You may have a number of reasons to consider starting your own business.  The most important question you should consider is whether you want to be an employee or an entrepreneur.  Even if you start your own company, you still have to determine whether you are going to work in or on your business.  There’s a big difference.

Starting a business puts you in the role of being the generator of both clients and income streams.  That probably means that you’ll be taking on at least one new role.  In order to make sure that you can eventually focus your efforts on your business, as opposed to in your business as a self-employee, you need to set up systems.

The Path Before You

The good news, as you consider the path to entrepreneurship, is that you probably already know a lot about the type of business you want to start.  Maybe you even have some experience in working with people and closing sales.  That’s all very helpful.

The bad news is that you probably aren’t used to the idea of creating and managing revenue growth, which is the true measure of business success.  Just like closing sales, accounting for taxes, and administering payroll, you need to have systems in place that take administrative tasks off of your plate so that you can focus on growing your business and developing relationships with your clients.

Developing Systems

The absolute best way to run any business is with systems.  The most successful businesses in the world use systems from the ground up.  Employees have established responsibilities and specific scripts they follow for closing sales.  They also report to managers.  Managers have specific ways of making sure that employees are on task and that customers are satisfied.  Managers report to owners, who should be evaluating how well the systems are working.

Take a moment to think about Warren Buffett, one of the wealthiest men in the world.  He has a system for finding and investing in companies that are consistently profitable.  Why are they consistently profitable?  They use systems that have been tested and honed over long periods of time.  They know that when they do X they get Y almost every time.

A System for Complying with Laws

As a business owner, you don’t want to get bogged down in paperwork and other mundane tasks.  You need to focus on running and growing your business, on developing relationships with customers, increasing sales, and scaling into a larger but more efficient operation.  If you decide to start your own business, it’s because that’s where you’ve determined you can add value.

As an attorney, my job is to remove the paperwork intensive task of keeping your business legal.  We pride ourselves on the fact that we have developed systems for making sure that your business complies with the rules that govern everything from business entity creation to employee relationships and vendor contracts.  We take all the worry out of the legal administration of your business so that you can focus on what really matters, growth.

Call today to schedule an appointment and take the next journey for protecting your business.

Hiring kids for summer jobs is a long standing tradition, especially for small businesses.

It’s a win for everyone involved – the kids get a little work experience and some extra money and the businesses get a somewhat less expensive and highly energetic work force for the summer months.

Well, at least it’s less expensive as long as you follow the Department of Labor rules governing minors and how and when they work.

And these aren’t pesky little rules that no one bothers to enforce.  A Department of Labor decision recently assessed $277,000 in fines against movie theaters for hiring minors to do jobs that were outside the bounds of the approved list and working them longer hours than were legally acceptable.

Here’s what you need to know:

Work Hours

The days of legally employing children to work from dusk until dawn are long past (and rightfully so.)  There are very specific restrictions on the hours your student employees can work.

If you hire minors aged 14 and 15, they can only work:

-         Outside of school hours (not a concern during the summer months)

-         Only 18 hours or less during the week when school is in session

-         40 hours a week when school is not in session

-         Only 3 hours during any day when school is in session

-         8 hours a day when school is not in session

-         Between 7 am and 7 pm during the school year

-         Between 7 am and 9 pm from June 1^st to Labor Day

If you hire 16 and 17 year olds, there are no federal limits on the hours they can work.  However, your state may have restrictions.  Contact us to find out whether or not your state is one that actually restricts the number of hours minors can work.

If your business participates in a program that gives school kids work experience or career training (like a health occupations or vocational training program), the students you hire can work as many as 3 hours during the school day and for up to 23 hours during the school week.

Type of Work

In addition to the length of their work days, there are also very specific restrictions on the types of work minors can do.  Failing to stay within the bounds of these restrictions can land you in hot water with the Department of Labor in the blink of an eye.  Pay close attention to the following restrictions and save yourself some serious money in fines.

Minors under the age of 14 are only allowed to take the following types of jobs:

-         Newspaper delivery

-         Baby-sitting

-         Acting and performing (actors and performers are exempt from federal child labor laws; however, check with us to find out how your state restricts their employment)

-         Agriculture, but only nonhazardous agriculture jobs and then only for children over the age of 12 with written permission from their parent or guardian.  And they can’t work during school hours.

-         Employment by their parent.  Parents can employ their kids except in manufacturing, mining or any other job where the minimum age for employment is 18.

Ages 14 and 15:

-         Office and clerical work, including operating office machines

-         Retail, grocer and restaurant work including cooking with electric or gas grills (not over open flames) or with deep fryers if they automatically lower and raise the baskets from the hot oil.

-         Cashiering, selling, modeling, price-marking, assembling orders, packing, shelving or bagging.

-         Janitorial work such as vacuuming or mopping, dusting, etc.

-         Grounds keeping or landscaping (but not using power mowers or other high-powered equipment)

-         Working in kitchens to prepare and serve food. But keep them out of the walk-in freezers except to go in and bring food out.

-         Artistic or creative work such as computer programming, graphic design, playing a musical instrument or painting.

-         Working in car washes or service stations as long as they are not working in a pit, rack or using a forklift or other hydraulic device.

This is just a quick and dirty list of the restrictions you face when hiring minors to fill summer positions.  As long as you follow the rules established by the Department of Labor, you can enhance your bottom line by hiring these energetic and ambitious teenagers.

Call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit to make sure you’re not breaking the law when hiring the kid next door.

Ever heard the old saying “An ounce of prevention is worth a pound of cure?”

As a small business owner, you would do well to bear that sentiment in mind when you’re hiring employees.

If you want to avoid employee problems, don’t hire problem employees.

To avoid hiring the wrong people, you need to do a thorough background investigation and that means getting up to your elbows in the Fair Credit Reporting Act.

The FCRA is about much more than just checking a potential employee’s credit score.  It can include obtaining any kind of public record, criminal records, sex offender registration and even driving records.

To stay out of trouble, make sure you abide by the requirements for obtaining information under the Fair Credit Reporting Act.

Follow these three steps to ensure you’re in compliance:

1. Employer Certification

In order to receive information for a credit reporting agency, you have to certify that you will follow the rules of the FCRA regarding disclosure of information, authorization, notice and adverse action notices.  You also have to certify that you will not use any of the information you obtain in violation of any and all anti-discrimination laws.

2. Authorization and Disclosure

Before you receive a report from a credit reporting or other consumer agency, you must advise the potential hire that you intend to obtain the report.  The notification must be in writing and cannot be part of the employment application; it needs to be in a separate document.  And have the potential new hire sign the notification authorizing you to obtain the report.

Make sure that you notify the person you’re checking in writing that the report you will be obtaining may contain information about their character, reputation, personal characteristics, lifestyle, criminal record, driving record and work history.

3. Adverse Action Letters

If you decide not to hire the individual you’ve checked out based upon the information you obtain, you have to provide them with a letter explaining your decision, a copy of the report you actually reviewed in making the decision, a Summary of Rights and a reasonable time to respond and object to the information in the report.

If the potential employee doesn’t object and your decision becomes final, you have to provide:

-          the individual in question with notice that the decision is final,

-          the name, address and phone number of the agency that provided the report,

-          a statement making it perfectly clear that the decision was yours, not the reporting agency’s,

-          notice that they are entitled to obtain a free copy of the report, and

-          notice that they are entitled to dispute the accuracy of the report.

Before you make your decision or take any action based solely on what you find in the report, bear in mind that mistakes happen.  Any number of things could lead to false or misleading information being included in the report.  Remember that any of the following things can cause you to get a flawed report:

-          Identity theft

-          Mistaken identity

-          An outright error

-          Confusion about the record

You could be penalizing someone for bad information they don’t even know anything about.  Make sure you’ve got good information before you use it to decide whether or not to hire someone.

Any of the information provided by consumer reporting agencies can save you from making some pretty costly mistakes in hiring the wrong person.  Just reading the list of the kinds of information you can obtain should make you want to ensure that you do your own thorough due diligence before you hire.

Remember to hire slowly and fire quickly.

Call us and we’ll talk about the best methods and services to use when doing your own pre-hiring due diligence.  Let us help you ensure that you’re in compliance with all the requirements of the FCRA.

So you’re in the planning stages of your new business venture…

Or maybe you’ve been operating for awhile but just hadn’t gotten around to doing the “business” paperwork…

Chances are your CPA has reminded you that no job is finished until the paperwork is done and you know it’s time to make your business structure official.

Depending on the nature of your business, you’ve probably been given the option of a Subchapter S Corporation (an “S Corp) or a limited liability company (LLC).

Which one do you choose?

It helps to know the pros and cons of each option so here’s a brief breakdown of the advantages and disadvantages of both:

Subchapter S Corporations

A Subchapter S Corporation is a tax election which means that you’re telling the IRS how you want your company to be treated for taxation purposes.  An S Corp election lets you as the shareholder treat profits and earnings as distributions and pass them through to your personal tax return.

If your company turns a profit and you’re an employee of the company, you have to pay yourself a salary and your salary must be “reasonable” – basically what you would pay someone else to do your job.  If you don’t pay yourself a salary, the IRS can reclassify the company’s profits as wages and you personally get to pay the payroll taxes on the full amount.

Some Advantages of the Subchapter S Corporation

∙           The life of the company is not bound to you.  If you die or become incapacitated, the company can continue on without your involvement.

∙           The gifting, purchase or sale of stock makes it possible to change ownership of the company without disrupting the business.

∙          With a few exceptions, if your Subchapter S Corporation is a partnership, the corporation pays no income taxes and corporate income or loss is passed through to the stockholders.  You are not personally responsible for it.

∙           If your S Corp has a strong business record, it’s usually easier to access credit and the secure resources as needed.

∙           The corporation’s finances are required to be maintained separately from the stockholders so there is less risk of unrecognized equity liquidations that could disrupt your business.

Some Disadvantages of Subchapter S Corps

∙           Disagreements among stockholders may disrupt the decision making process.

∙           If your bylaws include restrictions on the sale or buy-back of stock, minority stockholders may not be able to recover the value of their investment in the company.

∙           If stockholders give stock to their heirs, the stock ownership of the company may end up in the hands of people who are not actively involved in the business and that can lead to problems for the managing stockholders if they don’t cooperate.

∙           If your company owns assets that appreciate and you dissolve the company, you will have to pay income tax on the appreciation amount.

If you would prefer a simpler corporate structure, you might consider forming a limited liability company (“LLC”).  LLC’s are relatively new and were designed to limit personal liability of the owner, much like a corporation, but give the operating efficiency of a partnership.

An LLC is not a separate tax entity.  The IRS considers an LLC to be a pass-through entity like a sole proprietorship.  All the profits or losses of your LLC pass directly to you and you claim them on your personal tax return.

Some Advantages of the LLC

∙           You have limited personal liability for actions of the LLC.

∙           You have a lot of flexibility in how your profits are distributed.

∙           You don’t have to have corporate meetings, keep minutes or even pass resolutions approving the actions of the company.

∙           Your business losses, profits and expenses flow through to the individual members of the  LLC.

∙           You only pay individual taxes, not corporate and individual taxes.

Some Disadvantages of the LLC

∙           The LLC must be dissolved when a member dies or declares bankruptcy.

∙           You cannot issue stock in your LLC so you can never take it public without changing the corporate structure.

∙           You will have more paperwork in an LLC than a sole-proprietorship; however, your LLC may be classified by the IRS as a sole-proprietorship, partnership or a corporation for taxation.

There are advantages and disadvantages to either structure.  The choice is yours.  You know your situation and your goals for your company better than anyone else.

Just make sure you talk to an attorney well versed in corporate formations before you make the final decision.  This was just a quick list of the pros and cons of both corporate structures. There are many other aspects to take into account before you sign on the dotted line.

Call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.  We would love to help you make a sound decision on the structure of your business.