Getting into freelance work, or any small business for that matter, is not easy.  One of the purposes of Cincy Coworks is to support fellow self-employed professionals.  Unfortunately, there are systems in this country that are designed to discourage individuals from doing these things, and do so for one reason: to minimize risk.

You may have heard about the Whitehouse initiative called Startup America.  The Small Business Administration (SBA) is reaching out to startup communities by holding roundtables in several cities.  They are also accepting comments via email to include in their Reducing Barriers report.  I encourage you to email them and include your thoughts.  My email (paraphrased) is below.

If this administration is serious about “winning the future with America’s Entrepreneur’s,” I look forward to upcoming changes.

Hello Sir,

I am unable to attend any of the Reducing Barriers Roundtables since none are within close proximity to me. However, I would like to offer my comments that are germane to this program.

About myself: I am co-founder of Cincinnati Coworks, a coworking community and space in Cincinnati, OH. I am also a freelancer, and am currently employed in a small business with 7 employees.

Part of our purpose at Cincinnati Coworks is to advocate for and support the self-employed professional, which brings me to this message. At a time when the Obama administration wants to encourage entrepreneurship and innovation, it has never been harder to be self-employed. To wit:

1) Self-employment tax. I realize that programs like Social Security and Medicare are important, but it is quite a shock for the 1st-time freelancer to learn that he is now on the hook for 15% of his income instead of 7.5% as a W-2 employee – twice as much to these programs! It is as if he is being penalized for wanting to be an entrepreneur.

2) Health insurance. Health insurance companies will not provide major medical coverage to groups of individuals, unless they are employees. So entrepreneurs are forced to pay exorbitant rates for private health insurance, and/or devote time and energy to maintaining yet another tax-sheltered account in an HSA. Washington state is the only state I know of that corrects this wrong by allowing full-time, self-employed professionals to qualify for group health insurance.

3) Mortgage loans. By and large, self-employed individuals will not qualify for a home mortgage unless they can show 2 years’ worth, and a mountain of, invoiced revenue.  Even armed with all this paperwork, mortgage applications slowly wind their way through the labyrinthine world of home financing, and take on-average 6 months to be approved, with much faxing and emailing in the interim. I totally understand the reasoning and risk justifications for this situation, but I find it silly that a low-paying, newly hired employee qualifies for a home mortgage more easily than a highly-paid, longtime freelance professional just because the former pulls a W-2.

So, sir, you can see that the odds are stacked against the entrepreneur from the get-go, before he or she even sets foot outside his employer’s door. This system rewards low-risk, status quo behavior. This system adds significant burdens on the already substantial business challenges for the entrepreneur.

I hope while President Obama and Startup America work to increase the number of startups they will also think about the people who start them and join them. Not just when they are working on a startup or employed by one but as they work as individuals to better their own lives and the lives of their families.

Thank you!