Recently in Laws Affecting Small Business Category

May 4, 2011

Woman-owned Businesses: Uncle Sam Wants You

If your small business is woman-owned, the federal government wants to do business with you. After ten years and countless revisions, the U.S. Small Business Administration recently adopted a final rule creating the Women-Owned Small Business Program, offering special incentives for women-owned companies to participate in the $500 billion federal marketplace. Later this year, federal agencies are expected to begin setting aside up to 5% of procurement dollars--more than $20 billion annually--exclusively for competition among woman-owned small businesses.

To qualify as a woman-owned small business for federal contracting purposes, your company must meet three primary criteria:

  1. It must be "small" under the North American Industrial Classification System ("NAICS") code applicable to the procurement. For more on calculating your company's size, see Nolo's article Federal Small Business Contract Eligibility: Is Your Business 'Small'?
  2. It must be at least 51% unconditionally "owned" by one or more women who are U.S. citizens. If, for instance, ownership of a company is split 50/50 between a husband and wife, the company will not qualify.
  3. One or more women who are U.S. citizens must "control" the company's management and daily business operations. To satisfy this requirement, a woman must hold the company's highest officer position, have sufficient experience to effectively manage the company, and work for the company full-time during normal working hours of companies in the same line of work.
If you decide to participate in the Women-Owned Small Business Program, you should carefully review and, if necessary, amend your business's governing documents (such as bylaws, operating agreements, and shareholders' agreements) to ensure that women unconditionally own and control the company. Supermajority voting requirements, for instance, might cause your business to be ineligible.

Despite the red tape, the Women-Owned Small Business program promises to provide substantial contracting benefits to woman-owned companies in the federal marketplace. If your company is woman-owned, now might be a good time to think about adding Uncle Sam to your customer list.

By: Guest blogger Steven Koprince, an attorney with PilieroMazza PLLC in Washington D.C. Mr. Koprince's practice emphasizes government contracts and small business law.
May 2, 2011

Managing Your Social Media Presence on the Internet

Small businesses used to market primarily through print ads in newspapers, radio, and the spoken word of mouth. No longer. Social media and the Internet have taken over as the most powerful, far reaching, and accessible marketing tools for small businesses. The most popular social media sites include Twitter, LinkedIn, and Facebook--but there are many other ways to market and promote your business online.

With the ability to reach out so widely and effectively online comes the burden of having to monitor and manage this open communication about your business. To help with this, a new crop of social media management technologies has emerged. These technologies troll the Internet and sort, consolidate, streamline, and store information about your business found on social media sites. Not only can this save precious time, it can be crucial for helping to monitor and manage your online branding and marketing.

People are also starting to appreciate the possible legal significance of sorting and saving this information.  As stated in a recent New York Times article by Tanzina Vega, "Someone may get sued for the content of their social media or the information in the social media may be relevant to the suit . . . If you haven't preserved it, you've lost it."


April 27, 2011

"Disability" Under ADA to Cover More Workers

Does your small business employ individuals who are disabled within the meaning of the Americans with Disabilities Act? The answer is more likely to be "yes" today than it was earlier this year, thanks to the U.S. Equal Employment Opportunity Commission's recent adoption of regulations implementing the ADA Amendments Act of 2008.

The ADA defines "disability" as a "physical or mental impairment that substantially limits a major life activity." The new regulations do not change the definition itself, but make it clear that the government will interpret the ADA more broadly than in the past.

For instance, the new regulations provide that, in almost every case, disabled status is to be evaluated without consideration of ameliorative measures, such as medication, even if the employee can function without limitations with appropriate medication or other mitigating measures. The only exception is that an employee is not considered disabled on the basis of a vision impairment, so long as the impairment can be corrected with ordinary eyeglasses or contact lenses.

Similarly, the new regulations state that an impairment that is episodic or in remission nevertheless qualifies as a disability if it would substantially limit a major life activity when active. For example, an employee with lung cancer might be considered disabled even if the cancer has been in remission for years.

In addition, the EEOC has taken the guesswork out of determining whether certain employees are disabled. The amendments provide that in most cases, employees with the following conditions are covered by the ADA: deafness, blindness, intellectual disabilities, partially or completely missing limbs, mobility impairments requiring the use of a wheelchair, autism, diabetes, epilepsy, HIV, multiple sclerosis, muscular dystrophy, major depressive disorder, bipolar disorder, post-traumatic stress disorder, obsessive compulsive disorder, and schizophrenia.

If your small business has 15 or more employees, it is covered by the ADA. You should take note of the new regulations and consider training your officers and managers to ensure that all of the company's decision-makers know that your employees might be considered disabled under the ADA, even if the disability is not immediately obvious.

By: Guest blogger Steven Koprince, an attorney with PilieroMazza PLLC in Washington D.C. Mr. Koprince's practice emphasizes government contracts and small business law.

April 6, 2011

Repeal of Expanded 1099 Reporting Requirement Likely

If you were one of the many small business owners up in arms when lawmakers slipped into the 2010 health care bill a rule requiring all businesses to file 1099 forms for payments to vendors of $600 or more, you may soon have reason to celebrate. Yesterday, Congress passed a repeal of that rule, and President Obama is expected to sign it.

More information about the repeal can be found here and here.

February 10, 2011

More Take-Home Pay for Employees Under Tax Relief Act

For most employees, the net effect of the changes under the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, will mean less total tax being withheld from their checks. Under the Act, enacted on December 17, 2010, the income tax rates that were scheduled to expire at the end of 2010 were extended for an additional two years. These extended rates range from 10% to 35%. If the Act had not passed, the rates would have reverted to their previous higher levels of 15% to 39.6%. The Tax Relief Act also reduces the employee portion of Social Security taxes from the current 6.2% to a temporary rate of 4.2% for 2011 only. The employer portion is the same at 6.2% and Medicare taxes remain at 1.45%. So, the total self-employment tax rate, which was 15.3%, is temporarily reduced to 13.3% for 2011. The Making Work Pay (MWP) credit that was available for tax years 2009 and 2010 was not extended under the new law. The net effect of these changes--reducing the employee portion of Social Security taxes and taking away the MWP credit--will result in a net increase in take-home pay for most employees.

The IRS has asked employers to adjust their systems as soon as possible but no later than January 31, 2011. Many employees may not see these changes until their first paycheck in February 2011.

January 6, 2011

Year-End Tax Changes for Businesses

The Tax Relief Act of 2010, signed into law on December, 17, 2010, contains a wide range of income tax, estate tax, and unemployment insurance changes affecting individuals and businesses. For small businesses, the two most significant changes involved bonus depreciation and Section 179 expensing.

Bonus Depreciation Increased to 100% for 2011 and 50% for 2012

Bonus depreciation was first enacted in 2008 as a temporary measure to help our ailing economy. As first enacted and then extended for two years, the deduction was a first-year 50% bonus deduction. It allowed taxpayers to depreciate 50% of the cost of qualified property during the first year the property was placed in service. It was scheduled to expire at the end of 2010.

Under the tax laws passed in December 2010, bonus depreciation is extended and increased to 100 percent for qualified investments made after September 8, 2010 through the end of 2011. In addition, 50% bonus depreciation will be available in calendar year 2012.

Section 179 Expensing Increased to $125,000 for 2012

Section 179 allows you to currently deduct in one year the cost of long-term assets purchased that year instead of deducting the cost over time under regular depreciation rules. For 2010 and 2011, the maximum annual amount you could deduct under Section 179 was $500,000, subject to a phase-out once your total expenditures exceeded $2 million. The annual deduction limit was scheduled to go down to $25,000 in 2012, with a $200,000 overall property value limit. Under the new tax laws passed in December 2010, the Section 179 deduction limit is increased to $125,000 and the overall property value limit to $500,000.

November 2, 2010

IRS Defers W-2 Health Coverage Reporting

The IRS has decided to defer the new requirement that employers report the cost of health coverage under employer-sponsored group health plans. Under the Affordable Care Act passed in March, employers are required to report these costs for informational purposes--they are not taxable items. The IRS determined that it was necessary to delay implementing this new requirement for a year in order to give employers time to change their payroll systems so they can comply with the new reporting requirements. The IRS has issued a draft Form W-2 for 2011 which includes the codes employers can use to report the cost of health coverage if they choose to do so for 2011.
July 19, 2010

Hobby Versus Business--A Significant Tax Difference

One of the most powerful weapons in the IRS arsenal is the hobby loss rule. Under this rule, only taxpayers engaged in a bona fide business--as opposed to a hobby--can take business deductions. This means you need to be regularly engaged in an activity and your primary purpose must be to earn a profit. You don't have to show you earn a profit every year. But making a profit must be your primary purpose. Your business can be full time or part time, as long as you work at it regularly and continuously. In contrast, if the IRS decides that you are indulging a hobby rather than operating a business, you will face some potentially disastrous tax consequences. You may still be able to deduct some of your hobby-related expenses but there are serious restrictions and limitations on these deductions.

The IRS has established two tests to determine whether someone is in business. One is a simple mechanical test that looks at whether you have earned a profit in three of the last five years. The other is a more complex test designed to determine whether you act like a business. Under this test, the IRS looks at certain objective factors to determine whether you are behaving like a person who wants to earn a profit. The most important of these are that you act like you're running a business, you have a certain amount of expertise in the area, and you spend sufficient time and effort on the activity.

For more information, see Home Business Tax Deductions; Keep What You Earn, by Stephen Fishman (Nolo).

March 30, 2010

Health Care Reform - What Does It Mean For Small Businesses

To make sure employers play their part in ensuring more workers get health insurance coverage, the new health care law contains a combination of incentives for smaller businesses and penalties for larger businesses. Here's an overview of the main provisions that will impact businesses, as reported by Rhonda Abrams in an article in USA Today called "The good and bad in health care reform for small businesses."

Tax Credit. Small businesses with 25 or fewer employees and $50,000 or less in annual average salaries can receive a tax credit for providing health insurance for employees. For 2010 through 2013, the credit will be up to 35% of the health care premiums the company pays for its employees each tax year. The credit will go up to 50% in 2014 provided the company buys its insurance through the new small business health insurance exchanges that will begin operating in 2014.

 

Penalties. Starting in 2014, businesses with more than 50 employees that don't offer affordable health care options for employees would be subject to a penalty. However, according to a blog on health care reform posted by Robb Mandelbaum in the New York  Times, as bad as this may sound, it won't really affect many businesses because "Ninety-six percent of businesses in the country with more than 50 employees offer health insurance (according to the Kaiser Family Foundation). . . .And 95 percent of the 28 million small businesses in America have fewer than 50 employees."

 

Health Care Exchanges. Starting in 2014, Small Business Health Options Programs - or SHOP exchanges - will be established. Through these exchanges, small companies with 100 or fewer employees will be able to pool their resources so they have greater buying power. This could result in tremendous savings for these small businesses. Also acording to Robb Mandelbaum of the New York Times, supporters of health care reform legislation predict that health costs for small businesses will drop by 20 to 30% and the current inequity between what small and big businesses pay for health care will be lessened.

March 9, 2010

Moratorium on IRS Tax Shelter Penalties for Small Business Retirement Plans

The IRS recently extended--for the second time--a moratorium on collecting penalties for failing to report certain transactions considered tax shelters by the IRS. Caught in the IRS tax shelter snare are small business owners who paid into certain retirement accounts (namely 412(i) and 419(e) plans), even though the provision was intended to go after big corporation and wealthy individuals. As reported by Margaret Collins in a recent Business Week article, the IRS moratorium will suspend penalties on individuals who received less than $100,000 in savings from the unreported transactions and under $200,000 for other taxpayers. "Some of these businesses were assessed tax penalties as high as $300,000 per year but received a tax benefit for as little as $15,000 from the transaction," according to Senator Charles Grassley, an Iowa Republican. There is proposed legislation that would make the penalty proportional to the tax benefit received.