Andrew Ewalt's Law Blog

Hiring New Employees

Things to consider when hiring new employees:

Eligibility for employment. You must verify that each new employee is legally eligible to work in the United States. This will include completing the U.S. Citizenship and Immegration Services (USCIS) Form I-9, Employment Eligibility Verification.  You can get the form from USCIS offices or by calling 1-800-870-3676 or visit the USCIS Web Site at www.uscis.gov.

New hire reporting.  You are required to report any new employee to a designated state new hire registry. Many states accept a copy of Form W-4 with employer informaton added.

Income tax witholding. Ask each new employee to complete the 2007 Form W-4

Name and social security number.  Record each new employee's name and number from his or her social security card.  Any employee without a social security card should apply for one.

Protecting the Family Business or Farmers

Estate taxes can become a very real problem when an estate includes a farm or real estate used in a family business. Since federal estate tax have been repealed for only one year (2010), and Connecticut has recently implemented it own separate estate tax it is smart to plan now. 

For federal estate-tax purposes, land and buildings have to be valued at their “highest and best use.”  Thus, a farm that could be sold to a developer for more than it is worth, as a farm generally must be assessed at the higher fair market value. Unless the farmers family has another source of cash to pay the tax this may mean the farm will have to be sold in order to create the dollars necessary to pay Uncle Sam.

Proper planning now can help the farmer get around this problem.  If you are in this situation please call me now so we can advise you of any steps you should be taking to protect your family business or farm.

Business Sucession Planning

Statistically, only thirty percent of family owned businesses survive from the founding generation to the next generation. Beyond that generation the success is even worse.

The primary reason for the lack of success rests on the fact that most business owners fail to make plans, have the wrong plan or have not updated the plan. 

A comprehensive estate plan should include planning for the succession of the business. Here are some things to consider.

1.  If some children are active in the business and others are not, how do you treat everyone equally?

2.  If they business is to be sold to a third party how can the sale be structured to protect your family and loved ones?

3.  Will there be sufficient liquid cash in the estate to pay any death taxes or will the business have to be liquidated in order to raise the cash needed?

If you are concerned about the succession of your business it is very important to plan accordingly. 

Protect Your Business From Lawsuits

You might think that your business is unlikely to be sued.  But it could happen.

There are more then 70,000 civil lawsuits filed each day in the Unites States and most of them target small busniesses and individuals.

One easy way to protect yourself is with an umbrella policy which provides coverage above your primary insurance damage.  Umbrella insurance starts where your underlying general liability insurance limits are exceeded.

Here are some additional tips:

1. Taking the proper legal steps to make your business unattractive to those who may wish to sue. 
2. Prenuptial Agreements before marriage especially if one spouse-to-be has substantially more money than the other.
3. Shifting assets out of your name by using family limited partnerships. 
4. Employers should consider using binding arbitration and alternative dispute resolution agreements with all staff and those they do business with.
5. Warning customers of potential dangerous situations can also make it harder to get sued.

Tips To Avoid A Tax Audit

Its tax time again. Both individuals and businesses can be subject to the dreaded IRS audit.  Statistical only about 1.5% of all tax returns are audited each year. Here are some quick tips that might help reduce your chances of being audited (Note: These tips are not in any way a replacement for the advice of a qualified tax prepared. If you are concerned about an audit seek out the advice of your tax preparer or attorney.)

1.  Report all income

2.  Have proper documentation available

3.  Check your return for math errors

4.  If married file jointly

5.  Sign and file your return

6.  Be certain your personal information is correct

7.  Keep track of large money transfers

8.  Use deductions only when appropriate

Is Your Hobby Really A Business?

Is your hobby really a business?  The IRS may think it is. Once people start making money from their hobby, there may be a desire to deduct all of the hobby-related expenses.  If this happens the IRS may become very interested in the nature of the hobby because taxes may be due.

When the hobby generates some income it is generally okay to deduct actual hobby-related expenses up to the annual income the hobby generates.  There are a number of limitations so it is very important to discuss any deductions with a qualified tax professional.

Keep in mind that the IRS will not just take your word that the hobby is/isn’t a business.  Here are some questions to ask yourself:

1. Do you pursue the activity with the goal of making a profit?
2. Have you made a profit in three of the last 5 years?
3. Does your activity involve horse breeding, showing or racing?
4. Do you keep accurate books and separate your hobby and personal finances?
5. Do you spend a significant time conducting your hobby?
6. Does the hobby involve significant personal pleasure or recreation?

As stated before it is very important to speak with a qualified tax professional before determining the status of your hobby as a business.  If it is a business, besides the tax ramifications it may be important to consider protecting yourself by formalizing the business through the establishment of an entity like an LLC. 

Hobbies are a wonderful part of all our lives, and can become even more so as a business opportunity. However, it becomes very important to consider all of the tax and legal ramifications so that your hobby does not turn into your headache. 

Selecting The Best Employee

Employers beware!   It is very important to be careful when selecting the best candidate for a job opening – there are legal issues to consider when hiring an employee. 

Always treat all candidates for the same position equally and use objective, trust worthy tests that pertain only to skills relevant to the position. 

More and more employers are using test to help them determine which potential hire is best. Here are two examples:

1. Skill Test:  Having candidates take skill based tests confirms. That they have the skills they claim to have and show how well they compare to others in the field.

2. Personality Test:  Measuring traits like flexibility and ambition, personality test provide an indication of candidates’ interpersonal skills.

Protection For Key Employees

The business world can be very competitive. One of the worst things that can happen to a business is to lose a key employee.  That is why it is important to consider options for protecting your key employees.

What if a business owner or key employee where to die?  What process would be used to:

1.  Find, hire and train to take that employees place.

2. Pay bills to maintain the company's good credit rating.

3. Paying off business loans,  which lenders may call after the death of an owner/key employee.

4.  Make up for the loss of revenue caused by the subsequent disruption in the business.

One option is to purchase "Key Employee" life insurance. 

Trademark Infringement: Part 2

To often when protecting a trademark companies only focus on the bad acts of a direct infringer. However, what if it is discovered that other parties are continuing to infringe upon the trademark or other intellectual property.  Thus, it is very important to look beyond the direct infringement because courts have found secondary liability for trademark infringement. 

There are two factors to consider when attempting to prove secondary trademark infringement.

1.  Supply of a product or service.

2.  Knowledge of direct infringement. 

Example:  A mall owner could be found liable for infringement conducted by a vendor, even though the mall owner never bought or sold any of the products or services.

Trademark Infringement: Part 1

In order to prove trademark infringement it must be demonstrated that the trademark owner really owns the trademark and that the potential infringer's use of the mark (used to identify goods or services) causes a likelihood of confusion (confusion that their product is really the trademark owners product).  In other words will the consumer be confused as to the source of the goods or services.