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August 2017 Archives

Business formation considerations for startups

Pennsylvania entrepreneurs usually are filled with the excitement of a new idea, a new product, a new service and find it hard to switch gears and focus on the business per se. Nevertheless, such gear switching is vital, particularly in regard to deciding what type of business they wish to form.

As Founders Workbench points out, which business structure works best for which startup depends on the following three factors:

  1. The desires of the owner(s) regarding limited liability of personal assets
  2. The desired business ownership and management structure
  3. Federal and state taxes

Business entity types

The Small Business Administration can be helpful in cutting through the legalese associated with the various types of business organizations and explaining them in a relatively straightforward manner. Assuming that the startup will have more than one owner, the most common types of business are the following:

  • Partnership
  • Corporation
  • Limited liability company

There are several different types of partnerships. One popular type is a limited partnership wherein there is one general partner with unlimited liability and additional partners with limited liability and limited control. All of this is set forth in a written partnership agreement. The partnership itself pays no income taxes; rather, its profits are passed through to the partners who pay personal taxes on their shares of the partnership profits. Another popular type is a limited liability partnership. Similar to an LP, an LLP gives limited liability to every partner, protecting each from the actions of the others.

A corporation provides the strongest personal liability protection to the startup owners, but also is more expensive to form and requires more record-keeping. Corporations are legal entities separate and apart from their owners and pay their own income taxes. Shareholders pay personal income taxes on the dividends they receive.

Somewhat akin to a corporation, a limited liability company, a/k/a LLC, offers both corporate adn partnership advantages.  The personal assets of the owners generally are not at risk if the business is sued or goes bankrupt.  The LLC entity is filed with the state, the internal workings of the organization are mostly determined by the operating agreement amongst the members and/or managers of the company.

S corporations are a special tax election which can be taken by a corporation or an LLC.  By taking the special S election the business avoids the double taxation of a regular corporation and can receive other tax benefits.  One downside of an S corporation, however, is that all shareholders must be U.S. citizens and they are limited in the number and types of shareholders and shares that they can issue.

Kisner Law Firm works with a variety of startups to provide advice regarding the best entity for your needs, formation and drafting the necessary documents for good corporate (or company or partnership) governance.  Our attorneys are also available to assist entities who may have formed on their own using a service and now have concerns or are dissatisfied with the fit of that entity structure for their needs.

Fight back against accusations of discrimination

You base the decisions that you make regarding the hiring or firing of your employees on the best interests of your Pennsylvania business, yet sometimes, these decisions can come under scrutiny. Disgruntled employees or former employees may sometimes claim harassment or discrimination, when in reality you were making a reasonable decision based on facts and the well-being of your company.

It is prudent to confront these types of accusations swiftly and effectively. The best defense is a good offense, so documentation during employment is key.  It is also important to have enforce non-discrimination  policies in place.

If you are dealing with accusations of pregnancy discrimination, you do not have to deal with it on your own. The attorneys at Kisner Law Firm can provide a proactive plan to document compliance and can also provide advice to help you handle claims of discrimination.

Fighting back against false allegations

Whether an employee has actually filed a lawsuit, is simply threatening to do so or you suspect that a problem could arise soon, you have the right to take quick action to address these matters appropriately. Discrimination is serious, and even if you know the allegations are false and ungrounded, you still need to respond to them.

With assistance, you can work to show that you did not act in a discriminatory manner or unfairly, but made a reasonable decision as a business owner. Evidence, such as extensive documentation, can benefit your defense against claims of discrimination or lawsuits.

Protecting the future of your business 

One of the best defenses against allegations of harassment is to avoid litigation altogether. It would be beneficial to work on a plan of operation and HR policies that protect you as well as your employees.

In the event that you are confronted with claims that you discriminated against an employee, you would be wise not to ignore it or take these allegations lightly. A serious threat to your business merits a serious response.  Kisner Law Firm can assist with providing a proper response.

How can you start a successful business?

Pennsylvania entrepreneurs like you are always looking for opportunities to grow your business. Kisner Law Firm, LLC, works with you to get established in your chosen field, allowing you to reach your full potential and net the widest audience you can.

What's crucial to setting up a good business is asking the right questions before you get started. It's the same as it is when building houses: a strong foundation will last you a long time. First, you'll need to look at how you intend to manage your business. Questions to ask include:

  • How you plan on distributing your profits
  • How many owners the business has
  • Who plays active and passive roles in the business
  • The financial positions of all involved

Deciding all of this ahead of time will allow you to avoid potentially messy arguments later down the line when it comes to the profits that your company makes.

You'll also want to look at your business structure itself. For example, what kind of transactions do you expect to make? Will you need any special licenses to run your business? What sort of services do you intend to provide, or what items do you plan on selling? What is your intended audience? Are there any state regulations that you need to be mindful of?

Once you've figured out the above, getting started with your business will be a much easier task. Our linked web page has plenty of information for you to look at if you're starting your business.  Our knowledgeable attorneys are available to provide a variety of services to assist with starting or growing your business.

Employment contracts benefit workers and business owners

When the time comes to expand a business, a Pennsylvania entrepreneur may wish to hire employees to help carry the load. However, this may fill a business owner with trepidation because of the many potential complications that come with hiring, compensating and perhaps firing employees. Business owners often find that some of those complications can be avoided with a carefully drafted employment contract.

The advantages of such a contract include addressing common contingencies that arise in business situations. Contracts can describe what an employer expects of his or her workers, the benefits the employee may receive and how the relationship between boss and worker may end. While contracts are not always necessary, many business owners find that they are able to retain employees longer when they have signed such an agreement.

Contracts can also include important protections for the business owner. For example, a contract may include non-compete clauses, preventing former employees from seeking work with a company rival. Managers may also benefit from including requirements for employers to give reasonable notice before leaving the job. A common drawback of employment contracts is that they eliminate the "at-will" option, which allows an employer to fire a worker who isn't producing. A contract may protect the worker from such dismissal.

Well-drafted employment contracts can save business owners many headaches. Finding the balance between protecting one's business and attracting a talented employee requires skill and knowledge of employment law. Many business owners in Pennsylvania find those qualities in a experienced Kisner Law Firm attorney who can help them create a contract appropriate for their circumstances.

Source: entrepreneur.com, "Employment Contract", Accessed on Aug. 12, 2017

What is the Pennsylvania Wage Payment and Collection Law?

You may not give much thought to your employees' wages. However, wages can be a source of dispute for your Pennsylvania company. It is important to understand the various wage and hour laws affecting your business, including the Pennsylvania Wage Payment and Collection Law, so you can avoid disputes in this area of your business.

There are many things you are required to do in order for your employee wages to be considered legal. Even after you have established and promised a legal wage, you must follow through and comply with the wages and payment terms you have established.  This is why it is important not to unwittingly establish wages or payment that you did not intend to or do not plan on paying.

The Smart Business Network says that each employee's wages and hours should be recorded, and these wages need to be delivered on designated paydays. You typically have till the next payday to give workers their earnings when they leave your company, and failing to do this may result in a claim against the company. Additionally, workers need to understand their wages and benefits when you hire them.

Although these requirements sound simple, you may unintentionally break them. If a worker quits but owes your company money, you might wrongfully deduct money from the employee's last paycheck. You may also experience disputes if you do not give employees their wages after they leave the company, even if your company is facing financial difficulties. 

There may be stiff consequences for breaking Pennsylvania's wage law. You may be required to pay a portion of your former employee's legal fees and a fine, and in some circumstances you may face imprisonment. Before a claim proceeds to court, you typically receive a notification of your legal error and usually have 10 days to pay your former employee. The amount you owe usually increases if you do not deliver the wages after 30 days.    

The experienced attorneys at Kisner Law Firm can assist owners and management in understanding the multitude of hour and wage laws and develop a plan to help your company stay in compliance.

What is incorporation?

If you are starting a business or involved in business ownership in Pennsylvania, you may be curious about incorporation. Entrepreneur explains incorporation is the process of creating a corporation, which is a standalone entity with its own legal rights. Incorporation is done at the state level, but you can incorporate in different states, usually through filing forms and paying a fee.

Creating a corporation requires a board of directors who, along with the officers appointed by the directors, are responsible for running the business. The corporation will issue stock to shareholders, some of whom may be investors. the shareholders will enjoy limited liability because the business is an independent entity.

Incorporating a business requires following specific rules. You must file articles of incorporation. The corporation myst hold at least an annual meeting and keep records, called minutes, of the meetings of the shareholders and directors.  Taxes must be filed on behalf of the business and the finances of the business must be kept separate from personal finances. A corporation works for its shareholders and may need to provide dividends if the business is profitable.  You will need to register with the Securities and Exchange Commission if you do not otherwise qualify for an excemption.  

Corporations and shareholders sometimes face 'double taxation' where the company has to pay taxes on the profits it makes and then the owners have to pay taxes on those same profits when they receive them individually.  There are certain corporate and tax structures that can be used to minimize the impact of taxation.  Corporations must comply with rules and regulations, especially of special elections or exceptions, or they risk losing their corporate status and protections.

Corporate formation and governance can be daunting but Kisner Law Firm can provide advice and formation services to help you develop best business practices.

What's your 'pie in the sky' business idea?

Business meetings - those two words can draw excitement or ire depending on your perspective. As you meet with your partners to discuss a new business idea, you can quickly tap into the creativity in the room, but as ideas become a reality, questions arise that can bog down progress in both business formation and product creation. How can you work past these roadblocks on the way to success?

Choosing a business structure

In the early stages of planning, you will discuss what kind of business structure you and your partners will utilize. You probably know what the company will do, but how it will run takes a little more discussion. The advantages of entity types will be the subject of much discussion between you and your colleagues, and understanding the differences can help drive the conversation.  Two of the most popular entities are a limited liability company (LLC) and a Corporation. 

An LLC or a Corporation can also make tax elections to better fit the needs of your partners and your business.  Both an LLC or a Corporation can be taxed as an 'S-Corp' or a 'C-Corp', an LLC can also be taxed as a partnership.

LLC

  • Limited liability for members
  • Flexible 
  • Tax election options

S corporation

  • Avoids taxes on profits outside of compensation
  • Limited shareholder and stock options

Corporation

  • Limited liabiiity for shareholders
  • Favored by investors
  • Statutory requirements for governance structure
  • More restrictions on tax elections

Your business will likely change as the business grows, the prospects of which can be written into the business plan.

A business law attorney can assist in including the legal needs for growth in your business formation. Your legal professional can also act as a third-party voice to your business structure outside of the egos and emotions of the daily workflow.

Focus on the formation

As a soon-to-be business owner, you want to be efficient, and keeping discussions focused is often the key to early meetings. Even if you intend to develop a large business, the close company you keep is critical.

Amazon CEO Jeff Bezos was recently named as one of the richest people in the world. To help him reach his business goals, he relies on a "two pizza rule" to keep meetings productive. That is to say; he never invites more people to a meeting than two pizzas could feed. Could you use this same rule during the formation of your business?

Understanding the advantages of particular business structures can help drive formation discussion toward the 'pie in the sky' that is your business goal.

Kisner Law Firm can provide advice and planning on the formation of your business and assist new or soon to be owners on focusing on the pertinent discussions and important choices that will need to be made.  Our attorneys can also provide formation services and advice regarding best business practices one your new entity is formed.

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Gulf Tower
707 Grant St., Suite 2646
Pittsburgh, PA 15219
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Fax: 412-235-6704

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