Cava Faulkner

There are many reasons people decide to start their own business: to be your own boss, set your own hours, control the people and projects you work with. Yet the reality of business ownership isn’t quite as rosy—it’s one of the most stressful endeavors you’ll ever undertake.

While running your own company will inevitably have its maddening moments, some of the biggest stressors can be successfully managed if you know how to approach them. Here are three of the most unnerving parts of owning any business and how to handle them like a champ.

You’d think that running your own business would mean you’re in control of everything, with no one else telling you what to do, how to do it, or when to do it. And you’d be right—mostly. Paradoxically, by going it alone, you’re in control of everything and nothing at the same time.

With a steady 9-5 gig, you can pretty much count on consistent paychecks, predictable hours, a stable office location, and even regular vacations. But when you’re your own boss, consistency and predictability go out the window.

Dealing with inconsistent income can be a huge stressor, as you never know if you’re going to be able to pay your bills. What’s more, it’s often the case that if you’re not working, the business is not functioning, making things like days off and vacations seem like a fantasy.

Before launching a business, it’s crucial to have enough clients to ensure a fairly stable income. So it’s a good idea to keep your day job to pay the bills, while building a stable of regular projects on the side. Of course, there’s no guarantee that any clients will stick around forever, so it’s also prudent to set aside several month’s worth of savings to get you through the lean times.

And though it may be impossible to do in the beginning, make hiring a robust support staff a top priority, so you can eventually take time off when planned—or unplanned—events require you to step away from the driver’s seat.

Unpredictability and time management go hand in hand. Without a structured and enforced schedule to adhere to, it’s easy to get sidetracked by the day-to-day minutiae that comes with running a business.

Time management is arguably the most important skill for business owners to master, as not having enough time to handle key tasks will freak you out and wreck your business at the same time. It’s vital to establish an effective way to budget your time and then stick to a schedule as if your life depended on it (since it kind of does).

The first step to budgeting your time is to establish your top priorities and then set aside blocks of time each day/week/month strictly dedicated to those tasks. Focus on these items first and fit everything else in around them.

It’s also crucial to figure out the times of day you’re most productive and schedule your top tasks during these periods. Some people like to handle the most challenging items first, but others find their groove later in the day, so pay attention to your own energy and build your schedule around it.

Even if you’re one of those people who “live for their work,” if you don’t devote enough time to rest and relaxation both your work and life will suffer. Ironically, many people launch their own business specifically to have more time for themselves, but once you see what’s actually involved, you’ll often find the business is the one who owns you—not the other way around.

Having an effective work/life balance is the key not only to being effective at your job, but also being healthy and happy. Running a business can take a toll on your mental and physical health, and if you don’t find a proper balance, it can lead to literally fatal outcomes.

Like everyone else, you’ve probably been getting a ton of emails and online notices announcing that companies are updating their privacy policies and/or website tracking tools. So, what is the GDPR?

Although businesses do this from time to time as part of routine updates, practically all of the latest notices are aimed at complying with a new European Union (EU) law known as the General Data Privacy Regulation (GDPR).

Some of you probably don’t even know what GDPR is, and for those of you who do, I’m betting only a fraction of you have made serious efforts to comply with the new law.

The good news is—you’re not alone.

Surveys have shown that up to 90% of U.S. business owners are currently not in compliance with GDPR, which went into effect on Friday, May 25th. But just because only a few people are following the law doesn’t mean it’s something you should ignore.

With the maximum fines for non-compliance as high as 4% of your annual revenue or $24.6 million (whichever is higher), doing nothing could potentially devastate your business. But before you go into panic mode, realize that a lot of the hype surrounding the law has been overblown, particularly for small US-based companies.

The GDPR’s vague language, conflicting media reports, and fear-mongering from newly minted “GDPR consultants” have all fanned the flames of anxiety. Fortunately, we’ve thoroughly researched the GDPR, and we’re going to highlight our findings here to clarify what the new law is, who it applies to, and what—if anything—you should do to comply.

The first thing you should do is stop stressing! First of all, the EU regulatory bodies charged with enforcement have made it clear that excessive fines and other penalties will be a last resort, not the norm.

That said, if your company does business within the EU—even just collecting names and addresses—then you should become familiar with GDPR and possibly take some basic actions to ensure your company is in reasonable compliance.

In a nutshell, GDPR is aimed at enhancing EU citizens’ data protection and privacy rights. While the law is primarily designed to protect people’s personal data found online, it impacts all of the ways businesses collect and store customer data.

At its core, GDPR gives EU citizens the right to decide how their personal information is collected, stored, processed, and destroyed. According to GDPR, if you collect personal data from people living in the EU, your company must ensure that these customers:
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• can easily request access to their personal data
• can easily update their own personal information to keep it accurate
• can easily request deletion of their personal data
• can easily request that their data be delivered to themselves or a third party
• can easily object to profiling or automated decision-making that might impact them

Given its vast scope, GDPR is being touted as the world’s most sweeping privacy law. At the same time, because the law just recently went into effect, it remains to be seen how it will actually work when it’s put into practice and enforced.

If you collect and use this kind of information from EU residents, your company is technically required to comply with GDPR. If you don’t store such data on EU residents and don’t plan to in the future, the law doesn’t apply to your business.

At the very least, you may want to perform a basic data audit to see how much personal information your company is storing from EU residents. If EU residents don’t make up a significant portion of your customer base, you might simply choose to delete that data and stop doing business in the EU. Or you may decide to take the risk of non-compliance.

If you decide that you want to keep working with and/or marketing to customers in the EU, the level of your company’s compliance will need to be determined on an individual basis. One simple way this can be done is to complete a risk/reward analysis that looks at the costs of compliance, the risks your business faces from non-compliance, and the potential rewards compliance might offer. If you’d like our help with such a risk/reward analysis, call us to help you weigh the pros and cons for your particular business and discuss your compliance options.

It’s possible that small businesses with few EU residents in their database will not be targeted at all, and even if they are, they might simply receive a warning letter about future compliance. At this stage, however, it’s impossible to know for certain how GDPR will be enforced and whether such minimal collections of data will create a serious liability for US business owners.

Ultimately, GDPR is not intended to stop companies from marketing or processing personal data for aboveboard business reasons—it’s aimed at stopping companies from collecting and using individual data for shady purposes, a la Cambridge Analytica.

In the end, GDPR may turn out to be much ado about nothing, or it could transform the way countries, including our own, handle the privacy rights of their citizens—only time will tell. Until then, you should call us as your Creative Business Lawyer® to set up an appointment to discuss the law’s potential impact on your business. Armed with that knowledge, if and when the GDPR does impact your business, you won’t be caught unaware.

We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Schedule online today.

As its name suggests,  limited liability companies (LLCs) protect personal assets from debts and other business liabilities. But you may not be aware that LLCs can also offer tax savings. As an LLC, you have flexibility in choosing how you’ll be taxed. This allows you to reap a number of benefits unavailable to other business entities. This goes for both single-owner LLCs and those with multiple owners, also referred to as members or managers.

Here are a few of the biggest tax advantages available to LLCs:

LLCs are unique because the IRS doesn’t consider them separate entities for tax purposes, and in some cases, the IRS will not tax the LLC directly. Instead, the LLC’s members get to choose how they want to be taxed. Tax options include sole proprietorship, partnership, or as a corporation, and these options depend on how many people own the LLC.

Unless you choose to be taxed as a corporation, single-member LLCs are automatically taxed as sole proprietorships, while multiple-member LLCs are taxed as partnerships. The IRS considers these “pass-through” entities, meaning the business profit passes through the company directly to the owners and is taxed on the personal returns of the owners.

In such cases, your company doesn’t pay taxes at all. Instead, your share of the net business income is taxed on your personal tax return, along with the rest of your income. You’ll pay taxes based on your personal income tax rate, and depending on how much total income you earn, this may be less than the corporate rate.

Alternatively, you can also elect for your LLC to be taxed as an S-corporation. In this case, you will be responsible for paying payroll, plus payroll taxes, and  filing a tax return on behalf of the corporation (1120S). The good news about this way of doing things is that so long as you pay yourself a reasonable salary, you only pay payroll taxes on the amount of your payroll, not on your profit distributions from the company.

You will, of course, pay ordinary income tax on your profit distributions, but you save the 15.3 percent or so in payroll taxes. In contrast, when using an LLC taxed as a partnership or sole proprietorship, you will pay payroll taxes on all distributions to you from the LLC.

Again, the advantage of an LLC is its flexibility: You can qualify for the perks of multiple entity structures simply by choosing how you wish to be taxed. Typically, you’ll want to have at least $75,000 of net income per year before the S-Corp election makes sense, so if you’re close to that, contact us to discuss your options.

As of 2018, LLCs offer a new tax benefit. President Trump’s Tax Cuts and Jobs Act established a new income-tax deduction for pass-through entities, making LLCs even more attractive. LLCs can now qualify for a straight 20-percent deduction on “qualified business income” (QBI). This means some LLCs will only be taxed on 80 percent of their pass-through income.

However, this deduction is subject to several limitations, so not all pass-through entities will qualify. Be sure to consult with a Family Business Lawyer® and/or an accountant if you’re looking to take advantage of this new deduction.

All of the above benefits are based on federal income tax law, but not all states handle LLCs equally. Depending on where you’re located, state law may offset some of these tax advantages. For example, in California there is an extra tax on revenue earned by LLCs.

Given this, you should check with us to find out exactly how our state taxes LLCs before choosing to set up an LLC.

Whether you need help understanding state tax laws on LLCs or choosing which entity tax status is best, we offer you trusted counsel. With us as your Creative Business Lawyer®, we can ensure your company is able to take advantage of every possible benefit available. Contact us today to get started.

We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule. Or, schedule online.

Correctly classifying workers as employees or independent contractors has always been tricky. Depending on the regulatory agency involved and whether you’re dealing with state or federal law, there are numerous different factors and tests that can apply to your decision.

In April 2018, a ruling by the California Supreme Court added a new test to the mix, and depending on how it plays out in the Golden State, it may have a ripple effect on worker classification laws across the rest of the country.

The ruling was made in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, in which the California Supreme Court adopted what’s known as the ABC Test. Following the Dynamex case, unless California business owners can prove a worker is an independent contractor using the ABC Test, all workers are presumed to be employees.

As a result, the California Supreme Court has dramatically reduced the number of people in the state who are eligible for independent contractor status. And though California is the first big state to make the ABC Test law, the test is already in use in two other states, and more than 20 states apply specific aspects of it in certain circumstances.

Given this, it’s important for employers in all states to understand how the test works and what its impact might be on your business.

In the California case, delivery drivers who worked for Dynamex, a nationwide courier and delivery service, sued the company for classifying them as independent contractors rather than employees. Prior to 2004, Dynamex classified its California drivers as employees. But in 2004, Dynamex converted all of its drivers to independent contractors to reduce costs.

Using the new ABC Test’s standards, the California Supreme Court ruled in favor of the drivers, noting that Dynamex should have classified them as employees, not independent contractors. As a result, the ABC Test is now law in California, and it stands to affect more than just those in the parcel-delivery business.

The test spells out three new standards, each of which must be met, in order for the independent contractor status to be appropriate. A worker can be classified as an independent contractor only if all of the following three standards are met:

A. The worker is free from control and direction of the employer in connection with the performance of the service, both under contract and in fact;

B. The service is performed outside the usual course of the employer’s business; and

C. The worker is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as the service performed.

If a California business can’t claim “yes” to all three parts, the worker must be classified as a W-2 employee.

The B prong is particularly troublesome for companies that rely heavily on independent contractors to deliver and/or provide their core product or service. The Court used the example of a retail clothing store that hires an outside plumber to repair a bathroom leak as an example where the worker could be classified as an independent contractor.

Since selling clothing, not fixing plumbing leaks, is the usual course of the store’s business, the independent contractor status would be applicable.

One the other hand, the Court noted that a clothing store that hired seamstresses to create some of the clothes sold in the store would be employees, since they’re performing work that’s in line with the store’s business. Indeed, this is the prong the Court applied to the Dynamex case, seeing that the delivery services provided by its drivers are the core of Dynamex’s business.

The case has many California business owners scrambling to figure out how to comply with the new law, while keeping their business model and company intact. Companies like Uber and Lyft that rely heavily on contract labor face the prospect of completely overhauling their core operations or reclassifying many workers as employees.

What’s more, there are still several questions that need answering. Most notably is whether or not the ABC Test will be applied retroactively. The California Supreme Court has agreed to address this issue, but no decision has been made yet.

While it remains to be seen how the new law will ultimately play out in California, the ABC Test already exists in other states. Both Massachusetts and New Jersey currently use the ABC Test to determine worker classification, and other states like Maine use the ABC Test for specific situations, such as determining unemployment compensation.

With the gig economy’s heavy reliance on freelance labor, it’s likely that more states will soon follow California’s lead to help limit the number of workers who can be classified as independent contractors. Regardless if the ABC Test is already law in your state or may become so soon, you should be extra vigilant in classifying your workers to avoid the potential hefty fines and other penalties for misclassification.

We can review your worker classification practices and help you take the necessary steps to ensure your company is in compliance with these more stringent standards. Additionally, we can assist you in properly drafting your contracts, so you’re better protected from liability if someone does try to sue your company.

We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule. Or, schedule online.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family. Schedule online today.