A sole proprietorship seemed like the best option when Katie Murano started her wedding photography business in January.
Having previously owned an event-planning business as a limited liability company, she wanted to eliminate the complexities of state registration and startup fees in favor of a simpler approach better suited to her plans for a one-woman photography business.
Now, Murano can’t help but wonder how the last 11 months might have played out differently had she gone the LLC route with Katie Lovaas Photography. The business structure wouldn’t have
changed the devastating loss of work, clients and income caused by the pandemic, but it might have made it easier to access government aid.
Instead, Murano has found herself shut out or having to wait longer to qualify for a host of relief programs, from unemployment benefits to the U.S. Small Business Administration’s popular Paycheck Protection Program.
She is not alone. Roughly 23 million small businesses, 70% of those registered, were sole proprietorships, according to 2017 Internal Revenue Service information, the most recent available. This represents a 53% increase over the number of sole proprietors registered in 1997, with significant increases in average profits as well, according to the IRS.
Exactly how many sole proprietors there are in Rhode Island is unclear. Sole proprietors don’t have to register with the state, only the municipality in which they operate. Municipal business records such as those in Providence don’t specify the structure of the businesses that have registered, only their trade names and owners.
But anecdotally, Murano knows many other business owners in her same boat, particularly in the hospitality and tourism industries on which the state depends,
“I’m at a loss for words for why they can’t step it up for sole proprietors,” she said. “Our businesses bring a great deal of money to the state.”
‘Our businesses bring a great deal of money to the state.’
KATIE MURANO, Katie Lovaas Photography owner
Lauren McKenna shared Murano’s frustration. McKenna also chose to register her skin and eyebrow care business, Skin Fitness and Brow Care by Lauren McKenna, as a sole proprietorship for the simplicity it offered. For the first few years, it worked well; she rented space out of a salon in Westerly and had a steady stream of clients, but without the paperwork required for a payroll or a more complicated tax structure.
When COVID-19 hit and her business was shut down, she sought desperately to make up the lost income needed to pay her bills and feed her family of three, including an 11-year-old son, and a husband who also works as a sole proprietor in construction. But she found herself shut down at what seemed like every turn.
While Rhode Island was among the first states to make Pandemic Unemployment Assistance available for independent contractors and other self-employed workers, it was still several weeks before McKenna was able to apply, and additional time before her claim was certified.
The initial round of forgivable PPP loans also excluded sole proprietors, and though they were made eligible later on, the terms of the program – which requires a majority of funds to be spent on payroll – offered little help to McKenna, who did not put herself on a payroll.
Mark S. Hayward, the SBA’s Rhode Island district director, defended the SBA’s programs, including PPP and the Economic Injury Disaster Loan program, as serving those who needed them, including sole proprietors. His office worked one-on-one with several sole proprietors to help them understand and apply for the relief programs, he said.
The state’s Restore RI small-business grant program also did not include sole proprietors without employees until several weeks after it opened. Asked why these business owners were not included in the initial program, Matt Sheaff, a spokesperson for R.I. Commerce Corp., said the agency wanted to “maximize impact upon employment – enabling more Rhode Islanders to get back to work or stay in their jobs.”
Sheaff added that sole proprietors without employees were made eligible under the first major expansion to the program. As of Nov. 18, 401 sole proprietors were approved for grants with another 331 in the application or review stages, Sheaff said.
Carol Mossa, also a sole proprietor with a holistic wellness business in Charlestown, was among those to benefit from a Restore RI grant. She also secured a small PPP loan and one of the 500 free laptops distributed to small businesses through Microsoft Corp. for her company, The Well Healing Arts Center. The funding she got was “tiny” compared with what bigger companies might receive, but as a one-woman operation, she didn’t need much to make things work.
Still, it wasn’t easy. Mossa said she stayed up overnight completing each application, while constantly monitoring Gov. Gina M. Raimondo’s press conferences for new relief programs. But she felt optimistic about her ability to survive and grow her business despite the hardship, with plans to switch from bodywork and in-person wellness classes to a series of virtual programs designed to help women unlock and foster their creativity.
“I’m a survivor,” she said. “I can operate on a shoestring.”
Murano applied for a Restore RI grant the day she was eligible but waited more than six weeks before finding out she was approved for a $5,000 grant in mid-November. She was relieved, and appreciative, but also worried that even that would not be enough if the second wave of the virus extended into 2021, when most of her original 2020 wedding bookings were rescheduled to happen, and when her unemployment benefits run out.
“I have no idea what this winter will bring,” she said.
Nancy Lavin is a PBN staff writer. Contact her at Lavin@PBN.com.
