by eclewis | Dec 5, 2013 | Business News
Women Owned Small Business Certification
Government contracting makes up a large percentage of the gross domestic product in the United States. With federal agencies required to grant up to 5% of government contracts to women owned small businesses, many small businesses wonder about how to take advantage of this income stream. The first step is to become certified as a women owned small business (WOSB).
To become certified as a WOSB, businesses must go through state, federal, local, or third party certifiers depending on the what entity you want to contract with. For instance, the City of Denver has its own application process to get approved as a WOSB. The Small Business Association, on the other hand, has four outside agencies it uses to approve WOSB. Unfortunately, there is not one standard approval process out there.
The requirements vary depending on the certifier, but almost all of them require that a woman have at least 51% of the ownership interest in the business. Women must have the final say in most business matters, such as dissolving the company, merging the company, and in the day-to-day operations. Most certifying agencies will require paperwork such as operating agreements or bylaws to show the control of the company. Some even require an onsite visit or in-person interview to ensure that the company is truly run by a woman.
With some certifiers, husband and wife owned businesses are not even eligible for WOBS. For the certifiers that do allow husband and wife owned businesses to qualify for WOBS, the certification process is much more stringent in most cases. In addition to being the majority owner on paper, the wife must prove that she can handle the day-to-day operations of the company. There are several examples of how even if a wife owns the majority in a business, the SBA will not certify the company as a WOSB on the SBA website. One example that is listed is the case of a husband and wife owning an auto shop where the wife does not have experience as a mechanic and is not licensed as a mechanic. The SBA states that even if the wife owns the majority in the shop, if her husband is the experienced mechanic, holds the associated licenses, and has an equity interest in the company, the business will probably not qualify for WOSB status. If you have a husband and wife owned business, caution must be used prior to applying for WOSB status to ensure that you can qualify.
Prior to attempting to get certified as a WOSB, even if you know you are eligible, you should weigh the pros and cons. While the pros are fairly obvious (i.e. a greater chance to win those government contracts), the cons are sometimes more difficult to determine. If you are thinking about selling your business in the near future, WOSB are more difficult to sell as if the potential owners of a successor business are mostly male, the income stream may decrease as the business would no longer qualify for WOSB. In addition, if you are a small business that uses equity to get employees and contractors, you may find that while you qualify as a WOSB today, you don’t tomorrow. Finally, the process can be long and time-consuming so if you are already successful it may not be best for your bottom line to apply.
Get Advice Before Getting A WOSBC
Consulting with a business attorney who has expertise in creating these documents about your future plans might be the difference between a successful company and one that fails. If you’re ready to form a corporation or you’re still wondering, “do I need a lawyer to incorporate my small business”, contact the Law Offices of E.C Lewis today.
by eclewis | Sep 16, 2013 | Business News
Emergency Preparedness for your Business
Since last week, I have been watching the news showing the flooding north of Denver. While we have had rain coming down and puddles on our grass, luckily both my home and my office are on high enough ground away from streams and creeks to avoid flooding. Pictures from Boulder, where I went to law school, show areas underwater and damage to homes, business, and CU. My heart goes out to all those affected.
When a natural disaster does strike, though, it is a good time to reassess the measures that you have taken, both personally and as a business owner, to protect your family and your livelihood. You can find information about personal preparedness at the Red Cross’s website. I have included a list of items that you should make sure to do as a business owner.
- Backups: Having computer backups is essential if you store information on your computer about your sales, financials, customers, etc. You may want to have a backup at your home and at your business. In some instances, you may also want to have a backup in the cloud (you may want to encrypt this) so that you can access it from wherever you end up.
- Insurance: Having insurance is essential. In some cases, an office policy will also include a business interruption insurance clause and property insurance. Talk to your insurance agent. If you rent, is rebuilding covered? Is business interruption insurance covered? Do you have the ability to pay employees if you need/want to?
- Disaster Plan: Especially if you have more than one person in your company, a disaster plan communicated to everyone is necessary. How do employees find out if there is a weather system moving in? Do you have emergency alert systems in your office/retail space?
- Contact Information: Just like backups, it is important to have contact information accessible if you need to leave (or lose) your office space/retail store. You want to have names, phone numbers, email addresses, policy/account numbers for your banks, credit cards, loans, landlords, suppliers, employees, insurance agents and other people that you may need to contact in an emergency.
- Website Information: Do you have a way to change your website? Do you have login information? In case of an emergency, you may want to make changes to it to update the public and clients of new hours/locations/etc/
- Phone forwarding: If your business location is unavailable, can you forward your phones to another number? You may want to have the instructions on how to do this available before an emergency – you can add this information to your disaster recovery plan.
Hopefully, your business will never need a disaster recovery plan. However, if you do, planning ahead can make a stressful situation a little bit easier.
If you need any legal help, please feel free to call your Denver Business Attorney, Elizabeth Lewis at 720-258-6647.
by eclewis | Jul 22, 2013 | Business News, Online/Social Media Law
What is the Marketplace Fairness Act?
The Marketplace Fairness Act was passed by the U.S. Senate on May 6th and is currently pending vote in the House of Representatives. The MFA would enable state governments to tax online retailers generating $1 million or more in a fiscal year.
The Marketplace Fairness Act is not a federal sales tax but a uniform framework for state governments to enforce their own sales tax laws on interstate exchanges. If the bill is passed in the House of Representives and enacted by President Obama, who has already indicated support for the legislation, states will have to follow basic rules as outlined by Rick Burgess if they do not join the Streamlined Sales and Use Tax Agreement:
- Notify retailers in advance of any rate changes.
- Designate a single state organization to handle sales tax registrations, filings, and audits.
- Establish a uniform sales tax base.
- Establish a way that a retailer can pay sales tax at a different state’s rate for sellers in that state.
- Provide free software for managing sales tax compliance
- Hold retailers harmless for any errors that result from relying on state-provided systems and data
The bill has rallied supporters and opponents alike. Among the supporters are state and local governments who can expect increased tax revenue as well as The National Retail Federation -the worlds largest retail trade association. The NRF has urged Congress to pass and implement the MFA. In a letter distributed to members of the Senate, NRF Senior Vice-President, David French states:
“As the retail industry evolves and digital commerce becomes a more prominent portion of total retail sales, it is critical that the tax laws not discriminate between businesses based on how their products are distributed…The Marketplace Fairness Act addresses the crisis by removing the constitutional limitations on states’ authority to collect sales tax from out-of-state sellers.”
Ardent opponent of the MFA Terri Alpert, a well-respected CEO in Connecticut who has built two top-shelf brands that generate more than $14 million in sales every year sat down with Forbes magazine to discuss why she is against the bill. The most vocal proponents claim that the MFA is an attempt to level the playing field between brick-and-mortar stores and online retailers but in reality it is: “a way to consolidate sales and power in the hands of the biggest retailers and to crush the little guys with an administrative burden that no small or even medium-size company can handle” according to Alpert.
In regards to the $1 million dollar revenue cutoff exemption Alpert adds that “for most people, that sounds like a pretty large business. But retailers work on very small net margins, often 5% or lower. So the typical $1 million seller may have one part-time employee and may be earning about $50,000 a year!”
The Marketplace Fairness Act may have more difficulty passing through the Republican majority of Congress than it encountered in the Senate. For now, only time will tell how the Marketplace Fairness Act will play out. In the event that you have any questions about the pending legislation or any legal business matters, contact your Denver business attorney Elizabeth Lewis at 720-258-6647 .
by eclewis | Jan 29, 2013 | Business News
Starting a Business With Family: What You Need to Consider
The past few weeks we have been talking about starting a business. Just like starting a business with a spouse which we discussed two weeks ago, people start to think about going into business with friends and family. You’ve known your brother since you were kids – you have fought with him, beside him, and for him. What better partner in crime for a business than the same kid that teased you about going to school in hot pink or got your first boyfriend? In some cases, family owned businesses can be great. In others they can cause a family split like no other.
When you first start thinking about going into business with a family member, like going into business with a spouse or partner, you need to seriously evaluate your family member’s strengths and weaknesses. Is the family member a good fit for the business you are starting? Are you bringing the family member into the business because of what he can contribute? Or are you bringing the family member into the business for other reasons such as the family member doesn’t have a job and you want to help him? Even though you and the family member were raised with similar values, do you still have those similar values? For instance, do you have the same financial values? Do you both have the ability to be self-employed (and therefore probably little to no income) while the business is in the startup stage? Finally, and maybe most importantly, because it is a family member, are you going to be able to handle disputes without causing a strain in your relationship with the family member?
When working with family members, a dispute in the business can go very, very, very wrong. While a dispute with non-related partners can also go wrong, when there is a dispute in a family owned business it can mean not only the downfall of the business, but a break in the family bonds. Recently, the story of the Pasquini family in Denver has made the news. The Pasquini case has pitted brother against sister in a dispute over the family business, specifically the rights to the name of the business. As this Denver Post article highlights, the case has now evolved into a multimillion dollar dispute that will probably leave the family with bitter feelings forever. Prior to going into business with a family member, you have to consider all the possibilities to make sure that the potential costs are really worth it.
With these caveats in mind, proceeding with a family business is similar to proceeding with any business with partners. The family members need to seek legal help from a business attorney to determine what type of business entity they should open, what documents are necessary to open the business, and to help with legal issues as they come up. The family members may also need to seek the help of an estate planning attorney to ensure that should something happen to one of them, the estate plans are clearly recorded to lessen any feuding between descendants later on.
Finally, just like with all businesses, the family business should add several other members to its advisory team. In addition to the business lawyer, a CPA, insurance agent, and banker are essential members to make the business successful. These key players will help protect the family business’ finances and assets to ensure that the business can be successful for many generations to come.
If you have any questions about starting a family owned business, please call me, your Denver business attorney, Elizabeth Lewis at 720-258-6647 today!
by eclewis | Jan 23, 2013 | Business News
Starting a Business With a Partner: What You Need to Know
So far this month, we have gone over starting a business by yourself and with your significant other. This week, we are going to touch on starting a business with a partner (or partners). In many cases, people determine that they do not want to go into business by themselves and that their significant other, while a great match for a life partner, is a terrible match for a business partner. After coming to these realizations, the hunt begins for a great business partner.
In some cases, business partners enter the picture like many other people in your life – without trying to find someone that is a perfect match, it just happens. It may be that you have a business and hire someone that ends up a great match for becoming a partner. Or it may be that you have someone that you have met through work or other social circles that is a compliment to you and would work great as a business partner. In other cases, it may take more work. You may have to attend networking events or search someone out to find someone that will work as a partner.
When determining if someone is a good business partner (regardless of how you met them), you need to ask a lot of questions. Going into business with someone is like marrying someone – and many times there is a lot more emotional and financial entanglement between business partners then even spouses. With a business partner, your livelihood is going to depend on what they do in regards to the company that you jointly own. Depending on how the business is set up, many times financial decisions will need to be run by them and approved by them in many cases. You will want to know what the person brings to the table (both financially and skill-set wise). Questions such as how many hours does the person want to work, what are their long term goals, what are their short term goals, how to they work with customers, what are their business plans, what are their strengths and weaknesses, and how they deal with difficulties are just some of the things you want to know before you enter into business with someone.
Legally, when you go into business with someone you need contracts between the two of you. You want to decide prior to having issues how you are going to deal with them – and you want this in writing. If you have an LLC, this is accomplished through documents such as an Operating Agreement, Membership Agreements, and Buy Sell Agreements. If you have a corporation, you will have Bylaws and Shareholder agreements. Careful drafting of these documents is a must as just like marriages, many business marriages fall too.
Tax wise, if you are going into business with partners, a careful look at all of the partners’ financial lives is necessary. While an s-corporation may be best for one partner, it may be that a partnership (as far as taxes) is better for another partner. If it ends up that different tax structures are better for different individuals, then this will be one of the first decisions that the partners will need to make. It may even be that due to the partners that are going to be included in the ownership, certain tax entities are unavailable. Therefore, in addition to having an attorney help structure the business and write the business documents, discussions with the CPA should take place early on.
If you have any questions about going into business with a partner or partners, please call me, your Denver business lawyer, Elizabeth Lewis, at 720-258-6647 today!
by eclewis | Jan 16, 2013 | Business News
Last week we talked about going into business by yourself. However, many times starting a business by yourself is a lonely undertaking that you don’t want to do and finding a business partner can seem harder than finding a significant other. When looking for the perfect business partner, some people start to think that the person they have decided to share their (non-business) lives with would be the perfect match. What better person to go into business with than the person that you live with, possibly have children with, and want to spend the rest of your life with?
While sometimes this works, before going into business with your spouse, significant other, or life partner you really need to think about it. Relationships are stressful – adding on the dimension of being business partners in addition to life partners can make, or many times break, a relationship. You may have different ideas of the type of business to start, the way to run a business, or the way to handle the finances of a business. In addition, you have no separation between your personal life and your business life.
Legally, there can be additional issues to tackle. When setting up a business owned by a married couple, discussions need to take place about what will happen to the business if the couple gets divorced, how the business will be financed, and how the business will be treated for estate planning purposes. If there is another party also in the business, even more careful planning needs to take place to make sure the business isn’t disrupted if there is martial disharmony between two of the owners that will affect the other (non-married) owners.
Tax-wise, when a business is going to be owned by a married couple, there may be different options for the tax treatment of the business. For instance, the couple may decide only to have one owner and be treated as a sole proprietorship, may decide to be treated as a partnership, or may elect for c-corporation or s-corporation status (setting up the appropriate legal entity for the type of tax entity selected of course). Discussions with the couples’ CPA to determine what tax treatment is best for the business are essential and should include tax planning and estate planning discussions.
If the business is owned by a couple who is not legally married (even if the couple is engaged and planning on being married), then the business should be set up just as a business would be between two partners who were not romantically involved. With a legally married couple, should the couple decide that they no longer want to be involved with one another, typically the couple is headed to divorce which means the splitting of the assets would be handled during the divorce. However, if a couple is not married, then if the couple decides to separate, the assets would be divided as decided by contract or by a court. In most cases, it is easier to decide how you would want assets split when you are still friendly (i.e. when setting up the business), rather than waiting until you want nothing to do with the other person. In addition, non-married couples need to have estate planning done to ensure that the person they intend to get the business actually does as the default rules for non-married couples are different than married couples. Again, a discussion with a CPA is needed to determine the tax treatment of the entity also.
Putting the legal issues to the back burner, opening a business is stressful emotionally and financially. Having one person in a relationship become self-employed can put a strain on a relationship. Having both people in a relationship become self-employed at the same time can be devastating if the business is not financially successful. Many times, even if a couple both want to start a business, one may want to consider staying at a paying job until the business is up and running. These are things a couple will want to discuss to make sure they are really ready to take the plunge before they do it.
If you have any questions about starting a small business with your significant other, please feel free to call me, your Denver business lawyer, at 720-258-6647 today!
