Tax Advice from Your Small Business Attorney

I recently heard a story about how someone’s husband’s early experience as a business owner, and some very serious tax issues he found himself in the middle of after purchasing a company from his parents. The most difficult part of the story is knowing, as a small business attorney, that the entire problem could have been avoided had the family sought legal advice either before the business changed hands, or once the family knew there were problems with the tax obligations the company owed.

Small Business Law and Tax Law

Unfortunately, this scenario is not uncommon; a mom and pop shop grows faster than their knowledge of small business law and tax law and they continue to operate on incorrect assumptions about the rules their small business should follow with regard to state, local, and federal taxes. By the time they realize they have made a mistake, rectifying the problem looks impossible. The worst choice is often the first choice; feeling overwhelmed and afraid, a small business owner may decide to look the other way and hope the problem goes away. In the case of the story I was told, the husband, his parents did just that, and as a result, they accrued a very large debt to the IRS which their son inherited as soon as he became the owner of the business.

New and Established Businesses

Whether your business is a one-person show or you have many employees, both your interactions with the Internal Revenue Service and the Colorado Department of Revenue can have consequences for your business. Failure to pay your taxes on time, withhold the correct amount for employment wages, or tax preparation done wrong can be devastating for both new and established businesses. This was the case for the husband in the story.

Tax Issues

After the husband had moved his family to a new community and taken over his parent’s business, his mother mentioned in passing that the IRS had been calling her and she was not sure what they wanted. His heart was in his throat before he even picked up the phone, but the phone call made it that much worse. His parents had failed to pay their business taxes on time, and had failed to withhold and pay employee taxes properly. Their son had unwittingly taken on all of their tax issues when he became the owner of the business without having sought any business formation advice, or legal review, or business planning advice from a small business attorney here in Colorado, where the business was owned.

Tax Advice

For this family, one meeting with a small business attorney who could provide tax advice regarding the best business structure before the business changed hands could have protected the son and helped the parents find a way to meet their tax obligations without the type of stress and worry approaching the IRS on their own created for them. Going back further in time, his parents would have been wise to get tips for paying the right taxes, and paying them on time as soon as the business started to grow and acquire employees and profits. They may not have thought about asking an attorney for tax help, but it would have been a wise choice. Even for businesses that do everything right, a letter stating the business returns are being audited can make a business owner worry, but facing the IRS on your own, as this family did, is a recipe for disaster. Make sure you have spoken to an attorney for tax planning before you ever get a phone call or a letter from the IRS.

If your small business encounters tax problems, or better yet, if you own a small business and haven’t met with an attorney to talk about tax planning, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Business Attorney. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

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What Denver Small Business Owners Can Learn from Coach Kubiak

The resignation of a leader, especially one who has been a team player and responsible for the team’s success, is always a blow. Denver small business owners may, on occasion, think about what would happen if they were no longer able to lead their team, but most of us prefer not to dwell on it. That is understandable, as long as you have a succession plan in place. This post will discuss planning for succession, and making sure your business can succeed without you, whether you step down by choice, or because you have to.

Small Business Succession

In football, there are many people other than the coach and players who are invested in seeing the team succeed. In fact, replacing the coach is a fairly common practice. Coach Kubiak, who is a former Bronco and helped lead the team to the Super Bowl, was not expected to leave at this stage of the game. Unlike the Denver Broncos, you may not have a general manager, other owners, or anyone who understands your business well enough to take over tomorrow if needed, so small business succession is a little more complicated (believe it or not) than changing coaches in the NFL. Plus, the legal form of your business may not support a smooth small business succession plan, even if you have a vague idea of who could or would step in if you couldn’t lead your team. What if you have to leave your team unexpectedly, and at a time when they need you? Is anyone prepared to take over in your absence? Is there a plan in place?

Succession and Business Form

You already know you had to choose the legal form your business would take when you started it. You may have decided on the legal form of your business based on tax strategy, or ease of formation, but you might not have considered succession and business form when choosing how to set up shop. Do you know what would happen if you or your estate needed to transfer the business to a new owner unexpectedly? The good news is, that regardless of how your business is structured (for the most part), there are ways to transfer it to another party if necessary. I cannot stress enough how far a little preparation now will go toward saving your loved ones a lot of grief and stress if you have a legal, written plan for the transfer of your business, no matter what the legal structure is. In coach Kubiak’s case, he was able to discuss the transition with his team, his General Manager John Elway, the other coaches, and the team’s owners, the Bowlen family. It’s also likely that his contract with the team described in detail what would happen if he resigned. While this is an ideal scenario in a less than ideal situation, this is not always how things go. An accident, or sudden, serious illness can leave you entirely unprepared to plan the transfer of your business. Why not take some time now to put a plan in place?

Planning for an Unplanned Succession

Most of us have a vague idea of what we would like to sell our business for someday, or which of our children we think would enjoy running it for us when we are ready to retire, but we see that plan getting put into place down the road. If you are reading this post, it is possible you have not done much preparation for an unplanned succession. As an attorney, I see this scenario more often than not. Here are a couple of things to ask yourself about an unplanned succession:

  • What if you couldn’t make your wishes known?
  • Are your wishes in writing somewhere? Are they current, and properly structured?
  • Are there people who may argue (specifically, in court) about what your wishes are, if you are unable to make them 100% clear?

The legal expenses that can accompany arguments about who was supposed to do what with your small business should you pass can destroy not only the business, but personal assets and family relationships as well. The best thing you can do is sit down with your Colorado small business attorney and ask what would happen tomorrow if you had to announce to your team that you were leaving, effective immediately. Or worse, what would happen if you passed due to an accident or sudden, unexpected illness. As an attorney, I don’t like asking people to think about these scenarios, but I like it even less when a I see a family trying to figure out how to hold a business together while they are grieving.

Denver small business owners can learn from Coach Kubiak; you may not want to stop leading your team, but there might come a time when you have to. None of us like to plan for the worst, but when we do, we make things much easier on ourselves, our families, and our successors. If you need help thinking about succession and planning for the smooth transfer of your Colorado small business, please contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Attorney. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

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Law Office of E.C. Lewis, P.C.
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3773 Cherry Creek North Drive, Suite 575
Denver, CO 80209
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Elizabeth.Lewis@eclewis.com

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Colorado Employment Law and Non-compliant Employees

Perhaps the only thing we dread more than being fired is having to fire someone. When we are dealing with a non-compliant employee, it is understandable that we would want to get to the bottom of the issue rather than jump directly to firing. This post will offer recommendations for getting to the bottom of what’s going on with a non-compliant employee, as well as some advice if a demand for compliance or termination is in order.

Non-compliant Employees Have Issues

I’m not just being tongue in cheek here – you may or may not agree with the issues that are causing an employee to be non-compliant, but you do need to know what the issues are and you need to hear it directly from the employee. It may feel like you can avoid conflict by asking the employee’s supervisor or peers what the problem is, but this will work against you in two ways. First, there is a good chance you will not get the story straight, and second, the employee may feel he or she has still not had an opportunity to express important concerns to someone who may have the will and ability to resolve them. You can assume that non-compliant employees have issues by their behavior – but don’t assume to understand what the issues are until you’ve listened carefully to the employee.

Positive and Negative Motivators

If you disagree with the employee’s reasons for refusing to comply, and you value the contributions the employee is making in other areas, consider applying a little motivation. Your approach will work best if you know how the employee thinks; some folks don’t respond to positive motivation at all, and others crumble at anything that can be interpreted as a threat. Once you decide what type of motivation you want to put in play, there are dozens of ways to do so.

Demanding Employee Compliance

Once you feel you have listened well and the employee acknowledges he or she has been heard and understood, you may wish to skip attempts to motivate the desired behavior and simply demand compliance. If so, consider the advice of Alison Green, who addresses workplace and management issues for readers of the Denver Business Journal. Green advises you set an expectation and explain that non-compliance “will jeopardize [the employees] job.” This should bring clarity to the request. Is it legal to fire an employee for non-compliance on any issue in Colorado? Colorado is an employment-at-will State :

Colorado follows the legal doctrine of “employment-at-will” which provides that in the absence of a contract to the contrary, neither an employer nor an employee is required to give notice or advance notice of termination or resignation.

As long as your reason for firing is not illegal (ex: sexual orientation, gender bias, etc.), you are permitted to fire as you see fit. Even if you are firing an employee for sound reasons, it is a good idea to document the problems leading up to the firing, just in case the employee sees it differently and decides to bring a wrongful termination suit against you. Ask your Colorado business attorney for advice about documenting employment performance issues, just to make sure you have covered your bases. Also, if this is your first time firing an employee, you may want to conduct a quick legal review of the process with your attorney.

If you have questions about Colorado employment law and dealing with non-compliant employees, , contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Attorney. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

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Law Office of E.C. Lewis, P.C.
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3773 Cherry Creek North Drive, Suite 575
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Elizabeth.Lewis@eclewis.com

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Making Apologies as a Small Business Owner

After Wells Fargo CEO and Chairman John Stumpf stepped down following news of two million bogus accounts opened by employees under pressure to meet sales goals, a new CEO was culled from the ranks and put in charge. One of Tim Sloan’s first tasks as the new CEO of Wells Fargo was to reassure his employees and customers that things were going to get better. One thing is certain – before offering up his apology and presenting his plans to turn things around, he had legal advice. You may never face a televised congressional hearing evaluating your business practices, but you may someday find yourself making apologies as a small business owner. Here are three tips for getting the apology right, and some thoughts on when you may need legal advice.

1. Fix the Problem

This may seem obvious, but your apology will not have clout if the situation that allowed the problem to occur in the first place still exists. In Tim Sloan’s case, try to imagine that how effective his apology would be if his employees and the public knew customers were still being sold products they didn’t want, need, or authorize. You may need to make difficult choices to make sure you’ve fixed the root cause of the problem that lead to the need for an apology, choices which could include letting people go, changing the structure of your business, or altering your sales practices. If so, make sure you obtain legal advice before you fix the problem. If it’s a simple issue that can be resolved with simple changes to procedure, you may not need to talk to an attorney. But if your solution includes a major change to policy or practice, or a remedy that could expose you to risk, you should consider legal advice.

2. Make Sure Your Employees and Customers Know They Are Valuable

Regardless of what went wrong, even if the mistake that was made was an honest or unintended one, your customers and employees may be wondering if you value them. In the case of outright mistreatment – such as Wells Fargo employees being fired for reporting unethical behavior, or outright fraud – such as Wells Fargo opening unauthorized accounts for their customers – employees and customers will feel used and distrustful. But even if you simply made a mistake, or are facing a situation out of your control, people may wonder if you care about them, or if you carelessly “let this happen.” Make sure your apology includes a confirmation of caring that goes beyond your words if possible. Put yourself in the shoes of those who feel harmed. Is there anything that could make it better? What ever your solution involves, make sure you employees and customers know they are valuable to you and to your business.

This is another good point to consider legal advice. You need to make sure that what you offer in the way of making things right does not expose you to unintended legal consequences. Find a business attorney in Colorado and check in. This is one of those times when legal help in advance can make a big difference.

3. Listen to Employees and Customers

Advising you to listen to employees and customers who are impacted may seem like the first step, but I’ve placed it at the end because this is a two part listening practice:

  • You need to listen to all parties to understand what went wrong and why they are upset. Understanding why they are upset is as important as knowing what went wrong. When you make your apology, and you explain your steps to correct the problem, it is essential that you also be able to apologize to people about how they were made to feel. Do people feel they may no longer be able to trust you to keep promises? Are employees afraid you’re not paying attention to issues that could impact their livelihood? Don’t assume you know what they are feeling. Ask, and listen.
  • You also need to listen to feedback on your solution before you present it. Find a small group of key individuals and ask for their input as you formulate a solution and before you present it. Their feedback will be crucial to understanding the impact of your apology and how your solution might be viewed by those who are counting on you to make things better.

One final note on listening: make sure your listening process offers anonymity. Some people may not want to tell you what they knew about the problems in your organization before and after they surfaced – they may look at Wells Fargo as an example of what could happen and worry they could be fired. You will not be able to come up with the complete picture, and thus a viable solution, if you don’t get the full story.

Making apologies as a small business owner may not be easy, but if you are well prepared, it can make a real difference. If you need helping understanding the legal ramifications of a less than desirable business situation that may require an apology on your part, or crafting a solution that doesn’t compromise you legally, I can help with business coaching, or a business planning consultation to help you move forward. For any type of Colorado small business legal review, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Attorney. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

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Law Office of E.C. Lewis, P.C.
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Denver, CO 80209
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Elizabeth.Lewis@eclewis.com

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Time, Money, and Talent: Three Keys to Inclusive Small Business Giving

As we approach the end of the year, many Colorado small business owners are thinking about philanthropic giving. In addition to the need to vet a chosen charity, finding a variety of ways that allow you and your team to offer time, money, or talent can insure all employees have an opportunity to give and no one feels left out.

Small Business Owners Value Time

If you are a small business owner, you know how valuable your time can be. It probably comes as no surprise that some of your employees are in the same boat – they might clock out after a forty-hour week, but they go home to lives that are busy. Asking them to give up a Saturday to plant trees, or volunteer at a shelter might be asking for much more than they can give. Does that mean you should not offer volunteer opportunities to your team? Absolutely not; but you should make sure that any philanthropic activity you engage in is inclusive and allows your team members to donate time, money, or talent as they are able. Here’s how:

Create Tiers of Time

If you offer an opportunity to volunteer time, make sure you create tiers of time; try to break up the activities associated with volunteering time into two or three levels of giving. In the same way that we are often invited to give what money we can, we can offer employees the chance to give what time they can, rather than asking everyone to give up an entire Saturday for a good cause. By offering a variety of activities with different time requirements which each support the core giving activity, we can find good ways to accommodate someone whose weekends are filled with family members who rely heavily on them, or are unavailable for other reasons.

Money Can Be the Preferred Way to Give

For some of your employees, money can be the preferred way to give. The key to tying that gift to a team effort is connecting the giving that comes from your organization to the people that it benefits. Go beyond the typical thermometer measure of how much was given and make sure those who gave money can see the impact it had. Find some way to connect the gift to actual people, not just to the numbers benefited, or the amount given. When a connection is made, and the impact of the gift is felt, giving cash can be as rewarding an experience as volunteering.

Talent Takes Time and Money

Some organizations need your abilities and those of your employees more than your cash or volunteer hours. A third way to consider giving is to offer the services of your employees as part of their work day. A precaution here: when an employer directs an employee to volunteer, that time is compensable. The regulations state:

Time spent in work for public or charitable purposes at the employer’s request, or under his direction or control, or while the employee is required to be on the premises, is working time.

In many ways, giving talent is the most costly way for you to give to charity; but you may be able to get real bang for your buck from a philanthropic perspective. Look for opportunities where you and your employees can offer to serve in ways the general public cannot. In the same way a legal firm can offer pro bono work, your team may have desperately needed specialized skills or talent. If your team can truly experience or see the impact of their gift, it can have great value to your organization as well as to the charity.

Still not sure how to get started? Kim Jensen of the Denver Business Journal gives six excellent tips on where to start, including tips to broaden inclusion, and even involve your customers and clients! As always, If you need help vetting a charity, or understanding the rules associated with charitable giving, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Attorney. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

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Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney
3773 Cherry Creek North Drive, Suite 575
Denver, CO 80209
720-258-6647
Elizabeth.Lewis@eclewis.com

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