Before You Sign That Commercial Lease . . .

Finding commercial office space can be quite a challenge. While there’s certainly real estate available, finding the right office space that satisfies your business needs, fits your business vibe, is conveniently located, offers your business the flexibility to grow and which falls within your budget doesn’t necessarily come easy. And, even if you should find that “perfect” or “close to perfect” office space, you’ll still need to negotiate fair lease terms and work out the language in the final lease agreement before it’s a done deal. You don’t want to blindly sign on the dotted line!

First, negotiate the lease terms with the landlord. If you aren’t a strong negotiator or don’t feel you have the experience to negotiate, seek an experienced and qualified real estate broker who specializes in working for and in the interest of tenants. They should have insight into the real estate market and relationships with buildings and landlords to help you find the right space and negotiate, in good faith, fair terms with the various buildings and landlords.

Keep in mind that there are various factors which may help your negotiating power including, but not limited to: prominence of your business, size and financial position of your business, amount of commercial real estate space you intend on leasing and the length of the lease term (a longer term lease may offer you stronger negotiating power over a shorter term lease).

Once you’ve negotiated the lease terms to a point which are reasonably fair and agreeable, the landlord will have their legal counsel draw up the lease documents. Be sure to read the commercial lease agreement and all the applicable attachments, amendments, riders, guaranties and related documents thoroughly. Be sure that the lease terms and conditions, responsibilities and obligations of both the tenant and landlord are clearly spelled out and align with what has been agreed to during the lease negotiations. These include, but are not limited to: the start/end date of the lease, the lease term (number of years), the lease renewal and termination provisions, the date landlord shall deliver possession of the premises to the tenant, the date in which tenant shall surrender the premises to the landlord, base rent and any applicable rent abatement(s), additional fees and costs outside of the base rent (ex: cleaning, security, water/sprinkler), annual rent escalation (percent increase), proportionate share of property taxes and other applicable costs/expenses beyond the base year, the base year to be used for calculating property taxes and other applicable costs/expenses beyond the base year, electricity costs (ex: if the space is individually metered), HVAC (ex: if HVAC is tenant controlled – annual maintenance agreement requirement, who is responsible for repair/replacement of major components like compressor/condenser or replacement of the unit(s) in the event of a failure during the lease term? the landlord’s certification that the existing HVAC unit is in good operating condition; if HVAC is not tenant controlled, availability and costs for after-hours and weekend use), security deposit requirement, office space build out work and responsibilities, work to be performed by landlord, work to be performed by tenant (if work requires written approval by landlord), landlord responsibilities, tenant responsibilities, cost for building and office keys/key cards, covered and non-covered (a la carte) building services, commercial insurance requirement, “good guy” clause, etc. These are just some of the common items that typically appear in a commercial lease agreement which you should be on the lookout for and review carefully.

Even as an experienced business owner well-versed in negotiating contracts and agreements, it should go without saying that you should tap into and consult with a good real estate attorney who will thoroughly review the lease agreement and all the applicable attachments, amendments, riders, guaranties and related documents to make sure they are in order and contain the appropriate language to protect your interests. Let me be clear, having a good real estate attorney review the lease agreement does not mean that you should “pass the buck” and not exercise due diligence. YOU need to review the lease agreement thoroughly, make notes and consult with the real estate attorney so that you have a thorough understanding of what you are getting into before you sign and commit to the lease agreement. Don’t assume anything! Ask questions, get clarification and be sure you fully understand and are comfortable with the provisions of the agreement. Don’t think for a moment that any questions are stupid or silly. If it’s ambiguous, vague, unclear etc., get clear, definitive answers! Contracts and agreements often contain legalese which are difficult to fully comprehend and understand and may be vague and ambiguous.

Commercial leases are written for and inure to the benefit of the landlord. The objective is to try and get the lease terms to a point where the terms provide adequate protections, to the maximum extent possible, for you – the tenant. There may be several rounds of back-and-forth between you (and your legal counsel) and the landlord (and the landlord’s legal counsel) before you hash out the final language of the lease agreement so be patient, be thorough and exercise continued due diligence. This is one of those things where taking shortcuts will be more harmful than helpful. Don’t take shortcuts! Stick with best practices!

One final note . . . give yourself ample time to work through the process of lease negotiations and towards a final agreeable and acceptable lease agreement and whenever possible, have a backup plan. If you, with the advice of counsel, don’t feel comfortable with the lease terms and the landlord is not acting in good faith, don’t give in and don’t sign the lease agreement! Be prepared and willing to walk away! You don’t want to be stuck in an agreement for which you will ultimately regret!

Stop Procrastinating! Tax Day Is Coming!

If you tend to procrastinate when it comes to the tax season, it’s time to stop procrastinating and start taking action. Tax Day for the 2018 tax year is right around the corner. For most filers, Monday, April 15, 2019 is the deadline to file your tax returns with the IRS and where applicable, your state tax agency. However, for states observing a holiday, those filers will get additional time.

“For the 2018 tax return, the due date is April 15, 2019 for most filers. For residents of Maine and Massachusetts, the due date is April 17, 2019 because of the Patriot's Day and Emancipation Day holidays in those states.” – IRS Topic No. 301 When, How, and Where To File

Whether you file electronically or by paper, it’s vital that your tax returns are filed on-time. The IRS provides the following guidance:

“Your return is considered filed on time if the envelope is properly addressed, has enough postage, is postmarked, and is deposited in the mail by the due date. If you file electronically, the date and time in your time zone when your return is transmitted controls whether your return is filed timely. You will later receive an electronic acknowledgement that the IRS has accepted your electronically filed return.” – IRS Topic No. 301 When, How, and Where To File

If you have an Accountant or CPA firm handling your tax returns, be sure to return any applicable e-file authorization forms to them in a timely manner so they may electronically file your returns on your behalf. Also, make note of any filings you may be required to submit by mail and get those filings sent out on-time. If you are using a third-party tax preparer to do your taxes, be sure to schedule your appointment as soon as possible to ensure your returns are prepared and transmitted on-time. Appointments can become harder to come by as the tax deadline approaches. For paper filers, be sure to get to the Post Office ahead of the April 15th deadline or risk potentially waiting on long lines to get those returns mailed by the tax deadline.

The IRS and state tax agencies do allow qualified filers to request an extension to file their tax returns. A request for an extension must be filed by the tax deadline. However, an extension only extends the tax deadline for filing your returns. It does not extend the deadline for paying your taxes. If you owe taxes, you are still required to remit payment to the IRS and/or to your state tax agency by the tax deadline.

“If you cannot file by the due date of your return, you should request an extension of time to file. To receive an automatic 6-month extension of time to file your return, you can file Form 4868. File your extension request by the due date of your return. An extension of time to file is not an extension of time to pay so you'll owe interest if the tax you owe isn't paid by the original due date of your return. You may also be subject to a late-payment penalty on any tax not paid by the original due date of your return.” – IRS Topic No. 301 When, How, and Where To File

Filers should check with their individual state tax agency for guidance on their state’s tax filing requirements and deadlines. If you are unsure or unfamiliar with tax preparation and filings, be sure to seek professional counsel from an Accountant, CPA firm and/or certified tax professional.

 

RELATED POSTS:

Getting Ready For The Tax Season

Do Your Own Taxes Or Seek A Professional

Customer Service Can Make or Break Your Business

Customer service is a core part of many businesses. When customers reach out to or for customer service, quite often it’s about a problem or an issue that requires a resolution. Customers are typically looking for someone who is going to listen to and understand the issue at hand. They are looking for someone who understands that there is a sense of urgency, the issue needs to be treated with a level of priority and that it will be addressed in a timely manner. Customers are also looking for accountability; someone to take charge, be responsible and follow through from start to finish to ensure the problem or issue reaches final resolution or is escalated appropriately and promptly up the chain until reaching that resolution.

Talk is cheap! Customers want results!

It’s important to note that this is not the time to upsell or downsell to customers. Upselling or downselling is not a solution or resolution to a problem or issue. These are retention tactics, plain and simple! Sure, some customers may be taken in by the tactic while others who understand the retention tactic may manipulate it to their advantage. For real problems or issues, this will likely infuriate customers, especially patrons. Fair warning: If you’re going to play with fire, you’re going to get burned! Put your customers first! Focus on resolving the issue at hand in a timely, effective and efficient manner. Don’t give your customers the runaround and don’t make them jump through hoops. In the end, it can have serious repercussions on your business and its reputation.

Any business that is defined, in whole or in part, by the quality of their customer service, their customer service reputation and customer satisfaction rating MUST step up and provide an exceptional, premier level of customer service to their customers not only to differentiate themselves from their competitors but also to demonstrate and prove to their customers that they have earned and deserve their customers’ business. Anything less is simply unacceptable.

A Sub-Chapter S in New York

If you are planning to establish a legal business entity (ex: Limited Liability Company (LLC) or Corporation) or have an existing legal business entity in New York and are considering a sub-chapter S election, there are a few things you’ll want to keep in mind.

First, it’s important to understand that single-member LLCs (defaultly treated as a disregarded entity and taxed like a sole proprietorship for tax purposes), multi-member LLCs (defaultly treated as a Partnership) and Corporations making a sub-chapter S election are all considered pass-through entities for federal tax purposes. This means that the entities themselves are generally not subject to income taxes. Profit/loss from the business is passed through to the individual members (LLCs) or shareholders (S-Corps), generally reported on a Schedule K-1 for Partnerships & S Corps, and each member or shareholder reports and pays their respective share of income taxes on their respective share of profit/loss on their individual tax returns.

Eligible single-member LLCs, multi-member LLCs (Partnerships) and corporations (C-Corps) can elect to be treated as sub-chapter S for federal tax purposes in lieu of their default classification. There are various pros and cons associated with making a S election, so it is best to consult with your Accountant, CPA Firm and/or legal counsel so that you may make a well-informed decision.

At the federal level, to make a sub-chapter S election, eligible LLCs will need to file both Form 8832 – Entity Classification Election and Form 2553 – Election By A Small Business Corporation. Eligible corporations (C-Corps) will need to file Form 2553 – Election By A Small Business Corporation. When filing Form 8832, keep in mind that the election may take effect no more than 75 days prior to the date the election is filed or no later than 12 months after the election is filed. When filing Form 2553, keep in mind that the form must be filed no more than 2 months and 15 days after the beginning of the tax year for which the election shall take effect or any time during the tax year preceding the tax year for which the election shall take effect. Both forms do allow “Relief for Late Elections.” Eligibility information is available in the instructions for each form. Your Accountant or CPA Firm should be able to help prepare the necessary forms for you to sign and send to the IRS. The IRS should provide written notice as to the acceptance or rejection of the filing(s) within 60 days of receipt.

At the state level, things start to get complicated. While many states recognize the federal S election at the state level, New York State does not. By default, New York State will treat your entity as a C Corporation for tax purposes even if you have made a federal S election. In order for your entity to be recognized and taxed as a S Corporation at the state level, you must file New York State’s Form CT-6 – Election by a Federal S Corporation to be Treated As a New York S Corporation. Again, your Accountant or CPA Firm should be able to help prepare the necessary form for you to sign and send to the New York State Department of Taxation & Finance (NYS DTF). The NYS DTF should provide written notice as to the acceptance or rejection of the filing within 60 days of receipt. While filing Form CT-6 will allow your entity to be treated as a New York S Corporation for tax purposes, New York State requires most general business corporations to pay a franchise tax at the entity level under Article 9-A of New York law.

One last complication is at the city level. New York City does not recognize the federal S or New York State S elections. Therefore, S Corporations are subject to New York City’s General Corporation Tax (GCT) and will be required to pay this tax at the entity level.

If you are planning to make a S election for your business, be sure to seek and consult with professional counsel (ex: Accountant, CPA Firm) to understand the pros and cons as well as the administrative requirements and tax implications at the federal, state and local levels. As you can see in the case of New York, there are a couple of added complexities at the state and local level that you’ll want to be aware of. A good Accountant or CPA Firm should stay ahead of the game and keep you well-informed but don’t hesitate to ask your Accountant or CPA Firm directly about how the S election works within your state and local levels.

Do Your Own Taxes or Seek A Professional?

As the tax season kicks off, a fundamental question comes to mind – Should you do your own taxes or seek a professional?

Well, the answer depends on a variety of factors including:

  • How comfortable you are preparing your own tax returns?

  • How familiar you are with your tax situation and history?

  • How complex your tax situation is?

Generally, if you are comfortable preparing your own tax returns, are familiar with your tax situation and you don’t have a complex tax situation (ex: you only have income from W-2 wages, interest income from interest-bearing accounts, you don’t itemize your deductions or only itemize state & local taxes & charitable contributions), you should be able to prepare your own tax returns using either an online or desktop version of tax preparation software from companies like Intuit (TurboTax), H&R Block and TaxAct, just to name a few.

These companies have been developing tax preparation software for many years and have many customers who successfully use these products to prepare and file their tax returns annually. That said, you do need to have patience, be organized and dedicate a reasonable amount of time to go through the process. While the software will walk you through the process step-by-step, you do need to understand what information the tax preparation software is asking for then input the proper and correct information for your tax returns to be accurate. Keep in mind . . . Garbage in, Garbage out!

Even though these companies work to ensure their tax preparation software is accurate and apply computations and calculations based on the applicable tax laws, having a general understanding of your tax situation and history is extremely helpful so that you can raise a red flag if you notice that the tax preparation software is showing you too high of a tax refund or too much in taxes owed. Errors can occur due to incorrect user input or a software glitch.

If you are not at all comfortable preparing your own tax returns or have a more complex tax situation, consider seeking a professional tax preparer, Accountant or CPA firm. They should have a thorough understanding of the applicable tax laws and, provided you bring them all the necessary paperwork and documentation required, they should be able to properly and correctly prepare your tax returns, as well as identify and apply all applicable and available tax deductions to get you the optimal refund or try to minimize your tax bill/taxes owed. When looking for a professional tax preparer, Accountant or CPA firm, be sure to do your research, read reviews, get recommendations and compare service fees/rates.

In the case where you run/own a business, the tax situation can get even more complicated. There are different requirements on the federal, state and local level depending on the type of legal business entity you have created (ex: LLC: Single-member LLC, Partnership, LLC taxed as a sub-chapter S, Corporation: C-Corp or S-Corp) and the state in which your entity was established.

On the business side, you’ll probably want to have a tax professional, Accountant or CPA firm that you use on an ongoing basis. Except for the single-member LLC, all other entities are required to file a business tax return (separate from the personal return) even if the entities themselves do not pay income taxes (ex: pass-through entities). You also don’t want to reinvent the wheel dealing with a different tax professional, Accountant or CPA firm every year.

On the personal side, again, it depends on your comfort level and the complexity of the situation. For an individual with a single-member LLC, MAYBE you’ll consider doing your own tax return; but generally, it’s not a bad idea to consider hiring a tax professional, Accountant or CPA firm if you run/own a business especially as a member of a LLC Partnership, LLC taxed as a sub-chapter S, or you’re a shareholder of a corporation (C-Corp or S-Corp). There are a lot of requirements (not only income tax returns) that you may or may not be aware of at the federal, state and local level (ex: estimated quarterly tax payments) so having access to a good tax professional, Accountant or CPA firm can save you major headaches down the road. Yes, a good tax professional, Accountant or CPA firm will cost a bit more, but in the end, it will be well worth it!

Getting Ready for the Tax Season

With the holidays passed and the New Year upon us, it’s time to take some proactive steps in preparing for the upcoming tax season. That’s right! Now is a good time to start gathering and organizing all your 2018 financial/tax documents in preparation for the tax season. Don’t wait until it’s time to have your tax returns prepared to start hunting for all the crucial documents. Get a head start now by putting together a checklist of all the applicable documents you’ll need and start building a file if you haven’t already begun to do so.

Everyone has their own tax situation so first and foremost, if you have an Accountant, CPA Firm or Certified Tax Professional, get in touch with them to review 2018 and go over the documents that you’ll need to have ready to provide to them to prepare your tax returns. Due to changes in the tax law last year, you hopefully have been actively communicating with your Accountant, CPA Firm or Certified Tax Professional to discuss any applicable tax changes that could potentially affect you in the upcoming tax season. It’s also a good practice to reach out to your Accountant, CPA Firm or Certified Tax Professional in the fourth quarter of the year (if your Accountant, CPA Firm or Certified Tax Professional has not already done so), to discuss any applicable year-end tax matters and/or appropriate actions that need to be taken prior to year-end.

If you are a business owner, you’ll want to get in touch with your personal Accountant, CPA Firm or Certified Tax Professional to discuss any tax matters, issues or concerns applicable to your personal tax situation while also getting in touch with the company’s Accountant or CPA Firm to make sure the company is on the right track for year-end.

On a personal level, some of the financial/tax documents you should gather include:

  • Form W-2s from all employers that you worked for in 2018. Employers are required to furnish Form W-2s to their employees by January 31, 2019. A Form W-2 is considered “furnished” if it is postmarked by January 31, 2019. Most payroll companies also provide employee access to electronic copies of Form W-2s.

  • Form 1099-MISC from all companies/businesses for which you performed work or services as a non-employee/independent contractor in 2018. Companies/businesses must issue Form 1099-MISC if you were paid $600 or more during the year for work or services performed. Form 1099-MISC must be furnished by January 31, 2019. You are still required to report all applicable income even if you do not receive a Form 1099-MISC.

  • Form 1099-INT from all banks/financial institutions for which you earned interest income in 2018. Banks/financial institutions must issue a Form 1099-INT if you earned $10 or more in interest income during the tax year. You are still required to report all applicable interest income even if you do not receive a Form 1099-INT.

  • If you maintained health coverage through a Health Insurance Marketplace, you should receive a Form 1095-A. If you maintained health coverage through a health insurance provider or non-Applicable Large Employer (non-ALE), you should receive a Form 1095-B. If you maintained health coverage through an Applicable Large Employer (ALE), you should receive a Form 1095-C. These forms provide information regarding the health insurance coverage provided, to whom coverage was provided and when coverage was provided. Except for recipients of Form 1095-A, recipients of Form 1095-B and Form 1095-C generally do not need to wait for these forms to arrive to prepare their tax returns provided you have the information readily available including, who was covered and when, for tax preparation purposes. Keep in mind that for 2018, the Affordable Care Act’s Individual Mandate remains in full force. Individuals who fail to maintain proper health insurance coverage for all of 2018 may be subject to a penalty. You can get more information about these Health Insurance Information/Tax forms on the IRS website.

  • Form 1099-DIV from all financial institutions/brokerages for which you earned dividend income.

  • Form 1099-G if you itemized your deductions in the prior tax year and took advantage of the state/local tax deduction and received a state/local tax refund.

  • Form 1099-R if you received a distribution from a retirement plan, pension plan, profit sharing plan, etc.

  • Form 5498 if you made contributions to an Individual Retirement Account (IRA).

  • Schedule K-1 if you are a member of a multi-member LLC, LLC taxed as a sub-chapter S or a shareholder of a sub-chapter S.

  • Copies of donation confirmation/acknowledgment letters for tax-deductible donations made to qualified charitable organizations.

The list above is not intended to be a complete list of the financial/tax documents that you may need for the preparation of your tax returns nor does it necessarily reflect all the financial/tax documents that are applicable to your specific tax situation. Again, speak with your Accountant, CPA Firm or Certified Tax Professional to review the financial/tax documents that you should gather in preparation for the current tax season. If you prepare your own tax returns, look through the financial/tax documents you received last year while accounting for any applicable changes made in 2018 (ex: opening a new savings or brokerage account, working for more than one employer within the same tax year) as you put together your checklist and gather your financial/tax documents.

A little early preparation and staying proactive can go a long way in helping to make this tax season go smoother and be less stressful!

Making Investments in Your Business in the New Year

As we prepare to close out the year, business owners should take the time to evaluate their current business operations to determine what investments they need to make in their business heading into the New Year and begin planning & budgeting for those investments. This includes investing in staff (ex: hiring additional employees, employee training & education, health & wellness programs, incentives & retention programs), investing in technology (ex: computers, servers, software, storage, network equipment) and investing in infrastructure (ex: office/office space, furniture, fixtures) just to name a few.

While planning and budgeting for potential investments does not guarantee that business owners will be able make those investments into their business at any specific time (ex: due to financial constraints, weak business performance, unforeseen circumstances), business owners should still be proactive rather than reactive. Perhaps the investments may not occur in the first or second quarter of the year but may be possible in the third quarter.

In some situations, business owners may need to front-load the investments to achieve future business performance gains. For instance, if your business is a design firm relying heavily on up-to-date technology, but you are running outdated computers and software, you’ll need to make investments in technology to get updated computers and software NOW, so you can get the work done. If you can’t get the work done, your business will be unable to stay afloat. Likewise, business owners may need to hire an additional employee to help in critical areas to get work done and meet timetables. The successful completion of a client project can result in future projects (and additional income) but failure could mean the loss of the client (and loss of significant income). In these situations, business owners MUST make the investments immediately rather than postpone or delay them to a later date.

To help manage the business, business owners should utilize financial projections. Income projections (and if needed, cash flow projections) can be an extremely useful tool in helping to manage the business but keep in mind that projections are exactly that – A PROJECTION. The more reliable financial information that you have available, the better your projections will be; however, projections are NOT SET IN STONE!

Business owners who are unfamiliar with financial projections should work with their lead or senior Accounting/Finance person (ex: CFO, Director of Finance, Accounting Manager, Head of Accounting/Finance) to create/prepare financial projections for the business for the upcoming year. If you don’t have a lead or senior Accounting/Finance person, consult with your Accountant or CPA Firm for guidance. While preparing financial projections is not overly difficult, it does require a level of experience.

Employee Bonuses Are Taxable Income

Now that the holidays have arrived and with year-end fast approaching, as a business owner, you may be considering distributing year-end bonuses to employees as a show of appreciation for their passion and dedication to the business this past year. It’s important to remember that bonuses are treated as taxable income and should be processed and reported accordingly.

You should process your year-end bonuses through payroll and follow standard payroll practices to ensure the proper tax withholding for federal income tax, state & local income tax and FICA (Medicare & Social Security Tax). Generally, bonuses can either be run as an additional payroll outside of your normal payroll cycle or added to one of your normal year-end payrolls.

If you plan on running an additional payroll, check with your payroll company on how to submit the additional bonus payroll. Your payroll company will usually require bonus payrolls (or additional payrolls outside of your normal payroll cycle) to be submitted several days in advance of your regularly scheduled payroll. Pay close attention to the payroll submission due dates to ensure your bonus and year-end payrolls are submitted on a timely basis. Also, make sure your business bank account is adequately funded to cover your added year-end business expenditures.

If you have questions or concerns regarding the proper handling of bonus income, check with your payroll representative and/or your business tax professional (Accountant/CPA firm).

A Job Interview Is A Two-Way Street!

Job interviews can certainly be nerve-racking. While they may open the door to potentially great opportunities and hopefully, to a long bright future, they can unquestionably make you nervous and feel uneasy for good reason. Job interviews are an opportunity to showcase your credentials, demonstrate credibility and make an impression (hopefully, a very positive one) that will resonate long after you leave the interview. If the job interview is for that “dream job” that you’ve searched long and hard for, a great interview could land you that “perfect job” while a poor interview may leave you feeling defeated and devastated.

That said, it’s also important to understand and realize that job interviews are a two-way street. Yes, it’s your opportunity to showcase your credentials, make a lasting impression and statement about why you should get the job; BUT, it’s also an opportunity for YOU to evaluate the job opportunity to determine if it truly is the right match for you.

Use the job interview to assess the job opportunity thoroughly beyond the basics like job function/duties, compensation and benefits.

What is a typical work day like?

You’ll want to try to get a feel for what a typical day in the life of this job would be. Yes, no two days are alike but what are some of the things that you can expect each day from basic to moderate to extreme. Is it a fast-paced, be quick-on-your-feet type of job? Is it a seasonal type of business? Are there peaks and lulls? Is it a 24/7 type of business where you’ll be constantly on-call or is it more of a “9 to 5” or “8 to 6” type of job?

Does this job offer a good personal/work life balance?

While you’re certainly willing to put in 110% towards the job, it’s vital to have a good personal/work life balance to manage stress and avoid burnout. If you don’t take care of yourself, you won’t be effective or efficient in what you are doing. During the interview you’ll want to try and get a sense of what the personal/work life balance will be like in this job. As eager as you may be to get the job, you also don’t want to regret it immediately thereafter.

What is the culture, atmosphere and environment like? Do you like and feel comfortable with the culture, atmosphere and environment?

You’ll be spending a good amount of time in this job, so this is very important. Be sure to look around the office and try to gauge the atmosphere. Pay attention to how people act, behave, respond, interact, operate and so forth. If you meet with multiple interviewers or other company employees, it’s a great opportunity to gauge your interaction with each interviewer and employee. You can learn a lot from just having conversations with various people within the company. Also look around the office, how it’s setup, organized and arranged. The look and feel of the office can say a lot about the environment, atmosphere and culture. Rely on your senses and instincts.

What are the opportunities for growth & development? What is the outlook for the future?

You want to get a sense of what the future will look like for both you and the company. Obviously, if this is a job and more importantly, a company that you hope to spend many years with, you’ll want to have room and opportunity to grow and develop. If the outlook is that it’ll take 3-5 years before you can make a move within the company, you’ll need to decide as to whether this is the right fit for you personally and career-wise. Sometimes you may take a position that isn’t quite in your area of interest but has the potential to get you into your area of interest with the caveat that it will take several years. You need to decide whether taking this job is the most appropriate course of action or whether it’s better to seek a different opportunity. How does this fit into your short and long-term personal & career plan?

You’ll also want to get a feel for where the company stands currently and where it is going. If you walk into a company that appears to be on its last leg, you’ll seriously need to take this into consideration because you know that within a certain period, you could be on your way right out the door. On a similar note, if a company is in the process of a merger or acquisition, there is the potential for downsizing or elimination of duplicate roles or job positions. While mergers and acquisitions are a way for companies to grow & expand rapidly and may result in benefits for some employees, there is always the potential for job losses.

So, the next time you go on a job interview, keep in mind that it’s a two-way street. The interviewer is exercising his or her due diligence and so should you!

Co-Working Spaces, An Option for Startups and Small Businesses

If you’re a startup or small business, finding the right office space for your business can be challenging. In addition, depending on where you are located, commercial office leases can be quite expensive. For commercial leases, landlords will typically require at least three years of financial information (ex: balance sheets, P&Ls, tax returns) from your business as part of the review process. A security deposit will be required at the time of signing (typically two to three months of rent). Landlords will also require the business to show proof of commercial liability insurance coverage and will want the building owner, landlord and management company named on the policy as Additional Insured.

Let’s not forget additional costs that may come with leasing an office space including utilities, cleaning, a HVAC maintenance agreement, property taxes and escalations. Many landlords will also require a lease commitment. While some landlords may allow for short-term leases (1-3 years), many will seek long-term leases (5-10 years).

As a startup or small business, you may consider running your business out of your home. While that may be suitable for some businesses, it certainly won’t be suitable for all. In addition, if your business requires frequent meetings with clients and vendors, having access to a professional office space and conference rooms become a necessity.

Co-working spaces have been growing quickly over the past several years. Companies like Regus, WeWork, TechSpace and The Yard, just to name a few, have swept up commercial real estate spaces and converted these spaces into turnkey co-working office spaces. Offerings may include virtual office space (access to a physical mailing address, phone number, voice mail, call answering service), day passes (day access to the facility, general meeting area, high-speed Internet), dedicated desk or office space of varying sizes (typically requires a monthly fee and commitment terms vary from month-to-month to 3, 6, 9 or 12 month increments) and flexible access to their other facilities and locations.

For startups and small businesses, turnkey co-working space agreements provide greater flexibility than typical commercial lease agreements, which help business owners manage tight operating costs. Co-working spaces may require a security deposit; however, they typically won’t require three years of financial information from the business. The monthly costs will generally be lower than a typical commercial office lease since you are only paying for what you need. Some co-working spaces may require that you carry commercial liability insurance coverage; however, the costs are generally more affordable since the office space will be significantly smaller. Utilities and cleaning services are usually included in the monthly fee and some conference room access (hours) may be included in the monthly fee. Some spaces may also include complimentary coffee, tea and water. Additional services may be purchased a la carte.

All-in-all, co-working spaces don’t sound too bad at all . . . so why even consider leasing a commercial office space?

While co-working spaces can be beneficial in the short-term, there are plenty of reasons why you’ll eventually need to find a suitable commercial office space.

First . . .  SIGNAGE! You’ve worked hard to make a name for yourself and your business so you’ll want your business name prominently up at the entry way to your office space. Unfortunately, the first name you’ll see with most co-working spaces will be the name of the company that provides the co-working space. While you may place signage for your business on the door to your individual space, you typically won’t be able to place any signage in the Reception area for the co-working space. This can be a major drawback for new business and potential business prospects.

Second . . .  Costs can add up quickly! The two major areas where your costs can quickly add up even if your office space needs don’t change will be conference room hours and Internet bandwidth. If you have a monthly agreement in place, it will typically include a fixed number of conference room hours as well as Internet bandwidth. If your business requires meeting with clients or vendors frequently, your conference room hours can add up very quickly. Likewise, if your business requires a lot of Internet bandwidth for uploads, downloads, streaming, etc., you could be faced with a ridiculously high overage bill for your Internet bandwidth usage.

Third . . . PRIVACY! Co-working space means there will be plenty of other businesses sharing the overall office space. Some co-working spaces don’t have fully enclosed offices. This means you can hear the activities of your neighbors. If you are able to find a fully enclosed office space within the co-working space, this might not be a big deal. However, if you happen to be in one of the spaces that are not fully enclosed, you might feel quite uncomfortable discussing business plans, strategies and so forth where nearby neighbors can hear those discussions. Granted, most co-working spaces may include privacy spaces (ex: phone booth-style privacy space); however, if you’re paying a monthly fee for an office space, you shouldn’t have to pop into a phone booth-style privacy space to have a conversation.

One other reason for eventually needing commercial office space is if your business grows, you will outgrow your co-working space. Sure, you may be able to find a larger office space within the co-working space; however, if that happens, you could be paying just as much (probably more) for the co-working space as you would for commercial office space. If that’s the case, finding suitable commercial office space will make much more sense.

Lastly, let’s not ignore the fact that there are alternatives to co-working spaces. For instance, you could lease part of an office space from another tenant (Sublandlord). While similar to a co-working space, the number of other businesses that operate within the office space will be limited, you may be able to work out signage at Reception, there could be more privacy and you can split/share the costs of overhead which will be mutually beneficial to both the Sublandlord and SubTenant.

Considerations When Starting A Business: Seeking Professional Counsel

As you get started with your new business, there may come a time when you will need to seek professional counsel from a good business law firm and/or CPA firm. Even if your circumstances may not warrant professional counsel at the onset of your new business, you may eventually need to seek counsel as your business grows. Speaking with a good business law firm and/or CPA firm can help you stay on the straight and narrow and in compliance of the constantly changing local, state and federal regulations, requirements and laws.

Legal Counsel

A good business law firm can provide an array of vital services to your business. They can provide key legal counsel during the initial setup and establishment of your new business, helping you to better understand what the legal implications of your new business venture will be. They can offer important insight to help you operate your business legally and avoid unnecessary risks. They can also serve as a critical line of defense between you, your business and potential third-party litigation.

Business law firms can help you figure out the best legal entity for your business (ex: LLC, Corporation - C-Corp or sub-chapter S), assist with filing the necessary paperwork with the appropriate federal, state and local agencies (ex: Department of State, IRS) to setup the legal entity, prepare Operating or Shareholder agreements specifically customized for your business and act as a designated agent for legal notices. They can help prepare and review contracts/agreements (ex: client contracts, NDAs, merger agreements, employment contracts) and they can step in to provide legal aid/counsel in the event of legal action for or against your business.

CPA Firms

A good CPA firm can provide your business with an array of vital Accounting services. They can provide guidance on the different types of legal entities best suited for your business (ex: LLC, Corporation - C-Corp or sub-chapter S). They can provide insight on the potential tax liabilities and obligations you, as a business owner, should be aware of and can expect. CPA firms can handle a variety of required tax reporting and filings for federal, state and local jurisdictions. They should stay current on all the latest changes to the tax laws and requirements to keep you (and the rest of their clients) compliant and up-to-date on the potential impacts those changes will have on you and your business.

For instance, if your business is a single-member LLC treated as a disregarded entity for tax purposes or a multi-member LLC taxed as a Partnership, the owners or LLC members typically do not take a salary through payroll. An owner of a single-member LLC will take a draw and members of a multi-member LLC taxed as a Partnership will receive what are called Guaranteed Payments in lieu of salary via payroll. In either case, unlike salaries via payroll, payroll taxes are not withheld on the income. As such, owners/LLC members are responsible for making quarterly tax payments to the appropriate federal, state and local tax agencies on the applicable earnings. Failure to make the appropriate payments may result in a huge tax bill and tax penalty at tax time.

In addition, single-member LLCs, multi-member LLCs taxed as Partnerships and corporations taxed as a sub-chapter S (including LLCs that elect to be taxed as a sub-chapter S) are treated as pass through entities for tax purposes whereby the business entities themselves are not taxed. Taxes on income/profit are passed down to the individual owners (usually reported on a Schedule K-1) and reported on their individual tax returns. While LLCs taxed as Partnerships and corporations taxed as a sub-chapter S (including LLCs that elect to be taxed as a sub-chapter S) are not taxed at the entity level, they are still required to file the proper annual Partnership or Corporation tax returns for the applicable tax year.

This is just a scratch on the surface, but you can see how complex the tax obligations and implications can be if you don’t understand how the tax laws affect you and your business and/or have appropriate guidance from a tax professional like a good CPA firm. You and your business can easily fall into a tax maze. A good CPA firm should be an active partner in helping you and your business remain compliant with all applicable tax laws and requirements.

There will be times where it may be necessary for your business law firm and CPA firm to collaborate and work together. For instance, when deciding what type of business entity to form for your business (ex: LLC, Corporation - C-Corp or sub-chapter S), it’s a good idea to get insight from both a legal and an Accounting perspective as different types of business entities will have different requirements and implications. While your law firm and CPA firm won’t necessarily tell you which type of entity to form, they should advise you, make recommendations and offer pros and cons. You’ll want to gain as much insight from their counsel to make a well-informed decision.

It should go without saying that both business law firms and CPA firms can be quite expensive so it’s important to know how and when to properly use these professional resources to avoid unnecessary costs. Far too often, business owners use professional counsel prematurely, fail to use counsel until situations get out of hand, don’t know the right questions to ask and/or how to lead, manage and streamline the conversations. Before you speak with a business law firm or CPA firm, take some time to gather your thoughts and put together an overview of what you want to discuss and the questions you want to ask. Try to keep the conversations on point and focused. Don’t be afraid to ask questions if you are unsure about something being discussed. At the end of any conversation with a business law firm or CPA firm, you should feel comfortable that you have gotten the answers that you needed to get from the conversation.

Keeping Receivables In Check

As a business owner, receivables (accounts receivable or A/R) are a vital part of your business. If you are not billing or invoicing clients and consequently, collecting those receivables in a timely fashion, your business will be unable to sustain itself. Without a steady, positive cash flow, you will be unable to make payroll, buy supplies or inventory, make investments into your business and/or pay vendors and other business operating expenses.

It is also important to understand that billings or receivables do not necessarily represent 100% income or revenue when there are applicable direct costs (ex: cost of sale, cost of goods sold). Why is this important? Well, because you don’t want to “rob Peter to pay Paul.” If you invoice a client $10,000 for a project but $5,000 of that invoice is for direct costs to a third-party vendor, only $5,000 constitutes income or revenue (your actual business income) which can go towards paying your business operating expenses, not the full $10,000. The $5,000 for direct costs should be earmarked and set aside to pay your third-party vendor.

Far too often, some business owners don’t make this distinction and may use that full $10,000 to satisfy their immediate business cash flow needs. For instance, a business owner may choose to use that $10,000 to help cover their payroll or pay a vendor that is looking for payment on a past due invoice (aka “the squeaky wheel”). In essence, the business owner has “robbed Peter to pay Paul.” The business may be experiencing a cash flow issue and has decided to use the cash that is due and payable to another vendor to pay other business expenses or other vendors. While this may not seem like a bad thing on a short-term basis to satisfy immediate business cash flow needs, there will be a domino effect which will ultimately impact the business in the long-term. It should go without saying that this is a terrible practice to follow!

So, how can you keep receivables in check?

Billings - It’s important to stay active and on top of client billing. For a small business with limited resources and staff, the business owner may need to be the one to take care of billing or perhaps you have a billing clerk or third-party that does billing for your business on a fixed schedule each month. Whatever the case may be, you must get your client billing done on a timely, regular basis. How often you bill or invoice your clients may depend on existing client contracts or agreements that are in place and/or when a project or phases of a project are completed (ex: milestones); however, the most important part is to get your billing done and invoices out to clients as soon as possible. Book those receivables!

Collections – Typically, you should have established payment terms with your clients. Your client contracts or agreements should state the specific payment terms and your invoices should re-iterate the general payment terms (ex: Due upon receipt, NET 10, NET 15, NET 30). Monitor your AR Aging on a weekly basis. Your Accounting platform should be able to generate reports like an AR Aging Summary and Open Invoices. Depending on your comfort level with your clients, you may extend the courtesy of up to NET 30 payment terms, even if your standard payment terms are due upon receipt. Regardless of the courtesy that you extend to a client, when invoices go beyond NET 30 payment terms, you need to actively follow-up with clients on the status of payment. Be sure to send past due notices which include copies of the past due invoices, send account statements and follow up directly with your clients by phone and/or e-mail. Be active and NOT passive!

Be sure to invest in a good Accounting platform that allows you to generate invoices and statements as well as offers robust reporting to provide you with the necessary financial reports that serve your business needs. Try to use platforms that are widely-used, familiar and popular. It will be a lot easier to find people who are experienced using these types of platforms should you need to bring someone in to manage or takeover your books.

When possible, send invoices to clients electronically whether through the Accounting platform (if supported/available) or by e-mail (ex: PDF attachment) in lieu of regular postal mail. In addition, consider accepting electronic payments from clients (ex: wire, ACH) instead of paper checks. This should help to minimize lost checks and may speed up payment turnaround time. When considering electronic payments, check with your financial institution to see if any fees are applicable to these types of transactions. Many financial institutions will offer ways to avoid and/or reduce bank and transaction fees.

Best Practices for Small Business Corporate Cards

A business credit or charge card can be helpful for business owners when it comes to making purchases and paying expenses on behalf of your business. However, it’s extremely important to develop best practices when it comes to managing and using these cards.

When applying for a business credit or charge card, determine the type of card that best suits your business needs. A business credit card, just like a personal credit card, will offer you a fixed credit limit and the ability to pay over time while a charge card will have no preset spending limit (not to be confused with unlimited spending power) and will typically require the balance be paid in full each month. It should go without saying that you should only spend what you can afford so that you can afford to pay your monthly bill in full every month. Paying over time will not only cost more in the long run (due to accrued interest) but also set you and your business on the path of accruing unnecessary debt.

As a startup or small business, you’ll want to find cards that offer no annual fee while still offering some bang for the buck (ex: sign-on bonuses, cash back rewards, points for every dollar). As your business grows, you may need to upgrade or switch to a different card that offers you greater benefits and rewards, but keep in mind that you may need to pay an annual membership fee to gain some of those added benefits and rewards. While paying an annual membership fee won’t necessarily break the bank, don’t go off and get a credit/charge card with a $400 or $500 annual fee if the value of the benefits and rewards do not help offset the cost of the annual fee.

A business credit or charge card, unlike a personal card, is intended for legitimate BUSINESS expenses only. Do not get into the habit of mixing business and personal expenses on a business credit or charge card. Cardholder agreements will usually state that business credit or charge cards are only to be used for business expenses. While card issuers may not audit every transaction made on a business credit or charge card, failing to keep your business and personal expenses separate can pose risks and liabilities including piercing the corporate veil and you could face penalties if your business were to undergo an audit by the IRS (ex: treating personal expenses as deductible business expenses). Just don’t do it!

If you are planning on issuing additional business credit or charge cards to employees, be sure to limit the number of cards to only those employees who absolutely require one for legitimate business purposes. Also, be sure to have written policies in place on the proper use of business credit or charge cards. Make sure every employee understands the current policies in place and provide refreshers as needed. As part of your written policies, you may want to include a policy requiring employees to obtain pre-approval or pre-authorization by management before any charges are placed on a business credit/charge card and/or set spending thresholds which require additional management approval.

Make sure that for every transaction on the card, there is a corresponding receipt for the purchase. You should also require that a monthly reconciliation (ex: expense report) for each card be submitted along with copies of all the corresponding receipts for the applicable charges. Be sure to thoroughly review every monthly statement for accuracy and to protect against fraudulent charges. It can also be beneficial to enable alerts on each card and on the master card account and to frequently monitor transactions on the cards. All card issuers should have an online dashboard which allows you to monitor all the card accounts and transactions on your master account.

With some business card accounts, card issuers will allow you to select billing options for your cards. For example, one option would be to receive a single master bill for your business credit/charge card account with a breakdown of each individual card and the respective charges.  The business, upon reviewing and reconciling the statement, can then pay the master bill each month. Another option would be to have individual credit/charge card bills issued to each cardholder. Each cardholder would then be responsible for paying their respective bills and then submit those expenses back to the business for reimbursement. The latter option would add an extra layer of protection for the business to prevent and deter unauthorized spending on a card.

Business credit and charge cards can be a useful and vital tool in helping a business owner manage and run his/her business, but like anything else, they must be used properly and responsibly.

Considerations When Starting A Business: Putting Together A Game Plan

Now that you’re ready and committed to starting a business, you need to put together a game plan. There are a lot of moving parts when it comes to starting a business so it’s important to be organized, detail-oriented and have all your ducks lined up. You’ll first want to take a “view from 10,000 feet” and then drill-down into the specific details.

During the process, gather information and be prepared to answer a series of questions related to your business venture. This information will be extremely helpful during the setup of the legal entity and establishing business operating parameters as you begin operations. In addition, if you need to consult with professionals (ex: business law firm, CPA firm), this information will help to streamline the conversation. You’ll learn quickly that streamlining conversations and meetings are crucial when dealing with law firms and CPA firms, especially if you don’t want to rack up enormous legal and accounting bills.

Below is a list of questions that you should seek answers to. This list is not intended to be a complete list of questions but serves as a starting point in putting together your game plan.

  • What type of business do you plan on starting?

  • Will you be the sole owner or will there be other owners?

  • Do you or any of the other owners have non-compete agreements (or similar) that would prevent or prohibit you and/or the other owners from joining or participating in this business venture? Are there any potential conflicts of interest?

  • Are you or any of the other owners currently participating in or are a part of another business venture, whether in the same industry or a different industry?

  • Will the business be owned by individuals, another business entity or a combination of individuals and business entities?

  • What will be the name of your business?

  • Is the business name unregistered and available to register with your state’s Department of State?

  • Are there any other individuals, companies or organizations using this business name or names similar that may cause confusion for clients/customers and/or pose legal issues (ex: trademark)?

  • Is the corresponding Internet domain name available for your business name?

  • Are the corresponding social media handles available for your business name?

  • What type of legal business entity is best for your business (ex: LLC – single-member LLC, multi-member LLC taxed as a Partnership, LLC taxed as a sub-chapter S, Corporation – C-Corp or sub-chapter S)?

  • What will be the designated role (ex: job function or area of responsibility) of each owner?

  • What does each owner bring to the table of the business venture?

  • How will the business be managed (by the owners, by designated managers, by owners and designated managers)?

  • How much starting capital do you and your partners have to invest in the business?

  • How much capital will you and your partners need to invest in the business to cover startup costs and at least the first three to six months of business operating expenses?

  • If you and your partners don’t have the necessary capital, how will you and your partners secure the necessary capital (ex: bank loans)?

  • Do you and your partners have a solid credit history and a good/excellent credit rating? Do you and your partners have collateral, if necessary?

  • When do you expect to officially begin business operations?

  • Will the business operate in a single state or multiple states?

  • Where will the principal office for the business be located? Will there be a single office location or multiple office locations?

  • Will you require commercial space for your business?

  • Will you be hiring employees?

  • Will you be using independent contractors or external personnel?

  • What resources will you require to operate your business (ex: supplies, equipment, software)?

  • Do you currently have or are you working with existing clients?

  • Who are your target clients or customers?

  • What’s your business plan or strategy for acquiring new clients or customers?

  • If your business requires inventory, how do you plan on acquiring, storing and securing inventory?

  • Will your business be required to collect sales tax?

  • Does your business operate within an industry that has industry-specific or governmental requirements (ex: certifications, memberships, licenses, permits, insurance)?

Apple Announces Apple Watch Series 4, New iPhones at September 12th Special Event

Apple CEO Tim Cook and the Apple team took the stage this morning at the Steve Jobs Theater in Cupertino to announce Apple Watch Series 4, three new iPhones and release dates for iOS 12, watchOS 5, tvOS 12 and macOS Mojave.

iOS, watchOS, tvOS and macOS

iOS 12, watchOS 5 and tvOS 12 will all be available this coming Monday, September 17th. macOS Mojave will be available a week later on Monday, September 24th.

Apple Watch

Credit: Apple

Credit: Apple

Apple Watch Series 4 was the first product announced at today’s Special Event. The Series 4 comes in new 40mm and 44mm cases. The Series 4 features a new edge-to-edge display with curved edges and a viewing area that is thirty-percent larger, a black ceramic and sapphire crystal back, new Digital Crown with Haptic feedback, a fourth generation S4 64-bit Dual-Core processor which is up to 2x faster, a 50% louder speaker, the microphone has been moved to the opposite side for noise reduction, a new watch face which supports eight customizable complications and up to 18 hours of battery life on a single charge. The new Series 4 accelerometer and gyroscope add fall detection. Series 4 also adds new heart health features including low heart rate & atrial fibrillation detection and an electrocardiogram (ECG).   

The aluminum case will come in Silver, Gold and Space Gray. The stainless-steel case will come in Silver, Space Black and Gold. Existing Apple Watch bands will be compatible with the new Apple Watch Series 4.

The Series 4 wireless models will start at $399 and the cellular models will start at $499. Apple will begin accepting orders for Apple Watch Series 4 on September 14th and the Series 4 will be available beginning September 21st.

Apple is also reducing prices on Apple Watch Series 3 with pricing starting at $279.

iPhone

Credit: Apple

Credit: Apple

Following the announcement of Apple Watch Series 4, Apple announced three new iPhones today – iPhone XS, iPhone XS Max and iPhone XR.

The first two new iPhones announced were the iPhone XS and iPhone XS Max. The iPhone XS and iPhone XS Max are made from a surgical grade stainless-steel and come with Super Retina HD OLED 5.8-inch and 6.5-inch displays respectively, a 7-nanometer A12 Bionic Chip with a 6-Core CPU, 4-Core GPU and next-generation 8-Core Neural Engine offering faster app launches by up to thirty-percent, dual 12MP (wide-angle and telephoto) rear cameras, 7MP front TrueDepth camera, Smart HDR and dual SIMs (nano SIM + eSIM). The iPhone XS and XS Max also include a new feature that lets you adjust the depth of field of photos AFTER you’ve taken them from an aperture of f/1.4 to f/16. The iPhone XS offers an additional thirty-minutes of battery life over the iPhone X while the iPhone XS Max offers an additional ninety-minutes of battery life over the iPhone X.

Both the iPhone XS and iPhone XS Max come in Gold, Silver and Space Gray. Capacities will include 64GB, 256GB and 512GB. The iPhone XS will start at $999 and the iPhone XS Max will start at $1,099. Apple will begin accepting orders for iPhone XS and iPhone XS Max on September 14th and both devices will be available on September 21st. 

The third new iPhone announced at today’s event was the iPhone XR. The iPhone XR is made from a 7000 Series grade aluminum with a glass back and features a new 6.1-inch LCD Liquid Retina HD Display, the same 7-nanometer A12 Bionic Chip available in the XS and XS Max, a single 12MP wide-angle rear camera, 7MP front TrueDepth camera, Smart HDR, Haptic Touch instead of 3D Touch, Face ID and dual SIMs (nano SIM + eSIM). The iPhone XR offers an additional ninety-minutes of battery life over the iPhone 8 Plus.

The iPhone XR comes in White, Black, Blue, Coral, Yellow and (Product) Red. Capacities will include 64GB, 128GB and 256GB. The iPhone XR will start at $749. Apple will begin accepting orders on October 19th and the iPhone XR will be available on October 26th.

Credit: Apple

Credit: Apple

Apple is keeping the iPhone 7 and iPhone 8 in their iPhone product line. The iPhone 7 will now start at $449 and the iPhone 8 will start at $599. The original iPhone X has been discontinued.

For full product details, technical specifications and pricing, visit Apple’s website.

Considerations When Starting A Business: A Reality Check

So, why do you want to start your own business? Time for a REALITY CHECK!

This is a very important question to ask yourself and you’ll want to think this through carefully. You’ll recall in a previous post, Considerations When Starting A Business: An Introduction, I mentioned that starting your own business is not a decision to take lightly nor a decision to make hastily. If you plan to start your own business, you need to consider these “driving” words – discipline, dedication, passion, motivation, drive, sacrifice, determination, focus and commitment. These words describe what you will NEED to have to drive yourself and your business forward.

You may dislike your current job or your boss, feel unchallenged or stuck in your current position or simply need a change of scenery. While these factors may be part of the answer to why you want to start your own business, they alone should not be the ONLY reasons why you want to start your own business. You could just as well find a new job at a new company or seek a position with greater challenges and responsibilities. When you ask yourself WHY, you need to look at the big picture and your short and long-term goals. Challenge yourself to make sure this is the right decision for YOU!

As a business owner and entrepreneur, you will have a vested interest in your business. Its success and failures will have a direct impact on you. You will be responsible for setting the direction and steering your business through good times and bad. You will need to be the face of your business to clients and prospects. You will need to make investments in your business, take risks and make sacrifices. You will need to take an active role in the day-to-day management of your business, its activities and in making critical, time-sensitive decisions. You must familiarize yourself with every aspect of your business operations especially understanding financials and the importance of A/R, A/P, working capital, gross revenue, net income, cash flow and the P&L.

Sure, as your business grows, you can hire key, trusted people to help you steer and manage the business, but in its infancy, you will need to be extremely hands-on and involved. Even with the right people, you cannot be passive or take a back seat to your business. This is a mistake that some business owners make. If you want to be an employee, then find a job and be an employee. But, if you want to be a business owner and entrepreneur, you need to step up to the plate and be willing to give it your all.

Forming an LLC in New York? Don’t forget the Publication Requirement!

If you decide to go into business for yourself, you’ll eventually want to form a legal business entity. A common type of entity for startups and small businesses is the Limited Liability Company or LLC. LLCs are easy to form and don’t have as many requirements as Corporations.

A single member LLC is typically treated as a disregarded entity for tax purposes and a LLC with two or more members is treated, by default, as a Partnership unless an election is made to tax the entity as a Corporation (either as a C-Corp or sub-chapter S). If you are unsure about the type of legal business entity you should form, seek counsel from a business attorney and/or a CPA. These professionals can help you make the best choice for your specific business requirements.

Once you determine the type of legal business entity you should form, there are various ways you can go about forming the legal business entity. A business attorney or law firm can help you do the necessary filings with the appropriate state agency, usually your state’s Department of State. You can also use companies like LegalZoom.com, IncFile.com etc. to do the proper filings for you. Companies like LegalZoom.com and IncFile.com will typically prepare and file the necessary documents for a service fee with add-on services available a-la-carte. If you don’t have a complex situation, using LegalZoom.com, IncFile.com and the like can be a cost-effective option. However, in more complex situations, seeking a business attorney or law firm is highly recommended.

That gets us to the actual topic of this post which is the obscure requirement in New York referred to as the LLC Publication Requirement.

So, what is the LLC Publication Requirement?

Well, according to New York’s Department of State, Division of Corporations, State Records and UCC:

“Section 206 of the New York State Limited Liability Company Law requires that within 120 days after the effectiveness of the initial articles of organization, a limited liability company (LLC) must publish in two newspapers a copy of the articles of organization or a notice related to the formation of the LLC. The newspapers must be designated by the county clerk of the county in which the office of the LLC is located, as stated in the articles of organization. After publication, the printer or publisher of each newspaper will provide you with an affidavit of publication. A Certificate of Publication, with the affidavits of publication of the newspapers attached, must be submitted to the New York Department of State, Division of Corporations, One Commerce Plaza, 99 Washington Avenue, Albany, NY 12231. The fee for filing the Certificate of Publication is $50.”

What you may not realize is that companies like LegalZoom.com, IncFile.com and the like typically DO NOT handle the Publication Requirement as part of their service fee nor do they offer an add-on service to handle the Publication Requirement. Some companies do indicate on their site that they do not handle the publication requirement, but it may take some digging around to find the information.

BetterLegal.com does appear to handle the Publication Requirement for you provided you designate them as your Registered Agent, but you do need to dig around their site to find the information. USACorpInc.com is another company that will handle the Publication Requirement for you without being designated as your Registered Agent. They have a link right on their homepage navigation bar for “NY LLC Publishing.” If you don’t mind the work and you’re looking to cut third-party costs, you could opt to take care of the Publication Requirement yourself. Depending on what county in New York your LLC is located, the cost to publish in the required two newspapers will vary. For instance, running ads in Manhattan newspapers may cost $1000-$2000 whereas running ads in newspapers located in upstate New York may cost a few hundred dollars.  

There are exceptions to the LLC Publication Requirement for theatrical production companies:

“A limited liability company that is a theatrical production company is exempt from the publication requirements provided the words "limited liability company" appear in its name. Also, a limited partnership that is a theatrical production company is exempt from the publication requirements provided the words "limited partnership" appear in its name. See Section 23.03 of the Arts and Cultural Affairs Law.”

So what happens if you don’t comply with the Publication Requirement?

According to New York's Department of State:

“Limited liability entities that are formed or authorized to do business in New York after June 1, 2006, which fail to comply with the publication requirements within 120 days after their formation or qualification will have their authority to carry on, conduct or transact any business suspended.

Note that at any time following the suspension of a limited liability entity's authority to carry on, conduct or transact business, the limited liability entity may file the certificate of publication with the affidavits of publication of the newspapers annexed thereto, at which time the suspension of such limited liability entity's authority to carry on, conduct or transact business shall be annulled.”

While there aren’t any fines or financial penalties from failing to comply with the LLC Publication Requirement, suspension or annulment of a LLC’s authority to conduct and/or operate its business in New York can create potential headaches for your business down the road.

The New York State Senate has circulated several Senate bills over the years to update/amend the law with regards to the LLC Publication Requirement, which can be a burdensome cost to startups and small businesses. Until the day the New York State Limited Liability Company Law is updated/amended to remove the Publication Requirement, if you plan to form an LLC in New York, bear this requirement in mind.

Just a side note . . . if you operate a LLC in New York that was formed in another state (aka a Foreign Limited Liability Company or Foreign LLC), you are NOT exempt from the New York LLC Publication Requirement as per Section 802 of the New York State Limited Liability Company Law which reads:

“Section 802 of the New York State Limited Liability Company Law requires that within 120 days after the filing of the application for authority, a foreign limited liability company (LLC) must publish in two newspapers a copy of the application for authority or a notice related to the qualification of the LLC. The newspapers must be designated by the county clerk of the county in which the office of the LLC is located, as stated in the application for authority. After publication, the printer or publisher of each newspaper will provide you with an affidavit of publication. A Certificate of Publication, with the affidavits of publication of the newspapers attached, must be submitted to the New York Department of State, Division of Corporations, One Commerce Plaza, 99 Washington Avenue, Albany, NY 12231. The fee for filing the Certificate of Publication is $50.”