5 TIPS & CHANGES BUSINESS OWNERS SHOULD CONSIDER IN 2017
5 TIPS & CHANGES BUSINESS OWNERS SHOULD CONSIDER IN 2017
Happy New Year! As a business owner, there is no better time than the present to evaluate how you are going to make better organizational decisions, make tax-smart choices, and expand business opportunities. Below, you will find some helpful information that will put your business on the right path for 2017.
(1) Review IRS Section 1202 – Qualified Small Business Tax Breaks
Under the current law, a C corporation (“C-corp”) is typically considered the least desirable business entity because of the dreaded “double taxation” rule (income taxes are paid twice). Double taxation occurs when income is taxed on both the corporation’s tax return and the shareholder’s individual return.
However, many investors and entrepreneurs are still unaware of additional tax breaks that became permanently available to small businesses in 2015 with the passage of the Protecting Americans from Tax Hikes (“PATH”) Act. According to the PATH Act, Section 1202 of the Internal Revenue Code allows businesses to exclude a portion of their gains from the sale of qualified stock—or in some cases 100% of their gains—from federal tax.
There are many requirements to qualify for this tax break under Section 1202, and one of these requirements is that the stock must have been issued in a domestic C-corp. Although you should not base your corporate structure off of this tax benefit alone, it’s definitely food for thought if you are debating which corporate entity is best for your new or existing business.
(2) Be Aware of New Filing Deadlines for Tax Returns
On July 31, 2015, President Obama signed the short-term highway funding extension bill (H.R. 3236 ) into law. This law affects filing dates for two common business entities:
Partnerships — the new filing date is March 15 (for calendar-year partnerships), and the 15th day of the third month following the close of the partnership’s fiscal year (for fiscal-year partnerships). Previously, the returns were due April 15 for calendar-year partnerships. C-Corps — the new due date is the 15th day of the fourth month following the close of the corporation’s year. Previously, the returns were due the 15th day of the third month. Note: Most C-corps are eligible for a 5-month extension until 2026. After 2026, C-corps are eligible for a 6-month extension. You should consult with your accountant or a tax coach if you believe your business may be affected by these new filing deadlines. Note: Several other IRS information return filing deadlines are affected by this law, but our focus is on Partnerships and C-corps for the purpose of this article.
(3) Reevaluate Vendor Contracts
When it comes to our personal households, we can be pretty vigilant about reevaluating our monthly, semi-annual and annual expenditures. At times, we find ourselves renegotiating the terms of — cell phone, internet or car insurance — agreements to a price that suits our budget or sensibilities. As business owners, we should do exactly the same thing as it relates to our vendor contracts. At the beginning of the year (or end of the previous year), we should reevaluate and, if needed, renegotiate vendor contracts.
For example, the price of fuel changes each year. If your vendor is charging you fuel surcharges to ship your products based on higher fuel prices from 2 years ago, it’s probably a good time to reassess current fuel prices and renegotiate the price tag on your contract’s fuel provision.
Your business could benefit from increased bargaining power that arises out of changes in the market. So, you or a professional you trust should give those vendor contracts a second glance.
4) Review & Update Employment Handbooks
Employment handbooks and agreements are key to promoting solid, effective communication between an employer and his/her employees. Handbooks set expectations and allow business owners to point to standards when discipline or termination is needed. In addition, well written agreements provide clarity to employees regarding their boundaries, rights and obligations in the workplace.
Throughout the previous year, your business may have adopted new polices or modified old ones. There may even be new changes in the law that relate to employee-employer relationships. For most employers, these changes have not been memorialized in any employment document or memo to put company management and employees on notice.
Furthermore, if you are still using employment agreements or manuals that you found online and adopted as your own, more than likely there are weak areas within these documents that need to be addressed and redrafted. Every employer should possess employment documents that speak to their specific work environment and company culture.
(5) Let Yourself off the Hook — You Cannot Do It All
Whether you’ve started a new business or you’ve been in business for several years, you are probably very good at what you do. The reality is, however, that you cannot do it all.
Let’s imagine that you own a bakery. As a baker, you are extremely talented at balancing ingredients, developing new recipes, and arranging and presenting baked goods behind their display case. In this same scenario, you also happen to be an exceptional painter (i.e., you can paint and stencil wall art very well). The inside of your bakery needs to be painted. Should you step away from the kitchen or customers at the counter for the indefinite time needed to paint the walls in the storefront, bathrooms, offices and shelves?
No, you should operate your bakery. Painting would not be the best use of your time; it would result in missed revenue and potential opportunities that would outweigh any benefit you gained from painting the bakery yourself. My point is that time is a finite commodity. As business owners, we have to use our time in a way that brings the most value to our companies. Simply put, hire a painter, hire an accountant, hire a consultant—hire the professional needed to take unnecessary responsibilities off your shoulders so that you can use your time operating and nurturing your business.
Your thoughts: What new trends or changes are you considering for your business this year? Add your feedback and thoughts in the comment section below.
This article is intended to provide you with general information; it does not constitute any type of legal advice. For recommendations related to your specific matter, we encourage you to review our Practice Areas page for additional information and then contact us to discuss your company’s legal needs.