The Employment Side of Starting a Business

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We are continuing our conversation on the ABCs of starting a business, and we will follow the progress of a fictitious newly formed Yoga Studio. In episode 128, we looked at the business structure, and today we focus on the employment side.

With us is Cory Johnson from Cory W. Johnson, CPA, LLC which is located in Silver Spring, Maryland. He has about 200 individual clients and about 30 business clients all throughout the country, providing accounting, payroll, CPA, incorporation, and tax services.

Key Points

  • You can either have an employee or a contractor working for your business.
  • The front desk worker is probably an employee while the yoga instructor is most likely a contractor.
  • Look for guidance to help you determine whether someone is your employee or a contractor.
  • In addition to salaries, payroll-related expenses include social security, medical care, and unemployment tax payments.
  • Use a payroll service provider who will make the mandated state and federal payments as well as do monthly or quarterly filing of relevant taxes.
  • You need to file monthly, quarterly, and annual employer tax returns.
  • A business owner can have a solo 401(k).
  • If you are employed and also run a business, there are limits to what you can contribute to a solo 401(k).
  • Putting money away for retirement reduces your tax obligation.

Listen in and find out Cory’s best tip on doing due diligence.

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Looking out for Employees When a Company Is Targeted for Acquisition

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Today, we’re continuing our conversation with Christina Hynes Mesco from The Prinz Law Firm, and we are looking at the employee side of the business once your company is acquired by another. You might go from being an employer of 10-50 people to become an employee among 10,000 others. What are your rights now and what should you look out for regarding executive compensation?

The Prinz Law Firm is located in Chicago, Illinois, and Christina is a business and employment law attorney.

  • Hans watched a business owner gradually lose control over a company that he built.
  • Consider having an agreement that makes some portion of your interest in the company “non-dilutable.”
  • It might be expensive to engage an attorney to safeguard your interests, but an ounce of prevention is worth a pound of cure.
  • People in executive positions of an organization often assume they will be treated right after an acquisition, but that doesn’t always happen.
  • Be proactive about getting some terms in writing to ensure you enjoy continuity and predictability in your employment.
  • Why you should be part of the process that determines achievable performance targets.
  • Severance terms should be clear from the outset. If your employer doesn’t bring it up, take the opportunity to negotiate for yourself.
  • Read the fine print to assess what constitutes “cause” for severance.
  • Decide which factors would result in constructive termination.
  • Tips to help you get an attorney who specializes in the employment space.

We hope you enjoy this exciting topic.

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Here are some of our featured free resources.

What You Need to Know about Employees’ Rights

Find out more about how to start your own business

You own a business, and you’ve had to hire people. Are you hiring them as employees or subcontractors, and do you have an employee handbook?

Christina Hynes Mesco from The Prinz Law Firm helps us look at what employers need to know about employee rights. Christina is a business and employment law attorney who advises small and medium-sized entities on the gamut of issues that business owners might run into. That may be in starting or continuing their business practice, employment-related questions that might come up, or assisting in employment-related litigation.

Christina is licensed to practice in Illinois but gives general advice to clients all over the US. The Prinz Law Firm is located in Chicago, Illinois.

Key points

  • It is not uncommon for a business owner to overlook the area of employees, yet it is one that is rife with misunderstanding and litigation.
  • Employee contracts and formalizing employment relationships.
  • When hiring, decide whether you need an employee or an independent contractor.
  • A few facts that help in distinguishing between employees and independent contractors.
  • Using non-disclosure or confidentiality agreements to protect information.
  • Restrictive covenants usually are part of an employment contract.
  • It is sometimes helpful to have different terms extrapolated into separate documents.
  • Employers need to establish whether an individually negotiated agreement is required, primarily for key employees.
  • When an employee is terminated, a severance agreement could be used to obtain a “release of claims” that complies with federal and state statutes.
  • Employment litigation can be very contentious and acrimonious.
  • In cases of mergers and acquisitions, employees will be required to sign new employment agreements.
  • In addition to offering monetary incentives, a retention agreement can assuage possible concerns of top employees and prevent disruption to business operations.

Tune in to learn about employee rights.

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Here are some of our featured free resources.