Law & Entrepreneurship News

Family Owned Business Series

Business Week Online is running an excellent series on family owned businesses. It is a must read for all entrepreneurs in family owned businesses.

Sustainability of Family Business Important, Achievable

Click here to read an informative, concise article regarding the sustainability, longevity, and community importance of the family-owned business.

ADA Rule Changes May Affect Businesses

Proposed rule changes to the 1991 American’s With Disabilities Act, which, if enacted, would place new requirements on businesses relating to workplace accessibility, may have a dramatic impact on small businesses, including small, family-owned businesses.

Although the 1991 rule changes to ADA catalyzed a dramatic movement toward increased access for employees with disabilities, it appears that those changes may not have been enough, according to NFIB reports.

For example, one proposed rule change would mandate wheelchair access for disabled employees in employee work areas, irrespective of whether the business has any employees using wheelchairs. Other rule changes, too, may be to the detriment of small business owners, who have already struggled (economically) to comply with the 1991 rule changes.

While the extent to which any of these rules will affect small businesses is unpredictable at this stage, one thing is for sure: if enacted, ADA compliance will be more costly for businesses.

However,-as is usually the case with ADA rule changes that negatively effect business owners- disabled employees would likely experience better, more accomodating working conditions as a result of the modifications.

Small Business Administration's Funding Cut in 2005

Click here and read this nice article from Business Week Online to find out more.

Money to be Allocated to Specialty Crops to Aid Small and Mid Sized Family Businesses

Governor Mark Warner of Richmond Virginia has made a proposal that would, if accepted, allocate money for research and marketing programs focusing on the development of specialty crops.

This proposal is part of Virginia's focus on building the rural ecomony, officially termed the "Virginia Works Initiative."

Governor Warner stated that "the notion of focusing on specialty crops, like those sold in high-end grocery stores, could provide the profit these small- to mid-sized family businesses need.”

Good Time to Take Family Business Public in Saudi Arabia

For an interesting piece advising taking the family business public . . . in Saudi Arabia, see the following article.

Family Businesses- Plan for the Future

For a review of why succession planning is so important to family businesses, click here.

Interpreneurship (yes, not entrepreneurship), Important to Vitality, Success of Family-Owned Businesses

The Business Journal posted an interesting article today regarding how, by way of the "interpreneurial" spirit, family-owned businesses can "stay entrepreneurial" between generations.

Qualified Family-Owned Business Exemption Eliminated

For a detailed explanation of the elimination of the qualified family-owned business exemption, click here and read.

Single Payer Healthcare

For an informative back and forth regarding whether single payer healthcare is good for business, click here and see the November 11 posting.

Frivolous Claims Against Small Businesses Compells Vote on Proposition 64

Logic dictates that businesses run the risk of being sued for any number of reasons. Ideally (and logically, for that matter), however, businesses, including family-owned businesses, which comprise the majority of businesses in the United States, should not fall prey to frivolous causes of action.

California, under Proposition 64, is seeking to limit such baseless lawsuits. Proposition 64 rests in the hands of California voters in this November’s election. This new statute, if enacted, would arguably prevent private attorneys from threatening small businesses with litigation.

Proponents of Proposition 64 cite California’s recent business struggles as legitimizing enacting a law that would add an extra layer of protection for small businesses, which are often financially unable to maintain a lawsuit from start to finish. In turn, these businesses, proponents contend, will no longer be able to be bullied into settlement because of the high costs (both time and money) associated with litigation.

Specifically, the law focuses on forcing litigants to articulate an individual injury resulting in financial or property loss as a result of an unfair business practice before a lawsuit can be initiated. Certain procedural requirements would also have to be met in order for a claim to be brought by an entire class of persons. Additionally, the general public would only be able to seek representation from the California Attorney General or local government prosecutors when asserting an unfair business practice claim. Therefore, private attorneys would be precluded from bringing such claims. Finally, any revenues earned as a result of businesses violating fair business practices would only be available to assist in enforcing laws protecting consumers.

Those opposing Proposition 64 argue that while frivolous lawsuits are a real concern, this measure would militate against important protections for consumers, including claims involving environmental protections and claims involving threats to the public health.

Nationally, it will be interesting to see how other states react after the November vote, if at all. It seems plausible that absent major economic problems, states that do not already have similar protections will wait to see the effects of Proposition 64 in California.

Failure to Let Go of Family Business May Lead to Problems

Click here to find out more.

Succession Planning Likely Worth Your Time, Money

To avoid complexities related to succession, including tax issues, small and family-owned businesses should take a proactive approach- plan for the future!

The potential consequences for businesses that have not engaged in succession planning are not trivial.

For example, in a partnership, a partner can avoid having to go into business with an unsuspecting person upon the death of another partner. Tax issues, too, can be preempted in part through proper succession planning.

Intuition may suggest that succession planning is of less importance to family-owned businesses; however, experts say that every business should investigate succession-related issues. In fact, family-owned businesses may have the most exposure to the potential negative consequences resulting from a lack of succession planning.

Split-dollar Life Insurance Plans Offer Flexibility, Alternatives and Incentive

Split-dollar life insurance plans allow employees and employers to “split” the costs and benefits associated with health insurance plans, thus providing funding for next-generation owners. These plans are often used by family businesses to offset wealth transfer costs and to provide a way to fund future investments.

Under a Split-dollar plan, the employer usually owns the policy, pays the premium and is the first beneficiary. The employee, in turn, can option to buy the policy from the employer, in the event that the employee leaves the company. When the policy has built up its cash value or the employee passes away, the employer is typically compensated for the cost of the premium. The remaining proceeds pass to the employee or to the employee’s heirs.

Split-dollar plans extend beyond the family business, too. For example, they can be used as a benefit or reward for employees that go beyond the call of duty; as a tool that allows employees to obtain life insurance that would not otherwise be able to afford high premiums; to fund deferred compensation and salary benefit plans; and, importantly, to provide money for buy-sell agreements.

The advantages of these plans extend even further, though.

A clear, simple example example of a situation illustating how these policy work and why they may be an attractive alternative is helpful.

Many Small Businesses Scaling Back Health Care Coverage

With the costs of rising health insurance premiums increasing the burden many small businesses have to shoulder, many small businesses are reducing or eliminating coverage to their employees. A September 9th report by the Henry J. Kaiser Family Foundation shows that 63% of businesses with fewer than 200 employees now offer health benefits, down from 68% in 2001 and only 50% of employees at small businesses have coverage (down from 57% in 2001). These numbers do not account for the hundreds of thousands of small businesses that have reduced the benefits offered employees.

Health care experts find these figures troubling since a disproportionate amount of Americans work for small businesses.

President Bush's plan to curb this downward trend is to allow small businesses to pool together to buy insurance in association health plans (AHPs). Many experts believe AHP's offer false hopes because many groups will red-line high risk small businesses (employers with employees in high risk insurance categories) in order to reduce the premiums, thus leaving many small businesses out in the cold. Experts also point to Kansas's 1980's experiment with AHP's in which many plans did not charge enough to its participants and ended up going broke.

John Kerry plans to deal with the health insurance problem by opening the Federal Employees Health Benefits Plan to large businesses, small businesses and individuals in order to create a huge member base. Kerry plans to entice small businesses into the plan by subsidizing the rates in an attempt to keep them stable and Kerry also plans to give small businesses a tax credit to cover half the costs. Critics to Kerry's plan claim that the federal plan is too expensive for most employers and that Kerry's reforms would cost the federal government 323 billion over the next 10 years.

Thus, the health insurance problem will not be easily fixed any time soon. See small business posts from September 9th and August 30th for more health insurance information.