Don’t Treat Your Employees Like Strippers

By | Business Contracts, Employment Agreements, Independent Contractor Agreements, Taxes | No Comments

employees independent contractorsAs reported by Jessica Anderson in the Baltimore Sun (Strip club dancers are suing clubs over pay – and winning), strip clubs are getting in trouble by improperly treating strippers as independent contractors instead of as employees.

Although there’s no hard and fast rule as to whether an individual working for your company is an employee or an independent contractor, the U.S. Internal Revenue Service (IRS) does provide some guidance on the issue.

Important Employment Factors

Two key factors that favor employment status are setting the work schedule and controlling how the work must be done by the person. For strip clubs, this meant club management telling the dancers when they had to perform and dictating what they could and couldn’t do when stripping/dancing.

What’s the potential damage by mislabeling employees?

If you treat your employees as independent contractors, you may be liable for back wages, statutory damages, penalties, employment taxes, plus contributions to workers compensation and unemployment compensation funds. These misclassified employees may also be eligible for benefits you’ve provided to your other workers, such as 401k contributions, paid vacation, and health insurance.

How to this problem?

If your workers are really employees, treat them as such from the time you extend an offer to work for you. Pretending they’re independent contractors when they’re not creates a ticking time bomb of legal and tax liabilities you don’t want.

On the other hand, if a worker truly is an independent contractor, it’s often a good idea to make that relationship clear in a professionally prepared written independent contractor agreement signed by the parties. If the contractor decides to assert employment status, you’ve got a contract to point to when trying to convince a judge or government agency that the worker is not an employee.

IRS Form SS-8

If it’s truly unclear whether your workers are employees or independent contractors after consulting with an experienced business lawyer, you may wish to file a Form SS-8 “Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding” (PDF file) with the IRS for a determination as to the workers’ status.

IRS Increases Small Business Penalties For Some Tax Errors

By | Business Legal Alerts, Taxes | No Comments

If you’re a small business owner, I highly recommend you read “Small business alert: Beware of stiff penalties for failing to file information returns” by Bill Bischoff.

Don’t get hit by costly U.S. Internal Revenue Service (IRS) penalties for failing to timely file information returns or provide requisite financial statements to third parties. As explained in Bischoff’s article, this includes W-2s, 1099s, K-1s and other IRS forms.

2017 Ecommerce Predictions: How President Trump Will Affect Your Business

By | eCommerce and Technology, Federal Communications Commission, Federal Trade Commission, International Trade, Internet Business Lawyer, Internet Lawyer, Internet Sales Tax, Net Neutrality | No Comments

2017 ecommerce predictionsBased on Donald Trump’s background, platform, words, and actions, Internet Lawyer Mike Young makes seven 2017 ecommerce predictions because Trump defeated Hillary Clinton’s quest to carry on as President Barack Obama’s de facto third term.

1. The FCC Gets Hammered.

The recent attempts by the Federal Communications Commission (FCC) has spent recent years trying to control and regulation Internet activities as a “utility” (like your electric company) instead of an “information service” that has a lot less rules to follow.

How does that change things? You can say adios to the FCC’s enforcement of “Net Neutrality.”

This means Internet content providers that suck up a lot of bandwidth will get eventually get charged more by Internet Service Providers (ISPs) than those who use less bandwidth. And those costs will get passed down. For example, if Netflix is streaming movies to a home where three people are watching different shows and movies eight hours every night, both Netflix and the customer are likely to pay more.

2. Government Contracts will be Reallocated to Smaller Competitors.

With the notable exception of Peter Thiel, from Seattle to Silicon Valley, tech giants (e.g. Amazon, Google, Facebook, and Twitter) were heavily invested in defeating Donald Trump and electing Hillary as President. In fact, it appears that GrubHub is firing employees post-election who supported Trump (so much for free speech).

Aside from being on the Left Coast where it’s cool to be “progressive” and anti-Republican, there’s a monetary motive for the big tech companies supporting Obama and Hillary. To be profitable, many of these companies rely upon federal, state, and local government contracts.

You can expect that, to the extent feasible, there will be a shift in federal government monies away from those companies that dissed Trump in favor of smaller competitors who can deliver.

3. There Will be More Internet Sales Taxes.

Like Hillary Clinton, President-elect Trump came out in favor of Internet sales taxes at the state and local (county/parish and municipal) levels. It appears that his primary reason for doing so is the personal hostility between Trump and Amazon founder Jeff Bezos. Bezos’ Washington Post ran hit piece after hit piece against Trump as news and editorials trying to get Hillary elected.

Unfortunately, Internet sales tax collection will punish small companies that sell online (not Amazon).

Why?

Amazon recognized a few years ago that sales taxes are ecommerce were inevitable so the company shifted its strategy. Instead of denying that warehouses constituted a presence in a state for doing business subject to sales tax, Amazon agreed with state comptrollers and started building/leasing warehouses across the country and collecting sales taxes on purchases made on its websites.

This has spurred growth of the company, including development of brick-and-mortar Amazon bookstores and grocery stores.

Here’s an important point to understand: Amazon has morphed into a technology and logistics company from its inception as an online bookstore.

They developed software to collect sales tax. In other words, they’ll profit from smaller companies paying to license their software for collecting and remitting the taxes to each state, county, and city where a purchase is made rather than be hurt by such taxes.

4. The FTC Will Focus On Tech Antitrust Violations

As his remarks about Amazon have suggested, President-elect Trump believes that some big tech companies are violating antitrust laws through anti-competitive behaviors. You can expect the Federal Trade Commission (FTC) to shift some resources to focus on ecommerce giants to determine whether or not antitrust laws have been broken.

If you work for a large tech company, this obviously isn’t a good thing. However, if you’re an entrepreneur who believes the playing field is unfair because the big companies have stacked the deck with crony capitalism and imposition of onerous regulations the past eight years by Obama bureaucrats, then a breakup of these larger companies may benefit you as you attempt to grow your business online.

Note that the antitrust issue extends beyond a personal grudge match with Amazon. For example, companies like Microsoft and Alphabet Inc. may find themselves spinning off their respective search engines (Bing and Google) if the FTC comes after them.

In historical terms, this type of antitrust action would be similar to the breakup of AT&T’s phone monopoly into the Baby Bells. To avoid a similar fate, Microsoft actually invested in Apple during the 1990s to prop up the company so there was competition.

As an aside, if it looks like the Trump’s FTC is on board with applying antitrust laws to tech giants, you can expect such enforcement to further encourage European Union antitrust enforcement along the same lines.

5. More Snowflakes Will Get Their Feelings Hurt

Encouraged by President Obama, social media icons (e.g. Twitter’s Jack Dorsey and Facebook’s Mark Zuckerberg) have supported politically correct censorship on their platforms on the basis of protecting individuals from “bullying” and “offensive” content.

Needless to say, there has been an inherent left-wing bias built into what constitutes an offense against their speech codes. For example, threats to kill Trump have been routinely ignored while a liberal snowflake with hurt feelings can get someone (e.g. Milo Yiannopoulos) suspended or banned regardless of the accuracy of what had been posted by the offending user (e.g. denying that gender reassignment biologically occurs by genital mutilation surgery).

Perhaps the most important of the 2017 ecommerce predictions for free speech and individual rights, you can expect a Trump administration to disfavor rather than encourage online censorship. State bullying, harassment, and stalking laws will continue to be enforced against actual criminals.

6. International Governance and Segmentation.

Under the Obama Administration, international control of the Internet has been in the process with the goal of making all countries equal players. Because Trump was elected, the ecommerce regulatory obstacles of the proposed Trans-Pacific Partnership (TPP) are now dead.

However, under the auspices of the Internet Corporation for Assigned Names and Numbers (ICANN), international bureaucrats and techies will run the Web’s domain name system (DNS). It remains to be seen whether or not a Trump Administration will be able to reverse this handover of U.S. assets to ICANN.

Because of antitrust and other legal liability issues, it’s probable that ICANN will morph or be absorbed into an international organization like the United Nations (UN) to prevent lawsuits that destroy it.

Regardless, there’s a trend consistent with Trump’s trade policies for nationalism and segmentation of commerce both offline and online.

You can expect that trend to continue with additional censorship within authoritarian regimes and parallel development of a MultiNet, a system by which national and regional Internets interact with each other but the respective rights and restrictions vary within each area and there is an ability and willingness of each government to routinely partially or completely firewall off its Net from other parts of the online world on censorship and national security grounds.

7. Goodbye to Government Green Support.

For the last of the 2017 ecommerce predictions, Internet Lawyer Mike Young notes that President-elect Trump is not a fan of environmental fads and has appointed a skeptic of human-induced climate change to handle the transition matters pertaining to the Environmental Protection Agency (EPA).

Environmental protection resources and government contracts related to energy will be shifted. Instead of subsidizing solar panels, wind farms, and electric cars, expect the federal government to focus on clean coal technologies, oil and natural gas development (including fracking), and nuclear energy.

Although there will still be ecommerce opportunities for so-called “green” alternative activities, companies should not expect the continuation of federal government subsidies for those activities.

Disclaimer for 2017 eCommerce Predictions

Disclaimer: This article was written on November 11, 2016. This means that 2017 ecommerce predictions may not be 100% accurate because of national and global events that will occur after publication.

Set up an Affiliate Program for Your Business

By | Internet Lawyer, Internet Marketing, Internet Sales Tax | No Comments
start affiliate program

Are you ready to start your own affiliate program?

During the past three weeks, I’ve revealed three methods you can use for growing your company via the Internet (sampling, endorsed reciprocal promotions, and licensing). If you haven’t implemented any of these strategies, take a moment today to pick one that best fits your business model and implement it right away.

In addition, you’ll want to consider having an affiliate program.

Although Internet sales taxes have made it slightly less attractive than it used to be, running an affiliate program is a method of growing your business with minimal investment in the right affiliate management software and a good written affiliate program agreement prepared by an experienced Internet lawyer.

Are affiliate programs different from licensing? Yes.

Affiliate programs should not be confused with licensing.

When you license your products, the licensee makes the sale elsewhere (often on the licensee’s website) and then remits a cut of the sale proceeds to you as your profit.

In contrast, affiliates drive traffic to your site and get paid a commission on sales from traffic they send your way. You handle the sales (including client service) and pay the affiliates.

When running an affiliate program, it’s important to prescreen your affiliates with a questionnaire to ensure they’re a good fit plus perform due diligence. It typically takes less than 10 minutes to check out an affiliate application before making a decision on whether or not to approve the applicant. When in doubt, decline an application. Trust your gut if you sense something wrong.

Here’s an example of why prescreening affiliate applicants is important. One of my companies had a person apply to become an affiliate who had been banned by the U.S. Federal Trade Commission (FTC) from marketing activities both online and offline. A simple Google search of the applicant’s name with the word “fraud” revealed the two FTC lawsuits and bans.

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5 Quick Things You Can Do Right Now to Protect Your Website

By | Business Entities, C Corporations, eCommerce Agreements, eCommerce and Technology, Internet Lawyer, Limited Liability Companies, Taxes | No Comments
protect your website

Legally protect your website now to avoid a lot of paperwork headaches later

Now is a great time to make sure you’ve got the right legal paperwork in place to protect your website before the holiday season begins. Here are five important tasks you can take care of fairly quickly.

1. Entity Check.

Make sure your business entity is in good standing in the state where you formed it. You’d be surprised at how many Internet business owners have to clean up a mess after the fact when their corporation or limited liability company disappears because of a missed report filing deadline or a late corporate franchise tax payment.

2. Services Contracts Check.

If you’ve got anyone that’s providing services to your Internet business as an independent contractor, conbusiness you’ve got written agreements in place that make this relationship clear. This reduces your risk of getting hit with unemployment or workers compensation claims by a services provider claiming to be an employee.

In addition, be sure to get your independent contractor’s Taxpayer Identification Number (TIN). This makes it easier to deduct payments you make to the service provider as a business expense.

3. Ownership/Management Check.

Have there been any changes in who owns (or how much they own) or runs parts of your Internet business? If so, have you documented these changes in writing? Memories fade and that leads to lawsuits.

4. Major Events Check.

Have you made large purchases for your company (e.g. computers, tablets, company vehicle, healthcare etc.) that you’d like to deduct as legitimate business expenses? Did you loan your company money or make a capital contribution? If so, have you put the legal paperwork in place to document what happened? What would you say during an IRS audit if asked to produce supporting documentation for the transactions?

5. Website Docs Check.

Are your website’s legal documents (privacy policy, terms of use, etc.) up to date? Do they reflect current Internet law and the content of your website, including any changes you’ve made to your site this year? If not, it’s time for some updates to reduce your risk of getting sued or investigated by the government.

For the typical Internet company owner, each of these takes 30 minutes or less to identify what needs to be done. You can then decide whether to try to do the work yourself or retain a qualified professional to help protect your website for you (e.g. Internet business lawyer, accountant, etc.).

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