Year End Action Items for Business Owners

The end of the year can be a busy time for most business owners, so we’ve created a list to help you make sure your business is ready for the New Year!

1. Internal Documentation:
   • Review your Minute Book
     1. FIND IT!
     2. Is it up to date?
     3. Have officers and directors been properly authorized?
     4. Have significant business activities been memorialized in minutes?
        • Loans
        • Leases
        • Significant contracts
        • Significant purchases
   • Go through your leases:
     1. Are they written?
        • Particularly important for “home offices”
        • Even if owned by related parties (example owner of the business is also the owner of the property)
     2. Do you have significant upcoming dates
        • Renewal clauses
        • Termination provisions
   • Non-compete and/or Non-disclosure Agreements
     1. Have key employees signed them?
     2. Are signed copies on file?
   • Consider Employee Issues
     1. Review employee handbook
     2. Update job descriptions
     3. Review Employee benefits
        • Adopt or amend a Deferred Compensation Plan for key employees
        • Options for employees to purchase business equity
   • Buy/Sell Agreements (if there is more than one owner)
     1. Establish an agreement if there is not one in place
     2. Establish an “agreed price”
     3. Review insurance policies for adequacy of coverage
2. Establish or update a succession plan
   • Never too late or too early to start
   • Internal succession plan
     1. Stock purchase plan-
        • Creating an opportunity for key employees to buy-in
        • Terms need to be carefully documented
     2. Gifts to family members
     3. Most efficacious for family businesses
     4. “Grooming” of the successor is as important as the plan itself:
        1. Train the successor
        2. Introductions are important
           • Key clients
           • Key vendors
        3. Regular meetings are key
     5. Written Buy/Sell agreement is necessary if things don’t work out
   • External succession plan
     1. Selling the company to a third party
     2. Merger with a third party
     3. MOST commonly these involve a competitor or other companies seeking market share-Get to Know Them

3. Tax Matters-MEET WITH YOUR TAX ADVISOR
   • Don’t postpone purchases-Section 179 Depreciation
     1. Up to $500,000 can be expensed rather than depreciated
     2. Must be “placed in service” before 12/31
   • The WAY your accounting is measured for tax purposes matters
     1. Cash basis
        • Revenue is recognized when it is received
        • Expenses are deducted when they are paid
     2. Accrual basis
        • Revenue is recognized when “all events” have transpired to create right to revenue
        • Deduction is allowed when “all events” have transpired to create liability
     3. IF YOU ARE ON THE ACCRUAL BASIS-Determine (and document) Bonuses (these must be paid by March 15^th)
     4. IF YOU ARE ON THE CASH BASIS- Pay all of your outstanding bills
   • Plan now for tax elections for 2016
     1. Should your business elect to be an “S” Corporation for tax purposes?
     2. Should you change your basis of accounting?

 

If we can be of assistance with your internal documentation, succession plans, or other business matters, Please contact the Kreamer Law Firm, P.C. at 515-727-0900 or info@Kreamerlaw.com. At the Kreamer Law Firm, P.C.: We get things done®

Tips to Avoid a Lawsuit

1. Overview
   • In general, there are two basic principals:
     • Get it in writing (it’s the friendliest way to do business!)
     • Communicate
   • Sources of liability
     • Employees
     • Customers
     • General Public
2. Avoiding Lawsuits from Employees
   • Adopt/Establish internal WRITTEN policies and procedures
     • Have a written job description and check to make sure it’s being followed
     • These can be as broad or narrowly focused as necessary to meet the situation
     • there are third party vendors who do a nice job preparing manuals. For example: Merit Resources
     • Follow the manual:
       • Even if you don’t want to. Policies which are either not enforced or enforced selectively may not be policies at all
       • If you have to terminate an employee for “cause” document the reasons for termination as well as the steps PRIOR to the termination
   • Treat employees properly
     • Don’t be a jerk-Remember the Golden Rule
     • Be careful with humor: “politically correct” should be reduced to “correct”
     • Be careful when you’re in social situations INCLUDING social media
3. Avoiding lawsuits from Customers:
   • Use written contracts
     • The greater the specificity the better
     • If you use a “form” agreement, make sure you understand the form
     • Be aware that the length of the document is NOTHING compared to the contents of the document
   • Communicate with your customers
     • MOST customers will try to work with you
     • People don’t sue people they like
4. Avoiding lawsuits from the General Public
   • The key here is avoiding lawsuits against the owners PERSONALLY
   • Pay attention to your business infrastructure
     • The more you treat you business as a business the less likely that you will be sued personally for a business problem
     • You business should have a written operating agreement, Bylaws, Annual Minutes, and other internal written documents (like certificates, leases, and contracts)

Contact the Kreamer Law Firm, P.C. at 515-727-0900 or info@kreamerlaw.com for assistance with establishing internal policies and/or procedures, contracts, and other business documents.