable and encourage prospective entrepreneurs to turn their innovative ideas into profitable business ventures.
Pryor introduced the Small Business Start-up Savings Accounts Act to help entrepreneurs save start-up funds for a future small business. Specifically, the legislation allows entrepreneurs to save up to $10,000 per year and grow those savings tax-free for the purpose of starting up a small business. Once an individual decides to start a small business, funds in the account can be used for equipment, facilities, marketing, legal fees and other capital and operating expenses. Funds that are not used for start-up expenses or are withdrawn for other purposes would lose their tax-preferred status.
"Tax-free savings accounts help budding entrepreneurs save money so that they can get their small businesses off the ground," Pryor said. "These ventures create jobs and generate economic activity."
Pryor said personal financing is becoming increasingly important to start a business, especially in light of the current credit crunch and economic downturn. Instead of savings, would-be-business owners are turning to retirement savings and credit cards in order to produce enough start-up capital. The average cost to operate a small business in its first year is $80,000. The tax free start-up accounts, as proposed by Pryor, would put entrepreneurs on better financial footing by reducing their need to incur heavy debts or deplete retirement savings.
"Small businesses are a key to our nation's economic recovery, and we must create an environment that fosters their stability and growth," Pryor said. "Incentivizing Americans to save for business ventures is a smart start. These accounts also help entrepreneurs start a business on better financial footing, without the need to make risky financial decisions."