Small Business Jobs Act of 2010 Becomes Law

On Sept. 27, 2010, the Small Business Jobs Act of 2010 became law.  The Act includes tax incentives for individuals and small businesses as well as some revenue raisers.  The following is a brief summary of the key provisions of the Act.

Bonus Depreciation-The law extends the additional first year bonus depreciation deduction, which is equal to 50% of an asset's adjusted basis, to qualifying property acquired and placed in service in 2010.  This provision is retroactive to January 1, 2010.

Sec. 179 Expensing-Under current law, eligible taxpayers may elect to expense up to $250,000 of the cost of qualifying Sec.179 property.  This deduction begins to phase-out once the cost of qualifying property exceeds $800,000. For tax years beginning in 2010 and 2011, the new law increases the maximum amount a taxpayer may expense to $500,000 and raises the phase-out threshold to $2,000,000.

The new law also temporarily expands the definition of qualified Sec. 179 property to include qualified real property, which is defined as qualified leasehold improvement property (improvements to the interior portion of non-residential real property), qualified restaurant property and qualified retail improvement property.  However, taxpayers are limited to expensing up to $250,000 of the total cost of this real property.

  

Start-Up Expenses-For tax years beginning in 2010, the amount of start-up expenses that a taxpayer may elect to deduct increases from $5,000 to $10,000.

S-Corp Built-In Gains-A C-corporation that converts to an S-corporation generally must hold any appreciated assets it has on the date of conversion for 10 years following the conversion, or must pay tax at 35% (highest corporate rate) on any built-in gains if the assets are disposed of earlier.  Built-in gain is defined as the excess of the fair market value of the assets over their adjusted basis on the date of conversion.  The American Recovery & Reinvestment Act of 2009 temporarily shortened the 10-year holding period to seven years for dispositions in tax years beginning in 2009 & 2010.  The new law further shortens the holding period to five years for dispositions in any tax year beginning in 2011, if the fifth year in the recognition period precedes the tax year beginning in 2011.

Cell Phones-The new law removes cell phones and similar personal communication devices from their current classification as listed property, lifting the strict use substantiation requirements and the additional limits on depreciation deductions.  In addition, the fair market value of the personal use of cell phones or similar devices provided to an employee predominantly for business purposes will be excluded from the employee's gross income.

Extended Carryback of the General Business Credit-The carryback period for general business credits of eligible small businesses is extended from one to five years by the new law.  An eligible small business is a sole proprietorship, partnership or non-publicly traded corporation with average annual gross receipts for the prior three tax years of $50 million or less.  An eligible small business credit may offset both the regular tax and AMT.  This provision is effective for the taxpayer's first tax year beginning after Dec. 31, 2009.

Gain from the Sale of Qualified Small Business Stock-Under current law, individuals may exclude up to 75% of the gain from the sale of qualified small business stock held at least five years, subject to certain limitations.  The 75% exclusion applies to stock acquired after Feb. 17, 2009 and before Jan. 1, 2011.

The new law raises the exclusion to 100% for gain on stock acquired after Sept. 27, 2010 and before Jan. 1, 2011.  Also, under the new law, the excluded gain will not count as an AMT preference item but the five-year holding period continues to apply.

Self-Employment Tax-Under the new law, self-employed individuals may now claim a deduction for qualified health insurance costs (including long-term care) for themselves and their families in calculating their self-employment tax.  This provision is temporary and only applies to 2010.

Rental Property Expense Payments-Individuals receiving rental income from real property and who make annual payments of $600 or more to a service provider, will now be required to file information returns (Form 1099) with the IRS and the service provider.  However, exclusions may apply in the cases of hardship and where individuals only receive minimal amounts of rental income  This reporting provision applies to payments made after Dec. 31, 2010.

Expiring "Bush Tax Cuts"-This new law does not address the various "Bush Tax Cuts", including individual tax rates and reduced capital gains/dividend rates, which will expire on Dec. 31, 2010. There is proposed legislation in Congress addressing these issues.  We will keep you updated regarding the status of this legislation.

JURIS LAW GROUP PARTICIPATES IN DUMP THE PUMP DAY – JUNE 17, 2010

PRESS RELEASE:  JURIS LAW GROUP PARTICIPATES IN DUMP THE PUMP DAY – JUNE 17, 2010

CENTURY CITY, CA. – Juris Law Group will join the public transportation systems to participate in National Dump the Pump Day on Thursday, June 17.

Dump the Pump is a nationwide event that was started in June 2006 when gas prices were $3 per gallon.  The event encourages people to ride public transportation and save money, instead of driving a car.

Dump the Pump is sponsored by the American Public Transportation System (APTA).  According to the latest APTA report, individuals in a two person household can save an average of more than $9,000 annually by downsizing to one car.

For more information about Juris Law Group or Dump the Pump, visit http://www.jurislawgroup.com/ .

THE JURIS LAW GROUP PERSPECTIVE IS CERTIFIED GREEN:

Juris Law Group, through an alliance with the Green World Campaign, is spearheading a goal for the firm, its attorneys and clients to collectively pledge to plant as many trees as we cut down each year for paper. The firm has already implemented green strategies, such as having paperless offices and absolute digital files. As a green organization, we firmly stand by the mission of the Green World Campaign to plant trees in environmentally damaged areas, creating sustainable villages, restoring indigenous ecologies, and mitigating our climate crisis. The Green World Campaign poses a challenging question: "What can we accomplish as global citizens if we really put our minds to it?" The answer for this next-generation law firm is, "Just about anything."

Can a California Company Have Unpaid Interns?

On April 7, 2010, the California Division of Labor Standards Enforcement (DLSE) issued an opinion letter addressing the requirements employers must meet in order to have unpaid interns in compliance with California law. Although widely published news reports, including a recent New York Times article analyzing the DLSE’s April 7th opinion letter, have raised hopes that California is relaxing its position with respect to the permissibility of unpaid internships, such optimism appears to be misplaced and employers must continue to exercise caution in this area.

The DLSE’s guidance is timely, as thousands of college graduates and students prepare to hit the job market in search of employment opportunities. Many employers offer internships for a variety of reasons, including providing useful “real world” experience to students seeking to learn more about a particular industry or profession, and trying to help the children of customers, business colleagues, or friends. However altruistic their reasons, employers must be aware that California and federal law severely limit the circumstances under which such internships can be unpaid.

In response to a letter from an attorney representing Year Up, Inc., (a program aimed at developing fundamental job and technical skills in information technology for 18- to 24-year-olds) about the classification of internships in California, the DLSE concluded that the interns enrolled in the internship program were not employees under California law, and therefore were exempt from coverage under California’s minimum wage law. In reaching its conclusion, the DLSE followed the federal Department of Labor’s (DOL’s) criteria for determining whether the interns were exempt from minimum wage coverage and examined the “totality of the circumstances” surrounding their activities. Ultimately, the DLSE’s opinion letter reiterated its longstanding position that California follows the same stringent federal factors in analyzing the classification of interns, and thus serves as a reminder to employers that improper classification of employees as unpaid interns can be costly.

The DOL has articulated six criteria to determine whether an “intern” or “trainee” is exempt from the Fair Labor Standard Act’s minimum wage coverage. In order to qualify as an unpaid internship, all six factors must be satisfied under state and federal law. The six criteria are as follows:

1. The training, even though it includes actual operation of the employer’s facilities, is similar to that which would be given in a vocational school. 
2. The training is for the benefit of the trainees or students. 
3. The trainees or students do not displace regular employees, but work under their close observation. 
4. The employer derives no immediate advantage from the activities of the trainees or students, and, on occasion, the employer’s operations actually may be impeded. 
5. The trainees or students are not necessarily entitled to a job at the conclusion of the training period. 
6. The employer and the trainees or students understand that the latter are not entitled to wages for the time spent in training.

The DLSE’s new opinion letter concluded that all six criteria also must be satisfied in California. However, the agency now appears to take a more relaxed approach as to when an employer will meet certain aspects of the six factors. For example, in determining whether regular employees are displaced (i.e., the "non-displacement" criterion), the DLSE now takes the position that occasional or incidental work by an intern should not defeat the exemption provided such work does not intrude into activities that could be performed by regular workers and effectively displace them. As the stringent six criteria must still be satisfied, it will be difficult for companies, particularly for-profit companies, to have properly classified unpaid interns. The recent New York Times article regarding internships quoted Nancy J. Leppink, the acting director of the federal Labor Department’s Wage and Hour Division, as stating, "There aren’t going to be many circumstances [where for-profit companies can have unpaid internships and] still be in compliance with the law."

Many companies have relied upon unpaid interns as a way to minimize costs and provide opportunities to eager workers who are willing to work for free in hopes of ultimately securing a paid position. Such an approach is risky, and employers must understand that the consequences of utilizing unpaid internships that do not comply with applicable law are potentially grave. As with misclassification of an employee as an independent contractor, employers with misclassified unpaid interns face potential liability for unpaid wages and violations relating to failure to pay minimum wage, which could be significant for a full-time intern. In addition to the wages due to unpaid interns, the employer could face potential liability for overtime and missed meal or rest periods. Moreover, the employer could be liable for various penalties under California’s Labor Code (including waiting-time penalties for failing to pay wages on a timely basis), as well as unpaid employment-related taxes owed to governmental agencies.

This article was first published by Startup Company Lawyer.  For more information about legal issues regarding interns, please contact P.J. Javaheri or Hillary Ross, or another member of the firm’s employment law practice.

THE JURIS LAW GROUP PERSPECTIVE IS ALIGNED WITH OUR CLIENTS.

Juris Law Group’s legal service paradigm provides the benefits of both a large law firm and an in‐house legal staff without the procedural, structural, and economic inefficiencies of traditional service models. At the foundation of the Juris Law Group paradigm is a team of attorneys who have worked with a broad range of clients at the largest, most reputable law firms in the world and have handled a diverse range of complex corporate and litigation issues.

Juris Law Group serves as outside general counsel to small to medium size businesses and handles straight‐forward and complex transactions for companies of all sizes. Our attorneys are experienced, accessible and responsive, and take the time to understand the unique legal needs of each business they represent. Juris Law Group represents businesses at all stages of the business cycle. We help business founders structure and form business entities best suited to meet their goals and work with them, both initially and as they mature, to define and document their key relationships, including relationships between the business owners and those with customers, suppliers, employees, lenders and investors.

About the Authors:

P. J. JAVAHERI, ESQ. is a partner in the business and corporate division of Juris Law Group. Mr. Javaheri has represented a wide range of clients, from multi-national Fortune 500 companies to start-up companies. Some of his significant representations include CIBC World Markets and the Canadian Imperial Bank of Canada, Merrill Lynch, Deutsche Bank, Barclays, Alexandria Real Estate Equities, Inc., Golden West Trading Company, Culver City Meat Co., Alpine Corporation, Royal Poultry, Completely Fresh Foods, Mirant Corporation, Coram Energy, Sun Run Generation, LLC, and Ausra, Inc., and Alfred E. Baldwin. Mr. Javaheri notes with appreciation the research and writing assistance of Zachary Shine, a 2009 summer associate in Juris Law Group's Century City office.

HILLARY R. ROSS, ESQ. is Of-Counsel with Juris Law Group and has been practicing employment and labor law since 2002, when she joined Littler Mendelson, P.C., the nation’s largest and most prestigious labor and employment law firm. Ms. Ross has handled a wide variety of employment and labor law matters, including harassment and discrimination claims, employee benefits matters, and labor law matters. Ms. Ross has provided advice and counseling to clients ranging from small businesses to Fortune 50 companies to ensure compliance and to minimize risks of litigation. Ms. Ross also has extensive experience with wage and hour law and class action practice, where she conducted harassment prevention for employees and managers and created and revised employee handbooks, applications, forms and policies to ensure legal compliance. Since leaving Littler Mendelson in 2009, Ms. Ross has continued to practice employment and labor law representing both employers and employees. Ms. Ross has published several works, including “E-Discovery: Three Major Challenges for Employers,” Littler Mendelson ASAP, January 2007 and “EEOC Revises Compliance Manual to Target More ‘Contemporary’ Forms of Discrimination,” Littler Mendelson ASAP, May 2006.

See Employment for more information.  Or, visit Employment Law on our website.   

Interviewing an Attorney

Once you have identified a handful of lawyers who might suit your needs (perhaps they are in your neighborhood, or specialize in a certain type of case), you may be able to set up an initial consultation on the telephone so that you can ask some preliminary questions before you commit yourself to a formal, in-person interview. Ideally, the answers you get will help you screen candidates until you have only a few lawyers to interview. To help you choose a lawyer, it might also be a good idea to write down any answers you get. You can compare the answers to help you choose the lawyer(s) you would like to interview.

Some initial questions you might ask include:

• Does the lawyer provide a free consultation? If the lawyer charges for an initial interview, how much does it cost? How long is the initial interview or consultation?
  
• What type of fee arrangement does the lawyer require? Can you negotiate the fees? Additional information about legal fees and costs may help you ask additional questions on this topic.
  
• Has the lawyer handled similar cases? What percentage of the lawyer's cases are similar to yours? When was the last time the lawyer handled a similar case?
  
• How long has the lawyer been in practice? Where is the lawyer licensed to practice? Has the lawyer been investigated or disciplined before by state licensing authorities? If so, for what?
  
• Can the lawyer provide references from other clients?
  
• If the lawyer cannot handle your case, can the lawyer provide references to other lawyers?
  
• What type of information should you bring to a meeting with the lawyer?
  
• What is the range of possible outcomes for your case, including rough estimates of time and cost? Based on your brief description of the problem, your lawyer may be able to provide some general estimates.
  
• Will the lawyer handle the case or will others work on it also?
  
• What type of caseload does the lawyer currently have? What is the scope of the lawyer's existing commitments? Will the lawyer have sufficient time to devote to your case?

If you are able to narrow down your choices, you should be able to make an appointment with a lawyer to discuss the case in detail. During the initial interview you will likely be asked about the specifics of your case. In order to prepare for the meeting, you should gather all the information (documents, contact information) pertinent too your situation. You will want to bring those materials, along with a set of questions about the legal relationship you may have to the meeting.

See Century City Law Firm

What the Healthcare Bill Means for Small Businesses.

The House of Representatives last night passed the Senate’s Patient Protection and Affordable Care Act (H.R. 3590), as well as the Health Care & Education Affordability Reconciliation Act of 2010 (H.R. 4872).

While the final details are being ironed out, now the big question is: what does that mean for small businesses?

The biggest change is that employers with more than 50 full-time equivalents (FTE’s) will be considered large employers. Therefore, the most essential compliance step is for you to identify how many full time employees (about 40 hours) or FTE’s you have working for you. Employers near the magic number of 50 FTE’s will have to make sure you accurately count your employees. Keep records for each non-exempt worker, and certain identifying information about the employee and data about the hours worked and the wages earned.

Once you understand your employee count, you can determine your options or penalty calculations. You may want to analyze your employee count on a quarterly or monthly schedule based on how close you are to the federal goal post of 50 FTE’s.

Employer coverage mandate (”pay or play”)

Large employers will have to make available to all employees a minimum level of coverage or pay a per-employee penalty (fee). Employers will not be required to provide coverage for part-time employees, but these employees may be counted as partial employees for purposes of determining whether an employer has 50 employees. The bill is still unclear as to how employees will be counted and what formula will be used, but it looks like the real “number” to be counted will be a baseline of total hours worked by all employees. For that reason, keep accurate time records as described above. If the employer offers coverage but employees are forced to purchase insurance through the state-based exchanges because the employer’s coverage is not affordable, the employer must pay separate fees. This “Pay or Play” provision goes live in 2014 upon the creation of the state-based exchanges. Once the exchange is established, it can:

- Assess employers with more than 50 FTE’s that do not offer coverage and have at least one full-time employee who receives a premium tax credit a fee of $2,000 per full-time employee, excluding the first 30 employees from the assessment. For example, an employer with 50 employees will pay a penalty of $40,000 (20 times $2,000) for not offering coverage.

- Employers with more than 50 FTE’s that offer coverage but have at least one full-time employee receiving a premium tax credit, will pay the lesser of $3,000 for each employee receiving a premium credit or $750 for each full-time employee. (Effective January 1, 2014)

- Exempt employers with 50 or fewer FTE’s from any of the above penalties.

- Require employers that offer coverage to their employees to provide a free choice voucher to employees with incomes less than 400 percent federal poverty level whose share of the premium exceeds 8 percent but is less than 9.8 percent of their income and who choose to enroll in a plan in the Exchange. The voucher amount is equal to what the employer would have paid to provide coverage to the employee under the employer’s plan, and will be used to offset the premium costs for the plan in which the employee is enrolled. Employers providing free choice vouchers will not be subject to penalties for employees that receive premium credits in the Exchange. (Effective January 1, 2014)

Creation of state healthcare exchanges

Small businesses and individuals would have the choice of buying health insurance through state-based exchanges. The exchanges are expected to offer easy-to-understand competitive benefits at affordable prices. Some small businesses and individuals may be eligible to receive credits toward the purchase of insurance through the exchanges. The exchanges will begin in 2014.

Limitation on employee contributions to healthcare flexible spending account

Employees would be limited to an annual contribution of $2,500 to health care flexible spending accounts. One downside is that employers would no longer be permitted to reimburse employees for over-the-counter medication under flexible spending arrangements. For example, over-the-counter cough and allergy medicine that can now be paid under flexible spending arrangements will now be paid out of pocket by employees with post-tax dollars. This provision is effective at the beginning of 2011 in the Senate bill, but the House bill would delay the effective date to 2013.

Elimination of preexisting condition exclusions and lifetime limits

Group health plans and insurers will no longer be permitted to exclude coverage for preexisting conditions or place lifetime limits on coverage. Lifetime limits are prohibited effective six months after enactment of the legislation. Preexisting conditions exclusions must be eliminated for dependent children within six months of enactment and must be completely eliminated by 2014.

See Reuters and Employment for more details.  

Juris Law Group Continues it's Green Initiative - Alliance with Green World Campaign (www.greenworld.org)

Juris Law Group through an alliance with the Green World Campaign (www.greenworld.org) is spearheading a goal for the firm, its attorneys and clients to collectively pledge to plant as many trees as we cut down each year for paper. The firm has already implemented green strategies, such as having paperless offices and absolute digital files. As a green organization, we firmly stand by the mission of the Green World Campaign to plant trees in environmentally damaged areas, creating sustainable villages, restoring indigenous ecologies, and mitigating our climate crisis. 

The Green World Campaign poses a challenging question: "What can we accomplish as global citizens if we really put our minds to it?" The answer for this next-generation law firm is, "Just about anything."

Juris Law Group's adaptability and progressive approach equates to more business opportunities for everyone – our firm, our colleagues and most importantly, our clients.

Our commitment to having a flexible, cost-conscious infrastructure with highly competitive rates and customized billing arrangements is a natural fit for addressing today’s economic circumstances. We are able to provide exceptional, professional service at reasonable rates as a result of the experience and efficiency of our attorneys, their specialized focus, and because we do not engage in excessive staffing, associate turnover, or needless duplication of work.

In consideration of the synergy between our clients’ requirements and our personalized approach to meeting the need for the highest caliber of innovative, collaborative representation, we propose customized alternate fee arrangements as is appropriate for your circumstances.

Samplings of the inventive approaches to billing that can be put to work for your organization include:

• A versatile, collaborative approach to navigating solutions.

We are not only willing to partner with other firms as needed, but we guarantee access to the full extent of experience and knowledge each attorney in our firm has to offer, without limitation.

• "Flat" and "Not to exceed" rate structures.

The breadth of our experience and scope of resources we avail allow us to effectively predict the often "unforeseeable" costs of vendor, consultant and expert opinion services. Through this, we are able to submit cost proposals with a pre-determined maximum expenditure.

• Annual discounts and rebates on premium billable hours.

On an annual basis, we propose entering into contracts in which certain billing thresholds would trigger increased discounts.

A Strong Partnership Agreement Can Save You the Hassles of an Expensive Legal Battle.

Even in the best of circumstances, businesspartnerships can be fraught with conflict. To handle the twists and turns, smart co-owners put a well-drafted partnership agreement in place to act as a road map. Without one, lack of guidance in the event of a dispute can result in a free-for-all for partners, says Jonathan Levitt, a principal with Outside GC LLC, a team of former senior in-house lawyers who act as "on-demand" in-house counsel for clients.

For partners who don't have an agreement, or even those who do, there are a few things they should consider in order to best protect themselves when conflict arises.

First, business partners need to evaluate whether they can mend fences and settle their differences. Difficult issues surface in all partnerships, and they can create stress in the relationship, "but if you work through these issues, you usually have a stronger partnership," says Steven Thayer, an attorneywith Handler Thayer LLP in Chicago.

It's important to figure out what's at the root of the friction. Ask, "What is occurring within the partnership that is causing you to make a decision to [want to] sell or liquidate?" says Terry Mackin, managing director at Generational Equity, merger and acquisition advisor for small businesses. It can come down to rifts, family dynamics or other issues. "How are those things affecting the business?" says Mackin.

Business issues such as not making enough money, having too much debt or realizing your business model doesn't work are situations that may require you to adapt and change your business plan to make it work, says Thayer. Of course, fundamental issues that are hard to move past--lying, cheating, stealing or other illegal activity, for example--can be deal breakers and a legitimate basis to terminate the relationship.

Whether conflicts are resolved to make the partnership work is a business decision based in part on each partner's risk/reward tolerance level. "Each partner should regularly assess the risks and rewards associated with their business […] to make sure they are in check," says Thayer.

To that end, ongoing communication and a periodic review of your partnership (especially the agreement, if you have one) is essential. Just as in any relationship, partnerships grow old and co-owners need to reassess how decisions are made, who makes what decisions, etc., says Kurt D. Olender, a corporate attorney in Manhattan.

What do you do if you're unable to resolve your conflicts? At this point, business partners need to determine whether or not one partner buys out the other or both sell out to a third party. In the case of a partner buyout, the two important questions to ask are "Who has the most passion for the business, and who has an immediate cash need that requires them to cash out of the business?" says Steve Nielsen, CEO of PartnerUp, an online small-business networking community. As one would expect, both partners need to agree on the next course of action. In some cases, reaching an agreement may require a good business attorney to act as a sort of "corporate therapist."

Whatever the decision, make sure you hire a good business attorney to help with the dissolution of the partnership. There is too much at stake to use your friend's uncle or some other attorney who is not an expert in business law. Finally, "It is extremely critical that both parties either have their own independent valuations or that they agree on an independent business-valuation expert to determine the value of the business, " says Nielsen.

Most issues, serious or not, can be resolved at the onset through good communication and effective negotiation skills. "Before you resort to the worst case, try working things out by talking," says Nielsen.

Seehttp://jurislawgroup.com/jurislaw/partnership-and-shareholder-disputes.html and  http://www.entrepreneur.com/management/legalcenter/article205492.html for more information.