Decisions To Make Before Starting a Business
Business startups require a great deal of planning. It is important that you decide how you want your business to be structured and financed, what your preferred tax treatment will be, whether you plan to issue stock, and how you plan to deal with issues of owner liability or business disputes that may arise.
Types of Corporations That Will Protect You
Often, our attorneys will advise you to avert potential loss of personal assets by creating a corporation. There are two primary ways to establish a corporation, both of which have been approved by The Internal Revenue Code. The IRS differentiates between the two, Subchapter C and Subchapter S Corporations, in terms of tax treatment. Depending on your personal circumstances, one or the other may be preferable. As your business attorneys, we will be able to advise you on the matter.
Subchapter C Corporations
Typically, Subchapter C corporations are large and publicly held, so they are not usually appropriate for small businesses. These corporations face double taxation since they file their own tax returns, paying taxes on profits before paying out dividends. When their shareholders file their own individual returns they will be taxed again based on their own earnings.
Subchapter S Corporations
Subchapter S corporations have the advantage of being able to avoid double taxation, thus protecting their shareholders. There are, however, some restrictions on Subchapter S Corporations, including that they must:
- Be domestic, without any alien shareholders
- Have fewer than 100 shareholders
- Have no corporate or partnership shareholders
- Have only one class of stock
- Not be affiliated with any larger corporate groups
Other Types of Business Formations
For individuals starting up a new business, there are several other methods of approaching business formation. Besides Subchapter C and Subchapter S Corporations, you may be able to form one of the following:
Limited Liability Company (LLC)
State laws provide for the creation of LLCs as another means of providing personal liability protection. Though they don’t have the same restrictions as S corporations, LLCs are also business structures designed to protect members from being held personally liable for company debts. In many ways, LLCs integrate aspects of sole or partnership ownership with corporate protections.
In a partnership, both partners are equal in their ability to represent the organization as a whole. In some cases, a limited liability partnership (LLP) can be formed to limit each partner’s liability for another partner’s error or wrongdoing.
Since businesses may also be purchased by buying a large number of stocks in the company from existing shareholders, business attorneys can also draw up documents pertaining to stock purchases. While buyers are inclined to favor asset sales and sellers tend to prefer stock sales, in either case, there are tax and liability concerns to be dealt with and it is important to have a trustworthy business attorney at your side.
Employee handbooks, while not explicitly required by law, are almost universally used as an efficient method of communicating information concerning company policies and employee rights. Since federal and state laws do mandate employer actions regarding such things as minimum wage, overtime pay, meals and breaks, and time off for jury duty, the vast majority of employers find distributing an employee handbook a convenient method of making sure everyone is on the same page about the procedures at the place of employment and the behavior that is expected in the workplace. In most cases, employee handbooks are distributed as soon as an individual is hired.
Why Employee Handbooks Are Necessary
The advantages of having a printed employee handbook are clear. Because such manuals inform employees uniformly, in written form, of company policies, they represent indisputable evidence that employees have been informed of their employers’ expectations. This ensures that a great many disputes can be put to rest without litigation, particularly since knowledgeable business attorneys have prepared these booklets as solid legal documents, not open to interpretation.
For this reason, employees are often asked to sign an acknowledgment form indicating that they have received and understand the manual’s requirements. Though employees may refuse to sign such a booklet, the employer may, if they wish, take this as a form of insubordination and terminate them before they ever begin work.
What Employee Handbooks Cover
For employee handbooks to be useful and protective to both parties, they have to spell out as many procedures and policies are possible. Areas typically covered by employee handbooks usually cover many, if not all, of the following:
- Employee benefits: healthcare, sick days, vacation days, personal days, holidays, and pensions.
- Harassment and discrimination
- Health and safety (potential hazards) at the workplace
- Internet, cell phone, and social media usage
- Payment through automatic deposit
- Probationary periods
- Wages and work hours
You may have all the good intentions in the world and still not craft an effective employee handbook since the project involves:
- Strong legal background in federal and state employment law
- Working knowledge of the pitfalls of missteps with legal language
- Understanding precisely which topics must be covered in your particular handbook
- Sensitivity to political correctness regarding discrimination, both in wording and enforcement of rules
Why You Need Tand & Associates P.C.
Our talented attorneys are fully aware of all components necessary for starting a business, ready to take you directly from an intriguing concept to a carefully planned enterprise to a well-executed startup. We will assist you in every aspect of business formation, including advising you on what type of business structure is best for you, how you can go about bringing it to fruition, and how to craft an employee handbook that spells out your obligations and expectations in clear, unambiguous language. We can be reached via the contact form on our website or by calling 516-393-9151.