Bed and BreakfastThe website AirBNB allows property owners and leasers to list their homes and apartments for short term rental. Recent press and blogosphere coverage has discussed the proliferation of this service and the convenience it provides to visitors to the city looking for a hotel alternative and residents who want to earn a separate income stream. It’s even a topic I’ve discussed before. If you’re interested in renting out your property, the city provides a quick primer, but does not cite the sources. Here’s a run-down.

To understand the city’s bread and breakfast laws, we need to start with the definitions of a bread and breakfast in the city’s Comprehensive Zoning Ordinance (CZO). So, what is considered to be a “bed and breakfast”? A “bed and breakfast” is defined as “an owner-occupied residential structure, originally constructed as either a single-family or a two-family structure that is easily converted to a single-family structure, which provides sleeping rooms for overnight paid occupancy of up to seven (7) nights.”

There are variants on the different structures seen and permitted throughout the city. For example, there are bed and breakfast family homes, which are limited to no more than 2 sleeping rooms, and bed and breakfast guest homes, that are equipped with 3 to 5 sleeping rooms; subject to a current certificate of liability insurance posted on the premises. Bed and breakfast historic homes contain between 3 and 9 sleeping rooms and are subject to approval by the Historic District Landmarks Commission, at least 3,000 square feet in size and a minimum of 50 years old. Bed and breakfast inns, which can contain as many as 9 sleeping rooms, but do not necessarily have to have historic value, are limited to commercial and neighborhood business districts.

Therefore, assuming you own your home and want to rent a room, you will need to determine your zoning and whether or not a bed and breakfast is a permitted or conditional use in your zoning area. This is determined on a case-by-case basis. Note that this CZO is currently being updated and should become law in summer 2014, so while your zoning may change to allow you to open bed and breakfast, the owner occupancy requirement remains in the current draft. You can determine your property’s zoning by using the New Orleans zoning look up tool.

The city’s Municipal code provides additional guidance on costs. First, anyone seeking to rent property for less than 30 days (or 60 days in the French Quarter) is required to have a permit. The fee for a bread and breakfast with 1 or 2 bedrooms is $200 per year, and the fee for a bed and breakfast rental with 3 to 5 bedrooms is $600 per year. Keep in mind that the actual fees charged by the city may be a bit higher than stated above.

Frequently Asked Questions

Q. I rent my living space from a landlord. Can I sublease my space on AirBNB?

A. No, this practice is prohibited by city law. In order to rent your space, you first need a mayoralty permit. City law requires proof of owner-occupancy in the form of a homestead exemption affidavit before issuing a permit. If you rent your apartment, clearly you won’t be able to claim a homestead exemption.

Q. I purchased a property that I intend to rent exclusively on AirBNB. Is this allowed?

A. No, for the same reason as above. The CZO requires bread and breakfasts to be owner-occupied, so if you don’t live in the house and claim your homestead exemption on the property, you will not receive a permit.

Q. Will I be required to apply for a food service permit to serve meals?

A. No, but in addition to the mayoralty permit required, you will need to apply for a standard business license and submit the usual paperwork to the Bureau of Revenue. The appropriate paperwork is linked on their website.

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The city of New Orleans requires every business operating from a location within Orleans Parish to pay an annual tax. This annual tax is called an Occupational License, and must be renewed between January 1 and the end of February each calendar year. This tax is in addition to annual registration with the Louisiana Secretary of State, sales tax due to the city and state (Louisiana Department of Revenue), and federal taxes.

The city allows businesses to pay the tax in person at City Hall and online. If you found this, chances are you’d like avoid spending an afternoon at the wonderful building on Poydras and Loyola and pay online. Unfortunately, the instructions included on the renewal flyer are limited to listing the city’s general website.

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The city’s instructions to pay online: “Go to nola.gov”

Fortunately though, I’ve had several clients ask about the process, so here’s a detailed guide on how to pay the man.

How to Pay New Orleans Occupational Tax Online

First, you’ll need to go to the City’s online portal and create an account. Click here, and you’ll be taken to a page that looks like the one below. Register for an account, then login.Screenshot 2014-04-08 16.53.06Once you log in to your account, you’ll need to scroll down a bit. You’ll notice a list of services the city has made available online (finally!!), but the one you want to click today is for the Bureau of Revenue. Checkout the red arrow below.

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Click Bureau of Revenue

If this is the first time you’re paying online, you’ll have to connect your business occupational license account to your login credentials. So click the “Add Account” link indicated below.

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Click Add Account

From the Tax Form drop down menu, select Occupational License Renewal, and enter your account code into the field below. Your account code can be found on your Occupational License. If you can’t find it, you’ll probably have to call the One Stop Shop or travel to City Hall.

 

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Enter your account details

It generally takes a day or two for the city to approve the registration. Check back here for Part 2 of paying taxes to the City of New Orleans.

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Generally, most small businesses will initially form their company as a limited liability company. But sometimes, the corporation makes more sense. One of the key questions when determining whether to setup your business as a LLC or a corporation is the number and nature of the investors you  are attempting to attract.

The Entities are Similar, but LLCs are Easier

For the most part, an LLC can perform the same functions as a corporation. It can issue membership interests that are similar to shares of stock, it can assign management to a group, like a board of directors, and it can appoint managers, similar to officers.

So, an LLC operating agreement can be written to make the company manage like a corporation, and since it has less-stringent annual requirements why even use a corporation at all? One reason is registration requirements.

Registration Requirements

The entities differ when it comes to what needs to be reported to the Louisiana Secretary of State. For a corporation, the officers and directors need to be listed with the business. But the investors who own the shares don’t need to be reported. A corporation’s ownership records are kept internally, and never need to be made publicly available. An LLC is different.

Every manager or member of a limited liability company must be listed with the Secretary of State. So every time someone buys or sells an interest in the company, those records need to be updated. That also means that everyone who is either a member or a manager of the LLC is listed publicly. This may make some investors a bit weary.

LLC May Still Be the Better Option

Generally, if your investors are ok with having their names appear on the Secretary of State, and you only plan on having a few investors, the LLC is still probably the better option for you. However, if you plan on having multiple investors, or your investors place a premium on their privacy and publicly available information, the corporation may be the better option.

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A Louisiana woman is suing her brother and sister in a Gretna court to liquidate the family netting and rigging business. The father started Arabi Sling and Rigging Company Inc in 1972, and passed ownership of the company to what appears to be his 2 daughters and his son.

Since 2009, the company’s expenses, and in particular the salaries paid to the executives, have significantly increased, and those increases amount to breach of fiduciary duty, unjust enrichment, wrongful termination and violation of state law, alleges the plaintiff.

The plaintiff has asked the court to liquidate the entire business. Hopefully, the parties are able to come to a settlement that allows the business to survive.

 

Read more about the lawsuit on LouisianaRecord.com.

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The following checklist is designed to flag the many  issues involved in wrapping up an individual’s employment with a company. This checklist assumes that the decision to terminate has already been made or that the employee has voluntarily resigned.

Notify Human Resources

As soon as you are aware of an employee’s intention to terminate employment, notify your Payroll Manager or Human Resources office. When the employee tells you of his or her intention to leave your employment, you should then ask him or her to write a resignation letter that states why he is leaving and his termination date.

Also, have them complete Form 77, provided by the Louisiana Workforce Commission, for unemployment insurance purposes.

Permissions / Access Termination

As soon as you know that an employee is leaving, notify your network administrator or other appropriate staff person of the date and time on which to terminate the employee’s access to computer. Make arrangements for how these accounts will be re-routed to ascertain that your organization will not lose contact with clients and customers.

Effective on the termination date, whether immediate in a firing situation, or at a mutually agreed upon end date, you also will need to terminate the employee’s building access. Depending on your access methods, you will need to disable the employee’s building entry code, disable his or her entry swipe card, or collect the employee’s keys. It is in both your best interest, and the former employee’s, that he or she cannot access any company property.

Return of Property

Exiting employees should be required to turn in all company books and materials, keys, ID badges, computers, cell phones, Blackberries/PDAs, card keys, company cars, parking passes, credit cards, telephone calling cards, laptops, printers/copiers/scanners/fax machines, marketing materials/other files, company phone lists, employee contact lists and any other company-owned items. Consider what procedure will be used to quickly facilitate the return of company property and the retrieval of the employee’s personal property with dignity.

Employees should provide their supervisors with all passwords and other information pertaining to accessing computer files and telephone messages. Is there any company information located on employee’s home/personal computers? You should lock access to the company’s system and backup data prior to the notification meeting, and remove access to external company databases and/or remote access software.

Set up an automatic e-mail notification to alert senders that the employee is no longer employed. Re-route all voicemails to someone available to cover for the employee until a replacement is found.

Status of Benefits and Pay

Terminating employees are usually paid up to a maximum of 30 days for unused, accrued vacation time. If the employee has used time not yet accrued, payment to the company for this time is subtracted from the last pay check. (If your company designates a certain number of sick days and they are accrued, you would also need to pay the employee for the time accrued.)

Following termination, former employees should receive a letter from the Human Resources office that outlines the status of their benefits upon termination. This includes life insurance, health coverage, retirement plans and expense account plans. (In the United States, organizations comply with the Consolidated Omnibus Budget Reconciliation Act of 1980 (COBRA), and extend to eligible employees and their enrolled dependents the right to continue health care plan coverage for a specified period of time at their own expense and at full cost.)

Any unpaid payroll advances will be subtracted from the employee’s final check. Determine if deductions are necessary for unpaid loans, wage over-payments, lost or stolen company property and whether those deductions are allowed by law. Discontinue any automatic payroll deposits.

Determine what “wages” are owed. Any unpaid expenses for company business purposes (turned in on an expense report), unpaid commission and bonuses will be paid in the final pay check.

Coordinate the preparation of COBRA notice, or state law equivalent, with the health insurance provider. Confirm that the health insurance provider allows coverage through the end of the month of termination. Confirm that health insurance provider allows employee to be continued under group plan if continued insurance coverage is to be offered in connection with termination employee benefits. Prepare information regarding rollover of any 401(k) plans and other benefit information and notify carriers/providers of termination. Discontinue Life/Disability Insurance premium payments and notify carrier(s) of termination. Determine if any action should be taken regarding any applicable medical reimbursement or dependent care reimbursement plan promissory notes.

In going over acquired benefits, consider past practices, verbal commitments, any written documents or e-mail correspondence, what is stated in the offer letter/employment agreement, company policies or any handbook, etc.

Confidentiality and Non-compete Agreements

Any confidentiality agreement or non-compete agreement that the exiting employee signed when commencing employment should be reviewed to make certain the employee understands what is expected.

Even if the employee never signed such a document, most employee handbooks have a clause or code of conduct paragraph about not sharing company confidential information or trade secrets. Review this and remind the employee that any breech of this confidentiality will be addressed.

Things to Review at the Exit Interview

Exiting employees are encouraged to participate in a confidential exit interview with the Human Resources department. (Exit interviews are an important process you can use to gather information regarding the working environment in your organization.) When notified that an employee is terminating employment, your HR office should schedule an exit interview.

If the separation is involuntary, you should discuss appropriate details regarding termination (effective date, business reasons for termination, pay and benefits after termination, if any, unemployment benefits eligibility, etc.) with the employee. Exiting employees, who plan to seek employment, must sign a form giving the company permission to provide reference information when potential employers call.

Give the employee an address update form to fill out if they move. This goes especially for large companies, or those with high turnover, because W-2s will come back as non-deliverable if the address has changed. Without new contact information, it is difficult to provide needed information to the former employee. As a backup, verify that the employee’s emergency contact information is up-to-date and that you can contact that person to locate them if you have trouble getting their W2s to them.

These are simple, but important, tasks to remember. If you follow these guidelines, the difficult process of releasing an employee should go as smooth as possible in the future.

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Contract and Pen

Sign your contracts the right way, every time!

The primary reason most businesses form a limited liability company (LLC) is to avoid personal liability for business dealings. Unlike Louisiana’s strict corporate formalities, Louisiana law does not impose strict formalities on LLCs, but that doesn’t mean just having an LLC will protect you.

If you sign a contract with the intent of binding your business, but don’t mention your business in the contract or signature block, you may actually be binding yourself to the contract, personally. That’s an easy way for a plaintiff’s attorney to get around your LLC (“piercing the corporate veil” in legalese) in a dispute. Avoiding this is easy.

Sign Contracts the Proper way, Every Time

Whenever the owner, members, managers, or officers sign a contract, document, letter–anything!–on behalf of the LLC, the LLC’s name should be in the signature block and the person signing should indicate their title. This is an example of an appropriate signature block:

[LLC name]

By: __________________________
Name: [name of individual] Title: [Member, Manager, etc.]

Or, for a real example

Andrew Legrand Law, LLC

By: /s/ Andrew Legrand
Andrew Legrand, Member

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I-9 ScreenSheet

The previous I-9 Form Expired in August of 2012.

If you hire employees, you should be filling out I-9 forms to verify their employment eligibility. About a year ago, a previous revision of the I-9 form “expired,” and some small businesses have been asking whether or not they need to have all their employees sign new I-9′s.

The answer is no, you don’t. If the employee was hired before the previous revision expired, then there’s no need to have them sign a new form. But employers should use the most recent I-9 form for any new or re-hires.

For more info, and to download the latest I-9, head over to the Department of Homeland Security’s website.

 

 

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Purchasing a business

 

When purchasing a business (anywhere, not just Louisiana), it’s important to perform a due diligence review. But sometimes, even after conducting a thorough review, something unexpected pops up. This happened to one of my clients recently.
A small business client recently purchased a New Orleans restaurant. Rather than transferring the assets of the business, the sale was simply an exchange of the membership interests of the limited liability company (LLC) that operated the business. This means that the new owner assumed the existing LLC, including the equipment, assets, debts, and liabilities of the company. The new business owner did not believe there were any existing debts or liabilities, and, at the time, he was not represented by an attorney.

The Liability Rears its Ugly Head

A few months after the purchase, the client received a citation from the New Orleans Alcoholic Beverage Control Board.  The petition, sent by the New Orleans City Attorney, included an order to appear in front of the Control Board and argue why the restaurant’s alcohol and liquor permit should not be revoked. Needless to say, the business owner was a bit spooked considering his liquor permit was now at risk.

The letter from the city also included instructions for arranging a settlement conference. Since neither the client, nor myself, were exactly clear on the charges being brought against the business, the settlement process seemed like a good opportunity to assess just what the city actually had as evidence of a violation (Hint: If you receive one of these petitions, always schedule a settlement conference). We called the city attorney, and a settlement hearing was arranged for the following week.

Unforeseen Liabilities

At the settlement conference, the city attorney indicated that the business had settled another violation approximately 3 years ago, when the previous business owners were still operating the establishment. Because of this previous violation, the settlement for the current violation would not be as lenient as in the past. That seemed a bit absurd, since ownership of the business had changed.
I argued that the infractions by the previous owner should not count against the new owner, but it was of no use. The City Attorney was adamant that violations followed the business, and not the owners of the actual business. Essentially, the new business owner would be penalized for a violation by the previous owner!

Due Diligence Will Pay for Itself

In the end, the business owner was able to settle the dispute with the city without losing his license. But, after this experience, he learned to be more diligent about existing liabilities to protect himself the next time he purchases a business. If you’re curious to hear about some of the options you can use to protect yourself from hidden liabilities, just ask in the comments.

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The food truck ordinance adopted by New Orleans this summer specifically lists areas where food trucks can and can’t park. These restrictions are important if you’re considering starting a truck, or if you’re a customer who wants to know why food trucks aren’t appearing in a certain location.

The key to understanding available food truck spaces is understanding zoning. The city actually provides a pretty useful tool for finding the zoning of any given location. Just go here, click the “Layers” button, then check Zoning.

Where can Food Trucks Park

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Trucks are allowed on Loyola Avenue, next to Duncan Plaza


Trucks with permits are allowed to park in areas zoned for business, commercial, industrial, and mixed uses. Of course, there are exceptions.

Trucks cannot park:

  • In the Central Business District,
  • in the French Quarter,
  • in the Marigny (the area bounded by Esplanade Avenue, North Rampart, Elysian Fields Avenue and Royal Street), residentially zoned areas,
  • In any residential or park district as defined in the New Orleans Comprehensive Zoning Ordinance.
  • On Oak Street, between Broadway and Monticello.
  • On Maple Street, between Audubon Place and Leake Avenue (River Road)
  • In the area bounded by Louisville Street, Vicksburg Street, Robert E Lee Boulevard and Conrad Street in Lakeview.
  • On St. Bernard Avenue between Interstate 610 and the Lake.
  • On Paris Avenue between Interstate 610 and the Lake.
  • On Elysian Fields between Interstate 610 and the Lake.
  • On Franklin Avenue between Interstate 610 and the Lake.

The new ordinance does not include a restaurant proximity restriction. If you want to hold a food truck event in one of the restricted areas, you have to apply for a special events permit at City Hall.

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I’ve written before on the importance of properly classifying your workers as employees or independent contractors. When you classify a worker as an independent contractor, you’re passing the tax liability to the worker. Rather than splitting the employment taxes between the business and the worker, the worker accepts the full burden. Some workers like this because they think their paycheck is bigger. Their paycheck is bigger, but so is their tax liability.

But, the key is that you, the employer, really doesn’t have much say in how to classify a worker. That determination is made by the IRS. One risk of improperly classifying a worker is that the worker could come after you to pay her back taxes.

Such is the case of a Gretna Doctor who recently filed a lawsuit against a medical group and their accountant for failing to take out his taxes. The doctor was paid as an independent contractor, and the medical group hadn’t removed any taxes from his paychecks. When the doctor received a $200,000 bill from the IRS, he scoffed, and filed a suit to recover that amount from the medical group.

You may not have employees who earn salaries of $480,000 like this doctor, but the principals are the same. If you’re not sure how you should be paying your employees, you should consult with an attorney, an accountant, your payroll person, or even by filling out a form SS-8 with the IRS. You don’t want to be stuck with a back tax bill.

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