Although there is currently no federal sales tax, 45 states, and many localities, as well as the District of Columbia, have a sales tax. Different taxing authorities have their own regulations, tax rates, exemptions, and deadlines, which can be quite confusing, especially for entrepreneurs who have just started a new business. There are several key points to keep in mind.

Is your product or service subject to sales tax?

Unless your business is located in Alaska, Delaware, Montana, New Hampshire, or Oregon, which do not have a state sales tax, it is important to find out which products or services are subject to sales tax in your state. Keep in mind that there may still be local sales taxes in states that do not have a state sales tax.

• Although there is substantial variation among state laws, products (i.e., retail items such as furniture, cars, books, computers, etc.) are typically subject to sales tax. However, items considered to be necessities, such as food, medicine, or clothing, may be exempt from sales tax, or subject to a lower tax rate.
• Certain services are often subject to sales tax as well, although the law varies from state to state. Services related to the repair or maintenance of personal and real property, personal services, such as pet grooming, hair salons, and dry cleaning, and business services, such as advertising or human resources, may be taxable. Some professional services, such as medical care or legal services, are often exempt from state sales tax.
• Wholesale items that will be resold and raw materials that will be incorporated into a product that will be produced for future sale may be exempt from state sales tax.
• Sales to federal, state, or local governments or their agencies are typically not subject to sales tax.
• Sales to nonprofits, charities, religious organizations, or educational institutions are usually exempt from sales tax.

If operating as a partnership or LLC, a well-drafted partnership or LLC operating agreement will be crucial to memorialize your economic agreement, organizational structure, and key terms, and should include provisions designed to prevent deadlock if a disagreement later arises about important business decisions.

A disagreement concerning a major decision could impede the ability of a business to move forward, placing the future of the business itself in jeopardy. Even if the deadlock concerns a less important decision, the resulting frustration can be damaging to the owners’ relationship and thus harmful to the business. A deadlock could even lead to an expensive and lengthy litigation or to the dissolution of the partnership or LLC.

Deadlock-Breaking Mechanisms

Business owners can avoid this situation by entering into a well-drafted partnership or operating agreement containing provisions designed to prevent a deadlock from ever happening. There are a variety of potential solutions, and the following are among the most common.

Accessibility to customers, vendors, and employees, proximity to competitors, and zoning restrictions are just a few of the factors you have likely considered. Once you have determined the best location for your business, the next question is whether to lease or buy your commercial space. Several issues should be weighed before making this important decision.

1. What makes financial sense for your business?
Buying a commercial property is likely to require a substantial down payment—from 10% to 40% of the value of the property. However, if your business is already successful, and you have enough cash to make the down payment and several months of mortgage payments without depleting your cash on hand, purchasing a commercial space may be a good choice. It enables your business to benefit from the property’s appreciation, particularly if you are in an area where property values are rapidly rising. In addition, if the commercial space is larger than your business needs for its own operations, you can gain additional income by renting out part of the space to another business.

On the other hand, if your business is just starting out, or if you are short of cash, leasing commercial space may be a better option for a few reasons. To start, less of your cash will be tied up in the property. Next, there are usually fewer unexpected maintenance costs and a lower risk of unforeseen expenses (which are often the landlord’s responsibility). Moreover, because rental payments are generally the same from month to month during the lease term (though there is sometimes an escalation clause allowing the landlord to increase the rent at certain intervals by a certain percentage), there is more certainty in budgeting the amount you need to cover the rent each month. This will enable you to channel your cash back into your business, focusing on its growth. The downside is that monthly payments under a lease (which often include insurance, taxes, utilities, and maintenance costs) are likely to be higher than a mortgage payment on the same or similar property, and you will not be able to make additional income by renting excess space to another business owner.

Additionally, many services that were not available in the past, including do-it-yourself (DIY) legal forms also exist. As a result, it is tempting to think that the forms provided by these DIY services can be a low-cost substitute for the services of an attorney. The reality is business owners need to be aware that using these one-size-fits-all forms may end up costing your business much more than they save. We know that it may seem self-serving for an attorney to warn of the dangers of using DIY legal forms, but the risks are genuine, and we want you to make an informed decision when weighing your options.

Several years ago, Consumer Report® magazine evaluated the services offered by these DIY legal sites. They first created several types of legal documents using their online forms and then asked three law professors specializing in business, consumer, and estate planning law, to evaluate the documents created. The professors found that the documents were inadequate to meet the needs of most individuals. Furthermore, they were frequently not specific enough to address each user’s unique circumstances and needs or contained language that could lead to unintended results. The results should act as a wake-up call for anyone considering using these services.

In many of these states, ban-the-box statutes apply only to public employers, but 13 states (including some of the most highly populated, such as California and Illinois) and 18 municipalities and counties have applied them to most or all private employers as well. These laws have gained substantial bipartisan support, and more states and localities (and possibly the federal government) will likely enact ban-the-box statutes in the coming months and years. As a result, employers need to understand what these laws require—and what they do not.

What Is Required?

Ban-the-box laws prevent employers from including questions about a prospective employee’s criminal history on their initial employment application. The idea is to prevent applicants from being automatically eliminated from consideration by employers early in the screening process. Delaying questions about criminal history increases the chances that employers will consider all relevant factors. Some factors include the amount of time that has passed since the applicant’s conviction, whether the conviction was for a crime that could be related to the applicant’s potential job duties, and whether there is evidence of mitigating circumstances or rehabilitation. The precise requirements of these laws vary, with some allowing employers to inquire about criminal history after an initial interview and others only permitting the inquiry after a conditional job offer has been extended.

Keeping those employees may be essential to a successful transition of ownership and management to your children or another new owner when you retire or pass away. A “stay bonus” (also called a retention bonus) is a strategy that is frequently used by large companies during mergers and acquisitions but can also be used to facilitate a smooth transfer of small family businesses to the next generation or to new owners.

What Is a Stay Bonus Agreement?

A stay bonus agreement is a contract between the business and a key employee providing that the employee will not leave the company for a specified period of time after a particular triggering event, for example, the death of the business owner. At the end of that period, the key employee will receive a bonus. The amount of the stay bonus could increase over time: The longer the employee stays, the larger the bonus will be.

These important dates may vary depending upon the business’ structure. Here are some of the most critical deadlines business owners may need to meet over the next few months.

Federal tax deadlines

• September 16, 2019,  is the extension deadline for partnerships and S corporations to file their income tax returns. It is also the deadline for third-quarter estimated tax payments if you are a self-employed individual or have substantial non-wage income.
• October 15, 2019,  is the extension deadline for C corporations, sole proprietors, and individuals to file income tax returns.

• November 15, 2019, is the extension deadline for tax-exempt organizations to file income tax returns.

• December 31, 2019, is the deadline for 401(k) contributions for yourself or your employees. For the contributions to count for 2019, the account must be created and funded by December 31st.

• January 15, 2020, is the deadline for fourth-quarter estimated tax payments for self-employed individuals or those with substantial non-wage income.

• January 30, 2020, is the deadline to file Form 1099-MISC if you have non-employee (independent contractor) compensation to report. However, for all other reported payments, the deadline is February 28, 2020, and if you file electronically, the deadline is March 30, 2020.

Although it is often hard to fathom an event that may not occur for many years, it is important to put plans in place in advance. The failure to do so could result in the eventual loss of the business. There are several factors you should keep in mind in making plans for the future of your small business.

1. Identify a successor(s). Many small business owners plan to transfer their business to a child or children, or sometimes, grandchildren eventually. If you have more than one child, it is important to consider which of them has an interest in stepping into your shoes, as well as whether that child has the skills needed to do so successfully. It is important not to assume that just because one child is the oldest, control of the business will go to that child. The continued success of the company requires that the member(s) of the next generation who will take over the reins have the business acumen and commitment needed to run it.

However, it also presents some challenges, particularly for small businesses. According to the June 2019 National Federation of Independent Businesses (NFIB) Jobs Report, small business owners identified the difficulty of finding qualified employees as their single most important business problem. Although 58 percent of small business owners indicated that they had hired or tried to hire employees, 86 percent found that there were few or no qualified applicants for their open positions. Nevertheless, there are some strategies that your small business can use to attract excellent employees, even in a tight job market.

1. Strive to offer competitive wages. Although it is difficult for small businesses to compete with the salaries offered by large corporations, as your business becomes more profitable, view your employees as an investment that can help your business continue to grow. Twenty-eight percent of small business owners surveyed in the June 2019 NFIB Jobs Report indicated that they are offering higher wages, which can help attract the most qualified employees.

2. Emphasize a potential employee’s opportunity for more rapid advancement. In a large company, an entry-level employee may have to advance through several positions before obtaining the level of responsibility that an employee of a smaller business will, out of necessity, obtain relatively quickly.

3. Stress employees’ opportunity to gain a wider range of experiences. In larger companies, employees tend to have more specialized jobs. In a small business, every employee is incredibly valuable and will likely be given a broader range of responsibilities and work experiences.

In some circumstances, the IRS allows you to take a bad debt deduction.

What Is Considered a Business Bad Debt?

According to the IRS, a business bad debt is considered a loss incurred from the worthlessness of a debt that was created or acquired in a trade or business or was “closely related” to your trade or business when it became partly or completely worthless. If your primary motive for incurring the debt was related to the business, the IRS will consider the debt to be closely related to the business.

The IRS provides the following examples of bad business debts: (1) loans to clients, suppliers, distributors, and employees, (2) credit sales to customers, or (3) business-loan guarantees. For small businesses, the most common bad debt arises from credit sales to customers.

If the circumstances indicate that your business has no reasonable expectation that the debt will be repaid, it will be considered worthless. Depending upon the relevant facts, this could be on the date the debt is due or even prior to that date.

You must be able to demonstrate that you have made a reasonable effort to collect what is owed to your business prior to being eligible for the deduction. What is considered “reasonable” will vary depending upon the type of business in which you are engaged. It is unnecessary to sue the customer if you can show that a judgment would be uncollectible. For example, if the customer has filed for bankruptcy, this is sufficient to demonstrate that your debt is uncollectible and therefore worthless (assuming it is an unsecured debt).