Common Sense Guidelines for Small Business
As attorneys, we see business clients repeatedly for the same issues. There are a few simple steps every business owner should take that can save them thousands of dollars in legal fees and, more importantly, a lot of aggravation.
Every business owned by more than one person should have an agreement that governs what happens in the event of a life change such as a divorce or death of an owner. More importantly, what happens if the partners cannot agree on what direction the business should take? Even closely-held businesses should have some type of agreement to help in the event of a sale, probate or even for smaller things like obtaining loans. This is the easiest step to take that businesses often avoid.
No business should make the mistake of leaving its intellectual property unprotected. Logo and trademarks are a good place to start. Businesses can protect their property nationally or by state; however, the price difference is not much, so we always recommend applying for national protection. Because websites and social media allow protected materials to spread all over the United States easily, a state trademark usually is not enough. Failing to apply for these protections allows others to apply and gain superior right to use a name, logo or a slogan that came from a result of your hard work. A corollary is to ensure not to take someone else’s protected items, which can include something as simple as photos for a website to as important as the business’ logo or tag line. A trademark can be denied simply based on a logo being too close to someone else’s, which could be highly detrimental, especially if the logo is already in use.
Having employees act as independent contractors to avoid overtime rules, paying taxes or having a certain number of total employees is another critical issue for businesses. The state and national departments that govern these issues have very stringent factors for what makes an independent contractor as opposed to an employee, and every business should review these factors. We see many businesses that send employees to clients like therapists, house cleaners, etc., and that have been fined for calling employees independent contractors. Audits occur for this reason all the time, and the government initiates many of them, but disgruntled former employees or competitors can also trigger them.
Employers must keep complete time records and contracts for any business or person with which they have an independent contractor relationship. These measures are not enough to create an independent contractor relationship, but they are a starting point. Investigators examine multiple additional factors, including the amount of control the business exercises over the proposed contractor and whether the proposed contractor performs work for other businesses or people. There are fine lines here, so if you are uncertain, consult with an attorney.
Regarding overtime issues specifically, investigators look at similar issues for independent contractors. However, if you do not pay proper overtime, you can also be fined for your employees. When the state performs overtime audits, the investigators look at several factors, including the education of the employee, whether the employee supervises other employees and whether proper records are kept. Failure to pay proper overtime leads to certain liability.
Every business owner should also plan for what will happen when they are ready to exit the business. Some may plan to pass the business on to family and believe they are set. However, if the family members cannot afford to pay for the shares in order for the original owner to exit, this represents a serious problem. A more difficult problem may be having no one to take over the business. An ESOP might be the answer, as well as developing a relationship with a business broker to plan for the eventual sale by managing cash flow, adding clients, cutting expenses and making other moves to increase the bottom line.
Owning a business is challenging, and many owners put off dealing with legal issues, which is a crucial mistake. A few proactive steps will make all the difference in avoiding problems and legal fees.
Jennifer Englert earned her law degree as a graduate of the University of Florida Levin School of Law, with a B.A. from Stetson University. She helps to improve the lives of her clients in matters pertaining to business disputes, business law, general civil litigation, special needs and education law, family law, personal injury and real estate