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.
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.read more
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.read more
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.
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.
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.
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.
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.
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.
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.read more
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.
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:
Name: [name of individual] Title: [Member, Manager, etc.]
Or, for a real example
Andrew Legrand Law, LLC
By: /s/ Andrew Legrand
Andrew Legrand, Member
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.
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.
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.
Trucks cannot park:
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.read more
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.read more
At the end of July, the New Orleans City Council approved a new food truck ordinance by a vote of 6-0, and sent it to Mayor Landrieu for a signature. The Mayor signed the ordinance on July 31, 2013, and some provisions went into immediate effect. Food trucks, for instance, can now serve in the Tulane Hospital and Superdome districts that were previously off-limits (in fact, the first round up in this new area was held on this past Friday, September 6. Checkout some pictures below!). While trucks haven’t started regularly serving in those areas yet, you should see more of them shortly, especially as some come back from taking August vacations. While you’re waiting, here’s a copy of the new, amended ordinance as signed by the Mayor.
No one likes Quickbooks. It’s clunky, costs a few hundred bucks, and never seems to work like you would expect it to. But it’s function is mission critical to your small business. Whether you choose Quickbooks or another accounting app (I’m anxious to try Xero), I cannot stress how important it is to always have an accurate accounting of your finances, as these two examples show.
Necessary to Prove Damages
Example one came to me with a potential BP Claim. In order to file a claim, BP needs to have monthly profit and loss statements from 2007-2011. The business owner hadn’t used accounting software, and was surprised by the need for such detailed reports. Had she been using accounting software, those reports could have easily been generated, saved, and sent to me within an hour.
The second business owner came to me with a potential lawsuit. One of the claims for damages was a loss of future profit. Unfortunately, the business owner had not been using accounting software and could not produce detailed records of revenues and expenses. I explained that the portion of damages he was seeking would be nearly impossible to prove without those records (or costly, since we’d have to hire an accountant). I ultimately decided that I couldn’t take the case. I may have felt otherwise had he had those records.
Unfortunately, both of these business owners were at a disadvantage, simply because of lackadaisical record keeping.
It’s also important to download and file your bank statements. Banks have lured us into this feeling that all our information is accessible at anytime via their website. That’s generally true, but some banks have used this sense of security as a profit center.
The business owner in one of the examples above needed to get bank statements that were all over 2 years old. The bank (Capital One) didn’t provide them on the website, and charges $15 for each statement. He needed 5 years of statements. That’s $900!
I haven’t been following my own advice, and haven’t been saving copies of my bank statements. So this past Saturday, I sat down to go to each bank and download all my available statements (Using Hazel), I automatically organized all 152 statements within Evernote. All I had to do was click download. Let me know in the comments if you’d like me to blog about that process). I learned that not all banks have the same retention policies:
At this point, it should be pretty clear that any business owner keep accurate accounting records, and keep (hopefully digital) copies of their bank statements to support those records. This sounds like plenty of work, and it can be, and if you don’t want to do it yourself, there are plenty of qualified bookkeepers on sites like elance.com and odesk.com ready to get the work done. You may not need those records now, but if (and when) you do, you’ll be happy you’ve kept up with them.read more