en Employee Fraud: What You Can Do About It <p>Employees are one of your biggest assets, even though they don&rsquo;t appear on your balance sheet. They help you operate your business and are the faces of your company brand. But employees can also be a big liability if they steal from you. What can you do to protect yourself?</p> <p><strong>Acknowledge the problem</strong></p> <p><a href="" title="Links to"><u>*Recent statistics</u></a> found that companies lose 5% of their revenues each year to employee fraud. Companies with fewer than 100 employees had 28% higher fraud losses than larger companies.</p> <p>Fraud can take many forms, including outright theft of property (from paper clips to expensive inventory items), subtle theft by wasting time (focus on personal matters, sports events or other distractions), to embezzlement of company funds. Employees can be very creative in devising ways to steal from you, including creating bogus customers and invoices to siphon funds from the company.</p> <p><strong>Wise staffing practices</strong></p> <p>Having the best employees on your staff can go a long way in minimizing or avoiding fraud inside your company.</p> <ul> <li> <em>Do background checks before hiring anyone new</em>. You can check public records to look for bankruptcies and criminal records without permission from the job applicant. If you want to do a credit check (there&rsquo;s debate about whether a bad credit rating is any indication of potential employee fraud), you&rsquo;ll need permission. <em>Note</em>: About a dozen states bar employers from doing credit checks of job applicants and employees and Congress is considering similar federal legislation (<a href="" title="Links to">see <u>S. 1837</u></a>).</li> <li> <em>Get to know your staff</em> so you can detect potentially bad situations. Those with financial difficulties, such as an employee experiencing a home foreclosure or one with a gambling problem, may feel impelled to steal. Those displaying unaccounted wealth, such as a <em>Lamborghini suddenly being driven by an employee who was previously driving a Ford Focus, may raise suspicions.</em></li> <li> <em>Create the right company culture. </em>Let employees know how seriously you view any theft.</li> </ul> <p>&nbsp;</p> <p><strong>Implement systems for protection</strong></p> <p>As with the three branches of the federal government, checks and balances can prevent an employee from manipulating financial data. The less opportunity that employees have to steal, the lower the incidence of such action will be.</p> <p>Frequent inventories can monitor and detect any employee theft of company property. Bring your accountant in to review your inventory and other financial information.</p> <p>Make it clear that employee theft will not be tolerated and that violators will be prosecuted to the fullest extent of the law. Unfortunately, some small business owners ignore illegal activity, which then breeds more of the same.</p> <p><strong>Be vigilant</strong></p> <p>As the business owner, it&rsquo;s up to you to oversee what&rsquo;s going on in your business. Look for clues that something nefarious may be going on, such as a bookkeeper who never takes a vacation or declines to delegate work. Limit review of the monthly bank statement to you and, perhaps, your accountant; don&rsquo;t leave it to the bookkeeper to review the statement before you see it.</p> <p>Create an anonymous reporting system for employees to tell you about suspected fraud without fear of retaliation. Tips are the *<a href="" title="Links to"><u>most common method of detection</u> </a>(), yet fewer than 20% of small companies have a system in place, compared with 70% of larger firms. If you want to implement a reporting system, it can be a web-based system or a special phone hotline for this purpose.</p> <p>And keep your ears open to any talk from staff members about possible thefts that may be going on.</p> <p>&nbsp;</p> <p>* <em>Denotes non-government website</em></p> <p>&nbsp;</p> The Industry Word Business Laws Managing Thu, 17 Jul 2014 12:30:16 +0000 BarbaraWeltman 1098531 at Celebrate Pride Month by Making Your Workplace LGBT-Inclusive; SBA Sponsoring Events for LGBT Business Owners and Allies <p><span style="font-size:14px;">In honor of LGBT Pride Month, the SBA is teaming up with the Human Rights Campaign, America&rsquo;s largest civil rights organization working to achieve lesbian, gay, bisexual, and transgender (LGBT) equality, and the National Gay &amp; Lesbian Chamber of Commerce to provide free trainings for small business owners.</span></p> <p><span style="font-size:14px;">A schedule and instructions on how to sign up are below:</span></p> <p><span style="font-size:14px;"><a href=";do=register&amp;t=71">Webinar: Making Your Small Business Workplace LGBT-Inclusive</a></span></p> <ul> <li> <span style="font-size:14px;">Wednesday, June 25 at 2:00 PM ET</span></li> <li> <span style="font-size:14px;">SBA is teaming up with the Human Rights Campaign to present a free training for small business owners on making your workplace inclusive for LGBT employees. Attendees will learn:</span> <ul> <li> <span style="font-size:14px;">Why fostering an inclusive workplace can make employees more productive,</span></li> <li> <span style="font-size:14px;">How to provide safeguards for you and your employees by creating a non-discrimination policy, and</span></li> <li> <span style="font-size:14px;">Where to find the latest information about changing laws and regulations.</span></li> </ul> </li> </ul> <ul> <li> <span style="font-size:14px;"><a href=";do=register&amp;t=71">Register now</a></span></li> </ul> <p><span style="font-size:14px;">National Gay &amp; Lesbian Chamber of Commerce Conference Calls</span></p> <ul> <li> <span style="font-size:14px;">Along with the National Gay &amp; Lesbian Chamber of Commerce, SBA will present three conference calls for LGBT business owners and allies on key topics:</span> <ul> <li> <span style="font-size:14px;">Securing Federal Contracts &ndash; Monday, June 23 at 1:00 PM ET</span></li> <li> <span style="font-size:14px;">Accessing Capital &ndash; Tuesday, June 24 at 1:00 PM ET</span></li> <li> <span style="font-size:14px;">Innovation and New Programs (SBIR, Accelerators, Crowdfunding) &ndash; Thursday, June 26 at 1:00 PM ET</span></li> </ul> </li> <li> <span style="font-size:14px;">To register for any of the NGLCC conference calls, please email Theara Coleman at <a href=""></a> and include your name, company, and which presentation you are registering for.</span></li> </ul> <p>&nbsp;</p> Open For Business Business Laws Managing SBA News and Views Thu, 19 Jun 2014 18:48:11 +0000 Stephen Morris 1090531 at Worker Classification: What’s at Stake? <p>When you need help to run your business, you have to decide whether to hire an employee or outsource the work to an independent contractor. For the most part, independent contractors are on their own when it comes to taxes, insurance, and retirement savings. In contrast, employees are largely your responsibility for these costs. You&rsquo;re free to opt for the arrangement that works better for your business. But you can&rsquo;t simply attach a label to a worker and make it stick; it all depends on the degree of control that you exercise. Here&rsquo;s what&rsquo;s at stake for your decisions and actions:</p> <p><strong>Employment taxes</strong></p> <p>As a rule of thumb, it costs about 10% of a worker&rsquo;s pay to cover employment taxes, which include the employer&rsquo;s share of FICA (Social Security and Medicare taxes) and federal and state unemployment taxes. What&rsquo;s more, in most cases you have to carry worker&rsquo;s compensation insurance. So it costs more to have an employee than an independent contractor.</p> <p>The <a href=";-Self-Employed/Independent-Contractor-Self-Employed-or-Employee" title="Links to"><u>IRS uses various factors</u></a> to determine worker classification. These factors are grouped into behavioral control (whether you have the right to tell the worker when, where, and how the work gets done), financial (whether you or the worker controls such matters as when payment is made, if there is reimbursement for expenses, and who pays for the tools of the job), and the type of relationship created by you and the worker (what both envision, whether there is a written agreement, and the permanency of the arrangement).</p> <p>If the IRS challenges your treating a worker as an independent contractor and you lose (you should have classified the worker as an employee), you face back taxes and serious penalties. However, you can voluntarily reclassify workers as employees using the <a href=";-Self-Employed/Voluntary-Classification-Settlement-Program" title="Links to"><u>Voluntary Classification Settlement Program</u></a>. If eligible for the program, the cost is only 10% of the tax for the most recent year, with no interest or penalty. Or you may be able to rely on a safe harbor (called Section 530 relief).</p> <p><strong>Employee benefits</strong></p> <p>If you have employee benefit programs, such as a qualified retirement plan, you must include employees. Independent contractors are on their own for retirement savings. The cost of employee benefit programs can add another 10% or more of compensation to your payroll costs.</p> <p>At present, you don&rsquo;t have to offer health coverage to employees, but that may change. Whether you will be subject to the employer mandate depends on the number of your full-time and full-time-equivalent employees. Starting in 2016, if you have 50 to 99 such employees, you must provide health coverage of your full-time staff or pay a penalty (companies with 100 or more employees face the employer mandate in 2015). The IRS explains <a href="" title="Links to"><u>how to figure full-time employees</u></a>, which means essentially working 30 hours per week.</p> <p><strong>Government mandates</strong></p> <p>Employees are protected by a number of <a href="" title="Links to"><u>federal workplace laws</u></a> (some only apply if the company has a certain number of employees as indicated in parentheses), including:</p> <ul> <li> Age Discrimination in Employment Act bars workplace discrimination of those age 40 and older (20 or more employees)</li> <li> Americans with Disabilities Act barring discrimination on the basis of a physical, mental, or emotional disability and requiring reasonable accommodations for the disability on the job (15 or more employees)</li> <li> Civil Rights Acts bars discrimination in the workplace on the basis of a variety of factors (e.g., race, gender) (15 or more employees).</li> <li> Equal Pay Act mandates equal pay for men and women performing substantially the same work (2 or more employees)</li> <li> Fair Labor Standards Act for minimum wage and overtime rules (2 or more employees)</li> <li> Family and Medical Leave Act for unpaid time off (50 or more employees)</li> </ul> <p>Companies that violate these laws can be subject to government penalties and lawsuits by workers. Employment laws do not apply to independent contractors.</p> <p><strong>Conclusion</strong></p> <p>In figuring the real cost of employment, add 15% and 50% of compensation to your budget for taxes, insurance, and benefits for employees (e.g., a $40,000 employee costs you at least $46,000 and, depending upon the benefits package, as much as $60,000). Think about the cost before you add workers to your payroll. And make sure that if you decide to outsource, you do it right. Work with an employment law attorney so that the arrangements you make conform to law requirements.</p> The Industry Word Business Laws Taxes Thu, 19 Jun 2014 12:53:51 +0000 BarbaraWeltman 1090281 at 5 Traps in Paying Estimated Taxes <p>Having business income but being unable to cover anticipated taxes on the income through wage withholding means you&rsquo;ll have to pay estimated taxes. You&rsquo;ll have to project what you think you&rsquo;ll owe for the year and then pay them in four installments to the government. If you underpay, you can be subject to penalties. If you overpay, you&rsquo;ll effectively have made an interest-free loan to Uncle Sam and will have to file your return after the close of the year to recoup the excess tax payments. Unlike withholding on taxable compensation, which is regimented by IRS tables and up to employers to deposit their withholding, it&rsquo;s entirely up to you to figure your estimated taxes and pay it to the government. Here are five potential pitfalls that can cause you trouble and money when paying estimated taxes&mdash;<em>and what to do to avoid problems</em>.</p> <ol> <li> <h3> <strong>Failing to have cash on hand</strong></h3> </li> </ol> <p>One of the greatest challenges for many small business owners is having the money ready when the dates for estimated taxes roll around. Adopting a payment strategy can help:</p> <ul> <li> Make monthly payments even though you&rsquo;re not required to do so this frequently. It may be more manageable to handle smaller payments each month rather than larger payments on the less frequent usual payment due dates.</li> <li> Set aside funds in a separate account for estimated taxes. Don&rsquo;t touch the funds for other purposes, no matter how tempting.</li> <li> Explore wage withholding options. For example, if you have an S corporation, you can increase withholding on taxable compensation to cover what you expect to owe on your share of corporate profits (there will, of course, be withholding on your salary and other taxable benefits). Note: When starting a business, it may be worth considering becoming an S corporation rather than a limited liability company because of the ability to use wage withholding for tax payments.</li> </ul> <ol> <li value="2"> <h3> <strong>Not covering all tax obligations</strong></h3> </li> </ol> <p>In addition to factoring in taxes on net earnings from self-employment, include S corporation owners&rsquo; shares of their business profits, taxable compensation from being an employee (although there usually is income tax withholding on this compensation), and other reportable income for accurately estimating taxes. &nbsp;Estimated taxes also cover:</p> <ul> <li> Self-employment tax to cover Social Security and Medicare taxes on net earnings from self-employment (profits in a sole proprietorship and a partner&rsquo;s distributive share of partnership profits)</li> <li> Additional Medicare tax on earned income (employers must withhold this tax on taxable compensation over $200,000, but self-employed individuals must address this tax themselves)</li> <li> Additional Medicare tax on net investment income. Income from businesses in which you materially participate is not subject to this tax, but your business income can boost your modified adjusted gross income, triggering or increasing the tax on your other investment income.</li> </ul> <ol> <li value="3"> <h3> <strong>Believing each quarterly payment falls evenly</strong></h3> </li> </ol> <p>While estimated taxes are referred to as quarterly payments, they do not fall evenly throughout the year. The due dates for 2014 estimated taxes are:</p> <ul> <li> April 15, 2014 (for income received from January 1, 2014, through March 31, 2014)</li> <li> June 16, 2014 (for income received from April 1, 2014, through May 31, 2014)</li> <li> September 15, 2014 (for income received from June 1, 2014, through August 31, 2014)</li> <li> January 15, 2015 (for income received from September 1, 2014, through December 31, 2014)</li> </ul> <p>Thus, there are only two months between the first and second required payments. Set aside sufficient funds for each required installment.</p> <ol> <li value="4"> <h3> <strong>Paying too much, too early</strong></h3> </li> </ol> <p>It&rsquo;s not unusual for income of small business owners to vary&mdash;sometimes greatly&mdash;throughout the year. The IRS gives this example: A shop owner at a marina receives sizable income in the summer but not so much at other times of the year. If you are like this shop owner, you avoid incurring estimated tax penalties by using the annualized income installment method. Under this method, installments in one or more payment period may be less than one-fourth of required annual payments. Details about the annualized income installment method are in <a href="" title="Links to site"><u>IRS Publication 505</u>.</a></p> <ol> <li value="5"> <h3> <strong>Reporting the payment under the Social Security number of the wrong spouse</strong></h3> </li> </ol> <p>If you&rsquo;re paying estimated taxes under your Social Security number through the <a href="" title="Links to">Electronic Federal Tax Payment System</a> but your spouse is listed first on your tax return, this can delay a refund or cause greater scrutiny of your tax return. The reason: IRS computers only apply automatically estimated taxes paid under the Social Security number of the first spouse on the return. The IRS must manually look further into estimated tax payments if they don&rsquo;t match up. You can address this problem in three ways:</p> <ul> <li> List yourself first on the return; the tax law does not require any special order, such as a male spouse listed before a female spouse.</li> <li> Change your account to reflect the Social Security number of the first spouse listed on the return, even if this spouse is not the one earning the income or paying the estimated taxes.</li> <li> Continue to pay estimated taxes under your Social Security number but ask the IRS to credit your payments to your spouse&rsquo;s Social Security number; do this before you file your income tax return.</li> </ul> <p><strong>Conclusion</strong></p> <p>Your best strategy for avoiding estimated tax problems is to work with a knowledgeable tax advisor who can help you craft appropriate installments and ways to handle them.</p> The Industry Word Business Laws Taxes Thu, 22 May 2014 12:04:00 +0000 BarbaraWeltman 847301 at Virtual Currency and Your Business <p>Bitcoin is a digital currency now used as medium of exchange by more than 10,000 businesses. Last year Apple applied for a patent on iMoney, another form of virtual currency, so it&rsquo;s likely that using virtual currency as another payment method is something to be considered. How does this impact your business? The <a href=";utm_campaign=3.31.14+Tax+Alert&amp;utm_medium=email" title="Links to"><u>IRS says</u></a> that convertible virtual currency, which is digitally traded between users and can be purchased for, or exchanged into, U.S. dollars or other real or virtual currencies, is property, not currency. Here&rsquo;s what this means for you.</p> <p><strong>Receiving payment in bitcoin</strong></p> <p>If you receive bitcoin as payment for goods or services, you&rsquo;re taxable on this payment in the same way you&rsquo;d be taxed if you&rsquo;d received any other type of property. You must include in gross income the fair market value of the bitcoin on the date it is received. For example, if you are an independent contractor paid in bitcoin, its receipt is income, and it is also subject to self-employment tax.</p> <p>Determining fair market value may not be so easy. If the virtual currency is listed on an exchange and the rate is set by supply and demand, then this rate &mdash; on the day it is received &mdash; can be used for fair market value. There are several exchanges for bitcoin; both the buyer and seller must be listed on the same exchange to give and receive payment in this virtual currency.</p> <p>The customer may have a gain or a loss when making a payment to you; it all depends on his or her basis in the bitcoin. If this is less than the cost of the goods or services, then the customer has a gain. For example, the customer bought the bitcoin for $5 and used it to pay for your cupcake costing $7. The customer&rsquo;s basis is $5 and effectively acquired property for $7, so there&rsquo;s a $2 gain. If the opposite is true, then there&rsquo;s a loss. Whether the gain or loss is capital gain or loss or ordinary gain or loss depends on the person (usually capital gain or loss unless the person is a trader in bitcoin) and not on what is being bought with the bitcoin. &nbsp;If the customer has a capital transaction, then whether it&rsquo;s short-term or long-term gain or loss depends on how long the bitcoin was held (more than one year is long-term).</p> <p><strong>Using bitcoin as payment for employees</strong></p> <p>If you pay an employee in bitcoin, it&rsquo;s treated as an &ldquo;in-kind payment&rdquo; and the fair market value of the payment subject to payroll taxes. This means you have to withhold income tax on the payment as you would for any other compensation made in property. And you must take the payment into account for FICA (Social Security and Medicare) taxes and FUTA (federal unemployment) tax. For withholding purposes, check with your payroll company if you use one or <a href="" title="Links to publication"><u>IRS Publication 15</u></a> for more on noncash wages.</p> <p><strong>Information reporting for bitcoin</strong></p> <p>The fact that you&rsquo;re making payments in something other than money does not mean you&rsquo;re relieved of reporting transactions to the IRS. Some information returns you may need to file or will receive:</p> <ul> <li> Form 1099-MISC if you pay an independent contractor in bitcoin and total payments for the year to this person are $600 or more. If you&rsquo;re a contractor being paid in virtual currency, expect to receive a 1099.</li> <li> Form 1099-K if, as a merchant, you have more than 200 transactions totaling more than $20,000 for the year; the bitcoin exchange will issue this to you.</li> <li> Form W-2 if you pay an employee in bitcoin, regardless of amount.</li> </ul> <p>Customers using bitcoin may have to complete Form 8949 to list all of their purchases with virtual currency and then transfer the total to Schedule D of Form 1040; the IRS hasn&rsquo;t given guidance about this reporting. Once they learn about this onerous reporting (if this becomes the requirement), they may not want to do business using bitcoin.</p> <p><strong>Conclusion</strong></p> <p>As businesses adapt to changing technology, the tax law won&rsquo;t be far behind. If you have particular questions about how bitcoin may impact your business, contact your tax advisor.</p> The Industry Word Business Laws Managing Taxes Thu, 17 Apr 2014 15:49:45 +0000 BarbaraWeltman 825991 at 5 Payroll Tax Mistakes to Avoid <p>If you have at least one employee, you&rsquo;re responsible for payroll taxes. These include withholding federal (and, where appropriate, state) income taxes and FICA tax from employees&rsquo; wages as well as paying the employer share of FICA tax and federal and state unemployment taxes. The responsibility is great and the penalties for missteps make it essential that you do things right.</p> <p> <strong>1.&nbsp;&nbsp; &nbsp;Misclassifying workers</strong><br /> Perhaps the hottest audit issue today is misclassifying workers. There&rsquo;s incentive to treat workers as independent contractors rather than employees because payroll taxes and employee benefit costs are high; a company&rsquo;s only tax responsibility for an independent is issuing a Form 1099-MISC if payments in the year are $600 or more.</p> <p> You don&rsquo;t have the freedom to select the label for the worker; classification depends on whether you have sufficient control over the worker. This essentially means having the right to say when, where, and how the work gets done. Having an independent contractor agreement is helpful in showing that you and the worker do not intend any employer-employee relationships, but it doesn&rsquo;t bind the IRS, who is not a party to the agreement.</p> <p> Find information about worker classification <a href=";-Self-Employed/Independent-Contractor-Self-Employed-or-Employee" target="_blank" title="Links to">from the IRS</a>. When in doubt, consult your tax advisor.</p> <p> <strong>2.&nbsp;&nbsp; &nbsp;Not using an accountable plan for employee reimbursements</strong><br /> If you normally pay for travel, entertainment, tools or other business costs for employees, you&rsquo;re wasting employment tax dollars if you don&rsquo;t use an accountable plan. With this arrangement, you deduct the expenses but avoid all payroll taxes on reimbursements; employees do not have any income from reimbursements.</p> <p> To be an accountable plan, the employer must formalize the arrangement and set reasonable times for action (the following times are reasonable to the IRS but you can adopt shorter time limits for action):</p> <ul> <li> The reimbursable expense must be business related.</li> <li> Advances cannot be made before 30 days of the expense.</li> <li> Employees must account for the expenses within 60 days of the expense.</li> <li> Employees must return excess reimbursements to the employer within 120 days of the expense.</li> </ul> <p>Find details on accountable plans <a href=";-Self-Employed/Independent-Contractor-Self-Employed-or-Employee" target="_blank" title="Links to site">from the IRS</a>.</p> <p> <strong>3.&nbsp;&nbsp; &nbsp;Failing to keep payroll records</strong><br /> You are required to maintain payroll records and have them available for IRS inspection. These include time sheets, expense accounts, copies of W-2s and other payroll records. Usually, you should keep information for at least four years.</p> <p> You should also retain copies of <a href="" target="_blank" title="Links to site">Forms I-9</a>, which shows an employee&rsquo;s eligibility to work in the U.S. States may also have certain hiring forms that should be retained (e.g., E-verify forms). Details about retaining I-9s can be found at the <a href="" target="_blank" title="Links to site">U.S. Citizenship and Immigration Department.</a><br /> &nbsp;<br /> <strong>4.&nbsp;&nbsp; &nbsp;Choosing to pay creditors before the IRS</strong><br /> When a business gets into a cash crush, it may be tempting to pay the landlord, vendor, or utility company before the IRS; don&rsquo;t! As a business owner, you are a &ldquo;responsible person&rdquo; who remains 100% personally liable for &ldquo;trust fund&rdquo; taxes (amounts withheld from employees&rsquo; wages). This is so even if your business is incorporated or is a limited liability company.</p> <p> <em>Best strategy:</em> Set aside cash to cover payroll taxes so you won&rsquo;t use these funds for any other purpose. Find more information about the trust fund recovery penalty <a href=";-Self-Employed/Employment-Taxes-and-the-Trust-Fund-Recovery-Penalty-TFRP" target="_blank" title="Links to site">from the IRS</a>.</p> <p> <strong>5.&nbsp;&nbsp; &nbsp;Failing to monitor payroll company activities</strong><br /> Many small businesses use outside payroll companies to handle the job of figuring withholding as well as transferring funds to the U.S. Treasury to cover payroll taxes. However, some of these companies may not do their job, by error or intentionally. As an employer, even if you use an outside payroll company you remain responsible for payroll taxes.</p> <p> <em>Best protection</em>: Monitor your tax account to see that funds are being deposited on time and in the correct amount. If deposits are made electronically using <a href="" target="_blank" title="Links to "></a>, you can easily see activities in your account.</p> <p> <strong>Conclusion</strong><br /> Stay on top of your employer responsibilities to avoid any penalties or entanglements with the IRS, the Department of Labor, or your state&rsquo;s agencies.<br /> &nbsp;</p> The Industry Word Business Laws Taxes Thu, 20 Feb 2014 13:56:32 +0000 BarbaraWeltman 797631 at Customize Your 401(k) Plan <p>Nearly a quarter (24%) of small businesses today offer 401(k) plans to enable their employees to save for retirement, and the number is growing, according to a *<a href="" target="_blank" title="Links to ShareBuilder site"><u>ShareBuilder national survey</u></a>. You don&rsquo;t need a staff in order to have a 401(k) plan for yourself; self-employed individuals working alone can have what&rsquo;s called a solo 401(k). The plans may have certain features prized by owners and participants. The law does not require all plans to have them; it&rsquo;s up to the business to decide whether they should be included. Here are some options that you can add to your plan this year.</p> <p><strong>Loans</strong></p> <p>You can allow participants to borrow from their accounts. The tax law limits the extent of borrowing to the lesser of 50% of vested benefits or $50,000. For most loans, funds have to be repaid in level amounts over a period no greater than five years, with a reasonable rate of interest.</p> <p>If the plan allows it, owners are permitted to borrow from their accounts. They can use the funds to help with cash flow or for other purposes. &ldquo;Key employees,&rdquo; which includes owners, cannot deduct interest on the borrowing. Find more details about plan loans from the <a href="" target="_blank" title="Links to IRS site"><u>IRS</u></a>.</p> <p><strong>Designated Roth accounts</strong></p> <p>Contributions to a 401(k) by participants are made on a pre-tax basis; the portion of salary added to the plan is not currently taxable. The contributions as well as the earnings on them become taxable when funds from the 401(k) are distributed to participants. However, the plan is allowed to include a Roth component, called a designated Roth account. Here, employee contributions are made on an after-tax basis but distributions can become fully tax free.</p> <p>Contributions to designated Roth accounts are made only by participants. Total contributions to both the regular and Roth 401(k) are capped annually. No employer contributions can be made to these accounts.</p> <p>Find more details about designated Roth accounts from the <a href="" target="_blank" title="Links to IRS site"><u>IRS</u>.</a></p> <p><strong>In-plan rollovers</strong></p> <p>Like traditional IRAs that can be converted to Roth IRAs, basic 401(k)s can allow for conversions by participants to designated Roth accounts. These are called in-plan rollovers.</p> <p>From the employee perspective, amounts transferred to the designated Roth accounts are immediately taxable. However, there is no 10% early distribution penalty for employees under age 59-1/2 who make in-plan rollovers. Once the conversion is made, it cannot be undone.</p> <p>From the employer perspective, the frequency of these conversions can be limited (e.g., one a year). The plan can also cap the dollar amounts that can be converted to designated Roth IRAs. The 20% mandatory withholding on 401(k) plan distributions does not apply to in-plan rollovers.</p> <p>If you want to add an in-plan rollover option, generally you must amend the plan no later than the last day of the plan year in which the option becomes effective. The IRS has provided more <a href="" title="Links to IRS site"><u>guidance</u></a> on in-plan rollovers.</p> <p>Note: If your plan is a safe harbor 401(k) in which employees are automatically enrolled unless they opt out or choose a lower contribution amount than automatically specified, normally you cannot make a change&mdash;even a favorable one&mdash;during the year. However, under a special rule, you can make a mid-year change to add the in-plan rollover option in 2014.</p> <p><strong>More investment options</strong></p> <p>Plans are required to offer a menu of investment options from which participants can select for their own accounts. The minimum number of options is three, each of which is a distinct type of investment (e.g., a money market fund, a stock fund, and a bond fund), although some plans may have as many as 100 choices. According to <a href="" title="Links to FINRA site"><u>FINRA</u></a>, the average is 10 choices.</p> <p>Review your plan&rsquo;s investment options to see whether changes are warranted, factoring in the fees related to these options. For example, you may want to add new choices to your existing menu of investment options. Be sure to provide <a href="" target="_blank" title="Links to DOL gov site"><u>required disclosure</u></a> to participants about fees associated with these investment options.</p> <p><strong>Conclusion</strong></p> <p>Talk with a benefits expert to learn more about these and other plan options that you can use to customize your 401(k) plan. Also, make sure to update the plan to reflect any plan options you select. Find general information about 401(k) plans from the <a href="" title="Links to DOL site"><u>Department of Labor</u></a> and the <a href="" title="Links to IRS site"><u>IRS</u>.</a></p> <p><em>*Denotes non-governmental website link</em></p> The Industry Word Business Laws Taxes Thu, 23 Jan 2014 14:01:33 +0000 BarbaraWeltman 790511 at What to Know About Small-Business Licenses and Permits <p>So, you&rsquo;re starting a business &ndash; congratulations! You already know that there&rsquo;s a lot to take care of, from <a href="" title="link to choosing business structure information">choosing your business structure</a> to <a href="" title="link to information about business registration">registering your business</a>. You&rsquo;ll probably also need a business license or permit &ndash; virtually every business does in order to operate legally. It depends on the kind of business you run, where it&rsquo;s located and what state and federal rules apply. Here&rsquo;s what you should know to make sure you&rsquo;ll be running your business within the law.</p> <p><strong>Why Does My Businesses Need a License or Permit?</strong></p> <p><a href="" title="link to licenses and permits information">Licenses and permits</a> serve two major purposes: They allow the government to track your business&rsquo;s revenue for tax purposes, and they also protect the public.</p> <p>For example, if your business is involved in <a href="" title="link to information about activities supervised and regulated by a federal agency">activities supervised and regulated by a federal agency</a> &ndash; such as selling alcohol, firearms, radio broadcasting, commercial fishing, etc. &ndash; then you&rsquo;ll likely need to obtain a federal license or permit.</p> <p>Other special state licenses, known as <strong><em>professional licenses, </em></strong>are required for dentists, hairdressers, veterinarians, realtors, physicians and more. These licenses indicate the level of expertise of an employee or business owner and that they&rsquo;ve met a certain requirements when it comes to training or education.</p> <p>State licenses are also required of businesses, such as restaurants and those that serve alcohol, to demonstrate that they meet certain state standards or codes. Particular regulations may vary by state.</p> <p>Defined by local and/or state laws, <strong><em>permits</em></strong> generally regulate the safety, structure and appearance of a community and its establishments. There are a number of different kinds of permits to be aware of, including:</p> <ul> <li> Seller&rsquo;s Permits &ndash; if you&rsquo;re purchasing wholesale merchandise for resale</li> <li> Building Permits &ndash; if you&rsquo;re remodeling or building commercial space</li> <li> Health Permits &ndash; if you&rsquo;re preparing food</li> <li> Home Occupation Permits &ndash; if you&rsquo;re running a home-based business</li> </ul> <p><strong>What About Tax Permits?</strong></p> <p>The IRS doesn&#39;t license your business, but it does require that certain businesses register to&nbsp;<a href="" title="link to tax id number information">receive a federal tax identification number</a>. You&rsquo;ll also need&nbsp;to register with state and local government agencies for applicable tax permits&nbsp;such as a sales tax license, income tax withholding and unemployment insurance tax.</p> <p><strong>Managing and Maintaining Your License or Permit</strong></p> <p><a href="" title="link to information about licenses and permits">Once you have</a> your license or permit, you&rsquo;ll need to manage and maintain it. Keep these tips in mind to help make sure you don&rsquo;t lose sight of your obligations:</p> <ul> <li> Keep track of renewal dates.</li> <li> Keep a copy of all licensing applications and forms in your business records.</li> <li> Display your licenses or permits correctly. Most states and localities require businesses to prominently display their business licenses so customers can see them.</li> <li> If you expand your business &ndash; whether it&rsquo;s physical building expansion or launching a new product or service &ndash; you may need additional business licenses.</li> </ul> <p><strong>Additional Resources</strong></p> <ul> <li> <a href="" title="link to Obtaining a Business License or Permit page">Obtaining a Business License or Permit</a></li> <li> <a href="" title="link to 10 Steps to Starting a Business">10 Steps to Starting a Business</a></li> <li> <a href="" title="ilnk to Basic Zoning Laws page">Basic Zoning Laws</a></li> <li> <a href="" title="link to Zoning Laws for Home-Based Businesses page">Zoning Laws for Home-Based Businesses</a></li> </ul> Business Law Advisor Business Laws Managing Starting Thu, 09 Jan 2014 13:54:31 +0000 kmurray 786101 at 5 Tax and Financial Planning Actions for the New Year <p>With 2013 almost over, it&rsquo;s time to focus on 2014 and get the year started off right. Here are some actions to take now or in early January that will help you optimize your tax and financial results for the coming year.</p> <p><strong>1.&nbsp; Revisit your recordkeeping practices</strong></p> <p>Records are vital for both business and tax purposes. They help know whether or not you&rsquo;re profitable and provide key information to help you take business actions, such as adjusting prices, cutting expenses, or raising money.</p> <p>What&rsquo;s more, in order to take all the deductions and credits to which your business is entitled in 2014, you&rsquo;ll need good books and records. Often business owners fail to pay attention to this detail until it&rsquo;s too late and the IRS is questioning write-offs claimed on a return.</p> <p>Set up a recordkeeping system that satisfies tax law requirements, and make sure that employees know what to do. Check <a href="" target="_blank" title="Links to site"><u>IRS Publication 583</u></a> for details on recordkeeping rules for tax purposes. Consider using apps that can help with recordkeeping, such as those for capturing receipts for travel and entertainment expenses. Some may be available for use with, or provided by, your current bookkeeping software or cloud solution.</p> <p><strong>2.&nbsp; Note your odometer on January 1</strong></p> <p>If you use your personal vehicle for business, you can deduct the cost of business driving only if you have the records to back this up. This means noting your odometer at the start of the year and then tracking your business trips regularly.</p> <p>Again, consider using an app for tracking mileage. Some are free; others entail a modest fee.</p> <p><strong>3.&nbsp; Review your business plan</strong></p> <p>Your business plan should include projections for sales and expenses in the coming year. If you haven&rsquo;t yet updated these for 2014, do so now, advises SBA blogger <a href="" title="Links to article"><u>Tim Berry</u></a>. The projections aren&rsquo;t carved in stone, but they serve as a very useful benchmark against which to measure your results.</p> <p>It&rsquo;s a good idea to check projections monthly so you can make adjustments as needed in a timely manner. For example, if you&rsquo;ve been expecting gasoline prices to remain low but they suddenly spike, you may need to reduce another expense, such as advertising, to keep your budget in check.</p> <p><u><a href="" title="Links to article">SBA tool</a>s</u> can help you create a business plan.</p> <p><strong>4.&nbsp; Fix your withholding/estimated taxes</strong></p> <p>If you work for your corporation, make sure that withholding for 2014 will cover your projected tax obligations. Be sure to take into account the 0.9% additional Medicare tax on taxable compensation over a threshold amount that depends on your filing status (e.g., $200,000 for singles; $250,000 for joint filers) as well as the 3.8% additional Medicare tax on net investment income.</p> <p>If you&rsquo;re self-employed, your estimated taxes will have to cover roughly what you expect to owe for the year. These taxes should include not only the additional Medicare taxes if you&rsquo;re a high-income taxpayer, but also self-employment taxes (to cover your Social Security and basic Medicare tax obligations).</p> <p>The IRS offers guidance on withholding and estimated taxes in <a href="" title="Links to article"><u>Publication 505</u></a>; the 2014 version should be available early in 2014.</p> <p><strong>5. Plan to work closely with your tax and financial advisors</strong></p> <p>Make it a New Year&rsquo;s resolution to stay in touch regularly with these professionals. While there are fees for these services, likely they will save you money and trouble in the long run.</p> <p><strong>Conclusion</strong></p> <p>The economy and taxes are continually changing. Make it your top resolution to stay informed about new developments that can affect your business and impact your actions throughout the year.</p> The Industry Word Business Laws Managing Taxes Thu, 19 Dec 2013 16:33:48 +0000 BarbaraWeltman 781771 at Practices to Protect Your Small Business from Employee Lawsuits <p>Getting sued by current or former employees happens more often than you might think. In fact, <a href="" title="link to article about employers suing for overtime pay">the number of lawsuits filed regarding wage-and-hour laws alone in 2011 went up 32 percent</a> from just three years prior. Don&rsquo;t be too busy to check in and ensure you aren&rsquo;t breaking laws or otherwise opening yourself up to a potential lawsuit &mdash; no small business owner has the time, or money, for that.</p> <p>There&rsquo;s a plethora of advice out there on the subject of protecting your business from lawsuits. Before you read on, remember, you should always consult your legal counsel to ensure you are complying with federal and state laws. Laws regarding certain practices, such as non-compete agreements, vary widely from state to state.</p> <p><strong>Information and resources on avoiding legal trouble</strong></p> <p>We&rsquo;ve compiled a list of some of the most helpful tips from around the Web.</p> <ul> <li> <strong>Good intentions gone awry: </strong><a href="" title="link to OPEN Forum article">This OPEN Forum article</a> summarizes a whitepaper on how good intent regarding workplace flexibility could actually violate employment laws.</li> <li> <strong>Additional considerations on accommodating and hiring:</strong> <a href="" title="link to SCORE article">SCORE expanded on the good intentions concept</a> to make note that you must also accommodate disabled employees and pointed out the importance of hiring the right candidates the first place.</li> <li> <strong>Advice from someone who&rsquo;s been there: </strong>A New York Times article earlier this year featured a small business owner who was sued by a former employee. <a href=";_r=0" title="link to article with six tips to help small businesses prevent lawsuits from happening">The owner offers six tips to help small businesses prevent lawsuits from happening</a>.</li> <li> <strong>An ounce of prevention is worth a pound of cure:</strong> <a href="" title="link to tips for protection">Investopedia provides five tips for protection</a>, including <em>hire a competent attorney.</em></li> <li> <strong>Let&rsquo;s talk about it: </strong><a href="" title="link to tips from the Business Intelligence Group">More tips are available from the Business Intelligence Group</a>, including one important point &mdash; communicate. Clear, rational communication might just lead to a resolution.</li> <li> <strong>Go right to the source:</strong> Finally, it&rsquo;s important that you review all of the actual laws and regulations with which you should comply. <a href="" title="link to Department of Labor eLaws ">The U.S. Department of Labor has made this easy through its elaws website, a step-by-step tool that provides employment laws assistance for workers and small businesses.</a> The site features &lsquo;Advisors,&rsquo; which are virtual reports of applicable information based on responses to questions about your business. There are Advisors for Disability Nondiscrimination, the Fair Labor Standards Act and more.</li> </ul> <p>When in doubt, consult your legal counsel. However, by taking some preventative measures, you could avoid legal issues before they start.</p> Business Law Advisor Business Laws Managing Wed, 18 Dec 2013 13:01:59 +0000 jdelung 781491 at Small Business Patents, Copyrights and Trademarks <p>As an entrepreneur or aspiring small business owner, one of the most significant considerations that may come to mind is how to protect your work. What steps should you take to ensure that someone else couldn&rsquo;t lay claim to what your product or service? Does a patent, copyright or trademark apply? Here&rsquo;s some clarifying information about patents, copyrights and trademarks and how to protect your intellectual property.</p> <p>The <a href="" title="link to Copyright Office website">U.S. Copyright Office</a> provides a clear distinction between these three types of protection:</p> <ul> <li> Patents protect inventions or discoveries</li> <li> Copyright protects original works of authorship</li> <li> Trademarks protect words, phrases, symbols or designs identifying the source of the goods or services of one party that distinguishes them from others</li> </ul> <p><strong>Patents</strong></p> <p>According to the <a href="" title="link to Patent and Trademark Office website">U.S. Patent and Trademark Office</a> (USPTO), a patent is an intellectual property right granted to an inventor that prevents others from making, using, or selling the invention throughout the U.S. or importing the invention into the U.S. Patents last for a limited time and come in exchange for publically disclosing the invention when the patent is granted.</p> <p>There are three types of patents you can apply for based on your type of invention: utility, design and plant (yes, the green kind!).</p> <ul> <li> <a href="" title="link to information about utility patents">Utility patents</a> &ndash; if you invent or discover any new and useful process, machine, article of manufacture, composition of matter &ndash; or any new and useful improvement of these &ndash; you may be eligible for a utility patent.</li> <li> <a href="" title="link to PDF about design patents">Design patents</a> &ndash; if you invent a new, original and ornamental design for an article of manufacture</li> <li> <a href="" title="link to information about plant patents">Plant patents</a> &shy;&ndash; if you invent or discover a distinct and new variety of plant</li> </ul> <p><strong>Copyrights</strong></p> <p>A copyright (&copy;), according to the <a href="" title="link to Copyright Office website">U.S. Copyright Office</a>, protects original works of published or unpublished authorship including literary, dramatic, musical and artistic works (such as poetry, novels, movies, songs, computer software and architecture).</p> <p>Copyright doesn&rsquo;t protect facts, ideas, systems or methods of operation, but it <em>may</em> protect the way these things are expressed.</p> <p>While you don&rsquo;t have to register a copyright because it applies the moment your work is created, registration is required if you ever establish a lawsuit for copyright infringement. Many also choose to register their works because they want the facts of their copyright on the public record and have a certificate of registration.</p> <p><strong>Trademarks</strong></p> <p>A trademark (TM) is a word, phrase, symbol or design that identifies the source of the goods of one party and distinguishes them from others. You might have also heard of a service mark (SM), which is essentially the same as a trademark, but it denotes the <em>source</em> of a service rather than goods.</p> <p>You aren&rsquo;t required to register your mark to establish claim over it &ndash; you&rsquo;ll be able to use &ldquo;TM&rdquo; and &ldquo;SM&rdquo; to let others know of your ownership. The registered mark (&reg;) comes into play if you&rsquo;ve filed an application with the USPTO and it&rsquo;s been officially registered.</p> <p>Here&rsquo;s some additional <a href="" title="link to information about protecting your trademark">information about protecting your trademark</a>.</p> <p>&nbsp;</p> <p><strong>Additional Resources</strong></p> <ul> <li> <a href="" title="link to frequently asked questions on the Patent and Trademark Office website">FAQ from the USPTO</a> &ndash; answers to common questions and information about the patent process and registering trademarks</li> <li> <a href="" title="link to frequently asked questions on the Copyright Office website">FAQ from the Copyright Office</a> &ndash; a list of answers to questions and <a href="">copyright registration information</a></li> <li> <a href="" title="Is your Business Idea Patentable? A Guide to What Entrepreneurs Can Patent blog post link">Is your Business Idea Patentable? A Guide to What Entrepreneurs Can Patent</a></li> <li> <a href="" title="Protect your Invention or Product blog post link">Protect your Invention or Product</a></li> </ul> Business Law Advisor Business Laws Managing Starting Wed, 11 Dec 2013 12:55:32 +0000 kmurray 776271 at 5 Tax Rules for Year-End Bonuses <p>If 2013 has been a profitable year for your business, you may want to share your good fortune with your staff. Typically this is done by giving year-end bonuses. Before you cut a check, understand what these bonuses mean to your business and your employees as well as some alternatives to cash bonuses. The following points apply if December 31 is the end of your business year.</p> <p><strong>Timing of payments</strong></p> <p>Your company can pay bonuses before the end of the year and deduct them in 2013. If your business is on the accrual basis, you can declare the bonuses this year, pay them next year, but get a deduction this year as long as the payment is made to an unrelated person (not an owner or someone in the owner&rsquo;s immediate family). &nbsp;Make sure corporate minutes or other company records reflect the bonus declaration.</p> <p><strong>0.9% additional Medicare tax</strong></p> <p>Employees with substantial compensation should be apprised of the <a href="" target="_blank" title="Links to IRS site"><u>new 0.9% additional Medicare tax</u></a> that applies to earned income (wages, commissions, tips, taxable fringe benefits, and other taxable compensation) over a threshold amount for their filing status ($200,000 for singles; $250,000 for joint filers). Thus, if a manager who is single has a salary of $180,000 and you want to pay a $50,000 year-end bonus, $30,000 of his earnings for the year will be subject to the additional Medicare tax.</p> <p><em>Note</em>: As an employer, you must start to withhold this 0.9% tax once earnings exceed $200,000, regardless of the employee&rsquo;s filing status. Employees can request additional income tax withholding to be applied for this Medicare tax when they file their personal income tax returns.</p> <p><strong>FICA on deferred compensation</strong></p> <p>You and other high-earning employees may want to defer compensation to the future, presumably to be received in retirement when tax rates will be lower because income will be less. <a href="" target="_blank" title="Links to IRS site"><u>Strict rules</u></a> apply to deferred compensation to prevent the earner from tapping the money at will.</p> <p>For FICA tax purposes, deferred compensation usually is taxable in the year in which it is earned, not the year in which it is received. For example, deferring a 2013 year-end bonus means that bonus is subject to FICA tax this year and not in 2017 when the employee retires and receives the funds. This is advantageous because many high earners have already maxed out on the Social Security portion of FICA; the wage base limit for 2013 is $113,700, so earnings above this threshold are not subject to any additional Social Security tax. Of course, there is no cap on the Medicare portion of FICA.</p> <p><strong>Using qualified retirement plans</strong></p> <p>Instead of giving cash, you can use profits to fund a qualified retirement plan, such as a profit-sharing plan. The law restricts how much you can add each year and requires contributions to be nondiscriminatory (they can&rsquo;t favor owners and managers).</p> <ul> <li> <em>The good news:</em> You have until the extended due date of the return to fund the plan, so if you obtain a filing extension, you have until October 15, 2014, to make 2013 contributions.</li> <li> <em>The bad news:</em> You must sign the paperwork to set up the plan by December 31, 2013, if you want a profit-sharing plan or certain other plans. If you miss this deadline, however, you can still use a SEP plan because this can be set up and funded by the extended due date of the return for the year.</li> </ul> <p>Find details about qualified retirement plans in <a href="" target="_blank" title="Links to IRS site"><u>IRS Publication 560</u></a> (watch for an update to this publication for 2013).</p> <p><strong>Giving stock instead of cash</strong></p> <p>If you are willing to share a bit of ownership with your staff, you can give stock in your corporation. Without your giving them tax advice, you may want to tell them about a <a href="" target="_blank" title="Links to IRS site"><u>Sec. 83(b) election</u></a> to report the stock as compensation now so that any future appreciation will be taxed to them at capital gains rates.</p> <p>If your company is a C corporation that meets the definition of a qualified small business, you can issue the stock to employees as compensation. If they hold shares for more than five years, <em>all </em>of their gain will be tax free. Note that stock issued after 2013 will give owners only a 50% exclusion unless Congress extends the current 100% exclusion.</p> <p><strong>Conclusion</strong></p> <p>Make sure your year-end bonus plans factor in cash flow considerations. Discuss your options with your tax advisor now so you can take action before the end of the year. And tell employees to talk with their tax advisors as well.</p> <p>&nbsp;</p> The Industry Word Business Laws Managing Taxes Thu, 21 Nov 2013 14:42:36 +0000 BarbaraWeltman 764601 at Use ‘Em or Lose ‘Em: 5 Tax Breaks Set to Expire This Year <p>Dozens of federal tax breaks are scheduled to end on December 31 unless Congress extends them. No one knows for sure which ones, if any, will apply next year, so business owners should explore expiring rules and take advantage of them while they can. Here are some expiring breaks that may appeal to you:</p> <p><strong>Break 1: Faster write-offs for buying needed equipment</strong></p> <p>Need to upgrade your computers? Provide staff with tablets and smartphones? Add new machinery? You have two better ways to deduct your costs this year than merely depreciating the costs over a number of years:</p> <ul> <li> Deduct up to $500,000 of the cost of qualified equipment (whether new or pre-owned) this year as long as you&rsquo;re profitable. Next year, the deduction limit is scheduled to be $25,000.</li> <li> Deduct 50% of the cost of new qualified equipment, even if it adds to or creates a business loss. Next year, this deduction is set to disappear entirely.</li> </ul> <p><em>Note:</em> You can use either break even if you finance your purchase in whole or in part.</p> <p><strong>Break 2: Faster write-offs for improving your facilities</strong></p> <p>Usually when you make capital improvements to your workspace, the cost can only be depreciated over a period of 39 years. However, for improvements to leaseholds (by the lessor, lessee, or subleasee), restaurants, and retail establishments, you can use any or all of the following rules as long as the improvements are completed before the end of this year:</p> <ul> <li> $250,000 first-year expensing for eligible improvements</li> <li> 50% bonus depreciation for eligible improvements</li> <li> 15-year amortization period for any costs not deducted with first-year expensing or bonus depreciation</li> </ul> <p>Find details about write-offs for qualified property in <a href="">IRS Publication 946</a>.</p> <p><strong>Break 3: Tax credits for hiring certain workers</strong></p> <p>If you need more employees on your payroll and have projected the cost of this hiring after factoring in future health care obligations, think about hiring from certain targeted groups. Doing this may entitle you to a tax credit that can be used to offset your tax bill:</p> <ul> <li> Work opportunity credit for hiring certain disadvantaged workers, including certain veterans. Make sure that you timely submit <a href="">IRS Form 8850</a> to your state work force agency to get eligible workers certified as entitling you to the credit.</li> <li> Indian employment credit if you hire an enrolled member, or spouse of an enrolled member, of an Indian tribe who performs services within an Indian reservation.</li> <li> Empowerment employment credit if your business is located within a federally-designated empowerment zone.</li> </ul> <p>The amount of each credit and eligibility rules vary, but each requires that you hire an eligible employee before the end of this year.</p> <p><strong>Break 4: Exclusion for gain on certain stock </strong></p> <p>If your business is a C corporation involved in technology, manufacturing, retail, or wholesale and is seeking new investors, consider issuing new stock before the end of the year. If the stock meets the definition of <a href="">qualified small business stock</a> and investors hold it for more than five years, then <em>all </em>of their gain will be tax free. Stock issued next year will give investors only a 50% exclusion for their gain unless the current 100% exclusion is extended.</p> <p><em>Note:</em> You can issue qualified small business stock to employees as payment for services (i.e., year-end bonuses) to enable them to reap tax-free returns.</p> <p><strong>Break 5: Tax credit for doing research</strong></p> <p>If your company does research to create a new product, you may be eligible for a tax credit of up to 20% of increased research expenses. This credit is set to expire at the end of this year unless Congress extends it. While an extension is probable&mdash;the research credit has been extended 14 times since its inception in 1981&mdash;it&rsquo;s still smart to use the credit while you can.</p> <p>The credit is not limited to research to create products for sale. It also applies to research for internal processes (e.g., internal use software) that improve your business operations. For more details see the instructions to <a href="">IRS Form 6765.</a></p> <p><strong>Conclusion</strong></p> <p>A bi-partisan Congressional budget committee is supposed to decide by December 13, 2013, what measures (including tax rules) will apply for the future. By that time, it may be too late for certain actions that would otherwise be helpful for your business and tax savings this year. Meet with your tax advisor to explore which of these or other expiring tax breaks you may want to use before the end of the year, and what steps you need to take to nail them down now.</p> The Industry Word Business Laws Managing Taxes Thu, 24 Oct 2013 13:35:28 +0000 BarbaraWeltman 755253 at Rewarding Employees with Company Stock <p>If your business is incorporated and you want to reward employees, consider issuing stock. Using this form of compensation has benefits to employees and to you.</p> <p><strong>Company perspective</strong></p> <p>If you pay a cash bonus or give a fringe benefit, it&rsquo;s a cash drain to the company. Issuing stock as compensation is not. You merely issue shares to the employee equal to the bonus, reward, or compensation you intend.</p> <p>Company stock can come with restrictions on stock transfers or substantial risk of forfeiture that effectively tie employees to you. For example, there may be a time frame (say five years) before the risk of forfeiture expires and the employee is fully &ldquo;vested&rdquo; in the shares so that he or she can sell them at that time. With a closely-held business, other restrictions may continue, such as a requirement to first offer the shares to the corporation before selling them to an outsider.</p> <p>For most fringe benefit plans, strict nondiscrimination rules apply to prevent you from selectively rewarding employees. This does not apply to giving stock to employees; you can choose who to reward and how much the reward will be.</p> <p>This form of compensation is subject to payroll taxes. This means you must pay the employer share of FICA as well as FUTA taxes on the value of the shares issued to an employee.</p> <p>Giving stock to employees is likely to raise their company loyalty. As a stockholder, they have skin in the game and should want more than ever to see the company succeed.</p> <p><strong>Employee perspective</strong></p> <p>Stock issued to employees is a form of compensation that&rsquo;s taxable to them. When and how they are taxed depends on certain factors. If the stock is restricted or subject to substantial risk of forfeiture, there is no immediate tax required. Tax results when there is no longer any substantial risk of forfeiture or the shares are freely transferable. At that time, the value of the shares is taxed as ordinary income. It&rsquo;s up to the company to set the value.</p> <p>However, the employee can make a Sec. 83(b) election to report the compensation now, which allows all future appreciation to be taxed as capital gains rather than as ordinary income. The election must be made no later than 30 days after the date that the stock is transferred to the employee by filing it in the IRS service center (it&rsquo;s not filed with the employee&rsquo;s tax return but should be attached to the return). The <a href="" target="_blank" title="Links to website"><u>IRS has a sample election</u></a> that you can give employees to use for making an election. There is a risk in making this election. The employee cannot recoup any income tax paid when the stock is received if he or she leaves the company before shares have vested so that the shares are lost to this employee; no loss is allowed.</p> <p>If you issue qualified small business stock before January 1, 2014, and the employee holds it for more than five years, all capital gain becomes tax free. After this year, the exclusion for qualified small business stock declines from 100% to 50% unless Congress extends the current break. Qualified small business stock has specific limitations: the industry you&rsquo;re in, being a C corporation (not an S corporation), having assets of $50 million or less, and more. Find more details about qualified small business stock in <a href="" target="_blank" title="Links to publication"><u>IRS Publication 550</u>.</a></p> <p><strong>Final thoughts</strong></p> <p>Before you issue stock as compensation to employees, consider carefully what this means to the dilution of your ownership interests. Work closely with an attorney to craft a stock plan that works for your situation.</p> The Industry Word Business Laws Managing Taxes Thu, 26 Sep 2013 15:40:36 +0000 BarbaraWeltman 754172 at Is It Time to End Your Business Partnership? Here's How <p>Partnerships fail for many reasons. Misalignment of personality is possibly the first reason that springs to mind, but according to Michigan law firm <a href="" title="link to Family &amp; Aging Law Center ">Family &amp; Aging Law Center&nbsp;</a>, the two most common reasons that business partnerships fail is 1) <strong>failure to make an adequate plan</strong>, and 2) more importantly, from a legal perspective, <strong>failure to have a written partnership agreement</strong> that outlines in detail the partnership structure.</p> <p>Why is the partnership agreement so important? Most partnership agreements are written up at the beginning of the business venture and outline how the partners will run the business &ndash; how business decisions are made, how responsibilities are divided, how disagreements will be resolved and so forth. A good one will also include a dissolution strategy, like a prenuptial agreement. Although not required by law, it can be extremely risky to operate without one. Essentially, a good agreement brings structure and agreement to the partnership &ndash; without one, partnerships run the risk of being run like separate businesses within the business, with each partner doing (or not doing) their own thing!</p> <p>Without a partnership agreement, dissolving a partnership can get nasty and carry a lot of risk. For example, if a partner isn&rsquo;t paying bills on time or making regular contributions to pay off a business loan. Lapses and disagreements like these can quickly spiral out of control and impact your creditworthiness, relationships with vendors and so on.</p> <p>Even if you do have a partnership agreement, you are carrying an element of shared liability. Each partner is liable for the actions of the business, its debts, and of course, you also have to split profits.</p> <p>So what are your options when it comes to dissolving a partnership that&rsquo;s gone bad? Here are some considerations to bear in mind for those who have partnership agreements and those who don&rsquo;t:</p> <ol> <li> <strong>Change the weighting of the partnership agreement</strong></li> </ol> <p>You don&rsquo;t have to dissolve the partnership entirely. Perhaps you might <strong>change the weighting of the partnership</strong> so that you assume a majority share and with it more control over decisions and/or finances, while your partner agrees to remain involved, but to a lesser extent than currently.</p> <ol> <li value="2"> <strong>Buy out your partner or sell your share </strong></li> </ol> <p>If you want to continue the business, you could <strong>buy your partner&rsquo;s share</strong>, or sell yours if you want out but your partner doesn&rsquo;t.</p> <ol> <li value="3"> <strong>Legally dissolve the partnership</strong></li> </ol> <p>If you have a partnership agreement, revisit it and review your dissolution plan. Then take a look at the current state of your business to ensure a clean break. For example, have all partners completed all agreed duties? What&rsquo;s your business worth (use a third party valuation firm to help pinpoint this number)? What about leases, loans, and other contracts &ndash; how will the dissolution affect them and who will own the continued liability?</p> <p>As you can see, there are many considerations, so make sure you consult a lawyer to help protect your interests in any dissolution or restructuring of the partnership. They can also help draft a dissolution agreement that protects you from future disputes or claims that may be brought against you.</p> <p>It&rsquo;s also important to note that any dissolution of that partnership is governed by state law. Visit your state&rsquo;s website for more information about the process and the forms you&rsquo;ll need. It can take up to 90 days for the dissolution to become official. Once your partnership is dissolved, you can typically expect each partner to assume business assets and liabilities based on percentage of ownership.</p> <ol> <li value="4"> <strong>When there&rsquo;s no partnership agreement</strong></li> </ol> <p>If you didn&rsquo;t have a partnership agreement that outlined a dissolution strategy, try to work out terms together. If not, an intermediary may be able to help you resolve your dispute through mediation. Many law firms offer these services. Your final resort is a court-dictated decision which could be costly and may not provide the result you were looking for. Courts often divide assets and liabilities 50-50 regardless of any disputes.</p> <p><strong>Other factors to consider</strong></p> <p>Don&rsquo;t forget to let the IRS and state revenue office know that you are no longer in partnership the next time you file a return. Notify customers, vendors and others that your business structure has changed or dissolved. You&rsquo;ll also need to take care of other loose ends such as business licenses, permits and canceling a trade name or &ldquo;doing business as&rdquo; name with your local government. Refer to SBA&rsquo;s <a href="" title="link to Closing your Business guide">Closing Your Business</a> guide for more information.</p> Business Law Advisor Business Laws Managing Mon, 16 Sep 2013 18:29:34 +0000 Caron_Beesley 753505 at New Guidance on Information Reporting Requirements Under the Affordable Care Act <p>Under the provisions of the Affordable Care Act, those employers that are subject to the Employer Shared Responsibility provisions must report certain information regarding the health coverage they offer their full-time employees (known as Section 6056 reporting).&nbsp; The law also requires information reporting by insurers, self-insuring employers, and other parties like governmental entities that provide health coverage to individuals (Section 6055 reporting).&nbsp; These reporting provisions take effect on January 1, 2015, and the first reports are due to the Internal Revenue Service in early 2016.&nbsp;</p> <p>Last week, the U.S. Department of the Treasury and the IRS issued proposed regulations that provide further guidance about these information reporting requirement designed to help streamline and simplify the requirements under the law.&nbsp; &nbsp;</p> <h4> What Must Employers, Insurers, and Other Reporting Entities Report Under these Rules?</h4> <p>The Affordable Care Act calls for employers, insurers, and other reporting entities to report to the IRS, among other things:</p> <ul> <li> <strong>Section 6056 Reports</strong> <strong>For Employers That Are Subject to Employer Shared Responsibility (Those with 50 or More Full-Time or Full-Time Equivalent Employees):</strong> <ul> <li> Information about the employer that is offering health coverage (including contact information for the employer and the number of full-time employees).</li> <li> The names, addresses, and taxpayer ID numbers of the employer&rsquo;s full-time employees and information about the coverage offered to each such employee, by month, including the cost of self-only coverage.</li> </ul> </li> </ul> <p>Section 6056 also requires these employers to provide written statements to their full-time employees that includes the contact information for the employer and the information required to be shown on the section 6056 reports with respect to the full-time employee so that employees may use the statements to help determine whether, for each month of the calendar year, they can claim an individual premium tax credit on their tax returns. &nbsp;The first employee statements must be provided in early 2016 as well.&nbsp;</p> <p>In addition, information from these reports will be used to administer and ensure compliance with the eligibility requirements for the Employer Shared Responsibility provisions and the individual premium tax credit.</p> <ul> <li> <strong>Section 6055 Reports</strong> <strong>For Insurers, Self-Insuring Employers, and Other Parties That Provide Health Coverage:</strong> <ul> <li> Information about the entity providing coverage, including contact information.</li> <li> The name of each individual enrolled in minimum essential coverage along with taxpayer ID numbers and the months they were covered.</li> </ul> </li> </ul> <h4> How Do These Proposed Regulations Help to Streamline Reporting Requirements?</h4> <p>The proposed regulations issued by Treasury reflect comments received and an ongoing dialogue with a variety of stakeholders, many of whom already offer their full-time workforce coverage far exceeding the minimum Employer Shared Responsibility requirements.</p> <p>The proposed rules describe a variety of options to potentially reduce or streamline information reporting, such as:</p> <ul> <li> <p>Replacing section 6056 employee statements with Form W-2 reporting on offers of employer-sponsored coverage to employees, spouses, and dependents.</p> </li> <li> <p>Eliminating the need to determine whether particular employees are full-time if adequate coverage is offered to all potentially full-time employees.</p> </li> <li> <p>Allowing employers to report the specific cost to an employee of purchasing employer-sponsored coverage only if the cost is above a specified dollar amount.</p> </li> <li> <p>Allowing self-insured group health plans to avoid furnishing employee statements under both section 6055 and section 6056 by furnishing a single substitute statement.</p> </li> <li> <p>Limited reporting for certain self-insured employers offering no-cost coverage to employees and their families.</p> </li> </ul> <h4> How Can I Submit Comments on These Proposed Rules and Where Can I Go to Get More Information?</h4> <p>Employers and other stakeholders are invited to submit written or electronic comments on both the Section 6056 and 6055 proposed rules by November 8, 2013. &nbsp;Public hearings on these proposed rules are scheduled for mid-November, and these public comments will be taken into account in developing the final regulations for these reporting rules.</p> <p>Once the final rules have been published, reporting entities will be encouraged to voluntarily implement information reporting in 2014 (when reporting will be optional), in preparation for the full application of the reporting provisions starting in 2015.&nbsp;&nbsp;</p> <p>The proposed rules can be viewed on the Federal Register:</p> <ul> <li> <a href="">Section 6056</a></li> <li> <a href="">Section 6055</a></li> </ul> Health Care Business Pulse Business Laws Managing Tue, 10 Sep 2013 19:24:54 +0000 Meredith K. Olafson 753032 at Can Your Retirement Plan Own Your Business? <p>You may have built up considerable money in your 401(k) at a job or in your IRA and now you want to start a business or turn your sideline venture into a full-time activity. Can you use the money in your retirement account as capital for your business without incurring a tax bill? If you follow the rules carefully, the answer is a qualified yes.</p> <p><strong>ROBS</strong></p> <p>Rollovers as Business Startups (ROBS) are a way to optimize the use of money in your retirement account as a funding mechanism to start a business. It works if you have a 401(k) or other qualified retirement plan account with a balance that&rsquo;s sufficient for your funding needs and you adhere to the tax rules.</p> <p>Here&rsquo;s <a href="" title="Links to IRS gov site"><u>how a ROBS operates</u></a>: You incorporate your new business and have that corporation set up a qualified retirement plan (usually a profit-sharing plan permitted under the terms of the plan to invest in employer stock). Then you roll over your 401(k) or other retirement account to the new retirement plan (the rollover is tax free). That plan then buys shares in your corporation (i.e., the plan becomes an owner of your business). What ROBS does:</p> <ul> <li> <strong><em>Avoids immediate taxation on retirement plan funds</em></strong>. If you wanted to use the funds without the rollover, the distribution from the 401(k) would be immediately taxable, leaving you less after tax to invest in your company.</li> <li> <strong><em>Provides funding for the new company</em></strong>. Regardless of your credit rating or any other factors, you gain access to the money needed to get started.</li> </ul> <p><strong><em>Downside to ROBS. </em></strong>While there are benefits to this funding mechanism, there are drawbacks to consider:</p> <ul> <li> <strong><em>Putting retirement savings at risk</em></strong>. All of your eggs are in one basket; if the business fails, you lose your livelihood and your retirement savings.</li> <li> <strong><em>Increased IRS scrutiny</em></strong>. The IRS&rsquo; Employee Plans Compliance Unit ran an <u><a href="" title="Links to IRS gov site">audit projec</a>t</u> that concluded in 2010 to help identify sponsors (promoters) of ROBS that may be noncompliant with tax rules. Since owners of many of the new retirement plans examined by the IRS did not make any new contributions to the plans, these arrangements were dubious. If the IRS can successfully challenge the ROBS, all of the funds rolled over would be a taxable distribution.</li> <li> <strong><em>Costs</em></strong>. You should use a company that specializes in ROBS. Such a company usually charges a hefty fee for helping to set up and administer the arrangement. And there&rsquo;s annual reporting for the plan.</li> </ul> <p><strong><em>Annual filing. </em></strong>Qualified retirement plans, such as the new plan set up in the ROBS, are required to file an annual information return in the <a href="" title="Links to DOL gov site"><u>Form 5500 series</u>.</a> There is an exemption in the requirement to file if the assets of the plan are less than $250,000. However, this exemption does not apply to ROBS. The exemption applies to plans of businesses owned by an individual (or individual and spouse). In the case of ROBS, the plan, not the individual, owns the business. Thus, you must see to it that the plan files annually, regardless of the amount of assets within the plan.</p> <p>Use a ROBS? While the IRS has concluded that ROBS are not abusive tax avoidance transactions per se, they can be disqualified if they are not properly administered. If you are considering a ROBS, be sure to have your own tax advisor review a sponsor&rsquo;s program.</p> <p><strong>IRAs</strong></p> <p>ROBS are not the only way to own stock in a company you control. You can use a self-directed IRA for this purpose. The IRA can own stock in any publicly-traded or closely-held corporation. But watch for traps that can be viewed as prohibited transactions. These transactions cause the IRA to become disqualified and all of the funds in it immediately taxable to you. Before you do any transaction in your IRA, run it by your tax advisor, something one IRA owner, who was the subject of a recent Tax Court case, failed to do.</p> <p>In the case, an IRA owner had his account buy shares in a corporation that he set up. That corporation (&ldquo;corporation A&rdquo;) then bought shares in another corporation (&ldquo;corporation B&rdquo;) with cash and a note guaranteed by the IRA owner. B flourished and A sold the shares for a considerable profit. According to the <a href="" title="Links to USA tax court gov site"><u>Tax Court</u></a>, the personal guarantee of the A&rsquo;s debt amounted to an indirect extension of credit to the IRA, which is a prohibited transaction. The result to this IRA owner was that all of the gain that A reaped was taxable to him (and not tax-deferred in the IRA).</p> <p><strong>Conclusion</strong></p> <p>It may be tempting to use funds in retirement plans to buy businesses. But caution is advised. The tax savings and ready access to cash&mdash;the benefits&mdash;may not work out. You could face a big tax bill, and even worse, lose your retirement savings.</p> The Industry Word Business Laws Managing Taxes Fri, 30 Aug 2013 11:59:12 +0000 BarbaraWeltman 752516 at Health Care Changes: A New Tool for Small Business Owners <p>Affordable health care is a top concern for America&rsquo;s 28 million small businesses.&nbsp; During my travels, I&rsquo;ve had a number of small business owners across the country tell me that the moment they really felt their business was a success was the day they were able to offer health insurance to their employees. &nbsp;But we know that many small business owners may still be wondering when that day will be and what the Affordable Care Act can do to help.&nbsp;</p> <p>Depending on the size of your business, different provisions of the Affordable Care Act may apply. This is why it&rsquo;s so important that small business owners know the facts about the law and use them to make any business decisions. &nbsp;</p> <p>Today, we&rsquo;re excited to announce a new, streamlined health care tool for businesses --housed at -- to help you find out exactly what you and your employees need to know about the Affordable Care Act.&nbsp;&nbsp; leverages the resources of our partners across the federal government to ensure that business owners get comprehensive information and easy-to-use tools related to range of topics, including health care.</p> <p>In a few quick steps, the streamlined tool can help you understand what you need to know about new insurance options and other health care changes as well as find health care-related resources that are relevant to your business.</p> <p class="rtecenter"><iframe height="500px" src="" width="350px"></iframe></p> <p>The tool uses various prompts including your business&rsquo;s location, size, and whether you currently offer insurance to connect you with the resources you need from Small Business Administration (SBA), the Department of Health and Human Services, the Department of Treasury and our other federal partners.&nbsp; For example, if you&rsquo;re a small business owner in Oregon with 35 full-time employees who already offers insurance and wants to continue the coverage you currently use, the health care tool can use this information to connect you with the best <a href="">resources</a> and <a href="">information</a> available to help inform your plans.&nbsp;</p> <p>The SBA has also joined forces with our partners at Small Business Majority to offer a weekly webinar series designed to educate small business owners across the country about what the Affordable Care Act means for them.&nbsp; We&rsquo;ll be offering these webinars, which are free and open to all small business owners, every Thursday until October when the Marketplaces open for enrollment, so click <a href="">here</a>to sign up today.</p> <p>The Affordable Care Act allows small employers to offer health coverage in a way that makes sense for their business and works for their bottom line.&nbsp; Now, more than ever, SBA is committed to leveraging our resources and federal partnerships to ensure that small business owners have the facts and resources you need to understand the law.&nbsp;</p> Health Care Business Pulse Business Laws Managing SBA News and Views Thu, 01 Aug 2013 15:07:36 +0000 Karen Mills 749271 at Maternity Leave Benefits – What Are Your Small Business Obligations and Options? <p><img alt="" height="313" src="/sites/default/files/images/Untitled.png" style="float: right;" width="205" />Do you know what your legal obligations are to provide maternity leave to your employees? There are laws that dictate what maternity leave benefits you should be providing to your employees. However, they don&rsquo;t apply to all business owners.</p> <p>For example, under the <a href="" title="link to Family and Medical Leave Act information">Family and Medical Leave Act</a> (FMLA), certain companies are required to provide unpaid, job-protected leave for family and medical reasons with continuation of group health insurance under the same terms and conditions as if the employee had not taken leave. This includes 12 workweeks of leave for the birth and care of a child in its first year.</p> <p>However, FMLA only applies to companies with more than 50 employees &ndash; a fact that excludes many small businesses and their employees.&nbsp;</p> <p>Federal law aside, your state may have more favorable laws for maternity leave. In California, for example, women may collect state temporary disability payments of about two thirds of their wages for the time during which they&#39;re physically disabled due to pregnancy and childbirth (usually six to eight weeks). To find out what laws apply in your state, check out this list of <a href="" title="list of State Pregnancy, Childbirth, and Adoption Leave Statutes">State Pregnancy, Childbirth, and Adoption&nbsp;Leave Statutes</a> published by the National Conference of State Legislatures.</p> <p><strong>Should You Provide Maternity Leave if the Law Doesn&rsquo;t Require It?</strong></p> <p>If your business is not covered by FMLA or state laws, what steps can you take to ensure that employees get the appropriate level of maternity leave?</p> <p>Providing maternity leave is a smart option for small businesses.&nbsp; Even if FMLA does not apply to you, according to a <a href="" title="link to Department of Labor survey">U.S. Department of Labor survey</a>, providing both maternity and medical leave is proven to make a positive impact on the lives workers without placing an undue burden on employers. Abuse of these policies is also much lower than expected, and 90 percent of workers return to their jobs after taking FMLA leave.</p> <p><strong>Setting a Maternity Leave Policy</strong></p> <p>If you decide to offer maternity leave benefits (and assuming you don&rsquo;t already have to comply with federal or state maternity leave laws), the <a href="" title="FMLA link">FMLA</a> and state laws are useful models on which to base your policy. Consider the following guidelines (as set by FMLA):</p> <ul> <li> The employee has been in your employment for at least 12 months and works a regular work week (FMLA requires an average work week of around 24 hours to be eligible, although state policies often don&rsquo;t require an hourly minimum).</li> <li> The policy applies to both men and women to give them reasonable time to bond with the child (newborn, adopted or fostered).</li> <li> The leave must be taken as a continuous block of leave.</li> <li> Determine the amount of time off you wish to offer and whether it will be paid, unpaid or paid in part. FMLA allows for up to 12 weeks a year. State laws vary between 6-12 weeks.</li> </ul> <p>Whatever you decide, apply your policy consistently with no special favors for certain employees. Include your policy in employee handbooks and terms of employment.</p> <p>If you think this will be too much of a stretch for your business, consider alternatives such as allowing new parents to work from home or part-time during the initial weeks of new parenthood.</p> <p><strong>Prepare Your Business</strong></p> <p>The thought of doing without any employee for several weeks can be daunting, but there are a few things you can do to ensure your business stays productive during an employee&rsquo;s period of extended leave:</p> <ul> <li> <strong>Get High Performers to Step Up </strong>&ndash; If someone on your team is looking for an opportunity to take on extra responsibility or has shown an aptitude for growth, consider asking them to step into the shoes of employees who take maternity leave. Plan the transition in advance and be sure to have a plan to hand back the role when the absent employee returns to work so that they don&rsquo;t feel that the position is in jeopardy.</li> <li> <strong>Cross Train </strong>&ndash; Cross training should be a key part of any business and will help your business handle the strain of short and extended leave more seamlessly. Your employees don&rsquo;t need to be able to do everything; instead, spread the load by Identifying a back-up team member for certain key tasks.</li> </ul> <ul> <li> <strong>Hire Independent Contractors</strong> &ndash; Contractors specialize in being able to come into a company and learn the ropes fast. It&rsquo;s always worth building relationships with contractors across several disciplines just to ensure you have coverage &ndash; both for maternity/medical leave situations or to help out when you need an extra pair of hands.</li> </ul> <p><strong>Related Resources</strong></p> <ul> <li> <a href="" title="link to SBA Small Business Guide to Employment and Labor Law">SBA Small Business Guide to Employment and Labor Law</a></li> <li> <a href="" title="link to Employer's Guide to Discrimination: Pregnancy Discrimination">Employer&#39;s Guide to Discrimination: Pregnancy Discrimination</a></li> </ul> <p>&nbsp;</p> Business Law Advisor Business Laws Managing Wed, 31 Jul 2013 12:02:48 +0000 Caron_Beesley 746411 at Employer Actions after DOMA Dies <p>The federal Defense of Marriage Act (DOMA), which defined marriage as a union between a man and a woman, has been <a href="" target="_blank" title="Links to site"><u>declared by the U.S. Supreme Court</u></a> to be unconstitutional. What does that mean for your business? Plenty, if you have employees. Here are some actions you should be considering now.</p> <p><strong>Basics</strong></p> <p>In light of the Court&rsquo;s action, all married employees and their spouses are entitled to the same rights and privileges, regardless of gender. Who is married? This question is not easily answered. Is marriage determined by where the union took place (place of celebration) or where the couple now resides (place of residence)? Currently, thirteen states and the District of Columbia recognize same-sex marriages.</p> <p>Tax rules usually are based on the place of residence. In contrast, immigration rules are usually based on the place of celebration. More clarification on how to determine whether employees are married is needed for employers, and is currently being developed by the IRS and other federal agencies.</p> <p><strong>Wage withholding</strong></p> <p>Same-sex married employees who have been treated for payroll withholding as single now have withholding allowances for married persons; they can no longer be treated as single. They may need to complete a new <a href="" target="_blank" title="Links to site"><u>Form W-4, <em>Employee&rsquo;s Withholding Allowance Certificate</em></u></a> to indicate their withholding allowances, which may differ from the number of allowances claimed when they were treated as single.</p> <p>It is unclear at this time whether there is any retroactive impact on an employer&rsquo;s payroll obligations. IRS guidance yet to come will provide some light on this point.</p> <p><em>Complication</em>: Depending on how marriage is defined (place of celebration or place of residence), it may be possible for an employee to be married for federal income tax withholding, yet single for state income tax withholding.</p> <p><strong>Retirement plan benefits</strong></p> <p>Spouses have certain rights in employees&rsquo; retirement benefits, including:</p> <ul> <li> A joint and survivor spousal annuity (QJSA) unless the spouse waives this right. There&rsquo;s a similar right for a spouse if the employee dies before reaching retirement age.</li> <li> The need for consent to the employee naming anyone other than the spouse as the beneficiary of a 401(k) or other plan.</li> <li> The need to consent to a loan by the employee from the plan.</li> <li> Rights in plan benefits upon divorce.</li> </ul> <p>Meet with your benefits advisor to determine which plan documents, if any, must be revised and other actions you&rsquo;ll need to take to avoid any claims of discrimination. You may not have to take any action if your documents say &ldquo;spouse&rdquo; and you now apply the provisions to all spouses.</p> <p><strong>Other fringe benefits</strong></p> <p>Retirement plans aren&rsquo;t the only fringe benefit that will have to be reviewed to ensure all spouses are given equal access. Plan documents and election forms may need to be revised. Other fringe benefits include:</p> <ul> <li> <strong><em>Health coverage</em></strong>. If you offer health coverage to employees&rsquo; spouses, you must now extend this benefit to same-sex spouses. Marriage is viewed as a &ldquo;change in status&rdquo; that allows employers to add spouses to health plans during the year, rather than waiting until the start of the next enrollment period. However, if the marriage isn&rsquo;t recognized in your state and the place of residence determines marital status, health coverage to such spouse could still be taxable to the employee (as it has been up to now). If you are subject to COBRA because you offer health coverage and have more than 20 employees, continuation coverage is available to all spouses.</li> <li> <strong><em>FSAs</em></strong>. Unreimbursed medical costs of spouses can be covered through employees&rsquo; flexible spending accounts (FSAs).</li> </ul> <p><strong>Employment-related laws</strong></p> <p>The Family and Medical Leave Act (FMLA), which permits up to 12 weeks of unpaid leave time for employees because of the illness of a spouse or dependent, must be applied with respect to all spouses.</p> <p><strong>Conclusion</strong></p> <p>Following the Court&rsquo;s decision, the U.S. attorney general was directed to review the definition of marriage. The IRS is also expected to issue guidance soon.</p> <p>&nbsp;</p> <pre> </pre> The Industry Word Business Laws Managing Taxes Thu, 25 Jul 2013 14:04:14 +0000 BarbaraWeltman 740161 at How To Be an Ethical, Fair and Lawful Manager of Employees (While Protecting Your Interests) <p>Managing employees can be a daunting prospect, especially if you are new to it. Many small business owners started their businesses because they wanted to be their own boss, but what happens when it comes time to hire employees &ndash; what kind of leader will you be, how will you juggle your business and the regulatory requirements of being the boss?</p> <p>While great leadership is often measured by your ability to lead and mentor your employees, it&rsquo;s also important to remember that as an employer and manager you are required to treat all employees equally and fairly.</p> <p>Sounds obvious, but as a new employer, there are a range of employment laws and regulations that you need to be aware of such as those that protect employees against discrimination and sexual harassment, wage and overtime abuse and more. Ignore these and you run the risk of creating an environment for disgruntled employees and the potential for a government investigation or lawsuit.</p> <p>So what can you do to ensure you adhere to basic managerial ethics and the law? Which laws even apply to your business? Here are some tips and considerations to bear in mind to help you avoid costly managerial mistakes.</p> <p><strong>Treat All Employees Equally and Fairly</strong></p> <p><a href="" title="equal opportunity laws info">U.S. equal opportunity laws</a> require that &ldquo;covered&rdquo; employers cannot make any hiring decisions based on your own bias for a certain group of people &ndash; this includes gender, race, religion, age, disability, genetic information or any other class of individual protected by the law. (<em>Note</em>: Not all businesses are covered by these laws. More on this below).&nbsp;</p> <p>Likewise, as a manger, you cannot harass employees because of race, color, religion, sex (including pregnancy), national origin, age (40 or older), disability or genetic information. If your actions are questionable in this regard, an employee may be entitled to file a charge of discrimination with the U.S. Equal Employment Opportunity Commission (EEOC). Visit the <a href="">EEOC website</a> for a complete list of equal opportunity laws that impact employers.</p> <p><strong><em>IMPORTANT</em></strong>: <strong>Not all businesses fall under the EEOC&rsquo;s jurisdiction &ndash; and this may very well apply to most small businesses.</strong> For example, the EEOC does not enforce or uphold complaints of businesses with less than 15 employees for general bias against certain groups. Visit the <a href="" title="additional information about equal opportunity laws">EEOC website for employers</a> for more information on who is covered by its laws. Also, your state may have its own equal opportunity laws, so check these carefully.</p> <p>Even if you don&rsquo;t fall under the EEOC laws, all employers are subject to the Equal Pay Act (EPA), which makes it illegal to pay different wages to men and women if they perform substantially equal work in the same workplace.</p> <p>Other considerations to bear in mind include operating a safe and secure workplace for your employees; ensuring employees receive the <a href="" title="meal and rest break law info">appropriate meal and rest breaks</a>, <a href="" title="overtime law info">overtime pay</a> and more.</p> <p><strong><em>TIP</em></strong>: To help you determine which laws apply to your business, read: <a href="" title="tool for employment laws">Which Employment Laws Apply to Your Business? There&rsquo;s an E-Tool for That!</a></p> <p><strong>Keep Good Records</strong></p> <p>Good record keeping is a must in business, and it can help protect you should an employee raise a complaint (or even a lawsuit) against you. So document and record everything &ndash; from performance reviews, 360 feedback gleaned from colleagues about a job candidate, disciplinary actions (warning notices, performance improvement plans, etc.) and so on.</p> <p><strong>Develop an Employee Handbook</strong></p> <p>It&rsquo;s also a good practice to develop an employee handbook and code of conduct so you can ensure all new employees are aware of your corporate policies and procedures, as well as their rights.</p> <p><strong>Communicate any Policy Changes</strong></p> <p>Small businesses with a certain number of employees are often exempt from certain labor requirements &ndash; but as you grow or take on more employees, your compliance obligations will change. For example, most businesses with less than $500,000 in sales and only one employee aren&rsquo;t required to pay overtime according to federal law. (But do note that there are exceptions for certain jobs involved in &ldquo;interstate commerce.&rdquo; In addition, state laws can supersede federal laws &ndash; so check carefully.) But as the business grows, you&rsquo;ll need to adhere to <a href="" title="overtime laws info">overtime laws</a>.</p> <p>So as your business changes, make sure that you are aware of how it&rsquo;s legal obligations are shifting as well. And be sure to revisit employment contracts and corporate policies so the changes are clear to your staff.</p> <p><strong>Related Blogs</strong></p> <ul> <li> <a href="" title="10 Ways Your Small Business May Be Breaking Employment Laws blog post">10 Ways Your Small Business May Be Breaking Employment Laws</a></li> <li> <a href="" title="4 Tips for Effective and Inspiring Business Leadership blog post">4 Tips for Effective and Inspiring Business Leadership</a></li> <li> <a href="" title="7 Ways to Lead and Empower Your Team – Because Satisfied Employees Make for Happy Customers blog post">7 Ways to Lead and Empower Your Team &ndash; Because Satisfied Employees Make for Happy Customers</a></li> <li> <a href=";filters=tid%3A13671" title="8 Tips for Training your Small Business Employees on a Budget blog post">8 Tips for Training your Small Business Employees on a Budget</a></li> </ul> Business Law Advisor Business Laws Managing Starting Wed, 24 Jul 2013 12:43:38 +0000 Caron_Beesley 738381 at New Dates for the Affordable Care Act 101 Webinars <div> <p>The Small Business Administration and Small Business Majority are excited to announce the next set of Affordable Care Act 101 weekly webinar dates with SBA Administrator Karen Mills joining as a special guest today, August 15 at 2pm ET. During each presentation, small business owners can learn the basics of the Affordable Care Act and what it means for their company and employees. SBA representatives help small business owners understand the facts of the Affordable Care Act so they can make informed decisions about providing health insurance for their employees.</p> <p>This free series focuses on both federal and state provisions to help small business owners understand how the law will affect them. Topics being discussed include:</p> <ul> <li> Small business tax credits (available to businesses and tax-exempt non-profits)&mdash; who&rsquo;s eligible for them and how to claim them</li> <li> Small business marketplaces</li> <li> Employer shared responsibility</li> <li> Cost containment</li> <li> Tools and resources available for small businesses interested in learning more about the law</li> </ul> <p>A question and answer period will follow.</p> <p>The Affordable Care Act 101 takes place on Thursdays from now through the opening of the marketplaces in October. &nbsp;Content will generally be the same each week.&nbsp; Below are the registration links for upcoming presentations.</p> <ul> <li> Thursday, August 15 at 2:00 PM ET: <a href="">Click to Register</a> &ndash; <em>Featuring SBA Administrator Karen Mills</em></li> <li> Thursday, August 22 at 2:00 PM ET: &nbsp;<a href="">Click to Register</a></li> <li> Thursday, September 5 at 2:00 PM ET: <a href="">Click to Register</a></li> <li> Thursday, September 12 at 2:00 PM ET: <a href="">Click to Register</a></li> <li> Thursday, September 19 at 2:00 PM ET: <a href="">Click to Register</a></li> <li> Thursday, September 26 at 2:00 PM ET: <a href="">Click to Register</a></li> </ul> <p>&nbsp;</p> </div> <p>&nbsp;</p> Health Care Business Pulse Business Laws Managing Mentoring and Training SBA News and Views Wed, 17 Jul 2013 17:18:37 +0000 Meredith K. Olafson 729991 at Mid-Year Tax Planning: Do It Now to Save Later <p>With just about half of the year already in the books, now is the ideal time to take stock of your business activities year-to-date. This will enable you to take wise tax actions that will pay off on your tax bill when you file your 2013 income tax return next year.</p> <p><strong>What to look for in your books</strong></p> <p>Determine whether you&rsquo;ve been profitable so far, and whether your numbers meet, exceed, or fall short of your estimates at the start of the year. Also, face up to losses that you may have experienced to date. If your analysis shows:</p> <p><strong><em>Better than expected, </em></strong>you&rsquo;re looking for ways to reduce your taxes, so explore traditional actions such as:</p> <ul> <li> Setting up a qualified retirement plan, such as an SEP or 401(k) plan, to save for your retirement in a tax-advantaged way</li> <li> Buying new equipment and machinery to better run your business while capturing tax write-offs (explained later)</li> </ul> <p>Also, make sure that your remaining estimated tax payments for 2013 are increased to avoid underpayment penalties.</p> <p><strong><em>Lower than expected, </em></strong>tax savings can still be helpful but may not be the most important action now<strong><em>. </em></strong>If your profits aren&rsquo;t what you expected, or you experienced losses, <em>reduce </em>your remaining estimated taxes to conserve your cash and avoid making an interest-free loan to the government. (You can&rsquo;t recoup overpayments until you file your return next year.)</p> <p><strong>Use expiring provisions</strong></p> <p>While Congress has a habit of extending expiring or expired provisions, you can&rsquo;t count on this to happen this year. A number of important business-related tax breaks are scheduled to disappear on December 31, so take advantage of them while you can. Key actions to consider now:</p> <ul> <li> <em>Purchasing of equipment, machinery and off-the-shelf software</em>. The dollar limit for 2013 is $500,000 for new or used items, as long as you are in the black. At present, the limit is set to decline to $25,000 in 2014. Alternatively, if you buy new items, you can use 50% bonus depreciation to write-off half the cost, whether or not you&rsquo;re profitable. Either way, you can take one or both write-offs even if you finance purchases in whole or in part.</li> <li> <em>Improving your facilities. </em>You can expense up to $250,000 of the cost of leasehold, restaurant, or retail improvements made before the end of the year. Costs over this dollar limit can be depreciated over 15 years (rather than the usual 39-year depreciation period for commercial property).</li> <li> <em>Raising capital. </em>If your business is a C corporation in the fields of technology, manufacturing, retail or wholesale, you can induce investors to come on board with the tax law&rsquo;s 100% exclusion for gain on the sale of &ldquo;qualified small business stock&rdquo; held more than five years. Since these deals usually take several months or more to put together, start now so that the stock can be issued before the end of the year; the exclusion is set to revert to 50% on January 1, 2014.</li> </ul> <p><strong>Revisit your recordkeeping</strong></p> <p>Summertime may be slow for you and an ideal time to examine your recordkeeping habits as they relate to taxes. The better your records throughout the year, the more deductions and other tax breaks you&rsquo;ll be able to take advantage of when you file your return.</p> <ul> <li> <em>Recording your income and expenses. </em>No matter how small your business or how much you hate numbers, it&rsquo;s vital to keep a record of your income and expenses. Software or cloud solutions make this recordkeeping very easy and inexpensive.</li> <li> <em>Tracking travel and entertainment costs. </em>Receipts to prove the amount of an outlay aren&rsquo;t enough for tax law. You must also keep a record of the date, purpose and other information related to each expense. Fortunately, there are apps to simplify this recordkeeping chore.</li> <li> <em>Tracking car or truck mileage. </em>Unless you use a vehicle solely for business, you&rsquo;ll need to keep track of the miles you drive for business if you want to take a write-off for vehicle usage. Again, apps can be used for this purpose.</li> </ul> <p><strong>Meet with your tax advisor</strong></p> <p>Nearly 90% of small business owners used paid professionals to prepare their tax returns. But how many use expert advice during the year to better position themselves from a tax perspective? Meet with your tax advisor now to review all of the above actions and devise strategies that you can follow for the balance of the year that are unique to your situation.</p> The Industry Word Business Laws Taxes Thu, 27 Jun 2013 14:22:20 +0000 BarbaraWeltman 692421 at Using Testimonials, Endorsements and Online Reviews in Your Marketing – How to Ensure You Aren’t Breaking the Law <p>Do you use endorsements or testimonials from customers in your marketing or advertising? Many business owners do. The power of referrals and quotes from customers can mean the difference between success and failure. However, you need to be aware of truth-in-advertising and endorsement laws. Likewise, if you use ask bloggers to write about your products, you need to be clear and transparent about your affiliations.</p> <p>The Federal Trade Commission (FTC) oversees consumer protection laws in a number of areas, truth-in-advertising being one of them. So, if you intend to use customer quotes or endorsements from others to help sell your products and services, here&rsquo;s what you need to know to ensure you comply with the law:</p> <p><strong>All Endorsements Must Be Truthful and Not Misleading</strong></p> <p>What does this mean? In essence, they must reflect the endorser&rsquo;s actual experience and opinion. You also can&rsquo;t use endorsements or testimonials that make claims about your products or service that you can&rsquo;t back up with clear proof. We&rsquo;ve all seen the ads that promise weight-loss miracles, often backed by quotes from customers testifying to their success. However, if there isn&rsquo;t scientific evidence to prove that this is true, then you are effectively misleading your customers. The FTC can hold both you and your endorser responsible for deceptive marketing practices.</p> <p><strong>Endorsements Must Reflect Typical Experiences</strong></p> <p>In addition to being truthful and not misleading, endorsements must reflect the typical experience of consumers who use the product &ndash; not the experience of just a few satisfied customers. If an endorsement doesn&rsquo;t meet this requirement, the ad must clearly disclose either what consumers can expect their results to be or the limited applicability of the endorser&rsquo;s experience. It&rsquo;s not enough to simply add a disclaimer like &ldquo;Not all consumers will get these results&rdquo; or &ldquo;Your results may vary.&rdquo;</p> <p>So what are your options? Well, if the endorser&rsquo;s experience isn&rsquo;t typical, then you can go ahead and use the endorsement, but you must have adequate proof to back up the results that the consumer claims to have gained. Alternatively, you must clearly disclose the results that people can expect.</p> <p><strong><em>Example</em></strong>: Let&rsquo;s say you manufacture or sell a product for which you want to make very specific claims &ndash; backed by a customer endorsement, such as a cosmetic wrinkle-reducing cream. Any quotes, testimonials or endorsements used must also be accompanied by a statement that clearly discloses the results that most people could expect in similar circumstances. And be specific: &ldquo;<em>Most users of this product saw a <u>50 percent</u> reduction in the <u>appearance</u> of fine lines and wrinkles after using this product for <u>12 weeks</u></em>.&rdquo; It would also be a good idea to have a link to any data that backs up this claim, such as a scientific research study.</p> <p><strong><em>Tip</em></strong>: Let&rsquo;s look at a real life scenario that many small business owners might encounter. Say you run a hair salon or landscaping business and you want to use a few customer quotes on your website &ndash; what should you do? Well, it&rsquo;s a good idea to get permission from endorsers before you post their comments (and an absolute must if you intend to post their names). Likewise, it would also be a good practice to check that they are willing to be contacted for a reference if a potential customer wants more information about their experiences. Before and after pictures are also a great way to back up the validity and truthfulness of any endorsements or claims.</p> <p><strong>Disclose Any Connections or Affiliations to Your Endorser</strong></p> <p>If you have any material connection with an endorser of your product, you must disclose it. So if you pay bloggers or affiliate marketers, or even give them free samples in return for a review, you must disclose that relationship. It&rsquo;s OK to use these endorsements in your marketing or advertising, but be sure to add a disclaimer. For example:</p> <ul> <li> Encourage bloggers or affiliates to follow the law by adding a disclaimer to their blogs or endorsements: &ldquo;<em>ABC Company gave me this product and here&rsquo;s what I think&hellip;</em>&rdquo;</li> <li> In your own ad, state the material connection you have with a paid or compensated endorser: &ldquo;<em>We provided John Doe with a trial product for review, here&rsquo;s what he had to say&hellip;</em>&rdquo;</li> </ul> <p><strong>What About Using Online Reviews?</strong></p> <p>Referrals and recommendations are an essential part of the small business owners marketing mix. Today, those reviews are increasingly part of the post-sales experience thanks to the popularity of independent online review sites like Yelp, Google+ Local, Service Magic, Angie&rsquo;s List and more.</p> <p>But can you lift quotes from these sites and use them in your marketing? If you check the Terms of Service of most these sites, user-generated content (i.e. reviews) are the property of the person who wrote the review. To use these reviews without permission of the reviewer may infringe copyright laws. There are other ways, however, to incorporate customer reviews into your website. Consider the following:</p> <ul> <li> <strong>Add links or plug-ins to your website</strong> that take people directly to your page on crowdsourcing review sites like Yelp.</li> <li> <strong>Use third-party rating and review tools</strong>, such as Shopzilla or BazaarVoice, on your site so that consumers can review products post-sale. Don&rsquo;t forget to add a disclaimer notifying your customers that the review may be posted online and used for marketing purposes.&nbsp; By using these services, your reviewers are subject to Terms of Service, which often includes giving consent to you as the website operator to use and publish their reviews, as well as certain biographical information such as name, alias, or location.</li> </ul> <p>Because these reviews aren&rsquo;t technically endorsements or testimonials and the reviewer has previously agreed to the Terms of Service, businesses (including many notable brands) often lift quotes from online reviews (remembering to strip out any biographical information that could identify the reviewer) and use them in email marketing, fliers and so on. If you have any doubt about the claims you may be making by using these reviews, consult an attorney.</p> <p><strong>More Information</strong></p> <p>For more information, consult the&nbsp;<a href="" title="Endorsement Guide for Businesses">FTC&rsquo;s Endorsements guide for businesses</a> and check out this quick video from the FTC that summarizes what you need to know:</p> <object height="312" width="495" type="application/x-shockwave-flash" id="Endorsement Guides" data=""> <param name="swliveconnect" value="default" /><param name="play" value="true" /><param name="loop" value="true" /><param name="menu" value="false" /><param name="quality" value="autohigh" /><param name="width" value="100%" /><param name="height" value="100%" /><param name="scale" value="noscale" /><param name="align" value="l" /><param name="salign" value="tl" /><param name="wmode" value="opaque" /><param name="bgcolor" value="#FFFFFF" /><param name="version" value="7" /><param name="allowscriptaccess" value="always" /><param name="allowfullscreen" value="true" /><param name="src" value="" /><param name="flashvars" value="" /></object> Business Law Advisor Business Laws Managing Marketing Wed, 05 Jun 2013 17:39:27 +0000 Caron_Beesley 655421 at Developing a Mobile App? Follow These 12 Tips for Protecting and Securing User Data <p><img alt="SBA Mobile App" src="/sites/default/files/images/SBA_Mobile_App.JPG" style="width: 157px; height: 298px; float: right;" />Smartphone and tablet users will download 70 billion apps this year, according to an estimate by <a href="" title="ABI Research">ABI Research</a>. And the total global mobile app market is expected to be worth $25 billion by 2015 reports <a href="" title="TechCrunch">TechCrunch</a>.</p> <p>If you have an idea for a marketable app or are currently developing one, then the world may just be your oyster. But before you take your app to market and get it accepted by an app store, the Federal Trade Commission (FTC) wants to ensure that your security policies are up to scratch and that you have taken the right measures to protect the data that your users share with you. &nbsp;</p> <p>Why? Apps and mobile devices often rely on consumer data &ndash; including contact information, location, photos, and so on &ndash; all of which can be vulnerable to data breaches, digital snoops and regular theft. In fact, <a href="" title="Markets and Markets">MarketsandMarkets</a> cites the risk of data theft through delivery of phishing and spyware in mobile apps as the biggest downside to the growth in available apps.</p> <p>The FTC offers the following 12 tips to help developers approach mobile app security:</p> <p><strong>1.&nbsp;</strong><strong>Appoint a security lead</strong></p> <p>Your development team should include at least one person responsible for considering security at each stage of your app&rsquo;s development. If you are a solo entrepreneur, then that person is you.</p> <p><strong>2.&nbsp;</strong><strong>Review the data you intend to collect and maintain</strong></p> <p>Don&rsquo;t collect or keep data that you don&rsquo;t need. If you don&rsquo;t need user&rsquo;s contact info, don&rsquo;t collect it. Likewise, don&rsquo;t keep user data any longer than you need to &ndash; including location data.</p> <p><strong>3.&nbsp;</strong><strong>Understand the differences between mobile platforms</strong></p> <p>Each mobile operating system uses a different application programming interface (API), which includes different security features and permission handling. So don&rsquo;t just assume one size fits all; adapt your code accordingly.</p> <p><strong>4.&nbsp;</strong><strong>Don&rsquo;t rely on a platform alone to protect your users</strong></p> <p>Platforms may offer features to make security easier, but it&rsquo;s up to you to understand them. Use them properly, and explain them to your users in everyday language.</p> <p><strong>5.&nbsp;</strong><strong>Create secure user credentials</strong></p> <p>If your app requires that users create usernames and passwords, make sure that these credentials are secure and appropriate to the nature of your app. For example, a social networking app would require a higher level of authentication (password strength requirements) than a gaming app.</p> <p><strong>6.&nbsp;</strong><strong>Encrypt any data that is transmitted</strong></p> <p>Use transit encryption (SSL/TLS in the form of HTTPS) to secure usernames, passwords, API keys and any other important data that is transmitted from a device to your server. This is particularly critical because many users use un-secured public WiFi networks to access apps. If you use HTTPS, use a low-cost digital certificate from a reputable vendor and ensure your app checks it properly.</p> <p><strong>7.&nbsp;</strong><strong>Exercise caution and use due diligence on libraries and other third-party code</strong></p> <p>Third-party libraries can save time, but keep your ear to the ground. Does the library or SDK have known security vulnerabilities?</p> <p><strong>8.&nbsp;</strong><strong>Consider protecting data you store on a user&rsquo;s device</strong></p> <p>If a user&rsquo;s device becomes infected by a virus or malware, or they lose their device, think of ways you can help them protect any personal information that your app handles. Encryption is one option. Some platforms have their own storage schemes for protecting sensitive user data such as passwords and keys &ndash; use them.</p> <p><strong>9.&nbsp;</strong><strong>Protect your servers, too</strong></p> <p>If you maintain a server that communicates with your app, take appropriate security measures to protect it. If you rely on a commercial cloud provider, understand the divisions of responsibility for securing and updating software on the server. &nbsp;</p> <p><strong>10.&nbsp;</strong><strong>Don&rsquo;t store passwords in plain text</strong></p> <p>Protect user passwords by avoiding plain text storage on your server. Use an iterated cryptographic hash function to hash users&rsquo; passwords and then verify against these hash values. (Your users can simply reset their passwords if they forget.)&nbsp;</p> <p><strong>11.&nbsp;</strong><strong>You&rsquo;re not done once you release your app.&nbsp; Stay aware and communicate with your users</strong></p> <p>Once your app is out there and available for download, stay involved with its security. Update security libraries, push updates out to users, and use user feedback to help you spot and fix vulnerabilities.</p> <p><strong>12.&nbsp;</strong><strong>If you&rsquo;re dealing with financial data, health data, or kids&rsquo; data, make sure you understand applicable standards and regulations</strong></p> <p>If your app deals with kids&rsquo; data, health data, or financial data, ensure you&rsquo;re complying with relevant rules and regulations, which are more complex. The FTC offers details on the regulations that your business needs to be aware of in the following guides:</p> <ul> <li> <a href="" title="Children's Privacy laws">Children&rsquo;s Privacy</a></li> <li> <a href="" title="Gramm-Leach-Billey Act">Gramm-Leach-Bliley Act</a></li> <li> <a href="" target="_blank" title="HIPAA Guidelines">Health Insurance Portability and Accountability Act (HIPAA) Security Rule</a></li> <li> <a href="" title="Health Breach Notification Rule">Health Breach Notification Rule</a></li> </ul> <p><strong>The Bottom Line: One Size Doesn&rsquo;t Fit All </strong></p> <p>There are no hard and fast rules for app security. The <a href="" title="FTC mobile app development guidelines">FTC clearly states</a> that it expects app developers to shoot for reasonable data security practices and doesn&rsquo;t prescribe a one-size-fits-all approach. For example, if you are developing a basic app such as an alarm clock or flashlight that collects little or no data, then this is going to raise fewer security considerations than a location-based social network or, let&rsquo;s say, a health-monitoring app. These apps may use remote servers to store user data, and as a developer you&rsquo;ll need to secure your app from end-to-end. This includes the software, as well as data transmission and servers.</p> <p><strong>Related Articles</strong></p> <ul> <li> <a href="" title="5 Legal Issues to Consider when Developing and Marketing a Mobile App">Five Legal Issues to Consider when Developing and Marketing a Mobile App</a></li> <li> <a style="text-decoration: underline;">Does your Website or Online App Target Kids? Stricter COPPA Rules go into Effect Soon</a></li> </ul> <p>&nbsp;</p> <p>&nbsp;</p> Business Law Advisor Business Laws Marketing Starting Wed, 29 May 2013 10:51:47 +0000 Caron_Beesley 642221 at 3 Types of Insurance You May Think You Have But Don’t <p>Insurance is the backstop for business owners when things go wrong. Things happen, but owners want to be financially protected for the unexpected. The problem is that owners may assume they&rsquo;re covered for certain events but find out after such events that they were mistaken. Don&rsquo;t fall into the same trap. Here are three common situations you may assume you&rsquo;re covered for but may need to make changes to be protected.</p> <p><strong>Terrorist events</strong></p> <p>You&rsquo;re a restaurant owner whose windows have been blown out by a terrorist&rsquo;s bomb. Or you have a medical office but patients can&rsquo;t access your office because the street is closed following a terrorist attack. Will your business insurance policy help you? It depends.</p> <p>After the September 11 attacks, insurance policies were clarified to <em>exclude </em>coverage for property damage resulting from terrorist attacks. However, businesses can obtain coverage for such events by paying extra. The *<a href="" target="_blank" title="Links to WSJ article"><u>Wall Street Journal reported</u> </a>that about 60% of companies across the country do carry additional coverage for terrorism. Unfortunately, many small businesses don&rsquo;t because of the added cost.</p> <p>So are you covered or not in an event such as the Boston Marathon bombings? It depends on whether this is officially certified to be an act of terrorism. The <a href="" title="Links to NAIC"><u>Terrorism Risk Insurance Program Reauthorization Act</u></a> was passed post-9-11 to help insurers pay for terrorism claims. Under this law, terrorism coverage is now necessary for claims resulting from an act of terrorism and basic coverage does not provide protection if the Treasury Secretary, the Secretary of State and the U.S. Attorney all certify an event to be an act of terrorism. <em>Note:</em> This law is set to expire on December 31, 2014, but could be extended by Congress.</p> <p>Even if you have terrorism coverage, it may only provide protection for property damage. You usually need a separate business interruption policy to protect you for lost profits resulting from acts of terrorism and the aftermath. Business interruption insurance pays for your operating costs (e.g., rent, utilities and wages to employees) in addition to the profits you would have earned during the period your business was forced to close. Find more information about business interruption coverage from *<a href="" target="_blank" title="Links to InsureU Online"><u>InsureU</u></a>.</p> <p><strong>Water damage</strong></p> <p>Water damage is the most common type of property damage for commercial buildings businesses, *<a href="" target="_blank" title="Links to ZurichNA"><u>according to one insurance company</u></a>. But there&rsquo;s water damage, and then there&rsquo;s water damage. Some types of water damage are covered by your business owner&rsquo;s policy (BOP), but others are not.</p> <ul> <li> <strong><em>What&rsquo;s usually covered: </em></strong>BOP&rsquo;s typically limit coverage to water damage from within. This means damage that results from freezing pipes, broken pipes or other accidents causing water to be inside your facility.</li> <li> <strong><em>What&rsquo;s usually </em></strong><strong>not <em>covered: </em></strong>BOP&rsquo;s typically don&rsquo;t cover water damage from without (outside your building or under the foundation). This can result from flooding (e.g., from storms, snow melts), water main breaks, or sewer backup.</li> </ul> <p>You can obtain coverage for water damage that ordinarily is not part of your BOP. This can be done in some cases simply by extending the coverage of your basic policy.</p> <p>However, if your business is located within a flood zone, the only way to obtain coverage is with a separate flood insurance policy from the federal government (not a private insurer). The cost of coverage depends on where your business is located (the closer to a serious flood area, the higher the premiums). Find more about this coverage through the <a href="" title="Links to FEMA"><u>National Flood Insurance Program</u>.</a></p> <p><strong>Home-based businesses</strong></p> <p>Just because you have a good homeowner&rsquo;s policy doesn&rsquo;t automatically give you the protection you need for your home-based business. If a business client is injured in a fall or the inventory you store in your basement is destroyed by a fire, your homeowner&rsquo;s policy probably won&rsquo;t provide protection. There are two ways to remedy this:</p> <ul> <li> Add a rider to your homeowner&rsquo;s policy to cover your home-based business. This option is useful if you have few business visitors and not too much business property to protect.</li> <li> Obtain a separate business owner&rsquo;s policy (BOP). This option is preferable if clients and customers regularly visit your home and/or if you have expensive business property (costly equipment and/or inventory on the premises).</li> </ul> <p><strong>Conclusion</strong></p> <p>Former Defense Secretary Donald Rumsfeld said, &ldquo;there are &hellip;unknown unknowns -- the ones we don&rsquo;t know we don&rsquo;t know.&rdquo; You may be unaware of the type of coverage your business should have. Talk with your insurance agent to determine what risks your business faces and learn about additional coverage you may want or need.</p> <p><em>*Denotes non-government website</em></p> The Industry Word Business Laws Emergency Planning Managing Thu, 23 May 2013 12:23:46 +0000 BarbaraWeltman 636191 at 5 Tips for Hiring and Managing a Summer Intern <p>Is your small business looking to hire an intern this summer? You&rsquo;re not alone! <a href="" title=" survey">According to a December 2012 survey by</a>, 53 percent of the 300 companies surveyed plan to hire more interns in 2013 than they did in 2012.</p> <p>In fact, internships are becoming increasingly important to both students and business owners. The difficult economic climate means that new graduates face unprecedented challenges as they try to enter the job market. Internships give them a vital foot in the door and also provide employers with nurtured and eager talent to help them grow their business.</p> <p>Just look at the <a href="">data</a>:</p> <ul> <li> 47 percent of employers have a structured internship program</li> <li> 39 percent of small businesses made full time job offers to interns in 2012</li> <li> 85 percent of employers say hiring an intern was a positive experience</li> </ul> <p>If you want new ideas and the opportunity to nurture a potential future employee &ndash; at a low cost &ndash; read these five tips for hiring and managing an intern (within the law).</p> <p><strong>Assess your Needs</strong></p> <p>Interns will be looking for the right kind of experience, so it&rsquo;s important to evaluate your needs and create a job description that is appealing for both parties. Think about how an intern can help you achieve your business goals? Do you have enough work to support an intern? Who will supervise, train and mentor this individual? What about resources &ndash; like office space or a computer?</p> <p>Think about potential workload that you can hand-off in terms of short and long term assignments and be sure to plan well in advance (hiring takes time)!</p> <p><strong>Should you Offer a Paid or Un-Paid Internship?</strong></p> <p>Should you pay your interns? Interestingly, most students state that compensation is the least important factor when considering an internship. And according to, one third of businesses surveyed chose not to pay their summer interns (choosing to offer college credits, company perks or travel stipends instead).</p> <p>If you want to attract right talent and take your investment seriously, then it&rsquo;s worth compensating your intern(s) appropriately. (The average hourly rate for a bachelor&rsquo;s degree-level intern is $16.21, according to the <a href="" title="National Association of Colleges and Employers website">National Association of Colleges and Employers</a>.)</p> <p>Why not get an un-paid intern? Perhaps the biggest rationale for paying interns is that the <a href="" title="U.S. Department of Labor website">U.S. Department of Labor</a> puts limits on the work un-paid interns can perform under the Fair Labor Standards Act. For example, your business can&rsquo;t be seen to derive any benefit from the intern. Essentially, the following applies:</p> <ul> <li> <strong>Unpaid interns cannot do any work that contributes to a company&#39;s operations</strong>. This includes any tasks that help you run your business, like documenting inventory, filing papers, or answering emails.</li> <li> <strong>Unpaid interns can shadow other employees and perform duties that don&#39;t have a business need.&nbsp;</strong>For example, a bakery may allow an apprentice/intern to decorate a tray of cookies that will not be sold to customers. Because the task was only a training exercise for the apprentice/intern and the bakery did not receive any benefit from that work, the bakery would not have to pay that student worker for that time.</li> </ul> <p>For more information on what exactly unpaid interns can do, according to the Department of Labor, read <a href="" title="Blog about unpaid internships">The Truth Behind Unpaid Internships</a>. &nbsp;&nbsp;</p> <p>Clearly, a paid internship program will give both your business and your intern(s) more flexibility.</p> <p><strong>The Hiring Process</strong></p> <p>This process isn&rsquo;t a whole lot different than hiring a regular employee. You&rsquo;ll need to write a job description &ndash; be sure to state whether the internship is paid or un-paid, your objectives for the position, responsibilities and assignments of the job, and specific experience that the intern can expect to gain.</p> <p>Where should you look for interns? In addition to posting the opportunity to your website and online job boards, approach local colleges and schools and register with their career services office. Many of these candidates are screened and motivated. Another option is the Department of Labor&rsquo;s <a href="" title="Summer Jobs+ Bank website">Summer Jobs+ Bank</a>, a Presidential initiative designed to connect youth with employment and internship opportunities. <a href="" title="Summer Jobs+ Bank listing">Post your listing here</a>.&nbsp;</p> <p><strong>Managing Interns &ndash; Considerations to Remember as an Employer</strong></p> <p>Perhaps the most important thing to remember is that this is a learning experience for your intern, not a traditional &ldquo;summer job&rdquo;. &nbsp;Consider the following:</p> <ul> <li> <strong>Expose them to Real World Experiences and Tasks</strong> - There&rsquo;s no harm in giving your intern mundane, tactical tasks to complete, but be sure to mix it up and give them real business experience as well.&nbsp; &nbsp;Have your intern sit in on meetings and sales calls. Give them the opportunity to take a first stab at a project, guide and mentor them through it, don&rsquo;t be afraid to let go of the reins a little, and step in when you need to.</li> <li> <strong>Mentor </strong>&ndash; An intern is used to feedback (college tutors provide it all the time), so be prepared to coach and provide honest feedback about what they are doing well on a particular project and where there&rsquo;s room for improvement.</li> <li> <strong>Set Parameters and Guidelines </strong>&ndash; This may not be something you are used to doing with your regular employees, but expectations need to be set about appearance, business attire, work hours, and acceptable internet/social media use.</li> <li> <strong>Set Expectations Among Other Employees </strong>&ndash; If you choose to delegate mentoring to another employee, be sure that employee is aware of your expectations. Likewise, set expectations across your staff so that the intern doesn&rsquo;t find him or herself being taken advantage of or assigned tasks that are not within their job description.</li> </ul> <p><strong>Workplace and Labor Laws </strong></p> <p>Many of the labor laws that apply to employees, such as&nbsp;<a href="" title="Link to information about workplace discrimination laws">workplace discrimination laws</a>, also apply to interns. You must also ensure you comply with workplace&nbsp;<a href="" title="Link to informatoin about workplace health and safety laws">health and safety laws</a>. Some states also require that you carry&nbsp;<a href="" title="Link to information about workers' compensation insurance">workers&rsquo; compensation insurance</a>&nbsp;for interns.&nbsp;&nbsp;</p> <p><strong>Related Resources</strong></p> <ul> <li> <a href="" title="Internship Programs and the Fair Labor Standards Law">Internship Programs Under The Fair Labor Standards Act</a> from the U.S. Department of Labor</li> <li> <a href="" title="5 things to know about hiring temporary or seasonal workers">5 Things to Know Now about Hiring Temporary or Seasonal Workers</a></li> <li> <a href="" title="Which employment laws apply to your business? There's a e-tool for that">Which Employment Laws Apply to Your Business? There&rsquo;s an E-Tool for That!</a></li> <li> <a href="" title="10 ways your small business may be breaking employment laws">10 Ways Your Small Business May Be Breaking Employment Laws</a></li> </ul> <p>&nbsp;</p> <p>&nbsp;</p> Business Law Advisor Business Laws Managing Mentoring and Training Wed, 15 May 2013 11:35:42 +0000 Caron_Beesley 624181 at 7 Ways to Protect Your Small Business from Fraud and Cybercrime <p>How secure are your small business assets from fraud, identity theft and cybercrime?</p> <p>According to the <a href="" title="ACFE website">Association of Certified Fraud Examiners (ACFE),</a> companies with less than 100 employees lose approximately $155,000 as a result of fraud each year. Small businesses also have a higher fraud rate than larger companies and non-business owners. One of the most frequent sources of fraud is credit card abuse &ndash; largely due to the fact that few business owners actually take the time to go through every line item on their bill or choose to mingle business and personal accounts.</p> <p>Other sources of fraud stem from an overall lack of security across the business &ndash; such as inadequate network and computer security and a lack of background checks when hiring employees.</p> <p>Don&rsquo;t be a victim! Here are some tips you can take to better protect your business from some common forms of fraud and cybercrime.</p> <p><strong>Protect Your Credit Cards and Bank Accounts</strong></p> <p>Since this is a common area of fraud for everyone from sole proprietors to employee-based firms, this one goes at the top of the list. Start by separating your personal banking and credit cards from your business accounts &ndash; this will ensure fraudsters don&rsquo;t get their hands on ALL your money. Separating your accounts will also make it easier to track your business expenses and report deductions on your tax return.</p> <p>Next, make sure you use your card wisely. Don&rsquo;t hand over your plastic or your card number to employees or companies with which you don&rsquo;t have a familiar relationship. Switch to online bill pay or make sure you store paper bills securely. Likewise, use a secure mailbox for receiving and sending bills. If you don&rsquo;t have one, deposit your mail directly at the post office (this goes for any mail that contains sensitive information &ndash; you don&rsquo;t want to leave it lying around in an unsecured mailbox).</p> <p>Lastly, be sure to check your online banking every day for suspicious activity.</p> <p><strong>Secure Your IT Infrastructure</strong></p> <p>Every business owner should invest in a firewall as well as anti-virus, malware and spyware detection software. Backing-up is also a must and will make it a lot easier for you to continue working in the event of a cyber attack. This blog offers more advice on what to look out for and digs deeper into your options: <a href="" title="Article about how to protect business data">4 Ways to Safeguard and Protect Your Small Business Data</a>.</p> <p><strong>Use a Dedicated Computer for Banking</strong></p> <p>This is a great idea from Forbes magazine&rsquo;s <a href="" title="Article about how to protect your business from cybercrime">5 Ways Small Businesses Can Protect Against Cybercrime</a>.&nbsp; Use a dedicated computer for all your online financial transactions and, ideally, make sure it&rsquo;s one that isn&rsquo;t used for other online activity such as social media, email and web-surfing which can open up the machine to vulnerabilities. Avoid mobile banking if you can.</p> <p><strong>Have a Password Policy</strong></p> <p>Another easy step you can take to protect your IT systems is to institute a password policy.&nbsp;</p> <ul> <li> Make sure you and your employees change them regularly (every 60 to 90 days is good rule)</li> <li> Set rules that ensure passwords are complex (i.e. contain one upper case letter, one number and must be a minimum of eight characters)</li> <li> Use different passwords for different online and system accounts</li> </ul> <p><strong>Educate Your Staff </strong></p> <p>Employees are perhaps your biggest point of vulnerability when it comes to fraud, but they are also your first line of defense. Hold regular training sessions on basic security threats (online and off) and prevention measures &ndash; both for new hires and seasoned staff. Enforce the training by instituting policies that guide employees on the proper use and handling of company confidential information, including financial data, personnel and customer information.</p> <p>For ideas on what to include in your training, check out the resources offered by small business groups like your local Small Business Development Center or Women&rsquo;s Business Center (<a href="" title="Directory of small business assistance in your area">find one near you here</a>), you could also look out for free online webinars from security organizations and businesses.</p> <p><strong>Consider Employee Background Checks</strong></p> <p>One of the first steps to preventing fraudulent employee behavior is to make the right hiring decision. Basic pre-employment background checks are a good business practice for any employer, especially for those employees who will be handling cash, high-value merchandise, or have access to sensitive customer or financial data. This blog offers tips on which background checks you can legally pursue and some tips for doing your own detective work: <a href="" title="Article about conducting employee background checks">Conducting Employee Background Checks &ndash; Why Do It and What the Law Allows</a>.</p> <p><strong>Insure Your Business</strong></p> <p>Fraud and cybercrime does happen; however, you can still seek to cover your damages by purchasing an insurance policy that protects you against any losses that you may incur from crime or fraud. Likewise, find out what your bank is willing to do to help you out if your credit card or business account is compromised.</p> <p><em><strong>How do you protect your business against fraud and cybercrime? Leave a comment below!</strong></em></p> Business Law Advisor Business Laws Emergency Planning Managing Wed, 08 May 2013 10:57:08 +0000 Caron_Beesley 611861 at Does Your Website or Online App Target Kids? Stricter COPPA Rules Go into Effect Soon <p>Do you target children or a youth demographic online? Perhaps you&rsquo;ve developed or are marketing a mobile app that appeals to a youth market? If so, you should be aware of the <a href="" title="COPPA">Children&rsquo;s Online Privacy Protection Act (COPPA)</a> &ndash; a federal ruling enforced by the Federal Trade Commission (FTC) that gives parents control over what personal information websites can collect from children under the age of 13.</p> <p>The <a href="" title="COPPA Rule">COPPA Rule</a> recently underwent an important overhaul of which online marketers need to be aware. The revised rule (which goes into effect in July 2013) put additional protections in place and streamlines other procedures that companies covered by the rule must follow.</p> <p>If you run a website or mobile app designed for children or collect any kind of information from someone you know is under 13, here&rsquo;s what you need to know about the revisions to COPPA:</p> <p><strong>Key COPPA principles remain unchanged</strong></p> <p>Most of the <a href="" title="COPPA requirements">key requirements of COPPA</a> haven&rsquo;t changed. You must still give notice to parents and get their verifiable consent before collecting, using or disclosing personal information from children under 13. You must keep collected data secure and you can&rsquo;t request that a child disclose more information than is reasonably necessary in exchange for participation in an activity.</p> <p><strong>Expansion of who is covered by COPPA &ndash; Plug-Ins and advertising come under the spotlight</strong></p> <p>If you operate a child-directed website and you allow outside services&mdash;including plug-ins (like YouTube videos) or advertising networks&mdash;to collect personal information from visitors, you will be required to comply with COPPA. This means you will need to provide notice and get parental consent for any user that identifies themselves as under 13, before the third party can collect the child&rsquo;s information. In effect, as the site owner or operator, the FTC will now hold you liable for any personal information requests made by these third parties.</p> <p><a href="" title="FTC description requirements">According to the FTC</a>, this &ldquo;<em>close(s) a loophole that allowed kid-directed apps and websites to permit third parties to collect personal information from children through plug-ins without parental notice and consent.</em>&rdquo;</p> <p>In addition, plug-in or ad network operators who have actual knowledge that they are collecting personal information through a child-directed website or service must also comply with COPPA.</p> <p><strong>What constitutes personal information has changed </strong></p> <p>Under the new Rule, the types of personal information that cannot be collected from children under 13 (without parental consent) has expanded to include geolocation information, as well as photos, video and audio that contain a child&rsquo;s image.</p> <p>In addition, persistent identifiers (such as cookies, IP addresses and mobile IDs) that can be used to recognize a user over time and across different websites or online services are also now considered personal information and parental consent must be obtained before collecting this data. If, however, you use persistent identifiers solely to support the internal operations of your site or service, rather than for marketing purposes, parental consent is not required.</p> <p><strong>Certain information collection is now permitted in &ldquo;support for internal operations&rdquo; </strong></p> <p>COPPA now allows businesses to apply for formal approval to collect certain information if it is used in &ldquo;support for internal operations.&rdquo; Permitted activities include contextual advertising, frequency capping, site analysis and more. However, you can&rsquo;t use the information collected to contact a specific person through behavioral advertising or to amass a profile on that person for any other purpose &ndash; without parental consent.</p> <p><strong>Changes to how businesses get parental consent</strong></p> <p>COPPA has always required that parental consent must be requested via email or postal mail. The new Rule requires that key information (such as how the information will be used) is displayed up front in that notice so that parents can get the details they need quickly.</p> <p>The new Rule also offers more ways for businesses to get the &ldquo;OK&rdquo; from parents (for more details of what was previously acceptable read the Direct Notice to Parents section of the FTC&rsquo;s <a href="" title="How to Comply with COPPA">How to Comply with COPPA</a>). These include scans of parental consent forms, videoconferencing, use of a government-issued ID and more.</p> <p><strong>Stronger provisions to keep kids info secure and confidential</strong></p> <p>Before releasing information to service providers and third parties, site operators must take reasonable steps to make sure these companies are capable of maintaining the confidentiality, security and integrity of that information &ndash; with assurances that they&rsquo;ll follow through. In addition, you are now only allowed to retain kids&rsquo; personal information for as long as is reasonably necessary, and must ensure that it is disposed of securely.</p> <p><strong>Safe harbor programs to get more oversight</strong></p> <p>COPPA previously allowed industry groups to create self-regulatory programs that governed member-compliance with COPPA. The new Rule strengthens the FTC&rsquo;s oversight of these programs with new auditing capabilities.</p> <p><strong>More Information</strong></p> <p>For more information about all these changes, read the FTC&rsquo;s December, 2012 <a href="" title="COPPA press release">press release</a> and refer to the site&rsquo;s <a href="" title="Child Privacy Guide">Child Privacy Guide</a> for more tips and insights.</p> <p>It is highly recommended that you discuss any concerns you have about COPPA compliance with a lawyer. The new rules are complex and have consequences beyond the content that you create or originate on your business website of online service. In addition, you can also email your questions to <a href="" title="COPPA hotline email address"></a>.</p> <p>Check out these related articles too:</p> <ul> <li> <a href="" title="Marketing to Children bog post">Marketing to Children: Where is the Line and Who Enforces it?</a></li> <li> <a href="" title="Mobile app and legal issues blog post">5 Legal Issues to Consider when Developing and Marketing a Mobile App</a></li> <li> <a href="" title="Online privacy policy blog post">7 Considerations for Crafting an Online Privacy Policy</a></li> </ul> <p>&nbsp;</p> Business Law Advisor Business Laws Managing Wed, 01 May 2013 11:56:46 +0000 Caron_Beesley 598901 at Which is the Best State to Incorporate Your Brick and Mortar or Online Business? <p>One of the most frequently asked questions by prospective business incorporation filers is, &ldquo;which state should I incorporate in?&rdquo;</p> <p>It&rsquo;s a good question and the answer isn&rsquo;t always clear cut. For example, you&rsquo;ve no doubt heard about the perceived tax and operational advantages of incorporating in states such as Nevada (with its low filing fees and zero state corporate income, franchise and personal income taxes) and Delaware (with its flexible and pro-business statutes).&nbsp; But do these advantages really come into play for small business owners? Do you really want to tie your small business up legally with a state other than your own? What if your business operates largely online with customers in many states?</p> <p>Here&rsquo;s what you need to know about choosing a state in which to incorporate.</p> <p><strong>Why Incorporating in Your Home State May Be the Best Option</strong></p> <p>If you operate a small business and anticipate having less than five shareholders or members of your incorporated business, then it&rsquo;s widely considered the best strategy to incorporate in the state where you have a physical presence (property, shareholders, employees) &ndash; and for most small businesses, this is in their home state.</p> <p>Why? Even with the benefits of incorporating in states such as Nevada and Delaware, the hassles often outweigh the benefits.</p> <p>Consider the following:</p> <ul> <li> <strong>Even if you incorporate in tax-friendly Nevada</strong>, if you are operating or doing business in your home state, you&rsquo;ll still have to pay business taxes on revenue that originates in that home state.</li> <li> <strong>If you don&rsquo;t have a physical address in the state in which you incorporate</strong>, you&rsquo;ll need to hire and pay a registered agent in that state to act as your legal representative.&nbsp;</li> <li> <strong>If you are incorporated outside your home state, you&rsquo;ll need to file for a <a href="" title="Information about foreign qualification">foreign qualification</a> in both your home state </strong>(if you wish to do business there) and in the state in which you are incorporated. This means double-duty paperwork, filing fees, taxes, and even penalties if you inadvertently skip this important step. You may even have an increased tax liability in your home state because you are registered as a foreign entity there. You are also subject to the same annual reporting requirements in both states.</li> <li> <strong>If you register out of state, you&rsquo;ll be subject to the laws of that foreign state of corporation.</strong> These laws may differ from those of your own state (and state laws can vary significantly in many areas). This can have complicated ramifications and may require your presence in court in your registered state, if you run into even the simplest of legal disputes.</li> <li> <strong>As a &ldquo;foreign&rdquo; business, you may also encounter difficulties opening a business bank account</strong> in either or both the states in which you are incorporated in and physically located.</li> </ul> <p>Unless you intend to transact business in states like Nevada or Delaware, filing in these states has very few long-term advantages.&nbsp; Yes, the tax laws and ease of doing business may be appealing at first, but peel back the onion and you&rsquo;ll find that, in the long run, it is more economical and time-saving for small businesses to pursue home-state incorporation.</p> <p><strong>Where Should You Incorporate an Online Business?</strong></p> <p>Choosing a state in which to incorporate your online business involves pretty much the same steps as a brick and mortar business. For example, if you intend to market and sell to a relatively local market, then filing in your home state will make the most sense.</p> <p>However, it&rsquo;s important to get legal advice and weigh the pros and cons. Many small online businesses choose to incorporate in their home state because that&rsquo;s where they have a physical presence (such as a home-based business) and it&rsquo;s also often where most of their employees are situated, regardless of where their customer base is.</p> <p>If your online business grows and you open a physical location in another state, you&rsquo;ll need to apply for a <a href="">foreign qualification</a> in each state in which you are doing business (including your original home state). Foreign qualification is technically a form of incorporation, and your company will be responsible for the associated fees and laws in that state. As a rule of thumb, if your business meets any of the following criteria in a state other than your home state, then you should check with the state government and/or a lawyer to find out about applying for a foreign qualification:&nbsp;</p> <ul> <li> Your business has a physical presence in the state</li> <li> Your business has employees in the state</li> <li> Your business accepts orders in the state</li> <li> Your business has a bank account in the state</li> </ul> <p><strong><em>Disclaimer</em></strong>: The information in this blog doesn&rsquo;t constitute legal advice. Always consult a lawyer to find the incorporation option that best suits your needs.</p> <p><strong>Related Articles</strong></p> <ul> <li> <a href="" title="Business Structure Guide">SBA &ldquo;Choose your Business Structure&rdquo; Guide</a></li> <li> <a href="" title="10 Questions about Small Business incorporation">Top 10 Questions About Small Business Incorporation Answered</a></li> <li> <a href="" title="Is Sole Proprietorship Right for You?">Sole Proprietorship&mdash;Is this Popular Business Structure Right for You?</a></li> <li> <a href="" title="Legal Steps Involved in Moving your Business to Another State">The Legal Steps Involved in Moving Your Business to a New State &ndash; FAQs Answered</a></li> </ul> <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> Business Law Advisor Business Laws Managing Starting Wed, 17 Apr 2013 11:16:37 +0000 Caron_Beesley 575901 at