DESSEN, MOSES & ROSSITTO
INFORMATION ABOUT
BUSINESS MATTERS
Many individuals who think about starting a new business simply don't know where to start. The information below discusses some basic issues that must be decided before you can open your new business.
We hope that the questions and answers presented here will assist you in familiarizing yourself with employment discrimination issues and terms. While the material below attempts to answer common questions in this area, State and local laws may significantly modify the facts set forth. Because all legal problems are unique, nothing provided here is a substitute for the advice of competent counsel. We strongly urge you to consult with an attorney licensed to practice in your state about any particular legal problem you may have.
WHAT IS A SOLE PROPRIETORSHIP?
A
sole proprietorship is the most basic form of business ownership. The sole
proprietor is an individual who owns the entire title and interest of the
business alone. The owner receives all the profits from the enterprise as
income, suffers all of the financial losses directly, and is personally liable
for the debts and liabilities of the business.
WHAT IS A PARTNERSHIP?
A
partnership is another form of a business entity when two or more people own or
have some interest in the business. The rights, income, control, obligations,
duties and liabilities that the individuals may have in the partnership do not
have to be equal. The interests of the partners are often governed by a
Partnership Agreement which sets out the different interests, obligations and
liabilities the individual partners may have. The Partnership Agreement also
controls such issues as dissolution of the partnership if one or more partners
leave or die. The individual partners are entitled to their share of the
profits and they are individually liable for the debts and obligations of the
partnership, subject to the terms of their Agreement. Therefore, it is very
important that all the partners decide on the Partnership terms in advance and
then put them into writing. It is suggested that all Partners sign a
comprehensive Partnership Agreement before they start the business.
WHAT IS A CORPORATION?
A
corporation is another form 
of business entity. The
company ownership depends on who owns the stock of the corporation. There may
be as many shareholders as there are shares of stock. It is important to keep
in mind that a corporation is an independent entity from its owners. Often in
small business with only one or two shareholders, the shareholders act as
directors and officers of the corporation. In larger corporations, a Board of
Directors is elected by the shareholders and the officers are corporate
employees. The individual shareholders may receive a return on their investment
known as a "dividend." The individual shareholders are not, however,
individually liable for the debts and liabilities of the company as with a sole
proprietorship and partnership except in cases where personal guarantees are
executed, which are often in start-up companies with no financial track record.
SHOULD I INCORPORATE MY BUSINESS?
The
decision to incorporate should be made only after you consult with an
accountant and your attorney. Incorporating your business may be wise if you
want to be insulated from certain types of liabilities that may occur during
the course of operating the business. However, it is expensive and more
complicated to incorporate and there may be tax implications and other
financial considerations in the corporate form of ownership.
I OWN A CORPORATION. IS IT TRUE THAT THE CORPORATION'S SECRETARY SHOULD KEEP MINUTES?
Absolutely.
If you operate in a corporate form, the corporate secretary should be keeping
written minutes to reflect certain actions taken by the shareholders and
directors.
WHAT MATTERS SHOULD BE INCLUDED IN THE MINUTES?
All
of the following should be included in your corporation's minutes:
· The selection of corporate officers and directors;
· Any changes in the capital structure of the Corporation;
· The valuation of the Corporation for the use in shareholders' agreements;
· The approval of compensation, bonuses and other financial arrangements;
· Acquisitions of real estate or other capital goods via purchase or lease;
· Loans to and from the corporation;
· Other significant events affecting the corporation.
MAY I HAVE A DRUG-TESTING POLICY FOR MY SMALL BUSINESS, AND WHERE CAN I FIND HELP TO WRITE IT?
Yes.
Congress passed the Drug Free Workplace Act in 1998,which allows
all small businesses, to enforce their own drug and alcohol
program as long as they follow certain guidelines. If you need a release form
for checking references, or a checklist for what to do when you let someone go,
you can download, for free, the help you need from Findlaw's Small Business.
AS A BUSINESS OWNER, WHAT TYPES OF INSURANCE COVERAGE AM I REQUIRED TO CARRY?
Although
the law varies from state to state, businesses in Pennsylvania and New Jersey
are mandated by law to show financial responsibility for workers' compensation
and auto liability insurance.
WHAT OTHER TYPES OF INSURANCE WOULD BE BENEFICIAL TO MY BUSINESS?
Since every person and every business is different, you
should carefully explore the 
need for the following
types of insurance, by looking at the liability your business is likely to
incur in each case.
· Business Owner's Policy: This can include your equipment, inventory, building and even encompass such things as an interruption in your business. You could include your computer system and the cost of restoration of data.
· Product liability: This may be covered in the Business Owner's Policy.
· Directors-and-officers insurance: This is used to cover an executive's risk in running the business and usually covers such areas as libel and slander.
· Errors-and-omissions insurance: This is another form of coverage you should carry if your business risk warrants it.
· Malpractice insurance: This type is closely related to errors-and-omissions insurance but usually applies to a professional medical or legal practice.
· Employees benefit insurance: This form includes medical, disability, life, pension. These insurances are for the benefit of employees.
AS A BUSINESS OWNER, WHAT DUTIES DO I HAVE TO PROTECT MY CUSTOMERS?
We
all know that a business owner is responsible for a customer who falls on
ice in our parking lot, slips on a wet floor, or gets hit by falling boxes.
However, most of us are not aware of our duties if a customer is injured during a crime committed at our business, or even in the parking lot of our business.
Traditionally, a business owner's duty ended at the property line. Recent cases have expanded that duty of care beyond the property line if the business owner knows about the threat of crime and does nothing to stop it. However, if a crime such as robbery occurs, and a customer is injured during the crime because of lack of cooperation of employer/employees with the criminal, the business may or may not be held liable. So far, most states have not imposed a duty on business owners to cooperate with criminals.
Follow these steps to ensure the safety of your customers:
· Make sure merchandise displays are safely stacked;
· Avoid tripping hazards by removing debris from the floor and securing carpets and mats;
· Avoid slippery floors by repairing leaky coolers and mopping tracked-in slush and mud;
· Post "wet floor" signs every time the floor is mopped;
· Remove snow and ice promptly from sidewalks and parking lots;
· Teach employees how to respond in case of a holdup;
·
If a customer acts erratically or shows hostile
behavior, call the police immediately; and
If you a think a customer might be in danger, provide an escort.
WHAT ARE MY TAX OBLIGATIONS IF I HAVE EMPLOYEES?
As
an employer, you are responsible for withholding Federal and State employment
taxes. The first thing you will need to do is apply for a Federal Tax I.D.
Number (E.I.N.): This can be easily done by calling your local IRS office. In regard to
state and local taxes, you will need to check the tax laws of your area. As
always, you should consult with your attorney and an accountant before your
business starts, so that you can obtain and complete all of the necessary
paperwork in advance.
AS A BUSINESS OWNER, WHEN AM I RESPONSIBLE TO PAY PAYROLL TAXES, AND TO WHOM ARE THEY PAID?
Payroll
taxes must be paid as soon as you hire your first employee. In addition to
Federal payroll taxes, most states have their own income tax, and recently a
growing number of cities and counties have passed local income tax laws. You
must call each potential taxing authority in advance to determine if you must
collect something for the agency from your employee's pay and/or pay a
percentage yourself, as the business owner.
WHY IS IT IMPORTANT AND WHAT ARE THE DEADLINES TO PAY PAYROLL TAXES?
Payroll
taxes represent a significant portion of the IRS' accounts receivable. Depending
on the amount of payroll tax funds you deposit with the IRS, the deadline could
be quarterly, monthly, semiweekly, or the day after payday. Regardless of the
deadline, one day late could subject you and your business to IRS scrutiny.
AT WHAT POINT DOES IT MAKE SENSE FOR A BUSINESS TO USE OUTSIDE HELP, AND WHERE CAN I TURN FOR THAT HELP?
Even
small firms can afford a payroll service. ADP is one nationwide payroll
service, and rates vary across the country. However, if you want to do payroll
in-house, call the IRS at 1-800-TAX-FORM (1-800-829-3676) and sign up for a
free seminar on employers' trust-fund responsibilities. Also ask for a copy of
Publication 15, Circular E (Employers Tax Guide) and Publication 15A (Employers
Supplemental Tax Guide).
WHY DO I HAVE TO PAY INTO THE UNEMPLOYMENT COMPENSATION FUND?
Unemployment
compensation is a state mandated program which requires all employers to pay
into the fund that disperses the money to people who are out of work.
HOW MUCH AM I REQUIRED TO PAY INTO THE FUND?
The
amount you are required to pay depends mostly on the number of your former
employees who collect benefits. The fewer claims you have against you, the
lower your tax rate will be. It is therefore in your best interest to challenge
claims made by former employees who are not legitimately entitled to those
benefits.
UNDER WHAT CIRCUMSTANCES IS A FORMER EMPLOYEE NOT ENTITLED TO BENEFITS?
Although
the law varies by state, claims are generally denied when employees resign
without good cause attributable to the employer, and when employees are
terminated for gross misconduct. However, you may have a legitimate reason for
firing someone and that person may still qualify for unemployment compensation.
In order to protect yourself, thoroughly document any gross misconduct up to
and including the termination. Additionally, if an employee voluntarily
resigns, make sure you get the employee to put that fact into writing so he or
she cannot later claim that there was a forced termination.
WHAT IS THE PERSONAL RESPONSIBILITY AND WORK OPPORTUNITY RECONCILIATION ACT OF 1996?
The
Personal Responsibility and Work Opportunity Reconciliation Act of 1996
(PRWORA) is legislation that was signed into law on August 22, 1996. This
legislation provides for a much strengthened Child Support Enforcement Program.
It benefits children and families by locating noncustodial parents,
establishing paternity when necessary, and establishing and enforcing child
support orders. All states have a program providing information about the newly hired. Employers will
be required to report certain information on their newly hired employees to a
designated state agency. States will match new hire
reports against child support records to locate parents, establish an order, or
enforce an existing order.
I'M THINKING OF USING A TEMPORARY AGENCY. DO TEMPORARY EMPLOYEES HAVE THE SAME RIGHTS AS REGULAR EMPLOYEES?
Yes.
Although the employment agency is technically the employer for the temporary
employee, the employee has the same rights as any other employee to sue over
illegal discrimination, sexual harassment, ADA violations or labor disputes.
Additionally, the longer the employee works at your company and the more
supervisory control you exercise over that employee, the more likely a court
will find you to be a joint employer with the temporary agency.
Unfortunately, an arrangement that best insulates an employer does not always best promote business objectives. However, the best way to insulate yourself from liability is by avoiding control of temporary employees. You should require the employment agency to screen and hire applicants, evaluate and discipline them, and even supervise daily work. To avoid being construed as their employer, temporary workers must not be subject to your company's policy.
I'M STARTING A BUSINESS. WHAT GOVERNMENT PUBLICATIONS SHOULD I GET?
The
Department of the Treasury publishes a Tax Guide for Small Businesses.
This details the tax responsibilities of sole proprietorships. It's called
"Publication 334" in government-talk. You can get it by calling (800)
829-3676.
The Treasury also publishes a 22-page tax supplement on an array of subjects, including taxes on businesses of all sizes.
To order forms or additional instructions by fax, dial (703) 487-4160. To hear up to 140 pre-recorded tax messages, call (800) 829-4477. Via the Internet: "http:/www.irs.ustreas.gov." File transfer protocol: "ftp.irs.ustreas.gov." Telenet: iris.irs.ustreas.gov. Access by modem is available if you call (703) 321-8020.
DESSEN, MOSES & ROSSITTO is happy to assist you in any matter that arises in either Pennsylvania or New Jersey, the two states in which our attorneys routinely practice. If you have other questions or comments about small businesses or any other area in which we practice, please send us an E-Mail message with your questions or comments and we will be happy to try to assist you.
LINKS TO OTHER INTERESTING INFO
Better Business Bureau
Benefits Link: The National
Employee Benefits Website
Complete
Glossary of Insurance Coverage Explanations
Employment Law Resource Center
Fair Debt
Collection Practices Act
Family and Medical Leave Act
FAQ for Firms Hiring
Independent Contractors
Findlaw's Small Business
Internal Revenue Service
(IRS)
LawGuru.com
Major Laws Enforced by the US
Department of Labor
Legal and Illegal
Pre-Employment Inquiries
Securities and Exchange
Commission - Corporate annual/quarterly reports
Small Business Administration
(SBA)
Small Business Knowledge Base
Truth in
Lending Act
Uniform
Commercial Code
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2006
Dessen, Moses & Rossitto
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