A Small Business Legal and Tax Checklist

By Cliff Ennico

November 29, 2016 6 min read

As a small business lawyer and business guru, I am asked lots of legal and tax questions. Most are asked by newbies — people starting businesses for the first time. But even owners of established businesses should always be thinking about their legal and tax environment.

On Wednesday, Dec. 14, 2016, I will be hosting a one-hour webinar on legal and tax issues for small businesses and their owners on the BrightTalk website from 2 p.m. to 3:15 p.m. EST (11 a.m. to 12:15 p.m. PST). Sponsored by the good folks at Verizon, this program will focus on the most common questions I get from owners of established small businesses. To sign up for the free program, go to https://www.brighttalk.com/webcast/6255/221009?utm_source=presenter&utm_medium=social&utm_campaign=CE.

Whether or not you plan to join the webinar, here are some of the tough legal and tax questions you should be asking about your business right this minute.

—Is my legal entity still working for me? Perhaps you started out as a sole proprietor and are thinking about forming a limited liability company, or LLC, but it will make your business look bigger. Maybe you are an LLC and are thinking about being taxed as a subchapter S corporation. Maybe you are a subchapter S corporation and are thinking about becoming a C corporation so you can launch a crowdfunded offering of your securities or bring on foreign partners.

—Should I consider trademarking my company name? So you've built a huge social media following for your business. You are no longer a business but rather a recognizable brand. Good for you. But without a registered trademark your brand will go nowhere. Time to register your trademark, or choose a new name if your current one cannot be trademarked.

—Do I have all the business licenses I need? State and local governments are desperate for revenue these days. Some of them are getting very creative in passing new taxes or extending old ones. Consider meeting with your lawyer or accountant at least once a year to learn about what has changed in the last year and how to pivot your business so you don't get audited.

—Am I doing business in other states without knowing it? Your offices are only in one state. You never cross a state line when driving to and from your office. But your business may be operating in places and ways you don't even know about.

If you are selling stuff on Amazon from an office in New York but your inventory is being stored in an Amazon warehouse in Kentucky, which ships from Kentucky and accepts returns in Kentucky, guess what? You are now a Kentucky business and subject to all of that state's business taxes.

—Do I owe any taxes? Did your business have a tax liability of more than $1,000 last year? If so, you now have to estimate and pay your income taxes four times a year. Are you taking a mileage deduction for your personal car but not keeping a logbook to show when you use the car for business vs. personal use?

—Are my workers properly classified for tax purposes? Make no mistake: The IRS is auditing BIG in this area. Is your Wednesdays-only intern an employee or an independent contractor? It depends on whether or not he or she can schedule jobs. If you can tell someone to stop working on one project and start working on another, chances are that person is an employee, even though he or she only works a few hours each week.

Look at each of your workers on an individual case-by-case basis. If you're not sure about someone's status, now's the time to get it right — before the IRS reclassifies that person and socks you with tons of penalties.

—Am I doing everything I can to protect my assets from lawsuits? If you have a corporation or LLC, that's a great start. But are you using it or losing it? When I look at your business card or website, do I see your company name? Or something else?

Do you have all the insurance you need? Do you know the difference between liability coverage and errors and omissions coverage? Is your intellectual property insured against copyright infringement (did you even know such coverage existed)?

Are there disclaimers in all of your legal documents and contract forms? Where did you get your disclaimer language? Did a lawyer prepare it, or did you just grab something off the internet?

Should you consider putting all of your assets in the name of your spouse or other family member?

If you aren't sure of the answers to any of these questions, or worse, you don't have a lawyer to talk with about them, consider signing up for my webinar. I guarantee you will learn at least one thing you don't already know.

Cliff Ennico ([email protected]) is a syndicated columnist, author and former host of the PBS television series "Money Hunt." This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our webpage at www.creators.com.

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