Is Gay Marriage Good or Bad for Small Business?

Recent passage of a law permitted gay marriage in New York prompts this question. Putting aside personal feelings about the matter, consider what gay marriage can mean for your small business.

What’s good for small business?
According to the Crain’s New York Business.com, passage of the law in New York is expected to bring $184 million in business to the state over three years. As many as 56,000 gay couples might come to New York from out of state for their nuptials. Many of the beneficiaries of the new spending are small businesses: caterers, wedding planners, bakers, florists, photographers, etc. (and, eventually, lawyers handling divorces for gay married couples).

What’s bad for small business?

If you offer benefits for employees’ spouses, you’ll have to extend them to same-sex spouses. Thus, for example, if you provide health coverage, some group-term life insurance, or other benefits to employees’ spouses, offer them to same-sex spouses if your state recognizes such marriages. If you pay for them, this will raise your benefits costs.

When employees marry same-sex spouses, be sure to have them change their filing status for state income tax withholding purposes. Whether a change for federal income tax withholding is required is not clear, as I’ll now explain.

What’s happening on the federal front?
The Defense of Marriage Act (DOMA), which limits marriage for federal law purposes to a union between a man and a woman, continues to be on the books. Recent developments:

  • In February of this year, President Obama directed Attorney General Holder not to enforce the law.
  • Earlier this month, a federal bankruptcy court in California ruled that the federal Defense of Marriage Act violates the equal-protection clause of the U.S. Constitution. In a decision, the court said “there is no valid governmental basis for DOMA.” The case involved a gay married couple who sought bankruptcy protection from creditors as a married couple.

What this means for small business financially is unclear.

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