Small Business Legal Check-up

If you own a small business, do you get your annual check-up to make sure you are doing everything right? Never heard of an annual check-up? If not, you may want to consider getting a new lawyer.  All businesses need an annual check-up.  Think of it as your business’ physical exam.  You go to the doctor every year to check your health so why not go to your lawyer every year to check the health of your business.

Small business check-ups are often overlooked by business owners for fear of the high cost.  Well, this is where our firm comes in.  We offer 90-minute annual business check-ups for a low flat fee.  During the check-up, we review all of your incorporation paperwork, your contracts, your employment records and answer any questions you may have regarding the legalities of your business.  Engaging in a small business legal check-up can save you tons of money in legal fees down the road.  If you are interested in getting your check up, check out our facebook page where we are offering a special on the check-up until March 27.

Personal Training Business – The Important Stuff

Many fitness enthusiasts start a personal training business once they realize they are giving away free advice.  They see the opportunity to cash in on their fitness journey.  Unfortunately, Pennsylvania does not regulate personal trainers. Anyone can start a personal training business without certification.  Although not advisable, it happens and there are certain things a budding trainer needs to know.

Things To Know

First, you should incorporate your personal training business.  Incorporating provides liability protection for your personal assets from business creditors or litigants.  Most trainers with whom I have worked formed an LLC, but consult an attorney before making that decision.

Second, you need insurance.  Personal training poses a high risk to clients and providing the service without insurance is a large risk.  You should speak to a qualified business insurance broker to help find the best policy for you.

Third, you must have a well crafted contract.  Many trainers overlook this important piece. Without a contract containing liability waivers, cancellation and refund polices, etc., you are asking for trouble.  Do not be penny wise and pound foolish.  You should invest the money to engage an experienced attorney to draft our contract.  Taking one from the internet or some course is a bad idea.  You need to understand what is in your contract, how it operates and be able to explain it to your clients. By hiring a competent lawyer, this will be easy to do.

Remember, starting a new personal training business is exciting, but can be risky.  Protect yourself and your assets by engaging the right people to help you set up your business.

Incorporate Online

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Incorporate online

As our world moves more and more online each day, people frequently incorporate their business online. In fact, search google and you will find numerous websites created to help the thrifty business owner incorporate with “minimal” cost.  Well, let me say this….caveat emptor….buyer beware.

Am I saying these sites are not a good or legitimate way to form your corporation or LLC?  Absolutely not.  These sites facilitate the filing of the appropriate state forms needed to organize your LLC or incorporate your business.  For a small fee, plus the state filing fee, a business owner can incorporate themselves without the hassle of finding and paying for a lawyer.  However, one must understand which entity is right for their business.  Most of these websites won’t answer these questions.  By attempting to save money, one may end up spending a lot more in the end.

Regardless, in most cases, having an Attorney set up your business entity, be it an LLC or corporation, may not cost much more than what one of those websites charge.  You gain the peace of mind that your entity is properly structured and your business has the right foundation for future success.  If you are interested in learning about our office’s Business Start-up Package, contact us today.

LLC S-Corp Election

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I must preface this post with a disclaimer.  I am not a tax lawyer, nor should this post be taken as tax advice. Before making an S-Corp election, please seek the advice of a CPA or Tax Attorney.  With that out of the way, let’s discuss the election.

I receive calls from clients wanting to form S-Corporations because they believe that an S-Corp saves money on taxes.  When a call starts like this, I get the potential client to take a few steps back.  First, we determine if filing an S-Corp makes sense in the first place and for example sake, we determine it doesn’t.  Our analysis finds that an LLC is the best entity to form for this person, but we know that in a year or so, this person’s business will generate a substantial income.  Knowing this, we devise a plan to reduce the tax obligation in the best way possible.  The S-Corp election does just that.

As an LLC, a business owner can elect to be taxed as an S-Corporation so long as such election is made within 75 days of the beginning of the tax year.  Many businesses make this election at a later point because the tax savings offset any increased administrative expenses.  But what are the tax savings?

As an S-Corp or an LLC that has made an S-Corp election, an individual owner reduces their self-employment taxes.  With an S-Corp, the owner that works in the business must pay themself a reasonable salary.  The IRS does not define what this means, but most CPAs can guide you.  The rest of the income can be paid to an owner as a profit distribution, which no self-employment tax is paid.  Now, I have over-simplified the tax rules which is why you should consult with a CPA or Tax attorney to better understand.  But in the end, an S-Corp election can potentially save a business owner substantial money in self-employment taxes.

Independent Contractors and Employees

I hear the following constantly:  “should I hire independent contractors or employees in my business?”  I respond “you don’t get to decide, the law does.”  Let me explain.  Regardless of what you call a worker, substance of the job determines whether someone is an employee or contractor.  Based on the substance, the law decides the classification.  So after my initial response, the conversation moves to determining what the individual will be hired to do.  The IRS published a multiple point test to determine whether someone is an independent contractor, but I will not bore you with that.  If you are interested, you can find the test here.

To make things as simple as possible, the test boils down to control and independence.  How control is exercised over the individual performing the service? The less control exerted, the greater likelihood someone falls into the independent contractor category.  How much independence does the person have in performing their duties?  The more the better.  I know this is an oversimplification of this complex area but I am trying to make the point that one cannot decide the classification.  The law dictates.  Because of this, it is extremely important to work with an attorney to help you properly classify your workers. Improper classification causes more problems for businesses than you can imagine.

Does My Company Need A Lawyer?

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Now that the first month of the year has come to an end, many clients begin to ponder the needs of their business.  First and foremost, owners wonder whether they need a lawyer on retainer or just as needed.  A common question asked by most of my clients.  However, my answer differs from client to client.  If you own a small business and understand your risks and how to actually run the business, you don’t necessarily need a lawyer on retainer.  Hire one when needed, which hopefully isn’t much.  On the other hand, if you run a small business but don’t have the necessary knowledge or risk tolerance needed, you should consider hiring a lawyer on retainer.

The benefits of placing a lawyer on retainer far outweigh the costs.  In fact, your lawyer will more than likely save you money in the long run.  When placing a lawyer on retainer, you must utilize the services to the fullest extent.  We encourage all of our retainer clients to involve us in any decision before it is made.  Doing so helps a business avert risk and save money.  We never want our clients to view our services as an expense.  The dollars spent should be viewed as an investment.  If you are ready to make an investment in the success of your business, contact our firm today.  We can discuss our monthly retainer service and show you how the benefits far outweigh the cost.

Call or email today.

Founder Beware – Starting a Non-Profit Corporation

Many clients come to me with the idea of starting a non-profit corporation in furtherance of a cause they find dear to their heart.  However, most of these people do not realize that a non-profit corporation cannot be owned by them.  It is a public owned charity (for purposes of this post I am only referring to 501c3 public charities).  They found the corporation; the public owns it.  But what does this mean?

First, a board of directors must be put in place to run the organization.  Founders can fill a seat on the board; however, the board cannot be filled with related parties (there are specific IRS rules regarding board composition, which I will not cover here).  The board controls the fate of the organization and the founder.  Founders don’t always understand this and feel that they can run the organization however they deem fit.

Second, accounting and financial record keeping can make or break the non-profit.  To maintain the IRS exempt status, non-profits must be diligent in their record keeping and financial management.  Money going to the wrong types of expenses jeopardizes organizations more than I care to state.  Founders sometimes look at the non-profit as their own business and squander funds inappropriately.  This leads to IRS issues, board liability and founders being removed from the organization they started.

Lastly, the public can attend board meetings, request records and have access to a non-profit unrestricted.  Therefore, board governance and leadership determine the success of an organization.  Without proper governance and leadership at the top, non-profits fail and struggle maintaining public support.

If you are considering forming a non-profit, call our office to schedule a free consultation.  You must understand the world you are walking into and how to navigate it appropriately.

LLC Finances – Quick Do’s and Don’ts

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When owning an LLC, once must manage its finances with diligence to insurance they remain protected by the entity.  Many owners underestimate the importance of this.  There must be a wall between an owner’s finances and the finances of their business.  Let’s discuss a few do’s and don’ts to help an owner stay protected.



DO’S AND DON’TS

First, your company must have it’s own bank account.  This is non-negotiable.  This bank account must be used for all of its financial transactions.  All business income and expense should flow in and out of that account.

Second, once must never pay personal expenses from the above mentioned business account.  The law looks at co-mingling of funds, which this is called, as a no no.  Co-mingling of finance jeopardizes the liability protection an LLC affords the owner.

Third, if possible, one should refrain from using personal credit cards for LLC purposes and instead, obtain a business credit card.  If that is not an option and one must use their personal credit, the owner should reimburse themselves from their business account and keep an appropriate account record of the same.

Lastly, and as a general principle, one must remember that an LLC is a separate legal entity from themselves and one must treat it that way.  Co-mingling of finance causes more problems for owners than any other issue, at least in my years of practice.  Treat your LLC like a business, keep your money and finances separate and ensure you work with an experienced accountant to help set up appropriate financial systems. Doing these things will help one maintain the liability shield that an LLC provides.

Protecting the Trade Secrets of Your Business

Despite what you may believe, every business has trade secrets and these are the most valuable assets to a business owner.

A trade secret is a type of intellectual property, of a technical or business nature, that can take the form of:

  • Information or data
  • A device
  • A formula
  • A method, pattern or program
  • A process or technique
  • A customer list

Trade secrets must also have commercial value and must be the subject of efforts that are reasonable under the circumstances to maintain their secrecy.  Now that you know what may be considered a trade secret in your business, you need to protect them.

IDENTIFY AND CATALOG YOUR TRADE SECRETS

Inventory everything you believe to be a trade secret and compare your list to the list of trade secrets held by your key employees, executives, and down line employees. Exclude patents and trademarks, which are already protected under law.

Perform an audit that identifies all trade secrets including how and where the information is being stored, who has access to it, and if there are potential weak spots in your protection.

Don’t forget to develop a system to identify newly created material requiring trade secret protection.

KEEP TRADE SECRETS A SECRET

You can’t just call something a trade secret and expect it to be protected.  As a business, you must affirmatively behave in a way that proves you wishes to keep that information confidential.  There is a lot of case law out there describing what is expected by a court.  Here are a few examples:

  • Marking documents and folders “Confidential” and keeping them out of public view
  • Reminding meeting attendees of their obligations before meetings involving confidential information
  • Disposing of any confidential materials after the meeting unless needed by attendees

IMPLEMENT AGREEMENTS AND POLICIES

Another important step in protecting your trade secrets is to develop the policies and agreements to put into place to protect your trade secrets from making a visit to your competitors. Once created, you need to keep your policies and agreements updated. Enforceability of these agreements vary broadly across jurisdictions so make sure you work with an attorney in the state in which you are operating.

EDUCATE AND TRAIN YOUR EMPLOYEES

Your goal is to have a company culture that understands and embraces confidentiality and trade secret protection.  When hiring a new employees, have the employee sign a non-disclosure agreement, which can n be incorporated into the general employment contract. Periodically send out reminders to all staff about the need for confidentiality via email and other communication methods. Require they acknowledge receipt and understanding of the content of the reminder.

Provide training annually to all and upon hiring. Include:

  • Examples of things your company holds to be trade secrets
  • Conduct for all employees regarding trade secrets

 

HAVE A PLAN IN CASE OF VIOLATION

Know ahead of time what you will do if a trade secret is found to have been breached or stolen.  This process should include HR and your Information Technology/ Information Security departments if applicable.

Put in writing what you will do, who is responsible for doing it, who should be notified and of what, and who will terminate access by the person responsible for the breach.  Once you realize a breach has occurred, you need to protect your rights.  This is why having a lawyer on your side will be beneficial in navigating the complexities of this area of law. 

Trade secrets are your biggest assets. Take all possible precautions when protecting them and move rapidly in the case of a breach.  Retain experienced legal counsel to help you develop your trade secret policies and prosecute violators appropriately in court, if a violation occurs despite all your efforts.

Starting a Business in 2017?

The new year is here and many of you out there may be considering starting a business in 2017.  You have an idea, a product or a service you want to share with the world! Well, starting a business is one of the most exciting things you can do in life; also one of the most frightening to some.  Do not let the fear of starting stop you in your tracks.  However, before you do start you business, you must consider a few things first.  I want to share of few of these with you.

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First, what type of entity are you going to form?  LLC, S Corp, Sole Proprietor? All of these structures have different consequences, but choosing one is not that difficult once you understand the basics.

Second, how much money do you need to start the business?  This is often overlooked by budding entrepreneurs.  There are certain things that just cost money that should not be sacrificed; there are other things that you can eliminate or reduce.  You have to understand the difference. For instance, so many people believe that they can save a ton of money by incorporating online instead of using an attorney.  Well, using an attorney doesn’t cost much more and you will have the security that the appropriate entity was selected and put together properly.

Last, Will people buy your product or service?  Have you tested the market?  Some ideas are great in theory or on paper, but don’t solve a real world problem.  You must ensure that your product or services solves a problem or fills a need the public has.

These 3 things are, in my opinion, very important items to consider when starting a business.  When I work with clients, I have an extensive list of questions that we run through to make sure this is the right business for them.  If you are interested in sitting down with me to see if I can help, email me to schedule a no-cost consultation.