Preparing Quarterly Tax Payments for Your New Colorado Small Business

Preparing Quarterly Tax Payments for Your New Colorado Small Business

by | Mar 29, 2017 | Business News

Preparing Quarterly Tax Payments for Your New Colorado Small Business

If you are a relatively new Colorado small business, and the January deadline to pay estimated taxes just snuck up on you, this post is for you.

You or your bookkeeper are probably using software to keep track of your sales and income – but knowing what you brought in is not the same as knowing what you owe in taxes. Plus, for small business owners, paying taxes is not an affair you sweat out every year in April – your estimated taxes are due four times every year, so you want the process of estimating what you owe, plus having the funds on hand to meet your obligations to be as simple as possible. Tax planning is always an important part of your overall business plan for the coming year, so take some time now, before the year gets away from you, to make sure you are ready for what lies ahead.

Making Your Small Business Estimated Tax Payments

If you already have a year of business ownership in your rear view mirror, then the process of making your small business estimated tax payments can be a bit more simple for you, but you can still get caught owing much more than you thought you did when the final calculations are made in April of next year. What’s the best way to stay on top of what you will owe? If you have ever had trouble meeting your tax obligations, or failed to run certain calculations correctly, you already know this: hire a qualified tax professional to help you stay on top of what you will owe. Estimated taxes are actually designed to keep you out of trouble, so having someone help you make those estimations correctly is a smart thing for any small business owner to do. Plus, you can write of the expense of having help!

If on the other hand, your small business has only been around for a couple of months, trying to figure out what taxes you might owe on this year’s income based on last year’s income is going to be difficult. It’s true that owing less than $1000 in taxes at the end of the year will mean that you don’t need to file quarterly taxes, but what if you do so well that your start up expenses and other allowed expenses during the course of the year don’t reduce your taxable income as much as you expect?

Try Calculating Estimated Payments Yourself

Here’s a litmus test for you: try calculating estimated payments yourself. If you can do it, put them on your calendar each quarter, and do them yourself (but consider having a tax professional review and submit them for you). If they are confusing, or just take more time than you have to give, use the list of questions provided at the end of this blog to find and hire someone to help you. Here are the relevant forms:

  • Individuals, including sole proprietors, partners, and S corporation shareholders, generally use Form 1040-ES (PDF), to figure estimated tax.
  • Corporations generally use Form 1120-W (PDF), to figure estimated tax.

Questions to Ask a Prospective Tax Preparer

    When you hire a tax professional for your small business, take the time to find someone who is qualified – the IRS offers the following list of questions to ask prospective tax preparer.

  1. Has the preparer worked with businesses similar to yours in size and type?
  2. Is the preparer familiar with your particular line of business?
  3. Does the tax preparer offer electronic filing?
  4. [Will he or she] deposit your tax payments electronically?
  5. [Ask] what services are included in the preparers’ fees.
  6. If the IRS examines your return, what is their policy on assisting you?
  7. You may want to ask for references, just as you would for any professional service.
  8. Consider checking with the Better Business Bureau, your State Board of Accountancy for CPAs, the State Bar Association for attorneys, or the IRS Office of Professional Responsibility for enrolled agents.
  9. Avoid any paid preparer who refuses to sign a return they prepared.

If you need a highly qualified tax advisor, or just want a referral to a good tax accountant to help you calculate quarterly tax payments for your new Colorado small business, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Lawyer. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney

LICENSED IN COLORADO AND NORTH CAROLINA

Mailing Address:

501 S. Cherry Street, Suite 1100
Denver, CO 80246
720-258-6647
Elizabeth.Lewis@eclewis.com

Online at:

Your Small Business, For Sale

by | Mar 21, 2017 | Business News, Misc. Legal Tidbits

Your Small Business, For Sale

If you’re Joyti Bansal, you’re pretty happy these days. Your company, AppDynamics was just purchased by Cisco for 3.7 Billion dollars! As a Colorado small business owner, Cisco might not by eyeing your company for acquisition, but there could still be time when you might want to find a buyer for your business. This post will discuss some legal issues to consider, thoughts on establishing a value, and tips on finding a buyer in preparation for listing your small business for sale.

Legal Issues to Consider When Selling a Small Business

There are a plethora of legal issues to consider when selling a small business, but one of the first you will face is the form of your business. The sale of a C-corp transpires in a much different manner than an LLC. If your company has issued stock, there may be provisions that restrict how that stock can be sold. If you have partners, your contract with them may include clauses about when, how, and to whom you are permitted to sell your share. If you are considering the sale of your small business, one of the first things you should do is obtain a legal review of the business. Your Colorado small business attorney can help you determine how existing contracts or encumbrances will affect the sale, and make suggestions about the best way to proceed.

Other legal issues include the transfer of licenses associated with the business, any leases or equipment contracts you may have, the wording of the sales contract, non-competition concerns, non-disclosure agreements, tax implications, and current contracts with employees and customers. While there are several professionals you will want to enlist as you plan for the sale of your business, your business attorney is probably the first person you should talk to.

Establishing a Value for Small Business

Once your are clear about the legal details of selling your business, you will want to obtain input on the potential value. It is common to value a business as a multiple of annual cash flow. On average, the multiple is two times the annual cash flow, but this figure changes depending on the volume of cash. For example, if the annual cash flow is below $100k, you may get offers slightly below $200k. If it is above $500k, you may see offers closer to $1.5 million. Of course, cash flow valuations are dependent on market considerations – will the business continue to perform well moving forward, or are their indicators that sales may decline?

If cash flow isn’t a good measure of the value of your small business, there are several ways for establishing a value for your small business. The Small Business Administration (SBA) provides some definitions on the most common methods:

  • Capitalized Earning Approach: This method refers to the return on the investment that is expected by an investor.
  • Excess Earning Method: Similar to the capitalized earning method, except that it separates return on assets from other earnings.
  • Cash Flow Method: This method is typically used when attempting to determine how much of a loan the cash flow of the business will support. The adjusted cash flow is used as a benchmark to measure the firm’s ability to service debt.
  • Tangible Assets (Balance Sheet) Method: This method values the business by the tangible assets.
  • Value of Specific Intangible Assets Method: This method compares buying a wanted intangible asset versus creating it.

Your accountant can help you establish a valuation based on these models, and give you feedback on which model makes the most sense for your type of business. In addition to the straight forward number crunching your accountant may be able to discuss other business valuation standards that will help you arrive at a fair price.

Finding a Buyer for Your Small Business

There is an abundance of companies willing to take a percentage of the sale of your business in exchange for help finding a buyer. Not all of them are entirely scrupulous. If you are going to pay for help finding a buyer, you should consider asking your attorney for advice about a reputable firm. If you need help with resources for valuing you small business, or finding a buyer, or if you would like help with a legal review of your business in preparation for listing your small business for sale, 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

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney

LICENSED IN COLORADO AND NORTH CAROLINA

Mailing Address:

501 S. Cherry Street, Suite 1100
Denver, CO 80246
720-258-6647
Elizabeth.Lewis@eclewis.com

Online at:

3 Things to Know Before Starting an Online Business

by | Mar 15, 2017 | Business News, Internet Law, IP Law, Online/Social Media Law

3 Things to Know Before Starting an Online Business

It seems simple – no lease to sign, no building to maintain or insure, fewer employees to manage. Online is easy, and starting up a new business is as simple as building a website! Only, it’s not. More often than not, I end up helping small business owners with issues they could have avoided if they had sought advice before starting an online business.

Based on the issues I am most often asked to address after the fact, there are three things I would advise a new online startup to understand before jumping in:

  1. What type of business form is correct for my situation?
  2. What type of control am I giving to my web developer?
  3. How will I terminate an advertising and promotions contract?

The Correct Form for an Online Business

The rules governing your information technology company, information services company, or online business are different than a traditional brick-and-mortar business. There are the typical business formation questions; should you form your business as a corporation or LLC, for example. But it is also important to understand the legal implications of having a brick-and-mortar store with an online presence, or even transitioning your brick-and-mortar store to being solely online. And while it may look more affordable to ditch the brick-and-mortar storefront for a website, your agreement with the company that creates and maintains a website for you is in many ways similar to a lease. Signing a contract with a questionable company can cause you just as much grief as bad landlord.

Controlling Your Online Assets

With the growth of the internet and information technologies, more and more businesses are based completely online. An online business can include online advertising, a social media presence, and online sales of physical products, all of which come with their own set of legal ramifications. Whether your business is an information technology business, IT services business, supplements its income with an online store, or is completely online, you will probably be signing contracts with web development firms who will help you build and maintain your website. It is crucial that you understand what you are agreeing to when you allow someone to build a website for you. I hear stories all the time from developers such as:

I was being asked to build a third website for her, after two previous contractors failed to deliver a finished product, or failed to deliver a quality product. When I attempted to set up her new site, I found the previous developer had moved her domain, which she had owned and had control of for many years. She had given them permission to do so, but she didn’t understand that she was giving up control of her URL when she did. In addition, the company she contracted with to build her previous site had been controlling and filtering her email. She spent days on the phone trying to end the contract and get her domain and email back, and she lost much of her email history, and all of her website content in the process.

Unfortunately, this is a typical and frustrating scenario I hear from newcomers to online businesses. Another stumbling block I see small business owners encounter as they enter the online world involves contracts with companies that offer to help with advertising and promotion.

Promoting Your Online Business

Promoting your online business comes with it’s own set of concerns, whether you do it yourself or hire someone to help you. Some contracts tie you to a service regardless of whether or not it performs well for you – in this case, what you don’t know about social media, advertising, and promoting a business online can really hurt you. Again, a trusted advisor who understands internet technologies, and online business promotion can really help here. Until you have some experience and know what works for you, ask someone who does to recommend a company that can do it for you, or train you to do it yourself.

Even if you are an experienced entrepreneur, you will face challenges as you enter the online world and perhaps encounter unscrupulous actors offering to help you launch an online business. An attorney can help you make sure that important assets, such as your domain name, remain in your control. It is also very important that a clear means for you to retain the contents and coding for your website exists, even if you choose to end the relationship with the contractor or company that builds it for you. These, and other concerns can be avoided just by getting a good referral to a reputable firm. An attorney with a strong background in IT and online business practice can guide you to reputable firms, and make sure the contracts you sign are fair.

If you need guidance concerning the formation of your online business, or help reviewing a contract with a web developer or firm offering to promote your business online, 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

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney

LICENSED IN COLORADO AND NORTH CAROLINA

Mailing Address:

501 S. Cherry Street, Suite 1100
Denver, CO 80246
720-258-6647
Elizabeth.Lewis@eclewis.com

Online at:

Eight Important Questions For Your Small Business Attorney

by | Mar 8, 2017 | Business News, Misc. Legal Tidbits

Eight Important Questions For Your Small Business Attorney

Asking a Colorado small business attorney about these important aspects of your business now can save you a lot of frustration and expense down the road.

Whether you are a Colorado small business just getting started, or an established company with locations throughout the United States (and growing!), it is important that you work with an attorney throughout the life of your business. This post will cover the following list of typical reasons entrepreneurs with new or established businesses should seek out a business attorney:

  • business formation advice and documentation
  • business development and planning consultation
  • creation and/or review of business contracts
  • employment and independent contractor agreements
  • non-disclosure agreements
  • review of leases
  • software licensing contracts
  • website documentation

Business Formation Advice and Documentation

The form your business takes (ex: corporation, s-corporation, or a limited liability company) affects how you pay taxes, and how your personal assets are protected by the law. Business formation also has a role in your record keeping, and document filings. If you are in Colorado, there are some things you can do on your own, but before you get started, speaking to a small business attorney to get business formation advice and documentation instruction for your specific situation can be one of the most important decisions you make. Even if you want to handle some of the paperwork and filing on your own, you should still have an attorney review your situation and make a business form recommendation. Once you have good advice on which form of business to choose, your attorney can help you file the paper work, direct you on how to keep necessary records, or do it for you.

Business Development and Planning Consultation

Even if you are a brand new business, having an experienced small business attorney provide business development and planning consultation is a smart move. No entrepreneur has every skill-set needed to grow a business – you might have fantastic sales skills, but terrible record keeping practices. Let a good business attorney refer you to trusted resources in the areas where you need help.

Consulting with your attorney about gaps in your business plan is a good idea, too. While no attorney enjoys seeing a business fail, a big part of any small business law practice unfortunately involves helping people clean up after a business fails. This puts your small business attorney in an ideal position to advise you about what not to do.

Creating and Reviewing Business Contracts

Just do it! Whether you are a small business writing your first contract, or an established business sending out a contract you have used for years, it is critical that an attorney help with creating and reviewing business contracts. Even if you are familiar with contract law in Colorado, laws change over time, and what was a good contract five years ago may no longer be.

Employment and Independent Contractor Agreements

Employment law is one of the most complicated and confusing aspects of business. It is easy for a small business owner to get tangled up in a bad employment contract, or to set requirements for workers that disqualify them as independent contractors. Without the advice of an attorney, it is fairly easy to break the law unintentionally when it comes to your employment and independent contractor agreements.

Non-disclosure Agreements

If you are not sure if you need non-disclosure agreements in your line of work, ask your attorney. The answer may surprise you. There are many instances an NDA is a good idea, even if you are not discussing an invention or new idea.

Review of Leases

This is another “just do it” recommendation on our list of important questions to ask your Colorado small business attorney. There is no such thing as a “standard” lease agreement. Your attorney can provide a review of leases before you sign them and tell you exactly what you are committing to and how the lease can be terminated (or not!). You do not want to be stuck with a $20k widget that you can’t use and you can’t return. Your attorney can protect you, so let her!

Software Licensing Contracts

Even if you don’t write code or work in technology, it is a good idea to find out whether any of your ideas, practices, applications, or web sites should be protected by software licensing contracts . To do so, you will need the services of a good intellectual property attorney such as myself.

Website Documentation

You probably have a website, but have you properly posted your privacy and copyright policies, terms of service, etc.? If not, you could be placing your business in a precarious position. If you haven’t covered yourself with the correct legal statements, your small business attorney may have a broiler plate recommendation for the website documentation legalese that belongs on your public website.

Whether you have eight important questions for your small business attorney, or just one, the sooner you ask, the better. If you need legal advice about business formation, non-disclosure agreements, website documentation or any other legal advice for your small business, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Business Lawyer. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney

LICENSED IN COLORADO AND NORTH CAROLINA

Mailing Address:

501 S. Cherry Street, Suite 1100
Denver, CO 80246
720-258-6647
Elizabeth.Lewis@eclewis.com

Online at:

Tax Advice from Your Small Business Attorney

by | Feb 22, 2017 | Business News

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

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney

LICENSED IN COLORADO AND NORTH CAROLINA

Mailing Address:

501 S. Cherry Street, Suite 1100
Denver, CO 80246
720-258-6647
Elizabeth.Lewis@eclewis.com

Online at:

What Denver Small Business Owners Can Learn from Coach Kubiak

by | Feb 14, 2017 | Business News

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

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney

LICENSED IN COLORADO AND NORTH CAROLINA

Mailing Address:

501 S. Cherry Street, Suite 1100
Denver, CO 80246
720-258-6647
Elizabeth.Lewis@eclewis.com

Online at: