As one might expect, the dawning of a new year presents many great opportunities for legal planning. In fact, many of us procrastinate quality legal planning during the year because of our hectic lives…not because we don’t value its importance. However, life comes at us fast and it’s truly difficult to step back and look at the trees and focus on the areas of our business that need some legal attention. Here are five legal tips to help make sure 2016 is a Happy New Year for you, your family and your business.
1) Review your business structure. Maybe your business was brand new in 2015 and you have been operating as a sole proprietor or maybe you bought your first rental in 2015 and decided to take title in your own name. Both of these are certainly reasonable reasons to do business without the help of an incorporated business entity. However, choosing the right business entity for the right situation (and incorporated or organized in the right state) can help protect your personal assets from the liabilities of your rental property or operational business and may end up saving you THOUSANDS in taxes. Moreover, some of you may have an entity you haven’t maintained properly over the years. Out of haste and other business matters you have ignored the corporate formalities of doing Minutes or updating your Operating Agreement or Bylaws. This is as perfect time of year to get that new entity or update your current business structure.
2) Plan for what happens when you’re gone. I’m not trying to be morbid, but no matter how young or healthy you are, it’s possible that 2016 could be the year you die. Nobody likes to talk about it, but death happens even to the best of us! What will happen to your assets or business if tragedy strikes and you don’t make it to my year-end article for 2017? More importantly, if you have minor or adult dependent children, who will take care of them when you’re gone? If you have failed to plan, the simple answer is that the state will decide. Even if you have a will, without a trust in place your heirs will likely need to file at least one action in probate court if you own any real estate at all. A little planning now can save your heirs the time, headache and worry of the probate process – not to mention thousands in legal fees.
3) Get it in writing. If you own your own business, you likely have contracts with dozens of people and/or business entities – vendors, customers, partners, etc. Many of these contracts may currently be verbal “handshake” type deals. I know we’d all like to imagine we live in a world where business can actually be done this way. Unfortunately, the reality is we live in a world where communication is imperfect and honest differences can exist (and disputes can arise) even when all parties are acting honestly. This is not to mention the sad reality that not everyone you have a business relationship with will act 100% honestly all the time. For these reasons, having specific written contracts detailing the actual nature of your business relationships is absolutely vital. Spending a few hundred dollars getting your contracts dialed in now can save you tens of thousands in legal fees over a business deal or relationship if litigation comes to bear.
4) Think about how you classify your employees. Whether you already have folks working for you or are thinking about hiring someone in 2016, how you classify the people that work for you is extremely important. Choose carefully between classifying them as employees or independent contractors. This is a fairly complex area of the law, and it probably makes sense to speak with an attorney if you have questions. Getting the classification wrong can have serious tax and legal consequences. Make sure you get good advice from an experienced attorney so you get this one right. Moreover, don’t forget we are right around the corner from issuing W-2s and 1099s. No matter how you classify your workers, there is important paperwork that needs to be completed by the end of January in order to keep you out of harms way with the IRS.
5) Protect your intellectual property. As your business expands and grows, it’s likely that your intellectual property is doing the same. Almost all businesses have trade secrets – things like customer lists and specific formulas and ways of doing business that are proprietary in nature. However, you lose any protections for your trade secrets if you don’t take steps to keep them, well, secret. It’s also possible that you have a name or slogan associated with your business that you’d like to keep others from using. If so, registering a federal trademark is the best way to protect those rights. Maybe you even have an invention or other idea you’d like to protect with a patent. The point is that as the New Year begins, you should be conscious of the valuable intellectual property you are creating, and should make sure you are taking the proper steps to protect it.
Again, I realize how busy life can be trying to juggle your business, family, health and finances, but it’s important to dedicate a little time to legal matters. In fact, the items above don’t have to take a lot of time or money if you delegate them to your legal or tax counsel over the next month and have a couple follow up meetings. Remember, the best way to eat an elephant is one bite at a time. Don’t get overwhelmed and make a plan over the next few months to consider these important planning points.
Jarom Bergeson is an associate attorney with Kyler Kohler Ostermiller, and Sorensen, LLP (“KKOS Lawyers”) in its Cedar City, Utah office and has extensive experience in helping client register their trademark and protecting their brand identity. He can be reached at firstname.lastname@example.org or by phone at (888) 801-0010.