by Brenden | Nov 13, 2023 | Business Law
The Corporate Transparency Act (CTA) is a new law that was recently passed by Congress and is set to take effect in the near future. This law aims to increase transparency and accountability in the business world by requiring certain companies to disclose their beneficial ownership information to the government. In this blog post, we will discuss what every business needs to know about the CTA and how it may affect them.
Requirements
The CTA requires certain companies to disclose information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. Beneficial ownership refers to the individuals who ultimately own or control a company, as opposed to the individuals who may appear on paper as the owners or shareholders. This information will be kept confidential and will only be accessible to government agencies for specific law enforcement and national security purposes.
The CTA applies to companies that are formed under the laws of a U.S. state or Indian Tribe, and that are engaged in business, or that are formed for the purpose of engaging in business. This includes corporations, limited liability companies (LLCs), and other similar entities. It also applies to companies that are formed by filing a public organic record with the Secretary of State, such as a certificate of formation or articles of incorporation.
Important Things to Know
One of the most important things that businesses need to know about the CTA is that they may be required to disclose their beneficial ownership information to the government. This means that they will need to gather and provide information about the individuals who ultimately own or control the company. This may include information such as their name, address, date of birth, and government-issued identification number.
Another important thing for businesses to know is that the CTA imposes penalties for noncompliance. Companies that fail to disclose their beneficial ownership information as required by the CTA may be subject to fines and penalties. Additionally, individuals who knowingly provide false or fraudulent beneficial ownership information may be subject to fines, imprisonment, or both.
It is also important to note that the CTA does not require all companies to disclose their beneficial ownership information. However, it is essential to be aware of the law and its requirements in case your company falls under the scope of this law.
Conclusion
In conclusion, the Corporate Transparency Act is a new law that aims to increase transparency and accountability in the business world by requiring certain companies to disclose their beneficial ownership information to the government. Businesses need to be aware of the law and its requirements, as they may be required to disclose their beneficial ownership information to the government. Noncompliance may result in penalties and fines. Businesses should consult with their legal counsel to determine their obligations under the CTA and to ensure compliance.
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by Brenden | Nov 7, 2023 | Business Law, Small Business
S-corporations and C-corporations are two different types of business structures that are recognized under U.S. federal tax law. Both types of corporations provide limited liability protection to their shareholders, which means that shareholders are not personally liable for the company’s debts and liabilities. However, there are some key differences between the two types of corporations that can have a significant impact on how the business is taxed and operated.
What’s the Difference?
One of the main differences between S-corporations and C-corporations is the way they are taxed. C-corporations are considered to be separate entities from their shareholders, and they are subject to corporate income tax on their profits. In contrast, S-corporations are considered to be “pass-through” entities, which means that the company’s profits are passed through to its shareholders and taxed at the individual level.
This pass-through taxation can be a significant advantage for S-corporations, as it can help to avoid the “double taxation” that can occur with C-corporations. For example, if a C-corporation earns $100,000 in profits, it would be taxed at the corporate level, leaving $70,000 after corporate taxes. If the company then distributes the remaining $70,000 to its shareholders as dividends, the shareholders would then have to pay personal income tax on those dividends. With an S-corporation, the $100,000 in profits would be passed through to the shareholders and taxed at the individual level, avoiding the additional corporate tax.
Another difference between S-corporations and C-corporations is the number of shareholders they can have. S-corporations are limited to 100 shareholders, while C-corporations can have an unlimited number of shareholders. This can be a significant consideration for companies that are planning to go public or that have a large number of investors.
There are also some restrictions on the types of shareholders that S-corporations can have. For example, S-corporations cannot have non-resident alien shareholders, and they cannot have more than one class of stock. This can limit the flexibility of the business in terms of raising capital and issuing stock options.
Advantages
In terms of flexibility and management, C-corporations can have a board of directors, while S-corporations cannot. However, S-corporations can have more flexibility in terms of profit distribution. Unlike C-corporations, S-corporations are not required to distribute profits equally among shareholders, and they can choose to retain profits in the business if they wish.
Another advantage of S-corporations is that they are considered to be “Small Business Corporation” and they can enjoy certain tax benefits which are not available to C-Corporations.
Disadvantages
One of the main disadvantages of S-corporations is that they can be more complex to set up and maintain than other types of business structures, such as sole proprietorships or partnerships. They are also subject to more regulatory requirements, such as holding annual meetings and keeping detailed records of the company’s financial and operational activities.
C-corporations also have their own advantages and disadvantages. They are considered more stable and with more prestige. They can also raise capital more easily and attract more investors, but it comes with the trade-off of double taxation.
Final Thoughts…
In conclusion, whether to choose an S-corporation or C-corporation depends on the company’s specific needs and goals. S-corporations can be a good option for small businesses that want to avoid double taxation and have a relatively small number of shareholders. However, they may not be the best option for companies that are planning to go public or have a large number of shareholders, as they have restrictions on the number of shareholders and types of shareholders they can have. C-corporations, on the other hand, may be a better option for larger companies that plan to raise capital and have more flexibility in terms of profit distribution and management structure. It’s important to consider all aspects of each type of corporation, weigh the pros and cons, and seek professional advice to determine which structure best suits your business.
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by Brenden | Oct 25, 2023 | Business Law
An IRS Form 1099-NEC, or Nonemployee Compensation, is used to report income that was paid to individuals or unincorporated businesses that are not considered employees. Employers are required to file this form for certain types of payments made during the tax year.
Why should an employer file a 1099-NEC?
There are several different situations where an employer may be required to file a 1099-NEC. One common scenario is when an employer pays an independent contractor for services rendered. This can include everything from construction work to consulting services. In this case, the employer would be required to file a 1099-NEC for any payments made to the independent contractor that exceed $600 during the tax year.
Another situation where a 1099-NEC may be required is when an employer pays rent to a landlord who is not considered an employee. If an employer pays rent to a landlord that exceeds $600 during the tax year, they would be required to file a 1099-NEC for that landlord.
Employers are also required to file 1099-NEC for miscellaneous income. This could include payments made for prizes and awards, as well as other types of non-wage income. In this case, the employer would be required to file a 1099-NEC for any payments made to the recipient that exceed $600 during the tax year.
It’s important to note that the requirement to file a 1099-NEC is not based on whether or not the recipient is required to pay taxes on the income. Instead, the requirement is based on the amount of money paid to the recipient. As long as the payments made by the employer exceed $600 during the tax year, a 1099-NEC will be required.
When to file the 1099-NEC form
Employers are required to file 1099-NEC forms by January 31st of the year following the tax year in which the payments were made. This means that for payments made in 2020, the forms must be filed by January 31, 2021. Employers must also provide a copy of the form to the recipient by January 31st as well.
Failure to file a 1099-NEC when required can result in penalties imposed by the IRS. The penalty can range from $50 to $280 per form, with a maximum penalty of $1,112,500 per year for small businesses, and $5,562,500 for larger businesses.
Conclusion
In summary, an IRS Form 1099-NEC is used to report income paid to individuals or unincorporated businesses that are not considered employees. Employers are required to file a 1099-NEC when they pay an independent contractor, rent or any other miscellaneous income that exceeds $600 during the tax year. Forms must be filed by January 31st of the year following the tax year in which the payments were made, and failure to file can result in penalties imposed by the IRS.
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by Brenden | Oct 3, 2023 | Business Law
For those unaccustomed to legal services offered on a flat fee basis, the prospect might appear novel and even revolutionary. Traditionally, the legal industry has been associated with hourly billing, leaving clients wondering about costs and hesitant to seek assistance. However, the emergence of flat fee lawyers brings forth a wave of benefits that cater directly to your needs and comfort. Let’s explore why embracing this modern approach is a game-changer.
What is a Flat Fee Lawyer and Why Use One?
A flat fee lawyer, also known as a fixed fee lawyer, is a legal professional who offers legal services at a predetermined, fixed cost for a specific scope of work. Unlike the traditional hourly billing model, where clients are billed based on the amount of time the lawyer spends working on their case, a flat fee lawyer charges a set fee for a particular legal service or task. The benefits of using a flat fee lawyer are numerous.
- Transparent Cost Structure: Traditional hourly billing can often leave clients anxious about unexpected costs. Flat fee lawyers, on the other hand, offer a clear and upfront cost structure. This means you’re fully aware of the financial commitment from the outset, allowing you to plan your budget effectively without fearing hidden expenses.
- Predictable Budgeting: With flat fee services, you know exactly what you’re paying for the legal services you need. This predictability empowers you to allocate resources more efficiently, ensuring that you’re financially prepared for your legal matters without the stress of fluctuating hourly rates.
- Efficiency and Focus: Flat fee lawyers work with the goal of delivering results rather than stretching hours. This incentivizes them to work diligently and swiftly, focusing on achieving the best outcome for your case. The emphasis is on providing value-driven solutions instead of running up the clock.
- Tailored Services: Contrary to the notion that a flat fee model might be restrictive, it actually encourages lawyers to offer tailored services. Your lawyer will work closely with you to understand your unique needs, ensuring that the legal assistance provided is precisely what you require.
- Collaborative Approach: Flat fee lawyers thrive on building strong client relationships. Their success is intertwined with yours, and they are motivated to collaborate effectively, communicate transparently, and work alongside you to resolve your legal challenges.
- Eliminating Uncertainty: Legal proceedings can be inherently uncertain, but your financial commitment doesn’t have to be. Flat fee services provide clarity and peace of mind, allowing you to focus your energy on the legal matters at hand rather than worrying about billing intricacies.
- Diverse Expertise: Flat fee lawyers often cover a broad spectrum of legal areas, from business and contracts to estate planning and real estate. This diversity ensures that you have access to legal expertise across different domains without the stress of varying billing methods.
In embracing the benefits of flat fee lawyers, you’re opting for a model that prioritizes transparency, efficiency, and client-centricity. As you venture into this innovative approach, you’ll discover that the legal landscape can indeed be navigated with a more streamlined, cost-effective, and results-driven approach, tailored to your individual needs. Explore the realm of flat fee legal services and experience firsthand the advantages they bring to your legal journey.
Flat Fee Lawyers at Brenden Kelley Law
Embrace the future of legal services by exploring the world of flat fee lawyers. Say goodbye to the uncertainty of traditional billing and welcome the transparency, cost-efficiency, and personalized attention that the flat fee model provides. Contact us to discover how our experienced flat fee lawyers can partner with you on your legal journey. Take the first step toward a more accessible, predictable, and client-focused legal experience today.
by Brenden | Jul 25, 2023 | Business Law, Small Business
Small businesses are usually the most affected by inflation. This is because they have limited access to capital, bargaining power, and pricing power compared to larger corporations. Many small companies went out of business during the COVID-19 lockdown, and those who remained afloat barely made it through.
More recently, small business owners have had to contend with inflation driving up the cost of operations while also reducing consumer purchasing power. This has forced organizations to tighten their belts to ensure they don’t go out of business. However, there’s finally some good news on Main Street regarding inflation, and the recent economic data gives small business owners the confidence to keep going.
How Inflation Impacts Small Businesses in Particular
Inflation refers to the sustained increase in the general price level of goods and services in an economy over a period of time. It means that, on average, prices are rising, and each currency unit can buy less than it previously could. Inflation occurs when there is an imbalance between the supply of money and goods and services in an economy.
Inflation impacts every sector but significantly affects smaller businesses due to their limited resources to combat rising costs. In 2022, the National Federation of Independent Business reported that nearly 90% of small businesses stated that inflation unfavorably impacted their business.
Here are some ways in which inflation can impact small businesses:
Rising Costs
Inflation often leads to an increase in the prices of goods and services. Small businesses, especially those operating on narrow profit margins, may struggle to absorb these rising costs. When overhead costs rise, small businesses are forced to either increase their prices, which could reduce customer demand, or find ways to cut expenses elsewhere, such as reducing staff or compromising the quality of their products or services.
Reduced Consumer Spending
As the general price level rises due to inflation, consumers’ purchasing power decreases. This can result in reduced spending on non-essential items, negatively affecting small businesses that rely heavily on discretionary consumer spending. Small retailers, restaurants, and entertainment venues may experience a decline in sales as consumers prioritize essential purchases.
Financing Costs
Inflation can affect borrowing costs, including interest rates on loans and lines of credit. Small businesses that rely on external financing may face higher interest expenses, making it more expensive to expand operations, invest in new equipment, or undertake other growth initiatives. This can limit their ability to compete with larger enterprises with more substantial resources.
Inventory Management Challenges
Inflation can create difficulties in managing inventory for small businesses. If prices rise rapidly, companies may face challenges in accurately forecasting future demand and determining optimal inventory levels. Overstocking could lead to increased carrying costs and potential losses if demand doesn’t meet expectations while understocking could result in missed sales opportunities and dissatisfied customers.
Wage Pressures
Inflation can create wage pressures as employees seek to maintain their purchasing power. Small businesses may face challenges in offering competitive wages to attract and retain talent, especially if they are unable to increase prices or generate sufficient revenue growth. This can lead to higher labor costs and potentially impact profitability.
Good News for Small Businesses
Most people view inflation as the Big Bad, and it is easy to see why. If you had $300,000 in your savings account in 2005, that amount wouldn’t go as far in 2023. Inflation is always happening, so by understanding this, small business owners can find ways to cushion themselves during dire times.
The Federal Reserve tries to maintain a 2% inflation rate per year. This is because anything lower than that may weaken the economy. The inflation rate in June 2022 was 9.1%. The good news is that this number has been steadily decreasing since November, and the future looks somewhat brighter, especially for small business owners.
According to the Consumer Price Index, the inflation rate in November 2022 was 7.1%, and by the time the year was closing out, it had dropped even further to 6.5%. A June 2023 CPI report confirms inflation to have cooled to 3%, which offers some great news to small businesses especially.
Small business owners are seemingly optimistic about the economy, with 25% of companies planning for capital expenditures in the next 3–6 months. This is a 4% increase from 21% at the start of the year and a 6% increase from 19% following the March bank failures.
19% of small business owners from another survey said they intend to create new jobs in the coming three months. 40%, up from 34% last year, describe their current conditions as good, while 46% report they expect revenue to increase in the next year.
Bad News for Small Businesses
Despite the uptick in optimism, small business owners still view inflation, supply chain disruptions, and labor quality as their top concerns. While companies are hiring, an NFIB survey reported that 44% of owners were struggling to fill the reported job openings. 63% of owners said they were hiring in May, but nearly 90% said they couldn’t find qualified applicants for open positions.
Small business owners may also find themselves with another situation on hand as a UPS strike looms. With the contract between UPS and 340,000 UPS workers represented by the Teamsters Union expiring on July 31, employee pay remains a sticky point. Union workers account for over half of UPS’s workforce. Therefore, a strike could be devastating for the company and small businesses relying on the carrier.
The looming strike comes 25 years after a similarly larger strike by 185,000 workers brought the courier to a standstill. The strike, which lasted for 15 days, slashed package deliveries and put a strain on the US Postal Service and FedEx, who had to pick up the pace, effectively paralyzing businesses nationwide.
If a deal is not reached by the deadline, the strike will cause broader supply chain disruptions, and small business owners may need to find alternative ways to ship their last-mile deliveries to cope.
5 Tips to Help Small Businesses Mitigate the Impact of Inflation
Monitor and Adjust Prices
Regularly review your pricing strategy and assess the impact of inflation on your costs. Consider adjusting prices accordingly to maintain profit margins. However, it’s essential to strike a balance between maintaining profitability and remaining competitive. Communicate any price adjustments transparently with your customers to manage their expectations.
Manage Costs
Analyze your cost structure and identify areas where you can reduce expenses or find efficiencies. Look for opportunities to negotiate better deals with suppliers, streamline operations, and optimize resource allocation. Implement cost-saving measures without compromising the quality of your products or services.
Diversify Suppliers
Explore alternative suppliers and sources for materials or inputs. This can help you mitigate the risk of supply chain disruptions and price fluctuations caused by inflation. Having multiple suppliers can provide flexibility and negotiation power, enabling you to secure better pricing terms.
Improve Inventory Management
Efficient inventory management is crucial during inflationary periods. Analyze your sales patterns, customer demand, and lead times to optimize your inventory levels. Avoid overstocking or understocking, as both can lead to financial losses. Consider adopting just-in-time inventory systems or implementing inventory management software to improve accuracy and responsiveness.
Enhance Customer Value
Focus on delivering exceptional value to your customers to retain their loyalty and justify your pricing. Identify ways to differentiate your products or services, such as improving quality, offering unique features, or providing outstanding customer service. Build strong relationships with your customer base and communicate the value proposition effectively.
Explore Alternative Financing Options
If inflation increases borrowing costs, explore alternative financing options. Seek out financial institutions or lenders offering competitive rates or consider alternative financing methods like crowdfunding or peer-to-peer lending. Maintaining a good credit history and financial records increases your chances of securing favorable financing terms.
Enhance Operational Efficiency
Continuously seek opportunities to improve your operational efficiency. This can include automating processes, investing in technology, cross-training employees, or optimizing workflows. By reducing waste and increasing productivity, you can mitigate the impact of rising inflation-related costs.
Stay Informed
Stay aware of economic trends, inflation rates, and market conditions. Regularly monitor industry news, economic indicators, and government policies that may impact your business. Stay connected with professional networks and business associations to gain insights and access resources that can help you navigate inflationary environments.
Conclusion
While inflation continues to pose significant challenges, the recent economic data on inflation brings a ray of hope for small business owners. As small business owners, staying adaptable, proactive, and open to embracing new strategies and technologies that can drive resilience and sustainability is important.
If you’re a small business owner concerned about navigating the challenges of inflation, reach out to Brenden Kelley Law. Our experienced team of attorneys will provide the legal guidance and support you need. From reviewing contracts and leases to advising on pricing strategies and cost management, we have the expertise to help safeguard your business against the impacts of inflation. Don’t let uncertainty hold you back. Contact us today, and let us help you secure a brighter future for your small business.
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