Posts Tagged ‘new business’

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How to Avoid the Dreaded Lawsuit

Friday, August 19th, 2011


Lawsuits are an unwelcome guest in any household not to mention in any business; no one wants to be sued! Unfortunately, lawsuits surrounding the workplace are on the rise. Compensation issues, discrimination complaints as well as wrongful termination suits were all in abundance in 2010. For example, in 2010 wage and hour lawsuits under the Fair Labor Standards Act jumped dramatically, adding 700 more cases than in 2009 totaling 6,800 lawsuits.

Other areas contributing to an increased number of lawsuits are disability and leave of absence claims. Requests for disability accommodation as well as for a leave of absence are on a dramatic upswing. Employers are now seeing work-related injury claims stemming from physical or emotional ailments that don’t stem from the job but affect it. Denial of such claims can lead to a lawsuit under the Fair Labor Standards Act. The issue appears to be finding a balance between what legal right the employee has versus what legal right the employer has; the two rights often overlap.

What is causing this increase? Some point to the increased activism by the Obama administration in both discrimination and wage and hour claims. In 2010, the U.S. Department of Labor hired around 200 additional field investigators to strengthen its enforcement efforts. In fact, a number of complaints made surrounding the heightened investigation claim that federal agencies are turning what used to be small, resolvable workplace matters into full-scale investigations. How can the problem be solved? Better yet, how can lawsuits be avoided?

1. First of all, keep open lines of communication between all departments and employees. Full disclosure regarding wages and salaries, over-time pay and leave of absence policies will keep everyone in the office informed of their rights.

2. Provide outlets for counseling and dispute resolution within your business. Employees and employers alike should have an outlet in which they can air their grievances without feeling threatened.

3. Ensure hiring procedures are in place and employees are appropriately classified.

4. Don’t retaliate against employees for complaining. The majority of claims filed with the Equal Opportunity Commission include a form of retaliation.

5. Finally, treat everyone equally and fairly. Employees who feel valued are not only happier, they will perform more efficiently and accurately.

Lawsuits are intimidating. However, they can often be avoided. Keep the above five tips in mind to increase productivity in the office and to create a happier, lawsuit free environment. Learn more ways MyCorporation can help you maintain your business HERE!

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1099 Health Care Act: Information and Implications

Tuesday, April 5th, 2011

Small businesses face a unique set of challenges in the current economy.

The Senate voted to repeal the unpopular 1099 tax reporting requirement of the Affordable Health Care Act Tuesday, April 5th. This is the first piece of legislation that officially repeals part of President Obama’s widely-debated health-care reform movement.

Small business owners have expressed their frustration at the provision, which would require them beginning in 2012 to report to the IRS all payments of more than $600 on 1099 forms—work that many small companies just don’t have the time or manpower to do. According to the Washington Post, The bill would have generated an additional $22 billion in tax payments over the next ten years. In addition, the major provisions of the Health Care Act include:

1. Tax Credits for small business
2. Help for Seniors with the cost of Drugs in the Doughnut Hole
3. Elimination of Pre-existing conditions exclusions for children
4. A High Risk pool for anyone turned down due to Pre-Existing Conditions
5. Re-Insurance for early retirees (55 to 64)
6. Prohibition on Rescission of insurance policies if you get really sick
7. No More Lifetime Limits on insurance policies
8. Unmarried Children can stay on their parent plan (up to 26th birthday)

Despite the Health Care Act, there are numerous tax implications for employee’s and independent contractors. For small businesses seeking to make sense of the new legislation, regardless of possible appeals, the classification of their employees is paramount. Specifically, what makes someone an employee and not just an independent contractor? The answer is often less than simple. Many business owners fail to make the distinction, thus opening them up to potential lawsuits and tax complications.

The best way to avoid penalties is to know the law. Employee classification holds enormous potential for lawsuits, mainly because most employers really don’t understand the employee distinctions. The IRS published a great deal of information regarding this classification. The information can be found HERE.

Who is considered an independent contractor? The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax. Who is considered an employee? Under common-law rules, anyone who performs services for you is your employee if you can control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.

Only time will dictate the future changes and appeals to the Health Care Act. Small business owners should consider all of their employees and classify them into the correct category in order to avoid potential lawsuits and tax complications.

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Comparing Business Structures

Thursday, March 24th, 2011

One of the most difficult steps in the start-up process is deciding which business structure fits your business idea best. There aren’t that many options, but the distinctions between the types of entities can be overwhelming. A lawyer can help you make the decision but with a little research, you may be able to choose yourself. Here are some pros and cons of the major business structures you can choose from.

Sole Proprietorship. A sole proprietorship is the default business structure if you don’t file anything with the Secretary of State. This isn’t always the best choice for everyone, as it can result in a higher frequency of audits and it doesn’t provide protection for your personal assets and you can be personally liable for business debts. However, it is simpler to get started and the profits or losses can be reported on your personal tax return, without filing separately.

Limited Partnership. A limited partnership offers protection for the personal assets of the limited partners, however the partners who are actively involved in management do not have any protection. This is a nice option for many companies that focus on investing in real estate as it allows money to be raised for the business without involving outside people in the management of the business. This type of structure requires a filing with the Secretary of State.

Limited Liability Company (LLC). The Limited Liability Company, commonly known as an LLC, is one of the most popular entity structures among businesses right now. It’s a relatively new structure that combines the benefits of the corporation structures but eliminates some of the negative aspects. Specifically, the LLC protects everyone in the company from personal liability for business debts and allows losses to be “passed-through” to the people involved in the company. This “pass-through” option is a huge benefit to the LLC because it means that the people involved in the company can claim the losses of the company on their personal tax returns. In an LLC, you can take on passive investors to raise financing and corporation maintenance is fairly easy.

C-Corporation. A C-Corporation is the most general type of corporation you can have. The owners of a C-Corporation are mostly protected from personal liability for business debts, although if the corporation doesn’t follow the formalities of a corporation, there can be problems with personal liability. As a result, the formalities such as filing annual reports, maintaining separate bank accounts, keeping track of meeting minutes, and holding shareholders meetings are very important. A benefit of operation a C-Corporation is that the owners can share corporate profits with the corporation, lowering the overall tax rate. A C-Corporation can also have unlimited number of shareholders. A third benefit of C-Corporations is that if you wish to take your company public (selling shares over a public trade, i.e. NASDAQ or NYSE), you will need to be in a C-Corporation so starting out that way saves trouble down the road.

S-Corporation. An S-Corporation is a C-Corporation that has specially elected to be treated as an S-Corporation. It has the same personal liabilities protections and potential issues although it has significantly more stringent formalities. An S-Corporation can only have a certain amount of shareholders and the shareholders must meet specific requirements. An S-Corporation also allows for corporate profit sharing, but the allocations must be done in accordance with the shares each owner owns. A benefit is that owners can use any losses of the corporation on their personal income tax returns, reducing personal tax liability in many instances.

Another thing to consider when choosing a business structure is that your state may have some restrictions regarding the types of businesses that can operate in each structure. The Secretary of State for your state may be able to provide some guidance about this or an online filing service can as well while they’re filing your paperwork, if you choose to use them.

As you can see, there are numerous advantages and disadvantages to each type of business structure. Depending on the type of business you are starting, some of these disadvantages may not affect you as much as others. The only thing is to make sure that the business structure works best for you, and you are familiar with the applicable requirements. Let MyCorporation help you get started! Learn more HERE!

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Financing Made Simple

Monday, March 14th, 2011

Financing a start up is daunting for many entrepreneurs. While hunting for cash, many find themselves sucked into flashy gimmicks promising “Free Money!” and “Fast Cash Now!” from websites and hiring consultants. Unfortunately, most of these promises are empty, leaving many small business owners searching for cash.

As difficult as it may seem, small business funding is available. For qualifying businesses, there really are opportunities to land free money from state, county and city governments, as well as private foundations and corporations.

Technology startups traditionally have the best chance of getting grant funding, often through the federal government’s Small Business Innovation Research (SBIR) or Small Business Technology Transfer (STTR) programs. These programs are lucrative, awarding more than $2 billion each year, but both require a tight match with exacting requirements.

Finding grant money for non-tech businesses is a little tougher. The first step: Figure out if you qualify for any special small business certifications. Some of these special certifications include women or veteran owned businesses. Federal and state governments sometimes give priority for grants to these types of business owners.

Utilize the internet to connect with your local government. Check their websites to find the economic development agency or equivalent in your area. These agencies often offer government sponsored grants in an effort to attract new businesses. Grants are also offered in order to encourage business owners to make their business economically friendly. Unfortunately, in the current economic state, government funding is difficult to secure. However, patients and perseverance can pay off.
Another way to generate cash flow is to find partners or investors. Finding a few partners and/or investors that share your interests and you get along with can be the key to successful financing. Not only do partners and investors give money, finding a couple of partners or investors can make you money in two other ways. First, they involve themselves in the business and have a vested interest in the business doing well. They may bring other types of experience to the business and this is helpful for getting your start-up going in the best possible direction. The second way partners or investors help make the company money is that many other financing entities (including banks, grants, trade associations, and venture capitalists) feel more comfortable giving money to a business that has partners and investors. Getting involved with trade associations that apply to you, attending conferences that invite people who share your interests or expertise, and subscribing to industry journals are three great ways to finding compatible partners and/or investors.

Thankfully, the economy is improving. Credit is coming back to midsize and larger companies faster than small businesses. That’s because small businesses are riskier. Small businesses should benefit from general economic conditions improving and, as that happens, lenders should feel comfortable taking on more risk and making more small-business loans.

Learn more about financing your small business HERE!

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Take Your Business to the Next Level: Apply for a Trademark!

Thursday, March 10th, 2011

After starting your business and establishing your initial customers to reach out to, it may seem like there isn’t much to do except wait for the customers to come rolling in. On the contrary, this is the perfect time to start your business down the course for success! One of the most important (and easiest) ways to do this is to register for a trademark for you business name, product name, logo, or company slogan. In comparison to the number of people who open up businesses each year, not many people take advantage of this step but it can really save you in the end. The benefits of registering a trademark for your company name and/or product are twofold: protection of your business and brand recognition.

First, trademark registration provides protection to the company you have worked so hard to create. All the time and energy spent making sure that you are the best can be wasted if a similarly named company moves into your neighborhood and starts operating poorly. Consumers may then start confusing your company with theirs which is great for them, bad for you. Registering a trademark protects you from this scenario by deterring other entrepreneurs from using your company name and also provides a method of legal recourse for those situations when another company starts using your name anyway.

The second benefit of registering a trademark is to promote brand recognition. If you think of all the products and company names you encounter every day, many of those products are registered trademarks. “Branding” is vital to a company, especially for advertising and consumer recognition. Registered trademarks provide a national, and even sometimes international, license for use of your company and/or product name. This allows for uniform advertising on a national level that promotes name recognition anywhere you advertise. Consumers from California to New York that search for your product online or hear about your company will associate that name with your company only; a very valuable tool for increasing your company’s business.

After you’ve worked to bring your business idea to life, protecting it becomes important. One way to do that is through the use of trademarks. Companies with similar names or offering similar products can steal customers away or negatively impact your reputation. Registering your business name and product protects against this scenario and allows you to be a unique company, saving you from consumer confusion and promoting your brand wherever you want to operate.

Ready to apply for a trademark? Let MyCorporation help! Learn more HERE.

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