January 2017

There is no shortage of helpful year-end advice for small business owners.  Yet, for many of my clients, December is already too busy with holidays and vacations to focus on the legal needs of their business.  With the busy holiday season behind us, the new year presents a wonderful opportunity to review those areas of your business that might need some legal attention. Here are five legal areas I recommend my small business owner clients give attention to in order to start the year off right.

1. Think about how you classify your workers. How you classify your workers is critical to avoiding costly lawsuits down the road.  Careful consideration should be given to whether an individual properly qualifies as an independent contractor, or whether they should be an employee.  Getting the classification wrong can have serious tax and legal consequences. Similarly, give attention to whether you’ve properly classified any of your employees as exempt from overtime wages.  These are fairly complex areas of the law and it probably makes sense to speak to an attorney if you have questions.  Regardless of how you classify your workers, W-2’s and 1099’s should be issued for your employees and contractors by January 31^st.
2. Review your business structure. Have you been operating as a sole proprieter?  Did you add a business partner this past year?  Did you lease or purchase property?  If you haven’t already incorporated, now may be the time to do so.  Choosing the right business entity for the right situation is crucial to maximizing the legal protections and tax savings.  In some circumstances, it may be necessary to change your corporate structure to take into account changing business dynamics or the need to provide key employees with equity incentive.  For others, this is a good time to ensure you are compliant with the various formalities required to properly maintain your entity, such as maintaining corporate minutes or updating your Operating Agreement or Bylaws. Regardless of which stage your business is in, now is the perfect time of year to form that new entity or update your current business structure.
3. Review your business contracts. If you own your own business, you likely have contracts with dozens of people and/or business entities – vendors, customers, partners, etc. Now is the time to review your building lease, your vendor contracts and your equipment leases.  Have some of those relationships changed?  If so, its important to revisit those contracts now and ensure the terms are still applicable to the current relationship.  Make sure any agreed upon changes are in writing and signed by both parties!  While often times these contracts will do nothing more than sit in a drawer for another year, you’ll be thankful you gave attention to them now should an issue arise in the future.
4. Protect your intellectual property. Your intellectual property is the backbone of your business.  And as your business expands and grows, it’s likely that your intellectual property is doing the same.  However, you need to take action if you want to properly protect ownership of your company’s intellectual property.  Registering a federal trademark is the best way to protect your company’s name or slogan.  Maybe you even have an invention or other idea you’d like to protect with a patent.  Do your vendor agreements and employee contracts properly protect your intellectual property rights both now and in the future?  The intellectual property you are creating for your business is valuable (in some situations its priceless!).  Make sure you are taking the proper steps to protect it.
5. Give attention to succession planning. Have you made plans for what happens to your business when you move on?  Whether it be by death or retirement, it is important there is a succession plan for both management and ownership.  If you don’t already have an estate plan in place, now is a great time to begin the process.  A little planning now can save your heirs a substantial amount of money in taxes and legal fees.  This is also a great time of year to review your insurance policies.  If you changed locations, expanded, downsized or changed employees this past year, make sure that your insurance policies are adequate to protect the current needs of your business.

While small business owners may feel like every season is a busy season, it’s important to dedicate the necessary time to the legal aspects of your business.  By giving attention to the above tasks now, you’ll be off to a great start to making 2017 a success!

Michael S. Fauver, Partner

MFauver@BFASLaw.com

(Direct) 805.966.7499

www.BFASLaw.com

DISCLAIMER:  This Advisor is one of a series of business, real estate, employment, estate planning and tax bulletins prepared by the attorneys at Buynak, Fauver, Archbald & Spray, LLP. This Advisor is not exhaustive, nor is it legal advice. You should discuss your particular situation with us or with your own attorney. Our legal representation is only undertaken through a written engagement letter and not by the distribution or use of this Advisor.