Web app Casamatic LLC, which recently launched in the Phoenix area, provides tech-savvy prospective home buyers with a unique look at the home buying process. The app uses a 10-question survey to generate a customized list of possible homes for the user; read more here. The makers of Casamatic LLC hope to partner with local real estate agents in this venture.
Among the many challenges that women entrepreneurs face, one of the most difficult, according to Nina Vaca, is access to capital. The female CEO of Pinnacle Group explores this and other hurdles women encounter in her interview with Marcus DiNitto. Ms. Vaca founded the Pinnacle Group in 1996 with just $300 and broke the billion-dollar mark in less than 20 years. Read more here.
In a business world of ever growing flexibility, video conferencing will come to be utilized more and more by businesses of all sizes. With the convenience will come some challenges. Here's an interesting piece on, not only video conferencing technology, but also proper etiquette when conducting virtual meetings.
From vendors to clients, allowing your business to depend on others' financial stability can be disastrous. Levi King shares four helpful tips for protecting your business from outsiders' financial issues.
According to national mortgage firm HSH.com, metro Phoenix is the 8th most affordable large city in the United States for purchasing a home. A salary of $44,000 per year will allow a buyer to purchase a $221,000 home.
If you do any of these things, you may very well be a genius: http://elitedai.ly/1Tt8a1M
In agreement with other recent news, Michael Orr, housing expert with the Center for Real Estate Theory and Practice at Arizona State University, found that December 2015 was the best month for new home sales in the Phoenix region in over 7 years -- since May 2008. This doesn't mean that a large quantity of inexpensive homes were sold -- the median home sale price actually increased 9.2 percent from the December 2014 figures. Peoria, then Mesa and Gilbert lead the Valley in number of new home closings.
When the real estate market crashed 7 years ago, many home builders were forced to stop building, leaving spaces of vacant land throughout the Valley. Now, according to housing analysts RL Brown Housing Reports, new home building permits are up and new home prices are down, which could be great news for both builders and those seeking to buy a new home.
An interesting piece about the importance of the middle aged entrepreneur moving forward. Read more...
It happens all too often -- an individual intends to update his or her estate plan, but procrastinates and then passes away, leaving assets to be distributed according to outdated wishes. Guest writer and attorney Louis Silverman shares with the Arizona Republic some insight on why it's not sufficient to state your wishes verbally. The lesson here is to update your estate plan - in writing - as soon as your wishes change.
Three real estate investors and developers who have historically focused on the East Valley are now moving to the West Valley hoping to have similar success building and renting townhomes. Darryl Berger, Matt Blank and Samuel Blank of BB Living have purchased over 100 lots in each of Verrado in Buckeye and Vistanica in Peoria, as told by the Phoenix Business Journal.
By the end of March of this year, two companies - Pekham Inc. and HealthPort Technologies - are expected to hire a combined total of 850 employees. The companies both leased offices at Metro North Corporate Park near the I-17 and Thunderbird.
HSBC has reached a $470 million settlement as a result of its mishandling of loans and foreclosures. A portion of the funds will be available to Arizona borrowers to obtain payments and funds toward loan modifications.
This past Tuesday, the Arizona House Committee on Rural and Economic Development agreed to remove the requirement that liquor stores must maintain a 300-foot buffer zone from schools and churches. The decision was objected to by neighborhood activists but considered a positive for retailers, including Circle K Corp.
If you're a business owner contemplating selling your business in 2016, you might want to consider these questions posed by Andy Kocemba. From timing to emotional readiness, Kocemba brings to attention a number of items worth consideration before making this difficult decision.
Home affordability in the Phoenix area is a growing concern. There is good news, however; according to mortgage website HSH.com, an individual must earn just this annual salary "in order to afford the median-priced home in the Valley."
It's easy for small business owners to make mistakes that can expose them to legal risks. Here's a short list of common mistakes and how you can avoid unintentionally assuming liability risk.
1. Not Starting a Business as a Limited Liability Entity
If you start your business as a general partnership or sole proprietorship instead of a limited liability entity, not only are your investment in the business and the business assets at risk in the event of a lawsuit or other problem, but so are your personal assets. It is important to separate and protect your personal assets from your business by forming an LLC, corporation or even a limited liability partnership.
2. Not Having Good Written Agreements
It is important to put all your business agreements in writing and to be sure that those written agreements clearly define the roles/obligations/duties of each party as well as the remedies available if either party violates any of the terms of the agreement. This is essential not only for your contracts related to goods and services, but also for your contracts with your business partners.
Doing business with friends, family and lovers is a common practice, but fraught with potential problems. It is vital for business partners to discuss and clearly define in a written agreement issues such as:
Consider what might happen if the other party fails to fulfill its obligations, or if the business fails - or is wildly successful. Your written agreement with your business partners should protect everyone's interest when changes occur.
3. Not Treating Your Business as a Separate Legal Entity
In order to preserve the limited liability protection that your LLC or corporation provides, be sure to maintain good books and records and never comingle business and personal funds. This doesn't mean that you can't pay money on behalf of the business from your personal account, but document and track each transaction. Don't pay personal expenses directly from business funds or treat the business like your personal ATM.
If your company is organized as a corporation, you must observe additional legal formalities so learn what the law requires and be sure to meet the minimum requirements. If you don't observe these rules you run the risk that a court might remove the limited liability protection and allow a judgment creditor to go after your personal assets.
4. Not executing Contracts with Customers/Vendors/Landlords/Renters in the Name of your Entity
Make sure that all of your written contracts are executed in the name of your entity and never by you personally. Your company should be the party to the contract and when you sign, be sure to indicate that you're signing on behalf of your company. If you fail to observe these rules, you lose the limited liability protection for which you formed your legal entity.
5. Setting Unclear Expectations and Rules for Employees
If your employees are "at will" employees, which means they can quit or be terminated at any time without exposing your business to liability, be sure to have them sign something acknowledging their understanding of this employment status. Inform your employees that discrimination, sexual harassment, and other illegal acts won't be tolerated, but be careful when preparing employee handbooks because they are often treated as an enforceable contract by Arizona courts.
6. Treating Independent Contractors Like Employees
Use caution in how you deal with independent contractors. The IRS provides detailed information and a multiple point test to determine whether the independent contractor you've hired is actually a W-2 employee in disguise (see, for example: http://www.irs.gov/pub/irs-pdf/p15a.pdf). It is important to review that test and understand the legal risk and consequences of not complying with the rules related to independent contractors. In addition, Arizona has its own set of rules related to Workers' Compensation insurance coverage (see A.R.S. Section 23-902).
7. Ignoring Intellectual Property, Disclosure and Solicitation Issues
Whether you realize it or not, your company likely has intellectual property issues that may be important to the future success of the business and which should be protected. For example, do you require your employees and consultants to sign confidentiality and non-disclosure agreements? How about invention assignment agreements? Have you registered for a trademark for an important company logo or product? Are your trade secrets adequately protected? Do you have key employees sign non-compete/non-solicitation agreements so as to avoid a scenario in which an employee leaves your company, starts an identical business nearby, and takes your customers and other key employees with them?
8. If At All Possible, Stay Out of Court
The out-of-pocket cost of litigation, which also drains management attention, time, and energy, is far higher than most small businesses can afford. Try to remove the emotion when you deal with disputes with business partners or third parties, and find a business solution or compromise whenever possible. If you must go to court, be sure you have good legal representation and, if possible, consider settling with the other party when the opportunity presents itself.
9. Realize that Legal Ignorance is Not Bliss
Ignorance of the law is no defense against breaking it. Yes, there are lots of rules to follow and it's understandable that you may have been uninformed about some of them, but it's important to educate yourself on the essentials.
Just as you need to know some basic accounting, marketing, and sales techniques, you need at least a passing familiarity with:
10. Never go naked into action
Doing business without a good business attorney (as well as financial, tax and insurance advisors) on call is like ignoring a hurricane that's coming your way: you're inviting trouble, even devastation, by turning a blind eye to the potential danger. Issues related to organizing and running a business are complex, with far-reaching implications. You can't expect to possess the expertise needed to understand all of those issues or know what you need to do to protect yourself. You should, on the other hand, build relationships with the professionals who can look out for your interests and help keep you on the right path.
The Phoenix Business Journal has announced its list of 25 individuals worthy of recognition as the most admired leaders of 2014, as well as a lifetime achievement honoree. Read more...
As America limps out of the deepest economic recession since the Great Depression, the importance of small business has never been more evident than it is today. Stronger fundamentals and a shifting mindset may be setting up the ideal scenario for wannabe entrepreneurs.
Entrepreneurs are very much the backbone of our economy and it seems like more people, young and old, are hoping to claim their slice of the American dream. Baby Boomers who have had full careers in all corners of society are ready to try something new. The reality that there is simply less security in both the private and public sectors than in decades past has many feeling as if they’re on a bubble anyway. Why not take the plunge? And younger people are feeling less compelled to enter the rat race on anything but their own terms. With so much ambition and creativity abounding, we could be approaching an unprecedented resurgence of small business in America.
If a traditional storefront or office isn’t realistic for some startups, the burgeoning presence of the internet as a marketplace has created many more opportunities for those wishing to start a business. No longer are traditional brick and mortar settings required for many businesses and services to operate. According to internet commerce consulting firm Invesp, 10% of all retail sales in America will be of the online variety by 2017. All indications are that online commerce is set to explode on a global scale. This could be considered a modern day gold rush.
One more advantage that today’s entrepreneurs have is internet marketing. With the advent of social media, small business has literally seen a leveling of the playing field. Suddenly the little guy can gain access to millions of potential customers. Every day there are seemingly more ways to connect with each other…more ways to network and let people know who we are and what we offer.
There’s no doubt this is an exciting time to be an entrepreneur and this is a good thing. For America to thrive and flourish as we advance through the 21st century, it will have to be the entrepreneur that carries her forward.
All businesses, large and small, must choose an organizational structure that meets the company's needs. The decision regarding which business structure is best for your business should be made after consultation with an attorney and accountant. In determining the proper entity choice you should consider issues regarding tax, liability, management, continuity, transferability of ownership interests, and formality of operation.
Brief Overview of Organizational Forms
In the past, business planners were faced with a dilemma in choosing between only two organizational forms: corporations and partnerships. Partnerships offer certain tax benefits, but the partners themselves are responsible for the debts and obligations of the other partners. Corporations, on the other hand, tend to have additional tax burdens, but give the corporation's officers, directors and shareholders protection from liability. Today, however, there are a number of additional organizational forms, which offer solutions to this predicament.
A sole proprietorship is the business form most commonly used when a business has only one owner. In a sole proprietorship, a single individual owns all the business assets and is liable for any business debts. Proprietorships are usually small business enterprises, with capital demands being met by the owner and with little or no need for outside investors.
A corporation is the most popular choice of businesses seeking investor capital. Corporations are required to pay federal, state and, in some cases, local taxes. An Arizona corporation is created by filing Articles of Incorporation with the Arizona Corporation Commission. A corporation is distinct from its owners, or "shareholders," and is treated as a separate "person" under the law with the characteristics of limited liability, centralization of management, perpetual duration, and ease of transferability of ownership interests. The corporation itself, not the shareholders, is liable for the corporation's debts. Furthermore, absent wrongdoing on their part, officers and directors are not personally liable for corporate debts.
Note regarding C Corporations versus S Corporations:
Many people believe that there are two types of corporations: “S” corporations and “C” corporations; however, this is incorrect. The name "C corporation" is derived from the fact that regular corporations are taxed by the Internal Revenue Service under subchapter C of the Internal Revenue Code. An S corporation is organized and operated just like a regular corporation except for the special treatment afforded it under subsection S of the federal Internal Revenue Code.
With some limited exceptions the S corporation is not taxed at the corporate level. Instead it is permitted to pass income and losses through to its shareholders who report the income on their federal tax returns. A business must meet certain eligibility requirements to qualify for incorporation as an S corporation. S corporation status is established under federal income tax law and, therefore, is not necessarily available for purposes of state income tax law.
So, how do you determine whether a C corporation or S corporation is best for your business? You should consult with your tax advisor about the best tax election for your business, but here are some common situations that may also factor into your decision:
A "C corporation" might be the right business type for you if:
An "S corporation" might be the right business type for you if:
Limited Liability Company
A limited liability company (LLC) is another type of business formation designed to protect its owners from personal liability for the debts of the business. The LLC is not a partnership or a corporation but rather a hybrid of the two that has the benefits and advantages of both a corporation and a partnership but few of the disadvantages of either. An Arizona limited liability company is created by filing Articles of Organization with the Arizona Corporation Commission. Aside from this formality, the limited liability company can be structured to operate and/or taxed as a sole proprietorship, partnership or a corporation, depending upon the wishes of its owner(s). An owner of an LLC is called a "member."
An LLC might be the right type of business for you if:
A general partnership is the simplest form for a business to take when two or more people own the business. A partnership exists whenever two or more people co-own a business for profit and share in the profits and losses of the business. A partnership arises automatically whenever this arrangement exists, and no further formalities are necessary. Partnerships themselves pay no taxes; instead, the business "passes through" any profits or losses to its partners who report them on their personal tax returns. Because partnerships entail more than one person in the decision-making process, development of a legal partnership agreement which sets the ground rules for the partnership is important.
Importantly, A general partnership offers no liability protection to the partners. Each partner is personally liable for the partnership's debts and all the partners are liable for debts and obligations resulting from the wrongful acts of another partner if that partner acted in the ordinary course of partnership business or acted with the authority of the other partners.
The limited partnership is a variation of the general partnership. In a limited partnership there are two types of partners: general partners and limited partners. The general partners are the partners who manage the business and have the power to bind the partnership. Only the general partners are personally liable for the partnership debts. The limited partners are essentially passive investors. They do not participate in the management of the partnership, they may not bind the partnership and are not personally liable for the debts of the partnership. The formation of both the limited liability partnership and the limited partnership requires special formalities, such as filing with the appropriate state official.
Limited Liability Partnership
The limited liability partnership is another variation on the basic partnership model that evolved mainly in response to the desire to reduce the exposure to personal liability for the obligations of the partnership. In order to limit the liability of its general partners, a general or limited partnership may opt to register as a limited liability partnership. The limited liability partnership resembles a regular partnership in all respects except with respect to the allocation of liability. In a limited liability partnership, each partner is protected from personal liability arising from negligence, malpractice or improper conduct of other partners, agents or employees of the partnership, but not from his or her own actions of negligence, malpractice or improper conduct.
Choosing Your Business Structure
The advantages and disadvantages of the organizational forms described above must be considered when choosing the appropriate organizational form. For one, certain structures are more expensive to set up and maintain than others, and more formal steps may be required to establish them. Corporations must comply with strict statutory formalities regarding their creation and continued existence. In Arizona, corporations must file annual reports, whereas LLCs are not required to do any ongoing filing after their formation. Tax rules also must be observed. For example, failure to continually meet the requirements for S corporation eligibility will result in termination of S corporation status and thus result in potentially serious tax consequences. On the other end of the spectrum, general partnerships require no formalities whatsoever.
The management and control of the business is another big consideration. Corporations are not actually operated by the owners (shareholders) of the business. Instead, the shareholders elect a board of directors and officers to manage and control the business. By contrast, the partners in a general partnership have complete control over business operations, as does the sole proprietor. The general partners manage a limited partnership, and an LLC may be managed either by its members or by managers selected by the members.
Personal liability for the obligations of the business is critical. The protection of the owner's personal assets from the claims of business creditors is generally not available to a general partner in a limited partnership, all partners in a general partnership and the owner of a sole proprietorship. In these business forms the owners are all subject to unlimited personal liability for the debts of the business. This means that the owner's personal bank accounts, investment accounts, real and personal property and other assets are at risk.
Because different organizational forms are taxed differently, the tax consequences of the chosen organizational form should be explored. As a separate entity, the C corporation is subject to what is known as "double taxation." First, the corporation pays income tax on its earnings. Then, if the corporation chooses to distribute its after-tax income to the shareholders in the form of dividends, the shareholders must pay tax on that income as well. The same income is taxed twice at the corporate and at the shareholder level. Money passing through partnerships, limited partnerships, limited liability companies and S corporations are not taxed as separate legal entities. Instead, the profits and losses of the business flow through to the owners themselves. There are many other factors to be considered, such as, how the owners will be compensated, whether benefits will be offered to owners and employees, whether there will be more than one class of stock, and, whether there will be restrictions on the transferability of ownership.
The decision as to which organizational form to use depends on numerous factors, including the limitation of personal liability of the owners, tax consequences, and the roles of the various owners. An experienced business attorney can help you decide which business structure is right for you in light of your specific business needs.
As a small business owner and a business attorney, Jeana Morrissey has the experience to help you sort out these factors and form your business entity. Contact us today by email or by phone at (602) 556-1902.