Small Business Tips 8

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contractorWhy You Need an Independent Contractor Agreement

If you hire an independent contractor, having a written and signed independent contractor agreement allows you to clearly define the roles and responsibilities of your business relationship. An independent contractor agreement may also help you avoid disputes, protect you from liability and keep you out of court. The following information will help you consider what to include in your agreement. It is important to have an attorney review any agreement before you sign. If you need assistance call your LegalShield provider law firm.

  1. Worker Classification – Just because you define a worker as an independent contractor in your agreement does not mean the IRS will agree with your classification. Incorrectly classifying an employee may have significant tax implications for your business. Read our article, “Classifying Workers: Employee or Independent Contractor”, from January 2014 to learn more. Once you are certain that the worker is a contractor, clearly define them as such in your agreement.
  2. Responsibilities – Use the agreement to layout the exact nature of the work to be completed. Define materials to be used, expenses, workspace, development, delivery and any other details of the work. Set out the lines of communication. Who will be the primary point person for both parties? What is the preferred method of communication? Setting clear parameters will help avoid frustration and miscommunication.
  3. Deadlines – Delays and missed deadlines are frequent points of contention. Clearly define any important due dates and production deadlines, as well as the consequences for failing to meet them.
  4. Payment – Spell out the exact cost for work to be completed and how it will be invoiced and paid. If any additional work is required that falls outside the scope of the agreement, how will it be billed? You may require written authorization before additional work is completed or set a standard hourly rate to cover overages.
  5. Taxes and Benefits – Your agreement should make it clear that the contractor is responsible for paying their own state and federal income tax. In addition, the agreement should state that the contractor is not eligible to receive any employee benefits.
  6. Liability & Licensing – Confirm in the written agreement that the contractor has liability insurance and is fully licensed by the state and any other relevant regulatory agencies.
  7. Intellectual Property & Competition – Your agreement must specify your ownership of any intellectual property created by an independent contractor on your behalf. You should also include a nondisclosure agreement, which prevents the contractor from sharing information with competitors. If a contractor has access to client payment data or any other sensitive personal information, you may also have them sign a confidentiality agreement. Talk with your attorney to determine the best means to protect your business.
  8. Dispute Resolution – You may choose to include a clause requiring disputes to be settled via mediation. This may help you avoid some legal fees in the event there is a dispute. Talk with your attorney about the options available to you and how to best protect your interests.
  9. Termination – Set the duration of your agreement. Will the agreement terminate after a year or once work is complete? Who can terminate the agreement prematurely and under what circumstances?

Stethoscope with financial statement, calculator, penAffordable Care Act: 8 Facts for Small Business Owners

The following information and links are designed to help small business owners with fewer than 25 employees understand the Affordable Care Act’s (ACA) requirements and their obligations under the law. It is important to note, some requirements may vary from state to state and there have been modifications to the act in the past year. If you need assistance understanding what your business is required to do under the ACA and state law, contact your LegalShield provider law firm.

  1. Requirements – The ACA does not require small businesses to provide health insurance to employees. Fines for employers that choose not to provide coverage or financial assistance for health insurance to full-time employees will only apply to businesses with 50 or more employees and will not begin until 2015. You will need to provide monthly payroll data to show that your business has fewer than 50 full-time employees.
  2. SHOP – Small Business Health Options Program (SHOP) is a special market place designed to help small business owners access better pricing for insurance. Currently there are limited options available through many of the state SHOP exchanges. To find the options available to you and your employees visit the SHOP marketplace online.
  3. Tax Credits – Small businesses with fewer than 25 employees may be eligible for tax credits totaling up to 50% of their contribution to employee insurance premiums. Visit healthcare.gov to find out if your business qualifies.
  4. Notification – Companies with at least $500,000 in annual business are required to provide employees with notification on the health insurance marketplace. There is not currently a fine in place for employers who fail to provide the notice. For additional guidelines visit the U.S. Department of Labor website.
  5. Flex Spending – Employee flexible spending account contributions are limited to $2,500 per year. The limit will be subject to cost of living increases.
  6. Waiting Period – The waiting period for a new employee to receive employer-sponsored health insurance is capped at 90 days.
  7. Premium Refunds – Under the ACA, insurance companies are required to use at least 80% of premiums towards medical costs. Insurers who fail to meet this ratio will be required to issue a refund. To learn more read the IRS Medical Loss Ratio FAQ.
  8. Resources – To learn more visit the U.S. Small Business Administration website. The SBA offers a wide range of resources, including live weekly Affordable Care Act 101 Webinars that you may register to attend.

disasterCan Your Business Survive a Disaster?

Could your business recover in the aftermath of a natural or manmade disaster? What would you do if you lost your inventory in a flood or hackers stole your customer’s credit card information? Planning ahead and developing a recovery plan will give your business a chance to bounce back. If you need assistance preparing for or recovering from a disaster call your LegalShield provider law firm.

  • Develop a disaster recovery plan. Your first priority is the safety of customers and employees. Your plan should include evacuation or shelter in place guidelines in the event of a disaster. You should develop a plan for communicating with employees, customers and vendors during and after a disaster. You will also need to identify your critical business functions and set a plan for getting them back online. Your plan should be a path towards temporary short-term recovery and ultimately sustained long-term recovery. Keep copies of the plan, both physical and electronic, in multiple locations. Review and revise your plan every year or whenever your business undergoes major changes.
  • Train employees on your disaster plan. Your plan is useless if your employees do not know what to do. Everyone in your business should understand his or her role in the recovery process. Train all new employees and periodically review procedures with existing staff. Personally manage the most vital recovery aspects or assign them to your most trusted employees.
  • Evaluate your business insurance. Not all business insurance covers natural disasters and some types of coverage can be prohibitively expensive. It is important to consider the needs of your business and the likelihood of a disaster affecting your business. You may also consider purchasing data breach insurance, which may provide coverage if your business is hacked or your systems are sabotaged. The loss of client data could be a public relations nightmare and may lead to fines or expensive litigation.
  • Review your lease and talk to your landlord. If your business rents office or retail space it is important to understand the responsibilities of the landlord and their plan for recovering from a disaster.
  • Talk to your vendors. Without key vendors many businesses would quickly sink. You should keep an open line of communication with your vendors and understand their own disaster recovery plan.
  • Back up your business data. Offsite computer backup and storage is now more affordable than ever. Make sure all of your vital data is recoverable in the event of a disaster. Keeping your data in only one location is asking for trouble. Offsite cloud backup allows you to easily retrieve your data if your main office or data storage is destroyed.
  • Make sure you have access to the necessary capital to recover. Many businesses fail after a disaster because they do not have the money to make it through even a brief shutdown. If your business needs assistance after a disaster you may be eligible for a short-term low interest business recovery loan. Learn more about disaster recovery loans by visiting the Small Business Administration website.