Why a Potential U.S. Government Shutdown Matters for Your Business: What You Need to Know.

As tensions mount over a possible U.S. government shutdown, businesses—especially those navigating federal tax law, mergers and acquisitions, and business litigation—are facing heightened uncertainty. While shutdowns are not new in U.S. politics, the current situation presents a unique set of challenges for companies operating in the federal space. Here's what you need to know.

What’s Happening? A Budget Standoff

Funding for the U.S. government is on the line. Unless President Trump’s Republican Party and opposition Democrats can reach an agreement by the end of Tuesday, essential government functions could be temporarily halted. At stake are key aspects of public policy, including healthcare funding and tax credits, with the GOP and Democrats at an impasse over priorities. Democrats, for instance, are pushing to extend tax credits for health insurance and reverse Medicaid cuts, while Republicans have indicated that they won't compromise.

A failure to pass a spending bill by midnight Tuesday could result in a government shutdown by 00:01 EDT on Wednesday. Although negotiations are ongoing, the likelihood of a shutdown appears high, especially given the partisan gridlock in Congress.

How Might a Government Shutdown Affect Your Business?

While some services would continue—such as law enforcement, air traffic control, and Social Security benefits—others would grind to a halt or be significantly delayed. For businesses with federal contracts, dealings involving federal agencies, or clients in the government sector, a shutdown could cause operational disruptions.

Here are some specific ways a shutdown could impact businesses in areas of federal tax law, mergers and acquisitions, and business litigation:

1. Federal Tax Law:

   Tax-related services, including verification of benefits, processing of tax filings, and IRS audits, could be delayed or suspended. If your business is in the middle of a tax dispute or pending audit, a shutdown could lead to delays in case processing. Additionally, tax credits tied to healthcare policies, which are part of the budget standoff, could face interruptions.

   
   

2. Mergers and Acquisitions:

   For companies in the process of mergers or acquisitions, a shutdown could delay regulatory approvals or postpone important filings with federal agencies like the SEC or the FTC. Since government agencies are often part of the approval process for large transactions, any delays could create significant roadblocks.

   
   

3. Business Litigation:

   Litigation involving federal agencies or matters subject to government funding could also be impacted. Federal courts may operate at limited capacity, and delays in proceedings could push back critical case deadlines. Additionally, businesses involved in regulatory litigation may find that enforcement or oversight actions are paused or delayed.

   
   

The Bigger Picture: Potential Long-Term Impact

While government shutdowns tend to disrupt daily operations, the long-term effects could be even more profound. A prolonged shutdown could exacerbate economic uncertainty and affect business confidence, especially in industries reliant on federal funding or regulation. With key services like the issuance of student loans, food inspections, and national park operations suspended, businesses may experience indirect challenges that compound over time.

Moreover, the Trump administration has used past shutdowns to implement cost-cutting measures and reduce the size of the federal workforce. This means that, even once the shutdown ends, your business could face additional regulatory changes or workforce issues that could take time to resolve.

A History of Shutdowns: What to Expect

Government shutdowns, while disruptive, are not uncommon. During Trump’s first term, the U.S. experienced multiple shutdowns, including the longest one in U.S. history (lasting 35 days in early 2019). These shutdowns cost the economy billions of dollars in lost productivity, and the impacts were felt well beyond federal agencies.

In fact, the Congressional Budget Office (CBO) estimated that the 2019 shutdown alone reduced U.S. economic output by approximately $11 billion, with $3 billion of that being permanently lost. These figures illustrate that the consequences of a shutdown are not just immediate but can have ripple effects across the broader economy.

What Can Your Business Do to Prepare?

In the event of a government shutdown, businesses should consider the following strategies:

• Stay Informed: Keep up-to-date on government negotiations and how they might affect your business operations.

• Assess Your Dependencies: Identify whether your company is dependent on government services, including tax filings, approvals, or contracts, and prepare for potential delays.

• Consult Your Legal Counsel: Ensure that your legal team is ready to address any potential regulatory changes, delays, or disputes arising from the shutdown.

• Review Your Contracts: If your business has contracts that involve federal agencies, now is the time to review terms related to force majeure, suspension of obligations, and timelines.

  
  

While the current budget standoff is still in flux, the possibility of a government shutdown looms large. Businesses should stay alert and prepare for potential disruptions to government services. By understanding the risks and working with experienced legal professionals, your company can better navigate this period of uncertainty and protect its interests in the face of shifting political landscapes.

If you’d like to discuss how a government shutdown might affect your specific business, don’t hesitate to reach out to us. Our team of experts in federal tax law, mergers and acquisitions, and business litigation is here to help guide you through these turbulent times.

Thanks for reading.

MD

Reference: BBC News. (2025, September 29). Why the U.S. government might shut down and what to know. BBC News.