By Jeffrey L. Michelman
Politicians constantly speak of the small business entrepreneur as the backbone of America, and in fact many of our largest companies today started out as small businesses. Thus, it is surprising that the same politicians who boast of American small business would allow passage of “The America Invents Act.” It is likely to impact small businesses and certainly the individual garage/basement inventor in ways that the politicos haven’t yet considered.
Prior to this new Act, the law in the United States was that the first person to invent a new patentable product is the one who deserved to get the patent, thus giving that person the 20 years (from filing) a monopoly accorded to inventors who successfully achieved patents protection. This meant that there was time to do further research and development and prototype testing; there was time to raise money for achieving patent protection; and the small business owner had every opportunity to be first in line with rights to the monopoly granted under the patent statute. But now that standard has been changed by law. We are witnessing a transition from a first-to-invent system to a first-to-file system used in many foreign countries. Thus an inventor who races to the Patent and Trademark Office (PTO) to file an invention application may well be the one who successfully obtains the monopoly of patentability over a party who actually came up with the idea and invented the product first.
What’s the difference, you say. The difference is very plain to those who understand the patent system. Large corporations have in-house, or at their disposal, plenty of patent lawyers standing by ready to file for patents any new invention or twinkle in the eye of management that seems to be inventive and to get it on file quickly as a provisional patent application which requires limited filing of actual claim elements or filing as a full blown utility patent. The search for money in order to obtain patentability is not an issue for the large corporation. Thus by the time the small business entity perfects the invention and then seeks the money for the expense of patentability, the small business entity may lose in the battle for its place in line giving big business the opportunity to be successful in keeping the small business and, of course, others out of the marketplace once granted the monopoly.
Continue reading »
11/11/11 2:50 PM
Business Law, Emerging Business, Intellectual Property | Comment (0) |
Permalink
Is The New Patent Statute Patently Unfair to Small Business?
By Marcia Swihart Orgill
Both the IRS and the Department of Labor have indicated their intent to target misclassification of workers as independent contractors rather than employees. In the proposed budget for fiscal year 2012, $240 million is allocated for initiatives specifically related to enforcing this misclassification.
Employers who have misclassified workers in the past may want to consider taking part in a new program that will allow them to voluntarily correct their misclassification of workers at a relatively low cost. As part of its “fresh start initiative”, the IRS recently announced a new Voluntarily Classification Settlement Program (VCSP).
Under this program, eligible employers will only pay an amount that equals just over one percent of the wages paid to the misclassified workers in the past year, if they prospectively treat these workers as employees. The IRS will not audit employers on payroll taxes related to these workers for past years, and employers will not be subject to interest or penalties for past misclassifications.
In order to be eligible for the program the employer must:
- consistently have treated the workers in the past as non-employees,
- have filed all required Forms 1099 for the workers for the previous three years, and
- not currently be under audit by the IRS, the Department of Labor, or a state agency concerning the classification of these workers.
To apply for the program, an employer must file Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before it wants to commence treating the workers as employees.
Employers participating in the program will be subject to a six-year statute of limitations for the first three years under the program, rather than the three-year statute of limitations that generally applies to payroll taxes.
Information about the VCSP is contained in IRS Announcement 2011-64.
Posted by Attorney Marcia S. Orgill. Orgill concentrates her practice in the area of business and personal taxation—especially complex domestic and international tax strategies.
10/14/11 6:00 AM
Business Law, Emerging Business, Employment Law, Manufacturing and Distribution | Comments Off |
Permalink
Misclassification of Workers as Independent Contractors: How to Take Advantage of IRS’s New Voluntary Classification Settlement Program
By Christopher D. Vanderbeek
The United States Department of Labor has initiated a crackdown on enforcement of federal wage laws. The Labor Department has signed agreements with twelve states, as well as the I.R.S., to share information about wage violations. Missouri is one of the states that has signed on to assist in the effort. Illinois reportedly plans to become involved in the near future.
The hope is that the shared information will help the Labor Department target businesses that improperly classify employees in order to pay employees less.
The most prevalent violations across the country involve employers classifying employees as “independent contractors.” This allows employers to avoid paying employees overtime pay and avoid complying with minimum wage requirements. Employers also do not pay for workers’ compensation and unemployment insurance for these misclassified workers. Employers also skip out on federal payroll taxes for the workers, which is why the I.R.S. is involved in the effort.
The practice of misclassifying workers is illegal, but U.S. businesses have been employing it as a cost-cutting measure for years. Misclassification for the purpose of depriving workers of overtime pay and minimum wage – known as “wage-theft” – is most prevalent and wide-spread in the hotel, restaurant, janitorial, health care, and daycare industries. The Labor Department has recently intensified efforts to curb the practice of misclassification, including getting states like Missouri involved, due in large part to the practice growing across corporate industries in recent years.
Thus far, the Labor Department’s crackdown has been an overwhelming success. From 2008 to 2010, collection of back wages for misclassified workers increased by 400 percent. The Labor Department expects even better results now that states like Missouri are involved in the effort.
Missouri businesses looking to ensure compliance with employer classification legal requirements, as well as other employment-related legal requirements, can find more information here.
Posted by Attorney Christopher D. Vanderbeek. Vanderbeek is involved in the evaluation and defense of workers’ compensation and other insurance claims, protecting the interests of employers and insurers.
10/10/11 8:56 AM
Business Law, Emerging Business, Employment Law | Comments Off |
Permalink
Federal Crackdown on Misclassifying Employees Includes Missouri and the I.R.S.
By Jeffrey L. Michelman
October 28, 2011 is the Deadline to Protect Your Trademarks from the New .XXX Domain
In the Jurassic age of the Internet, it seemed that only some nerds (now mostly wealthy) understood the full potential of Internet commerce. Large and small businesses appeared to have failed to grasp the importance of web sites and a proper Domain Name for such sites as well as its use for email addresses. Both have blossomed across the world and become a gateway to new methods of selling products and promoting brand recognition and goodwill.
Unfortunately, many of the nerds became pirates, taking the names of big well known brands as their own Domain Names and then holding those names for ransom. For a fee the company that never thought or sought to register a Domain Name for itself found they had to hire counsel to get their names back.
In those days, the law was behind the technological advancements and (as with most things technical) failed to anticipate the problems for business. Rather we lawyers had to show the Federal and State legislatures as well as the courts what action was appropriate. Lawsuits flew from antique word processors and physically delivered to a court’s inbox.
How did such a thing happen in the tech savvy end of the last millennium? Simple, business failed to keep up with the developments in the Internet and its opportunities for new forms of commerce. And the lawyers who predicted dire consequences of this lack of attention went unheeded and unnoticed.
Today the cyberpiracy epidemic has dwindled to a trickle and filing lawsuits on line has become commonplace. There are a host of statutory prohibitions, remedies and even newly created quasi judicial bodies to battle the few pirates left sailing. One such entity created to “help promote the natural expansion of the net” is an international body known as the Internet Corporation for Assigned Names and Numbers, or ICANN.
Now, as legal problems were quieting down, this international power that directs Internet Domain Name usage has decided to stir up the pot with the issuance of two new policies that, if again unheeded by business, could cause as much upheaval, costs and litigation as occurred when Domain Names were new.
ICANN first approved a rapid and unprecedented policy allowing the expansion of the number of generic Top-Level Domains (gTLDs). Business owners by now are familiar with the .COM, .NET, .ORG, and .EDU specifically approved Top-Level Domains as well as those indicating a specific country. Domain registrants were free to register almost any sequence prior to the Top-Level Domain, but had few options when choosing a Top-Level Domain.
With ICANN’s new program, the Top-Level Domain Name space has been opened to allow the registration of nearly any combination of letters, including brands or other terms, such as .bank, .Lawyer, .plumber, .boeing, .nordstroms, .stlouis, etc. While the full impact of this expansion is uncertain, it is clear that regardless of their intent to participate in the new program, business owners will need to reevaluate the way they currently monitor and enforce their brands on the Internet.
Continue reading »
09/22/11 3:29 PM
Business Law, Emerging Business, Intellectual Property, Litigation | Comments Off |
Permalink
The Domain Name Game: Category 4 Internet Storm Warning for Business
By James M. Heffner
With downtown St. Louis office vacancy now at 19%, landlords are being forced to compete aggressively and find creative ways to market their office properties.
Landlords have found they also have to create major incentives for tenants: everything from rent concessions to significant tenant improvement allowances.
If you are looking at moving your business, or if you are opening a new office, your best bet may be a move to downtown St. Louis.
Now may be a good time to be looking! Read more in this article from the St. Louis Business Journal.
07/26/11 3:10 PM
Business Law, Emerging Business, Real Estate | Comments Off |
Permalink
It’s a Great Time to Become an Urban Business Dweller
By Christopher D. Vanderbeek
Good news for Missouri: A survey conducted recently by the United States Chamber of Commerce has determined Missouri to be the seventh most business-friendly state in the country, according to its ranking in the survey’s “taxes and regulation” category.
The category took into account five criteria affecting businesses and economic functioning: overall state and local tax burden, corporate tax burden, impact of “government-imposed and related costs” on small businesses and entrepreneurs, anticipated state budget gap in fiscal year 2012, and cost of living. Missouri was ranked in the top twenty in all five criteria. It ranked eighth in terms of cost of living.
The study specifically recognized Missouri for “comprehensive reforms” in its workers’ compensation system in recent years. This language undoubtedly refers, at least in part, to the sweeping amendments enacted in 2005. Prior to 2005, the system generally favored injured employees. However, the 2005 amendments dramatically shifted the landscape in favor of employers. A microcosm of the shift can be found in Missouri’s statutory directive regarding judicial interpretation of workers’ compensation statutes: prior to 2005, judges were directed to generally interpret the statutes liberally and in favor of employees, but the 2005 amendments called for “strict interpretation” of all statutes and struck the language regarding favoring employees.
The survey further noted the recent passage of legislation in Missouri to eliminate the state franchise tax. It is suggested that the measure will save Missouri businesses $80 million over the six-year period during which the tax is phased out.
Finally, the survey credited Missouri’s tax credit programs and state tax structure with providing corporations with “one of the most favorable situations in the nation.” For example, the state only considers income earned within the state taxable. Furthermore, manufacturer inventories (such as raw materials), as well as goods held by retailers, distributors and wholesalers, are exempt from property taxes.
What this means for Missouri businesses is, essentially, that Missouri is a great place to start, run, or relocate a business. The state tax structure allows businesses to keep a higher percentage of earned income than they would be able to keep in most other states. In addition, the employer-friendly workers’ compensation system keeps workers’ compensation insurance carriers’ liability exposures down relative to other states, which in turn bolsters relative the earning capacities of Missouri businesses even further.
The full U.S. Chamber survey report is available here.
07/18/11 7:36 AM
Business Law, Emerging Business, Tax | Comments Off |
Permalink
Missouri Ranks High for Businesses in U.S. Chamber Survey
By Ruth A. Binger
When the usual suspects are rounded up to determine the reason for the decrease in start-ups and/or business failures in 2009/2010, in this author’s view, some blame must be placed on the business owner’s own failure to have introduced himself to his “better self” in the words of Napoleon Hill.
Bob Calcaterra recently noted this problem in the August 2010 Missouri Venture Forum Newsletter.
In Ralph Waldo Emerson’s essay “Experience,” he posits that all of us have an iron wire which he calls “Temperament” upon which the seeds of the individual are strung. He further argues in his essay “Compensation” that “strength grows out of our weakness and that indignation which arms itself with secret forces does not awaken until we are pricked and stung and sorely assailed.”
This veto or limitation power of adversity is the theme in the Summer 2010 Wilson Quarterly article “What Next for the Start- Up Nation” where the author speculates as to what attributes Israel start-up founders have that create so many successful start ups (persistence, mission critical focus, etc.) .
In twenty-seven years of counseling small businesses, I have found that the business owners who are the most successful are self disciplined, incredibly focused, hungry and have an iron will.
When one reviews the evidence of successful start-ups, one sees so many first and second generation Americans who will not give up. So, for those of you with the iron will or who want to develop that iron will by apprenticing at the bottom or “start where you are and build”, please check out the Microlending article in the New York Times. You will be introduced to Kiva.org, who has just started a pilot program lending to business owners in the United States. Remember, Microsoft was created in 1975, at the end of the first great recession since the Depression.
Who knows what will happen, you may become a Bill Gates.
07/31/10 6:00 AM
Banking and Finance, Business Law, Emerging Business | Comments Off |
Permalink
Stepping Back. US MicroLending with Kiva: Raising Capital + Raising You
By Brian S. Weinstock
Recently, the Department of Labor advised that they are in the process of developing information to provide direction for Rollovers as Business Start-ups known by the IRS as ROBS transactions.
The IRS issued a memorandum on October 1, 2008 warning about potential pitfalls for ROBS transactions particularly related to prohibited transactions. Moreover, the Department of Labor and the IRS have indicated that a large percentage of ROBS transactions do not comply with federal rules and regulations with regard to tax-deferred retirement plans such as qualified 401k plans and IRAs.
According to Louis Campagna, Chief of the Fiduciary Interpretations Division for the Department of Labor’s Employee Benefits Security Administration, the direction being produced by his department shall address the Department of Labor’s apprehension with regard to ROBS transactions initiated with rollovers from employer sponsored qualified plans and individual retirement accounts, such as 401k plans and IRAs, in order to allow a professional to assess whether the ROBS transaction could be a prohibited transaction.
The Department of Labor is concerned with the employer’s intent when the ROBS transaction is initiated.
Specifically, the Department of Labor needs to determine whether the ROBS transaction was initiated to implement a lawful way for employees to save money for retirement or is the ROBS transaction being used to shelter income for taxpayers who want to start a business or capitalize an existing business. The latter would allow for the taxpayer to withdraw funds from the C-corporation with the 401k plan for reasons unrelated to the business. If so, the taxpayer could withdraw funds, which where designated as tax-deferred, before they are allowed to be withdrawn tax free.
The IRS has their own concerns with ROBS transactions such as the valuation of the transaction and their compliance with other rules for qualified retirement plans which invest in employer stock, therefore the IRS may publish their own memorandum with respect to the issues they have concerning ROBS transactions.
Besides the complex rules and regulations governing prohibited transactions, another major concern for the IRS is the ability to “unwind” ROBS transactions which have violated IRS rules and regulations for qualified retirement plans. If a 401k plan participates in a prohibited transaction, the entire 401k plan loses its tax deferred status. Therefore, the entire 401k becomes taxable. Another major issue is deterioration of the initial ROBS valuation. Many small to medium size business holders remove cash from the entity for reasons unrelated to the business. This type of action can cause a decrease in the initial value of the ROBS transaction and violate prohibited transaction rules and regulations.
Time is of the essence with respect to hiring a professional to review your ROBS transaction in order to determine if there have been any violations of federal rules and regulations, such as prohibited transactions. The IRS has a self-correction program for 401ks which taxpayers can take advantage of before an IRS examination.
06/9/10 7:30 AM
Business Law, Emerging Business, Tax | Comment (1) |
Permalink
ROBS transactions: the Department of Labor and IRS Regulation
