Furlough Explained

April 16, 2020April 16, 2020 Greg HarrisLeave a comment

If you are like many of my small business clients

navigating through the COVID-19 crisis, you have likely come to grips with the fact that you need to make some kind of cuts.Your business needs to conserve cash flow, and you recognize that salary and benefits have the largest impact on your budget. Like them, despite your best efforts to remain open and operational, you may be wondering which mechanism – lay-off or furlough – is best for you and you workers when reality hits. Great question.

Assuming these measures will only be temporary, meaning that when the COVID-19 outbreak subsides you will want to resume regular operations as soon as possible, then a more temporary action might be necessary for your business operations. In that case, furloughing some of your workforce would be a good move.

Employees who are furloughed are considered to be on “standby status.” They ought to be ready to come back to full-time work as soon as you call them to action. They can file for unemployment though. However, they need not take part in the stringent unemployment requirements to search for another job in order to collect benefits, unlike those that are filing due to being laid off. This makes them available for whenever you need them – for example, for a few shifts here or there if you are a restaurant owner only serving take out during these months with a very sporadic schedule of needs– until you are ready to call them back permanently.

When you furlough an employee, you give them an anticipated date or timeframe of when you will be calling them back to work. You don’t have to know with certainty, and you can easily extend their furloughed time if need be. This flexibility allows you to take a wait-and-see approach, which is helpful considering no one knows what the immediate or even semi-long term future holds right now.

FURLOUGH	LAY-OFF
Worker remains employed by you	Worker no longer employed by you
Quick way to cut costs	Quick way to cut costs
Temporary (usually a recall date)	Generally permanent
Employer still provides benefits	Employer may (not required to) offer lump sum to subsidize benefit costs (severance)
Off your payroll	Off your payroll

Whatever route you decide to take, I always advise clients to have open and honest communication with employees. After all this is a life altering event for both employer and employee. It’s best to level with them, especially if you feel that this is only a temporary situation and that business will at some point resume at some sort of normal operational levels. Also, if circumstances do change and you are forced to make more of a permanent move, you have the option to change the recall date or even to change their status from furloughed to laid off. While you cannot outright fire someone during the furlough period, you can admit to underestimating your company’s ability to resume your business at expected levels, which then results in the need to lay off.

There are a couple of important things to be mindful of when making the decision between furlough and lay-off. First, no matter what is decided, employers cannot discriminate against protected classes of its workforce. Second, if you have secured PPP loan funds, these funds become “grants” only to the extent your employment numbers remain compliant with the laws and regulations under the 2020 CARES Act.

These conversations and these moves are never easy, but as the business owner, being prepared, forthright and honest with your workforce will pay dividends in the long-run, no matter how long that is. Requirements do vary by state for lay-off and furlough procedures, and some are even changing by the week, so make sure you check with your attorney and state agency to stay up to date on these important regulations.

What is the Paycheck Protection Program and How Can it Help Your Small Business?

March 31, 2020March 31, 2020 Greg HarrisLeave a comment

photo of open signage — Photo by Prateek Katyal on Pexels.com

Many of my small business clients have asked me about the stimulus package (CARES Act) and how it may help them weather the COVID-19 Crisis. Many are concerned about how they are going to pay their employees, much less their other obligations. As part of the CARES Act, Congress is allocating approximately $350 billion to small businesses in the form of the Paycheck Protection Program (PPP), in an attempt to keep America’s small businesses up and running in the face of the COVID-19 pandemic. This is good news for small businesses, if they can just hang on until the terms and application details are fully in place.

The CARES Act, and specifically the Paycheck Protection Act, signed into law on March 27, seeks to can help your business stay afloat in these unsure times. While the complete details of the CARES Act are yet to be announced, including guidance on when and how the loans will be made available, here’s what we know so far:

The Small Business Association (SBA) is being funded more than ever in order to approve finance more loans to small businesses. Loan amounts are going up to $10 million (from the previous $5 million cap); Interest rates are now capped at 4% (previous limit was 6%) and personal guarantees and annual fees are now waived. In addition 100% of loans are now guaranteed regardless of size, unlike previous SBA loan programs. The amount of loan companies may receive will be based on payroll and other operating expense figures from trailing time periods.

These loans may be forgivable if used accordingly. The idea of these SBA loans is to keep companies going until business is back to usual. In order to prevent layoffs and ensure companies are ready to get back as soon as is possible, the incentive is to keep employees working. Congress is attempting to do this by dangling the carrot of funding forgiveness as long as workers remain employed through the end of June, 2020. If employees that earn less than $100,000 are let go during the first eight weeks following the loan origination, then the forgiveness scale slides away from 100% forgiveness. The loan principal, when used for payroll, utilities, rent/mortgage and existing business debt for those eight weeks, will be totally forgiven. Previously the SBA 7(a) loans had to be repaid in full.

close up of human hand — Photo by Pixabay on Pexels.com

Even debt taken out pre-pandemic may be relieved. While you could opt to use your new SBA loan to make payments on pre-existing debt, you don’t need to. Instead you can defer those existing payments for several months without penalty. This gives you the freedom to use the new loan primarily for keeping your workforce and your operations ready to commence usual operations when the time arrives. The goal is to keep small businesses poised and ready to act; a true ‘light at the end of the tunnel’ scenario.

The timing of funding. We have heard that funds will be available on the same day your application is approved. It may take another one-to-two weeks, bringing us to the middle of April, to have the applications accepted, so companies should be patient and investigative in the meantime. There are other loans already available and from the original Corona Virus Stimulus package, but those are not as generous with terms, fees or forgiveness and you may not be able to get PPP loans if you have other loans in process. If you can, hold off until the PPP Loan Program is operational.

Relaxed requirements include more U.S. workers in this classification able to get help. Even sole proprietors and gig workers are now eligible for PPP loans. And unlike before, the business does not need to prove lack of credit approval elsewhere.

What About the Fine Print?

Some details to be aware of when considering a PPP loan for your business:

You must be able to show that the economic uncertainty of the COVID-19 outbreak is leading you to apply for the PPP loan;
You must have been in business as of February 15, 2020 with fewer than 500 employees at a single location;
You must be a small business, small agricultural or private non-profit;
From the origination of the loan, you must not lay off any workers, or you will lose all or a portion of the forgiveness portion of the loan;
Even if the loan is forgiven, you will still need to pay back the interest;
Independent contractors and gig employees will still need to make quarterly tax payments; small business will be able to delay these payments; and
Companies will have to show an analysis where the PPP loan proceeds were used. Consider setting up a separate bank account dedicated solely to allowable expenses.

Further information may be found at the Wage and Hours Division of the Department of Labor’s website. Note that rules and guidelines are still being implemented.

With all the uncertainty surrounding our health environment and therefore our economy, it’s still reassuring to see steps being taken to assist small businesses. While the amount of this stimulus package is estimated to be one-fourth of what may actually be needed by the time we are out into the light at the end of this tunnel, it is a start, and one that will hopefully help countless businesses endure a longer period of reduced productivity and operations than they would otherwise be able.

view of tunnel — Photo by Elisabeth Fossum on Pexels.com

8 Key Components to a Solid Non Disclosure Agreement

July 12, 2019July 12, 2019 Greg HarrisLeave a comment

Generally a prospective business partner will not share confidential information with you until both parties sign a Confidentiality Agreement or Non-Disclosure Agreement (“NDA”), and neither should you. A client recently asked me to provide it with the main points to consider when reviewing and NDA or Confidentiality Agreement. Here is a quick overview of the key provisions to watch out for.

Err on the Side of Mutuality – In the event you receive a “One-Way” Non-disclosure agreement, always insist on it being made into a “Mutual” NDA. Always protect your confidential information and trade secrets with Mutual NDA’s.
Distribution of Confidential Information – Always consider who will be reviewing confidential information. Consider whether it is prudent to include representatives such as brokers, accountants and attorneys, and financing sources like banks.
Excluded from Definition of Confidential Information – A listing of Exceptions to “confidential information” should be included such as generally accepted information or information that has already been disclosed. Consider whether you want to name this partner or client as a partner or client in marketing materials.
Standard of Care – You should never agree to keep the other party’s confidential information “strictly confidential” or “in trust”. This raises the level of protection you are required to provide.
License of or Restrictions on Use of Your Intellectual Property or Trade Secrets. You should never agree to any restrictions on your use of your own intellectual property or licenses to use your IP or trade secrets for evaluation.
Employee Solicitation – Certain parties will broaden the reach of their NDA’s by including non-competition and non-solicitation clauses. Never agree to these restrictions.
Termination – A provision of termination should always be included, and it should state that the agreement shall end somewhere between 1 and 5 years from the date.
Governing Law – Always have governing law be in your state. Delaware is also acceptable. Caution should be exercised if another state is chosen; particularly if that jurisdiction does not have a connection to your proposed transaction.

Those are the Top 8 terms typical to an NDA Agreement. If you are specific, thorough and forward thinking when devising your NDA, or working with your attorney to do so, then you will have a worthwhile and binding contract that will help you protect your business exponentially. Lack of proper terminology or omission of crucial elements could lead to the demise of your business, so take caution and enlist legal advice.

THE JUGGLING GAME AND HOW TO PROTECT YOUR INTELLECTUAL PROPERTY

March 19, 2019March 19, 2019 Greg HarrisLeave a comment

It doesn’t matter if you are a hot technology start up, a small food services business with an interesting recipe or a services business with a new business idea, legal protection of your intellectual property is critical to your business and should be one of the first things you think about when you’re ready to embark upon your new adventure. And this is one of the balls you need to juggle when you first start out. Intellectual property generally falls into four principal categories – patents, copyrights, trademarks and trade secrets – and is fraught with misinformation.

three women and two men watching on laptop computer on table

For instance, a client recently asked me about copyrighting her business idea. And another client wanted advice as to how to protect his trademark because of his patentable device. Neither of these protections are possible, but the misinformation generally associated with intellectual property makes believe that they are. This blog attempts to demystify it.

Copyrights. Copyright protection is available for original works of an author and only protects the manner in which an idea is expressed. If you have a distilling recipe for a banana liqueur, you don’t obtain a copyright for it unless the recipe is stylized in narrative format. Besides, copyright applications are public records so your delicious recipe can be copied by all those who review the copyright rolls. On the other hand, if you have a computer program, work of art or literary piece, copyrights may be available. Copyright registration using the primary registration method costs $35 on the main registry and generally takes 6-8 months. You need to go through it though to protect your work.

Trademarks. Trademarks and servicemarks identify the source of the product or service (e.g., the brand name). It can also protect your logo or a tagline. The major purpose of trademark law is to prevent confusion among consumers as to the source of goods or services and can exclude others from using the same or similar marks. That is one of the concepts that I always try to drive home. Even if it is not an exact match, does your trademark cause confusion in the marketplace because it is so close to another trademark in the same industry? That’s why doing a search of your mark is the first thing I tell my clients to do. Even though trademark registration can take place federally or at the state level, I always recommend getting Federal protection given how often our goods and services cross state lines these days. Trademarks cost between $300-$400 in filing fees and also take 6-8 months.

Patents. A patent is a legal monopoly granted by the federal government to an individual inventor allowing the inventor to exclude others from making, using, or selling the invention during the life of the patent. Patent protection is available for any product, process, or design that meets certain requirements of novelty, non-obviousness, and utility. U.S. patent protection lasts for 20 years from the date on which the application was filed, with the exception of design patents, which last for 14 years from the date the patent was granted. In the United States, a patent application may be filed no later than one year after a description of the invention is published, or the invention is first put on sale or made available for commercial use. Be careful though to obtain patent protection in all jurisdictions your idea may be used in order to maintain protection overseas. Patent protection can take a long time to prosecute and cost thousands of dollars.

Trade Secrets. A trade secret is any information, formula, pattern, or device used in one’s business that gives a competitive advantage and is not generally known within the industry. It must be of continuing use and must be kept confidential. This last requirement is extremely important, because once the information is no longer secret, it is no longer protected. A person or company claiming a trade secret must use reasonable and active procedures and controls designed to prevent disclosure and misuse. Leaving confidential materials lying around or within easy access can result in forfeiture of trade secret protection. Total or absolute secrecy, however, is not required. A trade secret can be communicated to employees who must use it, and it can be assigned, licensed, or otherwise disclosed to other persons who are required to maintain its confidentiality. If material is known to some part (but not all) of the industry, trade secret protection may be available.

Other Considerations. Other lesser known caveats of this type of protection include the following:

More often than not, it is the employer who is the owner of intellectual property on a work created by an employee in the course of his or her employment. If the creator of the work is not an employee, he or she will own the copyright unless the work was created within specific statutory categories of works as a “work for hire” under a written contract which details the work produced was done so and commissioned by the company.
Before engaging prospective lenders, investors, employees, consultants, suppliers and vendors (really any third party), you should obtain the recipient’s agreement to maintain the information in confidence via a separate NDA or confidentiality agreement. This needs to be done prior to any disclosure of your business.
If a formal NDA is not in the cards, then you should always at the very least add a statement that the information being disclosed in “Confidential.”

With these pointers, you will be positioned for IP success. And while this information is readily available and easily researched, it doesn’t match the expertise that an attorney could offer your business. After all, you want to do whatever you can to make sure that your best ideas remain just that – yours.

Non-Competition Agreements Finally Demystified

October 15, 2018March 31, 2020 Greg HarrisLeave a comment

On October 1, 2018 a new law was enacted that will have extensive legal as well as every-day consequences for all companies with employees and contractors in Massachusetts. This new law governing non-competition agreements puts employers in a complex place, forcing them to examine the way their non-compete agreements are now executed, and potentially needing to revamp their older ones to make sure they are compliant.

person holding magnifying glass

Simply put, a non-competition agreement is an agreement between two parties under which one of the parties agrees that he or it will not engage in certain specified activities competitive with the other party. Non-competition arrangements may typically be found when two parties enter into a supply agreement, an acquisition, or in the employer-employee context, which is the focus of the new law. With this new Act, employers are much more limited in what and when they can impose on their Massachusetts workers and independent contractors, and the cost to them.

For a non-competition agreement to be effective, the non-compete must now protect a legitimate business interest, not exceed one year, and be reasonable in geographic scope and prohibited activities. Some exceptions still exist, such as non-compete agreements stemming from the sale of a business; non-compete agreements stemming from

man and woman shaking hand in focus photography

separation of employment (provided the employee is given seven business days to rescind acceptance); employee non-solicitation covenants; customer/client/vendor non-solicitation covenants; and non-disclosure of confidential information agreements.

The new law also differentiates between non-compete agreements entered into prior to the start of employment versus those that are drawn up during the course of employment. Prior to the commencement of employment, the agreement terms must:

be in writing;
be signed by both the employer and employee;
expressly affirm the employee’s right to consult with counsel prior to signing; and
be provided to the employee before a formal offer is made

Alternatively, if a non-compete agreement is produced during the course of employment, though not related to the employee’s separation from the company, the agreement must

be supported by fair and reasonable consideration;
be provided at least 10 days prior to the effective date;
be in writing;
be signed by both the employer and employee; and
state that employee has the right to consult with counsel before signing.

If a non-compete is found to be in violation of this new law, courts will either reform an overly broad agreement or otherwise void the provision altogether.

As a result of the enactment of the new non-competition law, all employers who maintain non-competes for Massachusetts employees should consult with qualified employment counsel to determine if their current contracts are still operable, and also to draft comprehensive boilerplates for new agreements. Contact us to find out more on this important subject as this is just a sampling of the requirements of the new laws.

Partner Agreements – But We’re Getting Along So Well!

May 14, 2018May 15, 2018 Greg HarrisLeave a comment

It doesn’t matter if you’ve formed a corporation, LLC, partnership or some other form of entity. And it doesn’t matter where you’ve formed your entity or for what reason you’ve formed it. More likely than not, you have a partner or partners (or members or shareholders). And whether there are two of you or 20 of you, when the business first starts, everyone is of like mind. Everyone gets along. But inevitably, the business is successful or unsuccessful, and the result is that the partners want more, or they want less. The discussion below outlines legal and business issues that the founders of a new venture may want to consider in structuring relationships with one another.

Partners always want to know who is in charge. Control of the business entity is sometimes determined by the nature of the partners themselves. I have one software client with two members. One member writes the code and one member runs the company and seeks funding. This system works well for them. On the other hand, I have other clients where the partners are truly equal. Who’s in charge then? Even though partners are equal, consideration needs to be given as to whom ultimately makes the decisions. Deadlock and corporate dissolution is no way to go through a business life cycle. And the draconian solutions (Dutch Auction, Russian Roulette or Texas Shoot Out) are truly extraordinary solutions that should be avoided at all costs.

One of the other issues that new clients overlook when we talk about their new venture is the outcome of a voluntary or involuntary transfer of ownership interest. Whether in a Buy-Sell Agreement, a Cross Purchase Agreement or just a good old fashioned shareholders or members agreement, the partners need to decide whether the Company and the other partners have the right to buy out the other partner if they want to (or have to) sell. What happens if a partner dies, becomes disabled, no longer works full time, gets divorced or goes bankrupt? The Company and the other partners may decide that that partner’s ownership stake must be repurchased. And repurchased at some measurable value. I often counsel my clients through these myriad of decisions.

The final issue that we often discuss at our initial partners’ meeting is the protection of the Company. I represent the Company and it is just as important to me that the company is protected from the partners themselves. Protections can take the form of a stock restriction agreement or an employment agreement, but I always recommend that the partners’ ownership interests are subject to vesting and/or repurchase rights based on employment with the Company. I also want the partners to agree not to compete with the Company, not to solicit its employees or clients to keep all information (IP, business plans and otherwise) confidential and to assign all intellectual property rights to the company.

These are just a few of the considerations that partners should be thinking about. Of course, every industry is different. A gym or yoga studio has different needs than a restaurant or software company, but the partners agreeing to work with one another in good faith on issues like these above are universal in every business. Contact me to discuss your business’s partnering needs.

Choosing the Right Entity for My Business is Easy?

March 21, 2018March 28, 2018 Greg HarrisLeave a comment

You have decided to take the plunge and start your own business. Congratulations! Now the real work begins. But if you take things one step at a time, you will be able to tackle all of the operational issues that you will face throughout this adventure.

The first item on your checklist is to form a limited liability entity for your business. Selecting the right jurisdiction and structure for your new business helps maximize your chances of financial and operational success while at the same time takes advantage of corporate tax breaks. And when faced with the confusing choices for structuring a business, new business owners can become overwhelmed. From corporations to limited liability companies (LLC’s); C corporations to S corporations; and Delaware entities to Massachusetts ones; how does one decide what’s best? It’s important to understand the differences – and similarities in vehicles, especially since categories can overlap – in order to choose what’s right for you.

Two choices need to be made before you embark upon your entrepreneurial journey:

Corporation, LLC or something else?
Jurisdiction of entity

Corporations, LLCs or Something Else

Sole Proprietorships, Partnerships, Corporations and LLC’s each have their own fiscal and legal benefits, but for the vast majority of companies, the choice really comes down to your business’s tax burden. Sole Proprietorships and single member LLCs don’t necessarily file separate tax returns. Income, profits and losses are reported on Schedule C of the principal’s individual tax return. Partnerships and LLCs are treated as partnerships and those entities’ income “passes through” to partners’ individual tax return through a Form K-1. Corporations are taxed in two very different ways: as partnerships where the operations pass through to the shareholders (S Corporation) or as its own individual entity (C Corporation).

While many micro-businesses with minimal risk are sole proprietorships and many professional services businesses (law firms, accounting forms, architectural firms, etc.) take the form of partnerships, the vast majority of my clients choose between corporations and LLCs.

A single member LLC is disregarded for tax purposes and income is reported on the Member’s personal tax returns. A multi-member LLC’s default tax form is a partnership, but the members may elect to be treated as a corporation. While an LLC is flexible in its corporate organization, it has limitations for more mature high tech businesses. LLCs can’t issue tax advantageous stock options and many investors don’t want to invest in an LLC. Generally, LLCs are useful for real estate investing and small companies with few capital requirements. If a client is purchasing investment property or opening a consulting business, I recommend forming an LLC.

C Corporations are the standard corporate structure and the default selection when you file your articles of incorporation. C Corporations’ benefits are plentiful – they help keep separate your business and personal finances, permit you to issue traditional stock options and restricted stock, and allow you to sell shares for investment capital raising. However, C corporations contain two levels of tax: (1) the corporation itself is taxed, based on its net income, and (2) the stockholders also are taxed when they receive dividends or liquidation proceeds from the corporation. Don’t be fooled by what you read in the news. Even with the 2018 corporate tax rate cut (down to 21%), these two layers of income tax can unfortunately result in a combined income tax rate of 45% or more on income earned by the C corporation. In addition, C corporation start-up losses incurred are not to be used on its owners’ personal income tax returns, whereas they can be with LLCs and S corporations.

S Corporations, while the same type of legal entity as a C Corporation, are taxed very differently. A business structured as an S Corporation is taxed as a pass-through in order to avoid the double taxation issue altogether. Potential drawbacks of this structure however are that S-Corp status must be classified as such before the 15^th day of the third month of the tax year (or they will be a C-Corp by default); they must be owned by U.S. individuals or certain qualifying trusts; they must have fewer than 100 shareholders, and they can only have one class of stock (i.e. no preferred stock).

Jurisdiction

While the structure of your business answers most of the important questions, finding the right jurisdiction for your business is important too. Corporate laws, taxation and costs vary from state to state; therefore you must also choose the jurisdiction of organization, i.e., Delaware, Nevada, or your own home state. Nevada and Delaware do offer unique advantages to small businesses.

Delaware, for example, has market acceptance, a highly developed body of law, special courts devoted to corporate issues, extremely quick and friendly secretary of state offices and tolerable fees for company filings. Given these factors, most venture capitalists and private equity investors will insist that you reincorporate in Delaware if you did not organize there in the first place. If my client from the outset considers outside investors, I always suggest incorporating in Delaware.

Nevada is similar to Delaware in that the state has low fees and corporation-friendly laws. Further, Nevada makes it extremely difficult to “pierce the corporate veil,” which shields your personal assets from corporate liabilities.

If you are operating a small company, then I always recommend incorporating in my client’s home state. While the fees are often greater, if you form in Delaware or Nevada but you engage in business in another state, it is likely that you will have to qualify your business in that state and pay even more fees. The only time I don’t recommend home state entities is when a client is purchasing rental properties out of state. The incorporation state should be the state in which the property resides.

Conclusion

When choosing the right entity type and jurisdiction for your business, be sure not only to consider the present situation but also the future needs and potential longer-range situations. There are benefits and challenges to each vehicle, but when all the details are considered, the best fitting one should become clearer. Before making this final first decision, experienced legal counsel and tax advisors can help focus the process.

Should I Incorporate My Business (or How I Learned to Love the Paperwork)?

January 15, 2018March 21, 2018 Greg HarrisLeave a comment

As the days were ticking toward the end of 2017, I started fielding more and more calls from clients and contacts alike. The vast changes to the tax code, including seismic changes in how businesses were going to be taxed, had the phones and emails buzzing.

Clients asked me whether they should check the box and elect to be taxed as a corporation. Some were asking me if they should move their sole proprietorships into LLCs and some were asking me whether they should convert their S Corp into a C Corp. Accountants and Financial Advisors, flooded with anxious clients communications, were asking me for advice and more importantly were asking me if I could get things done by the end of the year, or by March 15. All of these questions revolve around the same theme that I have been talking to clients about for 20 years. Should I incorporate my business?

The answer is an unqualified YES. A client of mine, trying to determine if incorporation was necessary and useful for her new human resources consulting business, asked me if incorporation was worth all of the paperwork that she thought she needed to complete. Of course; and whenever I speak to my clients about incorporation, I always fall back to my Incorporation Four Prong Test.

Do you want to risk losing your personal assets? The universal answer to this question of course is “no.” Now if you are starting your side art business or your freelance writing gig, you don’t need to necessarily incorporate your business – just obtain some liability insurance. But if you are dealing with the public in any way; providing services or goods with or to businesses; or driving your car, you need to protect yourself. Incorporating your business means that litigants can only go after the businesses assets and not your own.

Do you want to sign on to that contract personally? If you are leasing equipment, leasing real estate, or if you are borrowing money, entering into them in the name of your incorporated entity is always best. You must of course be careful not to sign these agreements personally and of course you may have to physically sign personally – especially if you are borrowing money. But as long as the contract is with your entity and not you, you always have the ability to “get out of” the agreement as a last resort.

Do you like your business to have legitimacy? This is one that my clients like to think about the most. A company called “Smith and Sons” just doesn’t have the same ring as “Smith and Sons, Inc.” I often explain to my clients that customers and other service providers always appreciate the professionalism and legitimacy that “Inc.” and “LLC” provide at the end of the company’s name.

Do you want to have something to leave for your family? If you own shares, units of membership interests or partnership interests in your business, you have the tools necessary to do succession planning, particularly if your children are interested in joining your business as you near retirement age. The gifting available in order to avoid taxes on the transfer of the business is made easy if you have shares, units or interests to gift. A sole proprietorship does not have this same ability. These kinds of businesses usually end when the principal retires.

Answers to these four prongs oftentimes leads to the conclusion that incorporation is the right move to make. Starting a business is one of the most important decisions you will ever make. Start it off the right way by incorporating your business.

9 Considerations Before Starting Your New Business

January 5, 2018March 21, 2018 Greg HarrisLeave a comment

Whether you have been in the workforce for years as an employee or whether you are freshly out of school, the allure of starting your own business can be overwhelming. The flexibility, freedom and possibility for a windfall are tough to ignore. I know because it happened to me when I decided to start a wholesale food business with my spouse.

But before you plunge head first into that retail store, franchise, trade or service business consider these nine points to make sure that this is the right choice for you.

Point 1 startup-photos . Your Business Idea Should Be Something that You Love. There will be a lot of ups and downs while you manage your business through the good times and the bad times. If you’re doing this because of money or necessity, you might not stick it out when those inevitable lulls set in.

Point 2. Capital Will Get you a Lot Farther than you think. Its cliché to think that money solves all of a start-up’s ills. It’s also cliché to think that it doesn’t. Face it. A lot of your start-up problems are more easily solved by having adequate capital. In that food business I worked on, we needed extensive capital to begin the first run and even more capital to complete the second run while still waiting to get paid on the first run.

Point 3. Don’t Quit Your Day Job. I always ask my clients, “Would you rather own all of you new business, or no?” Well you need capital. What better way to avoid the “angels” and the “banks” than by funding your new business yourself. A more practical message for the older entrepreneur is that the day job keeps the mortgage paid and the lights on at the house.

Point 4. Create a Three Prong Team, Or Learn the Three Prongs Yourself. Every successful venture masters the Three Prongs – Operations, Sales and Marketing, and Financials. If you start a business with two partners, make sure that each one of you fulfills one of the prongs. And if it’s just you? Learn the Three Prongs yourself. My Father was an entrepreneur before it became fashionable. He knew the industry and operations. His partner was the creative type who did not fulfill either of the other two prongs. So my Father learned the financial side and became a whiz at sales and marketing. His go-to book was Dale Carnegie’s How to Win Friends and Influence People. My Father eventually got rid of his partner, by the way.

Point 5. Build Up, then Leverage, Your Network. No matter which of the Three Prongs you’re responsible for, it’s easier than you think to build your network – in any industry. There are entrepreneurs just like you willing to meet and share ideas. There are numerous industry veterans – whether it’s through ego-stoking or business opportunities – who will sit down with you. Industry groups abound. Don’t be afraid to get out there.

Point 6. Work Life Balance Means a Lot of Different Things. A successful company depends on your 24 hours a day attention. It’s unrealistic to expect that 8 hours of attention to your fledgling business will make you successful. But you can balance your home life to spend time with your family. Take the kids on sales and collections calls. Take them to the Bank. Take them to meet your network. When you’re done, take them out for pizza or ice cream. As long as you communicate with them, your kids will love spending time with you while you’re doing your job. One thing I do – I have a picture of my family in between my phone and my computer. Every time you have to make a difficult phone or write a difficult email, you’ll remember who you’re doing it for.

Point 7. Focus on Your Goals. I’m not a big believer in starting a business with a splashy web presence, a dynamic social media profile and a graphic design team. I advise my clients to focus on making money anyway they can – with one exception. The business plan is a key document in your start up. SWOT analysis, analyzing what your risks are, discovering what your market looks like and putting some financial information together; these are all a part of the discovery phase. You will retain more information if you take that competitive analysis, those financial goals and strengths and weaknesses and write them down in your plan. Besides, it will make great reading 5 years later.

Point 8. Legal and Tax Considerations Do Matter. A client sent me an email recently pronouncing that she wants to start a business with “xyz” brand. Would I get a trademark for her? So after conducting my search, I informed her that she will not get any protection on the mark because there was another similar mark in that International Class. “But I already got the domain name!” she countered. This is just one example of how the legalities of your business are important. Just as important are the licenses and permits you have to get, and the taxes you have to pay and the state and federal agencies you have to interact with. Every new business needs to conduct at least some due diligence.

Point 9. Surround Yourself with Good Representatives. Make sure that you engage attorneys, accountants, insurance agents and other representatives whom you trust. A good advisor who you can trust is worth his or her weight in gold. Good advisors whom you have trust in will repay that trust with a lot of free advice, because these advisors want to see you succeed if you trust them.

A lot of things to think about, to be sure. But making smart choices and believing in yourself and your business idea will flourish.

NE Business Law

The Entrepreneur's Resource

Author: Greg Harris