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The Right Way to Reject a Job Candidate

rejectedMost small businesses today know about the importance of online reputation and the power of social media to help or hurt that reputation. Dozens of websites and rating services, from the majors such as Yelp, Twitter and Facebook to those serving specific business sectors such as travel, are open for anyone to express an opinion.

What many business owners haven’t yet realized, however, is that the so-called “Yelp factor” reaches into the job interview process as well. With social networks allowing everyone to share their experiences, good and bad, through a wide range of social media platforms, business need to be aware of how they deal with job applicants as well as customers.

[Follow Daniel Kehrer in Twitter]

Rejecting a job candidate the right way can avoid negative comments and finger-pointing, notes Barry Sloane, CEO of Newtek, a firm that offers a variety of small business services.

When a business decides not to hire someone, it is free to let the person know or not know he or she didn’t get the job. In the past, most businesses chose the latter approach since there were no consequences one way or the other. If these companies were aware of any ill will these actions generated, it wasn’t something that kept them up at night.

Things are different today. Job applicants freely share their experiences, good and bad, through a wide range of social platforms. Being treated poorly after applying for a job always makes for a good story and word travels fast if it’s a particularly bad experience.

It simply makes good business sense to treat job applicants in a dignified and professional fashion. Not only does it go a long way toward soothing wounded feelings, it elevates the perception of the business and creates goodwill.

Here are some tips on rejecting a job candidate the right way:

1. Don’t wait. Prompt notification of a job-seeker’s status significantly reduces the individual’s anxiety and stress. After a decision has been made, let finalists know the outcome.

2. Reach out in one of three ways. Ideally, a brief telephone call is preferable. It’s sometimes difficult and uncomfortable, but it’s also the quickest, most direct way to make contact. An email is the next choice and takes little time to compose and send off. Finally, a rejection letter can be sent as long as the tone is right. In any written communication, be sure to:

  • Address the applicant by name.
  • Thank him or her for taking time to apply and interview for the open position.
  • Get to the point clearly and politely.
  • Add a brief, positive comment about interview.
  • Encourage future contact, where appropriate.
  • Offer feedback, where appropriate.

3. If the job applicant barely missed the mark, or demonstrated talents and abilities that might later be of interest, encourage him or her to “please keep us in mind.” If it’s possible to provide a little feedback on where the applicant fell short (delivered in an upbeat tone), it might offer some insight into areas where he or she can seek improvement for the next job interview. This honest approach is often greatly appreciated by the recipient.

4. End on a positive note. Thank the candidate once again for his or her interest in the open position and wish them luck in their search for the right job.

5. In most cases, it’s best not to include any details regarding other candidates (including anything about the person actually chosen). This information is open to misinterpretation and may only aggravate the situation. And if there’s no plan to consider this applicant again, don’t tell them “We will keep your resume on file.”

Just as applicants can go to Facebook, Twitter and other social media channels to complain about a bad job-hunting experience, when they are treated well they will likely share this news as well. This can be great publicity for your business and assist in the future hunt for qualified job candidates.

Copyright © 2000-2013 BizBest® Media Corp.  All Rights Reserved.

9 Ways Small Employers Attract Lawsuits

Lawsuits filed by disgruntled employees or independent contractors against small businesses are one of the most vexing problems that business owners continue to face. Many are constantly on edge, fearing frivolous legal actions that can ruin the business even if the complaint has no merit.

Other small businesses – and especially those new to the employment game – may unintentionally violate employment rules simply by trying to be nice to employees by providing flexibility, or to save money for the business.  Either way, it’s a serious and longstanding problem for almost any type of small employer in the U.S.

Here are the top mistakes that small employers make that lead to lawsuits:

1. Classifying all employees as “exempt” from overtime rules. Under employment law, there are two basic employee classifications. In general, salaried employees are exempt from overtime and various other time-off or rest break rules that apply to hourly or “non-exempt” employees. Businesses get in trouble because it’s easier to pay everyone a salary rather than deal with hourly wage requirements that apply under both state and federal law. But merely paying someone a salary does not guarantee they are truly exempt, and job titles don’t either. An exempt employee is normally someone who is a high-level executive, administrative or professional.

2. Making people “independent contractors” because hiring employees is more trouble and expense. This is a bright red flag for the IRS. Just because you want the employee to be an independent contractor – or the employee prefers that status – does not make it legal. There are strict and detailed rules around what qualifies as independent contractor status and you’ll need to follow them.

3. Failing to provide supervisors (or yourself) with any training about harassment or discrimination. Too many business owners think that training just isn’t necessary. But the best defense against a discrimination or harassment complaint is making sure that you) or anyone in a managerial position in your business) know the rules on sexual harassment, discrimination, disability, safety and wage-and-hour laws.

4. Letting employees decide what hours and how many hours they want to work each day. Most employees are restricted by law as to the number of hours they can work without overtime pay. Alternative workweek schedules are an exception, but employees can’t simply decide they want to work 10 hours, four days per week. A valid alternative workweek schedule requires that employers follow specific steps to institute such a program. Failure to meet requirements can mean penalties and back pay for overtime.

5. Withholding a departing employee’s final check if they haven’t returned company property. For most business owners, this seems completely reasonable. But in some states, final paycheck deadlines set by law carry hefty penalties if not met, regardless of whether the employee still has keys, a uniform or whatever.

6. Firing an employee the wrong way. The simple step of being sensitive when firing an employee can go a long way toward avoiding lawsuits. Employees who consider legal action after being fired often do so because of the emotional aspects of being unjustly terminated. Treat the employee in a similar fashion to other similarly situated employees. Get professional advice on proper termination procedures before you proceed.

7. Being nice to employees by letting them take lunch breaks whenever they want to. Many employers – especially new ones – are surprised to hear this one. But in some states, such as California, employees must be provided at least a 30-minute meal break if they are working more than five hours. This is an unpaid, off-duty period. Failure to provide this can result in penalties and additional wages.

8. Failing to accommodate sick or disabled employees. Businesses with more than 15 employees are subject to the Americans with Disabilities Act (ADA) – and California laws take that down to five employees. Employers have been sued for firing someone who is sick, obese, depressed, injured on the job or otherwise limited.

9. Hiring the wrong employee.  Your most valuable defense against lawsuits is to hire the right employees in the first place. “Wrong” employees create a negative work environment, harass co-workers, offend customers or vendors and will sue your business. Don’t hire in haste, conduct background checks and carefully screen all applicants.

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How Business Owners can Fight Rising Fraud

 “Back office” and other types of financial fraud are rising at U.S. companies, and are hitting small businesses especially hard. Fraud experts point to the lingering effects of recession, cutbacks that have eliminated financial checks and balances at many businesses, and simple complacency as key reasons.

According to Joseph Wells, a CPA and founder of the Association of Certified Fraud Examiners, these three major risk factors can lead to fraud in a small business:

1)    Inadequate screening of employees before they are hired. Doing background checks is advised.

2)    Inadequate financial controls around record-keeping, bank accounts and how cash is handled.

3)    Too much trust. Sadly, the very thing that makes a small business a nice place to work also helps thieves succeed.

Some common back office fraud schemes include billing for non-existent goods or services, creating fake vendors, writing checks to dummy businesses or taking kickbacks from vendors.

A recent survey of small business owners by TD Bank, one of America’s 10 largest financial institutions, found that 75 percent are taking at least some steps to protect themselves against financial fraud.  But most aren’t doing nearly enough.

“It pays to be vigilant,” says Robert Dunlop, who heads corporate security and investigations for TD Bank. “Given the influx of new technologies available to small business owners, it’s important to learn about the latest techniques used by criminals, and to be more diligent in defending against fraud.”

Here are some tips for protecting your business against financial fraud:

Employ financial checks and balances.  Perform an internal review of company finances monthly. Make sure payment amounts match all invoices, and check for missing documents.  Running random audits or having a third party audit the books yearly shows employees that you are serious about fraud and deters would-be thieves.

Protect computer systems and practice web awareness.  Being complacent about cyber protection has cost many small companies dearly.  Every computer should have the latest firewalls and anti-virus software. Beware of “phishing” schemes that try to obtain confidential information from you or your employees. These usually take the form of an email that appears to be from a financial institution or service provider, but is fraudulent.  While most are easy to spot, some contain enticing headlines or appear to come from a legitimate address.

Guard sensitive hard copy documents, too.  The digital realm isn’t the only place your information is at risk.  Employees and others can steal your mail, credit card information or checks.  Printed financial statements and other sensitive papers should be shredded or stored securely.  Most financial institutions now let you opt out of receiving paper statements entirely, so that’s something to consider.

Even innocent photocopiers pose risk. “Most copiers built since 2002 contain a hard drive that stores every image scanned, copied or emailed. When you sell or upgrade your copier, the machine is usually reconditioned, but often the hard drive is left intact,” says Dunlop. Once the machine is resold, anyone can simply pop out the hard drive and access confidential information such as income tax and bank records, social security numbers, and medical records.

Use secure online banking.  Online banking is a secure way to manage small business finances. Most major banks now provide numerous levels of online security. Benefits include 24/7 access to real-time information, account transfers and payment management. You can easily schedule and manage payments and will have an audit trail of all transactions.  Be sure to check account activity regularly. Having instant access to payment histories helps you monitor spending for any discrepancies.  

Get proper insurance. Crime and fraud-related losses generally aren’t covered by property insurance policies, so it’s important to protect money losses from workplace fraud.  “Fidelity Insurance” protects your business against criminal acts such as robbery, embezzlement, forgery and credit card fraud. Liabilities secured under this type of insurance usually include money loss coverage (burglary or theft) and employee dishonesty (embezzlement and forgery).

Copyright © 2000-2011 BizBest® Media Corp.  All Rights Reserved.

What 1099 Reporting Rule Repeal Means to Small Business

Okay, small business owners just dodged a bullet. Chalk one up for common sense. The insane expansion of 1099 reporting hidden in 2010’s massive health care reform bill is now toast. President Obama put a stake in its heart on April 14.

Expansion of mandatory IRS 1099 form filing would have required every small business to file such a form for business-to-business transactions totaling $600 or more over the course of a year.  While businesses already must file 1099s for payments to individuals and independent contractors, this provision represented a giant escalation of the IRS campaign to close the so-called “tax gap” by putting a further squeeze on small business owners. [Also see New SBA Study says IRS Small Biz Audit Crackdown is Bogus.]

The expanded rule would, for the first time, have included payments currently exempted from the provision, such as those to vendors for merchandise and similar items. What’s more, under the now-defunct rule, individuals owning as few as one rental property would have been considered a “business” and required to file 1099s.

Needless to say, the filing burden would have gone through the roof, as business owners would also have been forced to collect tax IDs from every person or business they paid money to. And if they couldn’t get it, they would have been required to withhold federal income taxes and send the money to Washington.  In general, it was nuts.

But a public outcry, and some deft lobbying by the National Federation of Independent Business (NFIB), brought lawmakers back (briefly, at least) to planet Earth long enough to repeal the 1099 reporting provision. “The 1099 provision was so illogical, and so burdensome, that it was quickly identified as a must-repeal not long after the health-care law was signed into law last spring,” says Dan Danner, president and CEO of the NFIB. “But it took Congress more than six months to get this simple job done. They lingered over it, savoring the repeal effort in a way that only a politician can.  The process was deliberately prolonged by casting multiple votes for symbolic bills before voting on a piece of legislation that actually guaranteed repeal.”

Copyright © 2000-2011 BizBest® Media Corp.  All Rights Reserved.

Essential Guide to Hiring Teens for Summer Jobs

About four million teenagers will hold summer jobs in the U.S. this year.  If you plan to be among the millions of small business owners who provide those jobs it’s important to know the special rules that govern teenage workers.

Government statistics show that young workers suffer a disproportionate share of on-the-job injuries.  According to the Occupational Safety and Health Administration (OSHA), at least 160,000 teens suffer work-related injuries or illnesses each year; about a third requiring emergency room treatment. That can put your business at risk. And many injuries occur in businesses you might not think of.  For example, more than 75% of incidents happen in the retail and service industries – not sectors usually considered more injury-prone such as manufacturing and construction.

Young workers – especially those in their first summer jobs – are at greater risk of workplace injury due to inexperience. And also because, well, they are teenagers who may hesitate to ask questions (my own teens know everything, so why bother to ask?) and may fail to recognize workplace dangers.

Here are 10 teen hiring essentials:

1. Review federal and state laws on teen employment — especially the rules on what types of jobs teens are allowed to perform, and which ones they aren’t.  Many small businesses, and especially those just starting out, aren’t sure what’s required of them, or where to look for help.

2. The Fair Labor Standards Act (FLSA) sets minimum wage, overtime pay, recordkeeping, and child labor rules affecting full- and part-time workers in the private sector. The rules vary depending on the age of the young worker and his or her duties. But two things are certain: a) Once an employee is 18, there are no Federal child labor rules, and; b) Federal child labor rules do not require work permits.

3. Dozens of private suppliers sell OSHA compliance materials, and there are many safety consultants to choose from, available easily online. But your best starting point is OSHA’s small business website which offers abundant assistance. Visit:  www.osha.gov/smallbusiness. Check out Compliance Assistance Quick Start, which helps new small businesses understand the rules and find the right resources.

4. The Department of Labor has a special website devoted to the rules of youth employment called Youth Rules at www.youthrules.dol.gov.  Here you’ll find information and links to almost everything you need to know about both federal and state rules and limits on the hours teens are allowed to work, and jobs they can perform, including key information on age requirements, wages and resources for young workers.

5. Another helpful government site called Young Workers has a wide range of information on summer job safety for specific sectors such as construction, landscaping, parks and recreation, life guarding and restaurants. Under landscaping, for example, you’ll find tips on preventing injury from pesticides, electrical hazards, noise and many others.

6. The small business FAQ section is a must. It includes a long list of the most common questions small business owners have about hiring teens, along with dozens of links to detailed answers.

7. Restaurants rank especially high among industries at risk for teen worker injuries. OSHA even has  a special website devoted to safety for teen workers, covering areas such as serving, drive-thru, cooking, delivery and others.

8. Hours and Age Restrictions: For teens employed in non-agricultural jobs, restrictions on hours and jobs include these:

  • Minimum age is 14.
  • Those 18 or older may perform any job (hazardous or not) for unlimited hours.
  • Youth 16 or 17 may perform any non-hazardous job for unlimited hours.
  • Youth 14 and 15 years old may work outside school hours in non-manufacturing, non-mining, non-hazardous jobs. They cannot work more than three hours a day on school days; or more than 40 hours per week when school is not in session.
  • During the school year, 14- and 15-year-olds may not work before 7:00 a.m. or after 7:00 p.m. However, during the summer that’s extended to 9:00 p.m.

9). State labor laws can differ. Check the list of State Labor Offices to find the appropriate agency in your state.

10. Before you assign a job to a minor, be sure that it is allowed by law. If you have a specific question regarding the job which you are hiring a minor to perform, contact the Department of Labor’s toll-free help line at 866-4US-WAGE (866-487-9243).

Copyright © 2000-2011 BizBest® Media Corp.  All Rights Reserved.

New SBA Study says IRS Small Biz Audit Crackdown is Bogus

Ten years ago, a landmark IRS report claimed that small business owners under-report income by $80-100 billion yearly and account for over half of the U.S. “tax gap” of owed by uncollected taxes.   As a result, small business owners have been subjected to increased audits and reporting requirements, including the controversial new 1099 rule.

But now for the truth:  A new study just released by the U.S. Small Business Administration (SBA) Office of Advocacy says the IRS crackdown on the backs of small biz has been bogus all along.  And that comes from independent research commissioned by the Feds themselves – not some anti-tax business group.

After reviewing 10-years’ worth of IRS small business audits related to the innocuously-named “National Research Program” (NRP), outside researchers found that a mere 1% of all issues examined resulted from intentional failures to report income properly. Yes you read that right – one percent. In other words, 99% of income underreporting is unintentional, and undoubtedly the result of a vast and utterly confusing array of tax rules and regulations.

And here’s the real gut punch for biz owners:  While small business was tagged as the tax cheating culprit, the new study says that large corporation tax gaps are scarcely being measured at all, and that the IRS has been using estimates dating back to the 1970s and 80s to calculate corporate noncompliance.  What’s more, says the new report released by SBA:  “The IRS focused its tax-gap study on individual tax returns, and on returns not subject to withholding or third party reporting, which skewed the study unfairly toward small business.”

Over the last five years, audits of returns typically filed by biz owners have soared, while those for corporations with $10 million or more in assets have actually dropped 13%.  These are figures reported by the SBA itself.

But which type of audit pays off the most for taxpayers – small biz or big corporation?  No contest.  According to the new whistle blowing report, the IRS collects an average of $9,350 per auditor hour spend examining big biz returns, but only $1,034 per auditor hour spend auditing small business.

The new study concludes with this:  Unlike large corporations, small businesses lack the resources and expertise to negotiate with the IRS.  Indeed, 71% represent themselves in audits. They are overwhelmed by the complexity of the tax code.  Only aggressive outreach and education designed to help small businesses understand their tax filing obligations will significantly reduce the tax gap attributed to them.

BizBest will email the full 54-page report in PDF, free of charge, to anyone interested. Email your request to editor@bizbest.com, and be sure to include the email address you’d like the report sent to.

Copyright © 2000-2011 BizBest® Media Corp.  All Rights Reserved.

Why You Need a Business Buyout Agreement

A business buy-sell agreement – sometimes called a buyout or partner buyout agreement – is vital to any small business that has more than one owner.  And that includes family businesses.

But the terminology is tricky. This is not about buying and selling businesses. Rather, it is an agreement between partners or co-owners governing these basic things:

1)         When – and under what conditions – a partner or co-owner can sell his or her interest in the business.

2)         Who will be allowed to buy into the business.

3)         Circumstances that would require a co-owner to sell.

4)         How the price of an owner’s interest will be determined.

Think of it as a kind of pre-nuptial agreement for biz owners. There are too many uncertainties to leave this to chance, including death, divorce, retirement, bankruptcy, misconduct and just plain disinterest in the business that can happen over time.

But while the causes are many, the results are predictable. Without this agreement, an owner’s exit can be rancorous and disruptive, perhaps at a time when the business can least afford the headache. There are loads of what-ifs:

What if a partner gets divorced and her ex-husband —who gained part ownership in the settlement — causes trouble?

What if a co-owner demands to be bought out at an unreasonable price?

What if an owner develops a substance abuse problem, goes bankrupt and your new co-owner is one of his creditors?

Yet get the idea. The process of working out a buy-sell agreement can even strengthen a business from the outset, as partners better understand the possibilities…and each other.

Be sure to think about funding. Just because an agreement calls for a partner buyout doesn’t mean the money will be available. “Key person” life and disability insurance can help. Or the agreement might allow installments over a period of years.

Your agreement should include a right of first refusal that prevents departing partners from selling without first offering their interest to remaining owners. This is one way to control who is allowed to own an interest in the company. It will prevent unwanted outsiders from buying in, and allows the business to buy a deceased owner’s interest rather than allow inheritors to move in.

The topic of ownership vs. employment is also touchy. For example, what if an active partner wants to stop working day-to-day in the business, but still wants to remain an owner? Is this allowed? Your buy-sell agreement can address this issue.

While setting a price on the shares can be exceedingly difficult, you can certainly include a formula for setting the price as part of the agreement.

There are three basic buyout agreement types:

1)         In a “cross-purchase” agreement, a departing owner sells directly to remaining owners. This works best for partnerships, LLCs or S-corporations with no more than a half-dozen or so owners.

2)         In “Stock redemption” or “entity-purchase” agreements, the business itself buys back the departing owner’s interest and retires the shares. Thus, each remaining owner’s interest becomes more valuable.

3)         “Hybrid” agreements combine elements of both.

Once you have an agreement in place, review it regularly. Circumstances will undoubtedly change, and your agreement must change too. Pay special attention to the valuation formula. Have the business appraised every few years as a crosscheck.

These resources can help:

  • Business Owner’s Toolkit is a helpful website with advice and information on buy-sell agreements that is both succinct and authoritative. Enter “buy-sell agreements” in the site search tool to find what you need. Visit www.toolkit.cch.com.
  • Nolo, the self-help legal solutions publisher, has several articles and a handy buy-sell agreement FAQ you can access for free. Nolo also sells an excellent plain-English guide to writing your own buy-sell agreement. Business Buyout Agreements, 5th edition ($45 print; $35 eBook only), that comes with worksheets and sample agreements on a CD.
  • The detailed FAQ on buy sell agreements at FindLaw.com is also a good resource.
  • Buy-SellAgreements.com sells a fully customizable buy sell agreement template that you can download for $30.

Best and Worst Areas for Small Business Bankruptcies

Bankruptcy filings by small businesses in the U.S. have dropped sharply in some areas, but have actually risen in others according to a new study of bankruptcy trends among the nation’s 24 million small businesses conducted by Equifax, one of the major credit reporting agencies. While bankruptcy rates have slowed in many regions, California remains troubled, accounting for nearly 20% of the country’s business failures. 

The Equifax study traced small biz bankruptcy trends by metropolitan statistical area (MSA). While bankruptcies accelerated in some areas, 10 of the top 15 MSAs with the greatest number of small business bankruptcies in 2010’s 4th quarter saw a year-over-year drop from a year earlier. The Chicago-Naperville area scored the best improvement — a 30% drop in bankruptcies. Following behind were a number of California MSAs, many of which reported double-digit decreases. 

But five top MSAs saw bankruptcies rise. One surprising result involved Wisconsin, which saw a 16.5% jump in small business bankruptcies – more than any other MSA on the top 15 list below. 

Despite improvements in some areas, California ranks as America’s bankruptcy capital. Six California metro areas made the list of top 15 MSAs with the highest number of small business bankruptcies. And all California MSAs combined (22 total) accounted for nearly a quarter of U.S. small business bankruptcy filings over the past year. 

MSA Q4 ‘09 Q4 ‘10 % Change 
Los Angeles-Long Beach -Glendale, CA 1082123013.68%
Riverside-San Bernardino -Ontario, CA 705642-8.94%
Houston-Sugar Land-Baytown, TX 4114458.27%
Sacramento-Arden-Arcade –Roseville, CA 533424-20.45%
San Diego-Carlsbad-San Marcos CA 438389-11.19%
Denver-Aurora, CO   463368-20.52%
Santa Ana-Anaheim-Irvine, CA   410365-10.98%
Portland-Vancouver-Beaverton, OR-WA 407333-18.18%
Dallas-Plano-Irving, TX 367327-10.90%
California – Rest of State 352300-14.77%
Oakland-Fremont-Hayward, CA 293286   -2.39%
Wisconsin-Rest of State 23627516.52%
New York-White Plains-Wayne, NY-NJ 2702720.74%
San Jose-Sunnyvale-Santa Clara CA 2482667.26%
Chicago-Naperville-Joliet, IL 375262-30.13%
Total 65906184-6.16%

Despite improvements in some areas, California ranks as America’s bankruptcy capital. Six California metro areas made the list of top 15 MSAs with the highest number of small business bankruptcies. And all California MSAs combined (22 total) accounted for nearly a quarter of U.S. small business bankruptcy filings over the past year. 

 

 

 
 
 

 

 

MSA Group Q4 ‘09 Q4 ‘10 
Total Bankruptcies – CA MSAs in Top 15 4,0163,902
Total U.S. Bankruptcies – All MSAs 23,31919,616
CA MSAs in Top 15 as % of All US Bankruptcies 17.41%19.89%

The study also named 15 metro areas with the fewest small business bankruptcy filings in the fourth quarter of 2010 — all reporting 9 bankruptcies or less.    

MSA Total Q4 ‘09 Total Q3 ‘10 Total Q4 ‘10 
Kingsport-Bristol, TN-VA 1869
Baton Rouge, LA 18179
Erie, PA 16249
Gulfport-Biloxi MS 10139
Amarillo, TX 1758
Charleston, WV 968
Killeen-Temple-Fort Hood TX 20237
Binghamton, NY 16137
South Bend-Mishawaka, IN-MI 1876
Trenton-Ewing, NJ 1276
Shreveport-Bossier City, LA 976
Lafeyette, LA 7115
Gainesville, Fl. 685

Business Owner Guide to Top Legal and Tax Trends

Starting and operating a small business is never easy, and all of the tax and rule-making authorities that get in your way don’t help. Legal and regulatory issues, trends and requirements are always changing, forcing business owners to run a new gauntlet each year.  To keep you on top of things, here are 11 trends and changes you need to know:

1. Rising unemployment insurance (UI) rates: UI funds in many states are at critically low levels. As a result, biz owners in many areas can expect to see UI contribution rates higher in 2011 to replenish depleted UI trust funds and repay federal loans taken to allow states to continue to pay benefits.

2. Changing tax laws: In 2011, business owners even greater complexity (if that’s possible), including a partial payroll tax holiday, the ability for businesses to expense 100 percent of their capital investments, and the retroactive extension of some temporary incentives that expired in 2010.

3. Health care reform: A new rule provides business tax credits for small companies that offer health insurance to employees. Grandfathering will remain an important component of health care reform. Health plans that existed on March 23, 2010 are grandfathered, meaning that they do not need to add many of the new protections under the health care reform law. To remain grandfathered, health plans cannot make any significant changes to the plan.

4. Flexible spending account (FSA) changes: Effective this year, over-the-counter medicines and drugs other than insulin (i.e., aspirin) are longer eligible for reimbursement from a health FSA unless the item is prescribed by a medical practitioner.

5. Employment law trend: The U.S. Department of Labor and many states have enacted or are considering measures to provide greater transparency to workers on the wages they are owed, especially in key areas such as minimum wage and overtime requirements, and to increase penalties on those who fail to pay their workers the compensation they are entitled.  Expect to see new rules enacted.

6. 401(k) disclosures: If your business offers a 401(k) plan, new regulations will require disclosures of fees being charged by the plan. In addition, plans offering “target date” funds will likely see further disclosure requirements around those investments.

7. States go revenue hunting: Many states are facing critical budget shortfalls, and are contemplating new tax and fee increases or filing changes to raise money. Also be aware that many state agencies are reducing staff, which could result in processing delays for businesses requiring licensing or other state services. Be sure to renew or apply for business licenses early.

8. Federal Trade Commission (FTC) requirements:  With the dramatic increase in the use of social media such as Facebook and Twitter, as well as blogs, the FTC has issued regulatory guidance around the use of advertising in social media, especially endorsements and misleading or dishonest product reviews. The agency has also recently proposed the creation of a “Do Not Track” tool for the Internet (similar to the telemarketing “Do Not Call” registry).

9. IRS enforcement: To help collect more tax revenue, the IRS is ramping up its enforcement efforts in several areas affecting small business. In 2010, the IRS kicked off an employment-tax audit program that will carry into this year and beyond. These audits are focusing on employee misclassification, executive compensation, fringe benefits, and adherence to general employment tax filing requirements.  The IRS is also accelerating efforts to increase tax compliance among employees who collect tips.

10. Privacy protection: Most states now require businesses to notify customers (and sometimes government authorities) when sensitive data is breached. Some have new laws requiring that businesses protect sensitive client data. Businesses handling protected health information are subject to additional requirements.

11. Employment verification:  U.S. Immigration and Customs Enforcement (ICE) continues to crack down on companies knowingly hiring undocumented aliens. Several different Congressional immigration reform proposals, which may present further employment verification obligations, are being considered.

Copyright © 2000-2011 BizBest® Media Corp.  All Rights Reserved.