|
5)
Prepare
for
the possibility of death, disability, and the likelihood that one
partner or shareholder wants to be bought out.
A buy/sell agreement should be drafted to address the possibility of
death, disability, and/or one person wanting their interest to be
bought out. As a business owner, you do not want to enter business
with your partner’s family members. Upon any of the above
contingencies, your business must have a written contract explaining
the process for buying out your partner’s interest. This ensures a
smooth business transition period.
6)
Watch out for oral
contracts. As a small
business owner, you or your partners can create an oral contract
without realizing it. If another party believes there is a contract,
there may be a valid contract. Follow the advice in #1.
7)
Be careful when you
hire independent contractors versus employees.
Small business owners do not want to pay payroll taxes and hire
independent contractors to avoid this responsibility. In contrast,
IRS and State of Illinois may treat your independent contractor as an
employee. Therefore, IRS & Department of Revenue (State of IL) will
assess interest and penalties for back owed taxes. Speak with an
attorney or CPA before hiring independent contractors or employees.
8)
Be careful about
choosing to break contracts.
Small business owners will enter contracts and choose to break them.
A lot of times small business owners do not obtain the level of
service and expertise that vendors promise them. Consequently, small
business owners stop paying their vendors. Small business owners must
maintain records and specific examples and correspondence with their
vendors before breaching the contract. Evidence strengthens an
attorney’s negotiating power when defending your company for breach of
contract. The power of a written word is more powerful than oral
communication.
9)
Hiring and firing
employees should be carefully done.
Many small business owners do not provide their employees an employee
handbook. An employee handbook should be carefully drafted by an
HR consultant or an attorney to ensure that costly litigation does not
force your small business out of business. Small business owners
should be careful to document why an employee was fired. Fired
employees sue their former employers.
10)
Do not infringe
another company’s trademark.
Small business owners especially high tech companies should be careful
that they do not violate another company’s trademark. A
trademark is a logo/symbol that represents another company’s good will
such as a logo, name, and/or symbol. Fore more thorough
analysis, you should consult an intellectual property attorney.
11)
BONUS - Follow
Federal & State Securities Laws when you raise money from investors.
Small business owners must comply with Securities Act of 1933 & 1934
and state securities law. A private placement memorandum (PPM) is
required. A PPM is similar to a business plan. A PPM should address
relevant legal issues and make full disclosures to investors. A PPM
is necessary to enable an investor to evaluate the soundness of a
business investment. When raising money from family and friends, make
sure you comply with Federal and State Securities Regulations.
Sean L. Robertson
is the principal partner with Sean L. Robertson (SLR). SLR is a tax
planning boutique law practice that concentrates in business and
corporate planning, tax planning, and estate planning for business
owners and real estate investors. Visit him on the web at
www.SLRTaxPlanning.com.
Back to Article Home
|
