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Obamacare and Small Business: Is my business a large employer or small employer?

Second in an occasional series on the ACA: How the healthcare laws may affect your small business

As we briefly discussed in a previous post, the bulk of the effect of the new healthcare laws will fall onto large employers. The general rule to determine whether a business is “large” or “small” is this: If you have 50 employees that work more than 30 hours per week, or 50 “full-time equivalent” employees, then your business is a large employer, and must provide health care to its employees or pay a penalty. But this is just the general rule: there are a couple of wrinkles to the definition that bear further discussion.

First, there are exceptions for companies that rely heavily on seasonal labor. Even though a business might employ more than 50 employees, the ACA does not consider a company to be “large” if the employees that put a company over the threshold are employed for less than 120 days in a calendar year, and are employed for seasonal work. “Seasonal work” includes any job that can only be performed at a certain time of the year; in Minnesota, this might include agricultural employees, construction workers, or, in the retail context, additional employees added during the Christmas season.

Second, if you own multiple businesses, the ACA may require you to aggregate the number of workers employed by all of your businesses to determine whether you qualify as “large” or “small.” Whether you must aggregate depends on the ownership structure of your businesses, and the relative levels of control you have over each business. If, for instance, you own two businesses organized as a parent and subsidiary, and the parent owns at least 80% of the stock of the subsidiary, you must combine the number employees of both companies to determine the organization’s status under the ACA. Generally, if you own multiple businesses, the primary issue is how concentrated your control over each business is. If you have more than the thresholds prescribed in the ACA and tax code, you may be designated as a “large employer.”

The distinction between “large” and “small” can have a big impact on your small business’ ability to grow. If you’re close to the threshold, and still growing, you may find that the costs of becoming a “large employer” may be prohibitive. If you’d like to learn more about how to manage the costs of compliance while continuing to grow your small business, call the small business attorneys at Lohse & Kreuter today.

For previous posts in this series, please see:

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