Doing it right is not. Leonard D. DuBoff, Attorney at Law for Small Business Organize Your Business • Develop a Business Plan Finance a New Business • Work with Contracts Hire Employees • Collect Overdue Accounts ® THE (IN PLAIN ENGLISH) ® DuBoff EAN UPC S PHINX ® P UBLISHING AN IMPRINT OF SOURCEBOOKS, INC. ® NAPERVILLE, ILLINOIS www.SphinxLegal.com Business $19.95 U.S. $29.95 CAN Every decision you make today directly impacts your future success. Careful planning is crucial for identifying your goals and creating a path to achievement. Understanding the many legal obligations as well as legal protections available to you is key. The Law (In Plain English) ® for Small Business is your one-stop guide for making the right decision every time. It covers the topics that concern you the most and provides clear and accurate explanations of the laws affecting your small business. All the basic tools needed to begin operations are included such as— Starting a small business is easy. Doing it right is not. • Succession Planning • eBusiness Considerations Small Business for Small Business LAW LAW The Law (In Plain English) ® for Small Business helps you keep an eye toward the future by examining the unique issues of— No matter what stage your business is at, it is never too late to get on track. So, whether you are thinking about opening a small business, wanting to make sure that you do it right, or ready to expand to the next level— The Law (In Plain English) ® for Small Business has everything you need! • Incorporating • Licenses • Advertising • Trademarks • Taxes • Insurance • Franchising • Multilevel Marketing THE LAW (IN PLAIN ENGLISH) ® for SMALL BUSINESS Leonard D. DuBoff Attorney at Law SPHINX ® PUBLISHING AN IMPRINT OF SOURCEBOOKS, INC. ® NAPERVILLE, ILLINOIS www.SphinxLegal.com Printed and bound in the United States of America. VHO — 10 9 8 7 6 5 4 3 2 Library of Congress Cataloging-in-Publication Data DuBoff, Leonard D. The law (in plain English) for small businesses / by Leonard D. DuBoff p. cm. Includes index. ISBN 1-57248-377-6 (alk. paper) 1. Business law United States. 2. Small business United States. I. Title. KF390.B84D83 2004 346.73'0652 dc22 2004001921 Copyright © 2004 by Leonard D. DuBoff Cover and internal design © 2004 by Sourcebooks, Inc. ® All rights reserved. No part of this book may be reproduced in any form or by any electronic or mechan- ical means including information storage and retrieval systems—except in the case of brief quotations embodied in critical articles or reviews—without permission in writing from its publisher, Sourcebooks, Inc. ® First Edition, 2004 Second Printing: July, 2004 Published by: Sphinx ® Publishing, An Imprint of Sourcebooks, Inc. ® Naperville Office P. O. Box 4410 Naperville, Illinois 60567-4410 630-961-3900 Fax: 630-961-2168 www.sourcebooks.com www.SphinxLegal.com This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the serv- ices of a competent professional person should be sought. From a Declaration of Principles Jointly Adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations This product is not a substitute for legal advice. Disclaimer required by Texas statutes. Dedication To my wife, Mary Ann Crawford DuBoff, for all you have done and for all we have together, and to my mother, Millicent DuBoff, for giving me the tools necessary to create this work and the drive to actually do it. Finally, to my grandson, Brian Michael Haak, with hopes that he will carry on the tradition. [...]... shareholders have other sources of income against which they wish to write off those losses, the S corporation is likely to be a desirable form for the business Small corporation, as defined by the tax law, does not refer to the amount of business generated; rather, it refers to the number of owners In order to qualify 14 • The Law (In Plain English) for Small Business for S status, the corporation may not have... the original partnership is technically dissolved when one partner retires, it is not uncommon for the remaining partners to agree to buy out the retiring partner’s share—that is, to return that person’s capital contribution and keep the business going 8 • The Law (In Plain English) for Small Business Raising enough cash to buy out the retiring partner, however, could jeopardize the business by forcing... is your accountant The accountant will provide valuable input on the business s financial structure, funding, capitalization, allocation of ownership, and other issues 18 • The Law (In Plain English) for Small Business BUSINESS NAME Regardless of its form, every business will have a name Contact your attorney ahead of time with the proposed name of the business A quick inquiry to the corporation commissioner... to the preparation of an agreement 6 • The Law (In Plain English) for Small Business IN PLAIN ENGLISH Enlist the services of a competent business lawyer The expense of a lawyer to help you put together an agreement suited to the needs of your partnership is usually well justified by the economic savings recouped in the smooth organization, operation, and, when necessary, the final dissolution of the. .. to determine which business form will be most advantageous for you In addition to the business forms discussed, many states have enacted laws that permit the creation of hybrid forms of business organization, such as limited liability limited partnerships (LLLPs) and business trusts It is important for you to consult with an experienced business lawyer in order to determine which business forms are... have done to minority owners Avoiding these problems is no more difficult than drafting an appropriate agreement among the owners Both LLCs and LLPs have operating agreements that can be structured for minority protection You should always retain your own 16 • The Law (In Plain English) for Small Business attorney to represent you during the business entity’s formation, rather than waiting until it... Plans Defined Contribution Plans Designing and Documenting a Plan Employer-Sponsored Plan Investments in a Qualified Plan Chapter 24: Estate Planning 247 The Will Payment of Testator’s Debts Disposition of Property not Willed Advantages to Having a Will Estate Taxes Distributing Property Outside the Will Probate xiv • The Law (In Plain English) for Small Business Chapter... principals of such xvi • The Law (In Plain English) for Small Business companies might gain a clearer understanding of the legal issues they deal with by reading an In Plain English® book This book is not intended to be a substitute for the advice of a professional Instead, it is designed to sensitize you to the issues that may require the aid of a skilled attorney or other expert It is my sincere hope that... subject.) (For further information on tax planning devices, contact your local Internal Revenue Service (IRS) office and ask for free pamphlets or use the services of an accountant experienced in dealing with business tax planning.) PARTNERSHIPS AND JOINT VENTURES A partnership is defined by most state laws as an association of two or more persons to conduct, as co-owners, a business for profit No formalities... by issuing debentures or bonds 12 • The Law (In Plain English) for Small Business IN PLAIN ENGLISH Actually, a corporation’s ability to raise additional capital is limited only by its lawyer’s creativity and the economics of the marketplace Taxes Under both state and federal laws, the profits of the corporation are taxed to the corporation before they are paid out as dividends Then, because the dividends . as— Starting a small business is easy. Doing it right is not. • Succession Planning • eBusiness Considerations Small Business for Small Business LAW LAW The Law. . . . . . . . . . . 303 xiv • The Law (In Plain English) ® for Small Business When I first began writing The Law (In Plain English) ® series more than a