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How (and Why) to Choose an LLC Attorney

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Forming a limited liability company (LLC) can bring you a host of benefits – it will establish a legal identity for your small business, separate you from your business’ legal and financial liabilities and simplify your taxes at year’s end. 

Whether you are creating a new LLC or converting to an LLC from a sole proprietorship, the process requires knowledge of your state’s rules on how to form and operate an LLC, a lot of paperwork and legal agreements between you and the members of your LLC, if you do not intend to be the sole member. 

Your best bet in forming an LLC is to consult with an attorney who has experience in forming LLCs in your particular state and municipality. Of course, you can try forming an LLC yourself, but mistakes on any of the required paperwork can leave you prone to significant delays in or, worse yet, legal liability and fines. 

Your LLC attorney can help you:

  • Determine if an LLC status is right for your business as opposed to sole proprietorship or an L or C corporation structure;
  • Draft and file your articles of incorporation, and make sure that they comply with your state’s regulations;
  • Negotiate funding agreements with your investors, if you have any other than yourself;
  • Draft and file the most important document of all – your LLC operating agreement, which specifies how you will operate your business, which includes how to invite or replace members of your LLC and bind the company to business loans. Without an attorney representing the interests of all of the LLC members, you are vulnerable to drafting an operating agreement that could present future conflicts and financial risks for your business, as well as potential future legal disputes between you and your partners, and 
  • Ensure that your LLC is compliant with business laws specific to your state and municipality. 

How to Choose an LLC Lawyer

Of course, attorneys can be expensive, and if you’re just starting a business, you may not have the budget for one. If that’s the case, you may consider using one of the various online legal services out there such as LegalZoom and Rocket Lawyer. These types of services offer you legal advice as well as an on-call attorney for a low monthly fee. 

However, if you are using one of these services, chances are you’re setting up an LLC yourself, which can still make you prone to errors in your paperwork. Additionally, you don’t know the experience level of the attorney you will be in contact with when using one of these services. 

If you choose to hire an attorney and have the budget to do so but don’t know where to begin, you can always look in your local Yellow Pages, put out a request for local referrals to the community via social media platforms, or you may wish to use online services such as LegalMatch and UpCounsel – both of which can match you with a qualified local attorney after you answer an online questionnaire.

Another inexpensive way to go could be to consult with a law school near you. Most law schools such as Columbia University in New York and Northwestern University near Chicago have programs in which law students assist entrepreneurs with starting their businesses, and the services these students render typically are free. Note however, you will be getting advice from law students who are seeking experience, and not licensed attorneys. 

Questions You Should Ask

If you have a list of attorneys that you are considering but don’t wish to end up inadvertently hiring the slick-talking title character from “Better Call Saul,” here are some questions you should ask:

  • How many years of experience do you have in helping to form an LLC?
  • Are you familiar with business law in my state and the state in which my LLC will conduct the most business?
  • How much experience do you have with my specific industry?
  • How much do you charge and what is your fee structure?
  • How long will it take to finish setting up my LLC (this affects how much you’re going to pay)?
  • Will paralegals or legal assistants handle part of my case? (This will also affect how much you pay)?
  • Do you have experience with funding agreements for an LLC?
  • Are you knowledgeable about tax options for LLCs?
  • How much experience do you have in drafting articles of incorporation and operating agreements?

While all entrepreneurs have dreams and are determined to operate for themselves, if you’re forming an LLC, you would be well-advised not to go it alone. While state agencies can provide you with the necessary templates and forms to fill out to create an LLC, the law prevents them from giving you any sort of legal advice. Mistakes in drafting complex documents such as operating agreements, articles of incorporation and funding agreements can cost you in the long run, so you should at least use an online legal service, depending on your budget.

How to Use Contract Help without Landing in Legal Trouble

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You need some work done, but don’t want more employees. Hiring independent contractors may seem like a smart move. You get help only when you need it, and contractors come with fewer regulatory demands than having salaried employees. Hiring contractors can be cheaper because you only pay people when you need them. You can also avoid expenses like payroll taxes, unemployment taxes and workers comp.

It can be a good strategy, but there are some significant challenges. Government agencies at the federal and state level investigate companies which claim to use contractors but, under the law, treat those workers as employees. The result can be legal trouble, significant defense expenses, and the potential for back wages, overtime, large fines and other sanctions. Hire contractors, but make sure you do it right. Here are some ways to protect yourself.

Keep contractors at arm’s length

It’s important to distinguish contractors from employees. According to the Equal Opportunity Employment Commission there are legal guidelines used to determine if a worker is a contractor or an employee. Generally, you can’t control when, where and how contractors do their work. It’s best if they conduct business out of their own location when possible. They should always use their own tools, materials, and equipment to do so. Pay them by the project or job, not by the hour or week or month. The more you seem to control the work environment and how people undertake tasks, or the larger portion of the person’s income you provide, the more you look like an employer.

Pick and choose where to use contract help

One of the big flags to regulators is the type of work the contractor does. The less skill the task requires, or the lower the pay it offers, the more likely a person may be seen as an employee. The work performed should not be part of your regular business. There should also not be an ongoing regular relationship. If, for example, you own a retail store, clerks would likely be considered employees, not contractors, even if you bring someone on as seasonal help. But you could hire a contractor to set up your POS computer sales system.

Consider legal structures to insulate you

For contractor use outside of one-time employment, the American Bar Association recommends having a written contract. The contract alone isn’t sufficient to establish the right relationship. It’s usually necessary and can include clauses that specify the person is independent, managing their own taxes, and gets no employee benefits. You might also consider other legal structures. Perhaps the contractor has his or her own established business, with a license from their city or town or even incorporation. You also might hire individuals through a temp agency or other organization independent of yours.

Illinois and Internet Privacy Bills: What Businesses Need to Know

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Companies are pushing for more customer data.  This information serves for making decisions on product development, crafting marketing campaigns, and deciding the overall direction of operations moving forward.

For customers, though, the popularity of data collection has brought concerns. A report from the TRUSTe/National Cyber Security Alliance (NCSA) reveals that 68 percent of customers are concerned about how their personal information is being used. Meanwhile only 57 percent say they’re concerned about losing their principal income. Perhaps acknowledging these concerns, legislators in Illinois are taking action to keep customers safe.

Right to Know

Among the bills working their way through the Illinois legislature is the Right to Know Act, which passed in the Illinois Senate Judiciary Committee recently. If approved across the board, the bill will require apps and websites to notify Illinois consumers of the information they’re collecting. If they sell or give the information to third parties, businesses will also have to disclose the names of those third parties to customers.

The act only provides a broad definition of the type of information it covers. Mostly it relates to personal data like names, addresses, birth dates, race, and gender. The law would not only apply to Illinois businesses. It also applies to any company that collects data on Illinois customers. These companies could be responsible for disclosing data collection efforts to the state’s residents.

What It Means

If you do business with Illinois customers, it’s important to follow the path of this bill. The good news is, if it’s passed, businesses will not have to proactively disclose data collection activities. A customer would have to request the information following a transaction with a business. Once requested, businesses would have up to 30 days to provide it. This means that companies should be ready to disclose their data collection practices quickly. If businesses aren’t already tracking the information they collect and what they do with that data, they will likely need to begin creating that paper trail once the bill is in place.

If the Illinois bill goes through, it could serve as a model for other states. These are states considering setting local privacy restrictions in light of the possible federal regulation rollback. For businesses that serve multiple states, this could create additional work. Companies will be required to set separate policies for data collection and tracking based on where customers live. The current federal rule requires internet providers to ask permission before collecting data on the online habits of their customers.

Opponents are concerned that the bill could stifle the state’s booming data analytics industry, especially in Chicago. However, many businesses will likely only need to ensure they’re tracking their information collection and usage efforts to prepare for a possible disclosure request. For businesses collecting and using information meeting customer approval, the bill may have few negative repercussions.

Hiring Seasonal Employees

3 Things You Need to Know About Hiring Seasonal Employees

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Warmer weather isn’t the only thing to look forward to as winter draws to a close. For many small businesses, the spring and summer months represent peak sales seasons. If last year’s seasonal rush left you breathless, hiring seasonal employees can help ease some of the pressure of keeping up with customer demand. If you’ve never hired seasonal employees before, there are some important issues to keep in mind.

1. Federal and state employment laws still apply

Legally, seasonal employees are entitled to the same rights and protections as regular employees. That includes the right to work in a safe environment and to not be subject to discriminatory practices or harassment. Under the Fair Labor Standards Act (FLSA), you’re required to pay seasonal employees at least minimum wage, plus overtime if they work more than 40 hours per week.

Under the FLSA, small businesses have to extend benefits required by law to seasonal employees – including worker’s compensation coverage – unless your state grants an exception for seasonal hires. You are responsible for withholding Social Security and Medicare taxes from their wages and paying in a matching amount on their behalf. In general, seasonal employees are subject to the same tax withholding rules as other employees.

2. Special rules apply to hiring minors

Approximately 23.1 million 16 to 24-year-olds joined the labor force in the summer of 2016, according to the Bureau of Labor Statistics.  Hospitality and retail sectors employ nearly half of them. If you’re thinking of hiring teens to wash dishes at your restaurant or man the cash register at the beach shop, there are certain legal guidelines you have to observe.

For example, federal law doesn’t require teens to have a work permit but some states do. Sixteen is the federal minimum age requirement for most types of non-farm work. Teens who are 16 and 17-year-olds can work unlimited hours. They can’t, however, be employed in certain occupations that are deemed hazardous by the federal Labor Law Guide.

Teens aged 14 and 15 years old can be employed outside school hours with certain conditions. For example, they can’t work more than three hours on a school day or 18 hours in a school week. They can only work between the hours of 7 a.m. to 7 p.m. Evening hours extend to 9 p.m. from June 1st through Labor Day. There are additional restrictions on the types of work that younger teens can do.

3. Rules for hiring temps

A temp agency can be a good resource for hiring seasonal employees; but it adds another dimension to the hiring process. Legally, there’s a distinction between temp workers and employees, including seasonal employees. While they’re still protected under federal equal opportunity and labor laws, you’re not required to extend benefits like health insurance or retirement benefits to temps.

Taxation also works differently with temps, depending on how you hire them. A temp hired through a staffing agency is technically considered their employee. The staffing agency is responsible for issuing their paycheck and withholding the necessary amount of taxes. If you’re hiring temporary workers directly, on the other hand, you would bear the burden of withholding and paying Social Security and Medicare taxes.

One thing you may have to be careful with is when a temporary worker strays into permatemp territory. A permatemp is someone who works for you over an extended period of time. They do the same type of work as regular employees. Depending on the size of your business and how long a permatemp is employed, you may have to grant them limited benefits with regard to things like access to a retirement plan or sick leave. Check your State Department of Labor for details.

Don’t skimp on training seasonal or temporary workers

Just because you’re hiring seasonal employees for only a few months, doesn’t mean you can put less time into their training. As you’re putting together your seasonal budget, you should be leaving room for the added cost of getting new hires up to speed. Properly trained employees, whether they be seasonal or full-time, can yield a solid return on investment if they’re helping drive sales during the seasonal months. Investing in their training can pay even more dividends, particularly if they work for your business year after year. It saves you the time and money of having to bring new seasonal staff on-board.

2017 New Laws in California Will Affect Small Businesses in Many Ways

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You may have made a few resolutions to start the New Year; California made a few laws – in fact, 898 new laws are going into effect in 2017, and some might affect small businesses in more ways than you might imagine.

Wages — and Equal Pay Protections — Rise

Employers are required to post the new California Minimum Wage Official Notice alerting workers that companies with more than 26 workers must pay at least $10.50 an hour. For companies with 25 or fewer workers, the new wage is $10 per hour. In many places around the state, though, the law surpassed. Several municipalities in Silicon Valley are instituting minimum wages closer to $13 an hour.

Other new legislation is aimed at ensuring people receive equal pay. Currently, employers cannot pay women lower rates than men for essentially the same work. The same protection is provided to people based on race and ethnicity.

Another new statue decreed that disparities in compensation could not be justified by prior wages, noting that lower prior wages might simply “reflect widespread, long-standing, gender-based wage disparities in the labor market.”

Parts of the Past Are Off-Limits In Hiring

Hiring and employment contracts are affected by new laws. Employers cannot ask job applicants to disclose their arrest or other interactions with juvenile court, and that information cannot be used as a factor in hiring someone.

There are also changes in how you can settle disputes with employees. If your small business employs some salespeople or other workers in the Golden State, take note of this. Employers cannot require an employee who primarily resides and works in California to agree to bring a claim or file a lawsuit in another state if the claim arises in California.

Blowing Smoke (Not)

California received a lot of hoopla for legalizing the recreational use of marijuana for people over age 21; however, another aspect of the law has received less attention: employers may still prohibit workers from inhaling on the job. They can also test workers for marijuana before they’re hired or anytime there’s a reasonable suspicion of impairment.

While grass got the green light, lawmakers broadened the prohibition of smoking in the workplace. They removed previous exemptions for bars, hotel lobbies, warehouse factories and several other areas.

While you might not be able to smoke ’em if you got ’em, you may be able to pour yourself a good still drink. Beauty salons and barbershops will be able to provide patrons with free beer or wine until 10 p.m. This was to cater to the growing trend of pampering customers while attending to their locks.

A Bathroom For Everyone

This just shows that everyone follows what Starbucks does. Any business or public place that offers single-user toilet facilities must make them all-gender. The move, applauded by advocates for women’s rights and the LGBT community, won’t be too costly to businesses. They’ll just need to change their signage, which should cost about $40 per bathroom.

The company medicine cabinet just got a boost, as well. Any business can stock EpiPens in case life-threatening allergic reactions need to be treated. Even as he signed the law, though, Gov. Jerry Brown chided the makers of the device for their “rapacious corporate behavior” in raising their prices.

Putting the Kibosh on Instagraming Drivers

If your workers drive on the job, they’re already banned from texting while driving, but even more stringent requirements are going into making the highways safer: Californians can no longer use handheld wireless phones or devices while driving, unless the equipment is mounted on the dashboard and doesn’t inhibit their view of the road. So check your directions and Facebook likes before you put the key in the ignition.

Be Happy If You Don’t Own Cows

Farmers have their own new challenges that other small businesses are probably glad they don’t have to deal with. Among the newly regulated activities are – no kidding – cow farts. The law reduces global warming when a cow produces methane by belching or passing gas. Farmers will need to employ devices like methane digesters, which capture methane from manure in large storage tanks and convert them into electricity.

As far as dealing with the cow belches – we’ll leave that to your imagination. Sometimes following the letter of the law isn’t pretty.

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