Virgin Islands Law Blog

Virgin Islands Law Blog

U.S. Virgin Islands law & politics

Audit Prevention: Preparing Your Business Taxes as Effectively as Possible

Posted in Corporate & Financial Services, Tax & Estate Planning

taxauditTax season is officially here, and individuals ranging from small business owners to top executives at the largest corporations are thinking about business taxes. It might not be the time of the year you mark on your calendar with a big smiley face—but it’s important nonetheless.

How you are feeling about upcoming tax deadlines may depend in large part on the extent to which you are confident in the accuracy of your recordkeeping and your chances of avoiding the dreaded Internal Revenue Service audit. With this in mind, there are two very important ways you can help your business have a smooth tax season this year and well into the future.

Understand your legal entity

When it comes to business and corporate taxes in the U.S. Virgin Islands, much depends on the legal entity under which your company operates. Whether it’s a sole proprietorship, a partnership, a limited liability company (LLC) or a corporation will determine a number of issues related to your taxes, two of the most important of which are the rate at which you will be taxed and the forms you need to submit.

Generally, sole proprietorships, partnerships and most LLCs are taxed at the same rates as individuals, whereas certain other LLCs and corporations are taxed at corporate rates. Knowing the legal entity of your business will also make it easier to ensure you are using the proper tax forms, as different entities are required to submit varying forms with their tax returns. Check with your tax accountant or business attorney to ensure you are using the right forms, as this will help improve your chances of submitting a completely accurate return.

Maintain accurate records

The other way in which accuracy plays a key role is when it comes to your company’s recordkeeping. In addition to making it easier to submit an accurate tax return, as you’ll have thorough, complete and accurate financial records to work with, you will also make the process easier in the event of an audit. If you are able to show the auditor where you got your numbers, you can demonstrating both your willingness to work to resolve the issue and, hopefully, that your numbers were correct in the first place.

Even if you do find yourself the subject of unwanted attention from the IRS, an audit is not the end of the world, particularly if you cooperate with the auditor. And even if the auditor determines that your business owes additional tax payments (as well as interest and penalties), you still have some recourse in the form of an appeal should you believe the auditor’s decision is unjust.

Perhaps not surprisingly, the process of appealing an IRS decision is complex, and your business would likely benefit from the counsel of an experienced and knowledgeable attorney. If you have questions about the appeal process, or if you have general concerns related to your business taxes and the possibility of an IRS audit, consult a trusted legal professional.

BoltNagi is a respected and established business tax law firm proudly serving clients throughout the U.S. Virgin Islands.

The Dos and Don’ts of Managing Corporate Formalities

Posted in Corporate & Financial Services

corporateformalitiesWhen you go into business, you probably don’t do so for the fun and excitement of dealing with corporate formalities. However, these formalities are perhaps the key elements in protecting the shareholders and particularly the representatives of a corporation.

By clearly formalizing the corporation’s proceedings and separating the activities of individual representatives from those of the organization as a whole, corporate formalities help protect representatives from personal liability issues. Four important aspects of corporate formalities include holding regular meetings, planning for the future, keeping thorough and accurate records and ensuring the clear separation of corporate and personal activities—particularly in the realm of finance.

Holding an annual shareholders’ meeting and regular board of directors’ meetings are the two most basic activities that need to carried out related to formalizing what goes on within the corporation. But there are a number of other situations in which holding special meetings may be necessary, such as when major decisions are being made regarding financing, opening new accounts, selling or acquiring assets and entering into business contracts.

Proper planning and corporate formalities

Just as major decisions taking place in the present merit the formality of a board meeting, so do decisions regarding the future. Perhaps the biggest concern from a planning perspective is the budget, which is why it’s so important to meet to discuss the past year’s activities and develop and approve a budget for the foreseeable future. Meeting with an attorney or tax professional to ensure prudent tax planning is never a bad idea, and it’s also useful to schedule meetings at which the board is brought up to speed on the implementation of the budget plan.

In all aspects of the corporation, but particularly matters related to the activities of the board and the financial dealings of the corporation, it’s crucial that accurate and thorough records be kept. Having a paper trail is one of the best ways to protect the corporation—and its individual representatives—in the event of a crisis. And it’s also just good business practice to keep records for future reference, as you never know when your company might need them.

The above are all critical “dos” when it comes to corporate formalities, but there’s one big “don’t” that all corporations should keep in mind as well: don’t mix the corporate with the personal.

This goes for just about everything, but it’s especially important when finances are involved. Keeping strict separation between personal and corporate funds and assets is essential for minimizing risk to both individual representatives and the corporation.

The task of establishing good habits and processes related to corporate formalities can seem overwhelming and confusing, especially for new corporations and first-time business owners. For this reason, it is helpful to consult a U.S. Virgin Islands business attorney familiar with the specifics of corporate formalities to receive the guidance and advice to proceed with confidence.

BoltNagi is a well-established and widely respected corporate law firm serving businesses and organizations throughout the U.S. Virgin Islands.

Using Your Personal Money to Finance Your Business

Posted in Corporate & Financial Services

financingMost small business owners know of the challenge of dealing with sudden expenses or the need to make a quick investment to help their company grow. When these situations come up, many business owners tap their personal finances to provide what acts essentially as a short-term loan to the company.

Small business owners might want to think a little more before doing this, however. Once a company is established, the use of personal funds becomes a bit more complicated than you might imagine.

How and when to do it—and where the risk lies

There may be situations in which investing your own money in your business can work to your advantage. Perhaps surprisingly, the best time to do so is often when you’re actively seeking loans from third parties. If prospective investors can see that you’re sufficiently committed to your business to the point that you’re willing to put your own money into it, they may be more inclined to get on board with funds of their own. Another time in which your personal money might be sufficient is when you know you have the funds to spare, either in savings or in assets that you can sell for a quick infusion of cash.

But it’s important to keep in mind that there’s a certain amount of risk involved when it comes to investing in your own business. The biggest risk comes from investing personal funds in a business other than a sole proprietorship, as it intermingles personal and business finances in ways that can be legally shaky. Additional areas of risk include borrowing in your own name using a credit card or other high-interest funding source, along with taking out a home equity loan or second mortgage—which can be extremely risky if your business goes south and you’re unable to make payments.

How to protect yourself

As with any business transaction, the key to protecting yourself when financing your business with your personal money—aside from doing so without assuming entirely unnecessary risk in the first place—is to make sure everything is properly documented. If you are putting personal money into a partnership, protect yourself by formalizing everything in a loan document. If you’re investing in a sole proprietorship, keep the personal funds in a separate account.

In all cases, keep track of where the money is going and protect your personal finances by treating the investment as you would any other loan. If you have questions or concerns about investing personal funds in your business, or if you need assistance in formalizing the investment through legal documentation, seek the counsel of an experienced business attorney.

BoltNagi is an established and respected small business law firm serving clients throughout the U.S. Virgin Islands.

E-Commerce: Know the Legal Way to Sell Products Online

Posted in Corporate & Financial Services, International, Tax & Estate Planning

With so much businecommerceess either originating online or migrating there from brick-and-mortar establishments, the possibility of conducting transactions via the Internet is opening up a whole new world for entrepreneurs and business owners on a global scale.

Whether you’re selling products or services, having the ability to sell your goods online makes it possible to expand your potential customer base in ways that would have been unimaginable not too many years ago.

But the rapid and expansive development of e-commerce has also resulted in a situation in which certain key aspects of doing business—like dealing with taxation, protecting customer data and establishing corporate liability—have become more complicated, largely due to the fact that state, federal and territorial laws are not always consistent. Additionally, there’s a lag between the realities of e-commerce, determining how existing laws apply to online businesses and actually changing those existing laws to account for new developments in technology and common practice.

All told, the legal side of e-commerce is complex and in seemingly constant flux. However, here are a few things you should know about if your business sells products or services online:

  • Taxes: In the tax realm, there are two key things to be aware of: income tax and sales tax. Your business must pay income tax on all sales conducted via the Internet, regardless of the buyer’s location. Sales tax is a bit trickier. If you have a physical location in a particular state and a resident of that state makes a purchase, you should charge sales tax. In theory, out-of-state customers should also pay sales tax, but this is rarely enforced.
  • Customer data: Any time your company conducts a transaction online, you end up with valuable customer information, including names, addresses, phone numbers and credit or debit card numbers. It’s your company’s responsibility to safeguard this information against hackers, and to protect it from unlawful use by your own employees.
  • Liability: A security breach is not something any company wants to experience, as it betrays the trust of their customers and requires rebuilding the brand’s reputation. In the event that a data breach does occur, your company is responsible for disclosing it to your customers. Failure to do so can result in serious legal consequences, not to mention bad press and damage to your company’s good name.

Ultimately, while the rise of e-commerce is good for countless types of businesses, it can be quite confusing for business owners to know what they need to do to stay on the right side of the law, as well as how to do it. If you have questions about the laws related to your business’ online sales, speaking with a knowledgeable attorney focused on e-commerce is the best way to get the information and assurance you need.  Attorneys at BoltNagi not only have experience with ecommerce law, but with running ecommerce websites themselves.

BoltNagi is a widely respected and established business and corporate law firm proudly serving clients throughout the U.S. Virgin Islands.

Simplifying the Franchise Agreement

Posted in Corporate & Financial Services

franchise-agreementWhether it’s a restaurant, retail store, auto dealership or any other type of business, operating a franchise is often a great way to get your feet wet as a small business owner. You often get the benefits that come from working with an established franchisor and a recognizable brand, and it frees you from the idea that you need to develop a totally unique concept before you can even think about running a company.

At the same time, however, there will be certain expectations by which you must abide, and they will be set out in a franchise agreement. Although the franchise agreement can save you from having to make various tough decisions about the business, it also identifies a number of requirements. Here’s an overview of some of the matters a franchise agreement is likely to cover:

  • Royalties: As a franchisee, you will likely be obligated to make royalty payments to the franchisor on a regular basis in exchange for your right to operate under its banner and sell its products. While the amount of your payments will be based on your revenue, having to pay royalties can also impact your profit margins.

  • Location: With a franchise, you won’t have as much freedom when it comes to choosing a location for the business or being able to move in the future. The franchisor will typically choose a site based on local competition, as well as on other franchise locations.

  • Appearance: You’ve likely noticed that, when you visit a big chain restaurant in one city, it’ll look very similar to a franchise in another city. Standardized appearance, color schemes, signage, employee uniforms and menus will often be requirements outlined in the franchise agreement.

  • Advertising: In addition to royalty payments, most franchisors also require franchisees to make payments toward advertising. Although advertisements may not be specifically targeted for your location, you can still benefit from national ad campaigns that draw attention to the company as a whole.

  • Operations: The vision and policies of the franchisor may even have an impact on your business’s daily operations. For example, you may be required to stay open during certain hours, work with particular distributors and get franchisor approval for some key business decisions.

Not surprisingly, all of these factors could have a real impact on the success of your business, for good and for ill.

Operating a franchise can be a rewarding and educational experience, and understanding the franchise agreement can go a long way toward helping you get the most out of your time as a franchisee. If you’re considering delving into the world of operating a franchise, consult an experienced and knowledgeable U.S. Virgin Islands business law attorney before signing any agreement. An attorney can help you understand the document, explain your rights and responsibilities as a franchisee and answer any questions you might have about the entire process.

BoltNagi is a respected and well-established business and corporate law firm serving entrepreneurs and business owners throughout the U.S. Virgin Islands.

Is Your Small Business Exempt from Certain Regulations?

Posted in Corporate & Financial Services, Labor & Employment

exemptIf you own and operate a small business, you know that it can be time-consuming and stressful at times. Not least of the worries for many small business owners is the question of whether or not they are properly abiding by the myriad rules and regulations put forth by the federal and U.S. Virgin Islands government to ensure certain protections for employees.

But while much noise is made about the over-regulation of small businesses, in fact there are many ways in which companies are spared from excessive regulatory burdens. This is particularly true in the following areas:

  • Health insurance: Amidst the debate surrounding the Patient Protection and Affordable Care Act and its impact on smaller businesses, the actual requirements have perhaps been underreported. Businesses with fewer than 50 employees are not required to provide any healthcare coverage whatsoever. Moreover, companies with fewer than 25 employees that do provide insurance coverage may be eligible for a tax credit.

  • OSHA requirements: In an ideal world, your business would never have to deal with the Occupational Safety and Health Administration, the federal agency that oversees situations involving workplace accidents and injuries. However, smaller businesses can take some solace in the fact that penalties for an OSHA violation are cut by 60 percent for organizations with fewer than 25 employees—and eliminated altogether for those with fewer than 10.

  • Workers’ compensation: Although OSHA is a federal agency, workers’ compensation policy is left up to the individual states and territories. As a result, there’s wide variance in how workers’ comp is handled. Generally, businesses with one or zero employees are exempt from paying for workers’ compensation insurance, but slightly larger businesses in some jurisdictions may also be exempt.

  • Employment discrimination: Many people assume that employment discrimination laws are to be enforced universally, but this is not necessarily the case. In fact, businesses with fewer than 15 employees are exempt from abiding by the terms of Title VII of the Civil Rights Act of 1964 (which prohibits discrimination based on race, color, religion, sex and nation of origin) and Title I of the Americans with Disabilities Act.

As should be clear by now, much of what determines the extent to which a small business is bound by regulations—or freed from them—is the number of employees on the payroll. Companies with a small handful, only one or even zero employees can often benefit from these exemptions.

However, it should also be clear that there is not much consistency from place to place (or from regulation to regulation) in terms of what qualifies a business for exemption and what does not. This is where the knowledge and experience of a skilled business attorney can be of assistance. A lawyer with an understanding of the rules and regulations can help you determine what your U.S. Virgin Islands business is and is not responsible for when it comes to matters like health insurance, OSHA oversight and other regulations.

BoltNagi is a widely respected and established business law firm serving clients throughout the U.S. Virgin Islands.

“The New Law Issue”-Law Practice Today Magazine-January 2016

Posted in American Bar Association

This issue of Law Practice Today focuses on “new law” within the practice. When first presented with the theme by our LPT Editor-in-Chief Andrea Malone, I was in a quandary as to what was meant by “new law.” She noted that this issue would cover emerging areas of law such as marijuana, artificial intelligence, crowdfunding, cyber insurance and fashion, and how they are changing the legal landscape. She also said that this cutting-edge issue for our ABA Law Practice Division webzine would address how practitioners would develop and market a practice in one of these new areas of law. While the ABA Law Practice Division works with all areas of substantive law in their respective practices, it is timely in this edition that we also highlight the new ways and means to practice law.

 

Over the past half century, the ABA Law Practice Division has led the way embracing new ideas in providing legal services in our core areas of finance, management, marketing and technology. How can we as practitioners be more efficient and effective in the delivery of legal services and educate our members and the profession accordingly? As we began this new year with our various resolutions to do things better,  many in the profession are looking for new means to address old concerns in the practice of law.

As I have stated in other forums, including the current issue of the division’s magazine, Law Practice, attention to client service is paramount. Clients grow weary of business as usual in securing legal services. With an abundance of new ideas, many propelled by technology, lawyers are finding themselves in a buyer’s market. In-house counsel are using matter-management software to analyze billing trends to make data-driven business decisions. Clients want certainty as they purchase legal services, and are demanding legal project management, a method for attorneys to plan, execute, manage and control a legal engagement to provide an effective solution for the client at a predictable cost – in other words, bringing more value to legal services.

Developing a data-driven practice through knowledge management, connecting people to the information they need, is a key to survival in the law practice market of tomorrow. The implementation of knowledge management systems enable lawyers to thrive in today’s rapidly changing economy and contribute to the development of sustainable competitive advantages.

Technology also is transforming the practice of law through virtual or mobile practice, cloud computing and document automation. Today’s practice has attorneys throughout the world using the cloud and providing legal services through client portals, where tclients and lawyers can quickly and easily collaborate on documents and other tasks. In today’s legal services market, lawyers must continually strive to provide cost-effective and efficient solutions to our clients’ legal problems.

The new ways of practicing law also incorporate a number of models that are not so new, such as alternative billing with flat fees and value pricing, and limited scope representation where attorney and client agree to limit the scope of the legal engagement, leaving certain tasks to the client or other responsible parties. All are part of the client centric movement that is transforming today’s legal market.

Finally, new ways of practicing law are not just about clients and their desires for cost-effective and efficient delivery of legal services, but “new law” is also about the attorneys and how they practice. The new concept of mindfulness in the practice of law is gaining traction. Lawyers are faced with handling some of the most stressful issues in their clients’ lives. Multiply that by 100 or more for most attorneys, and no wonder that today’s lawyers are under a tremendous burden of stress. How do we handle, how do we manage that stress? Mindfulness in the practice of law has been the answer that many have found that offers a solution.

 

As witnessed over the past half century, the ABA Law Practice Division is continuing to bring these and so many other areas of “new law” to the members of the profession through CLE, webinars, publications, the Legal Technology Resource Center, Law Practice magazine and this webzine, Law Practice Today. For those that want to learn more there are a number of fivision committees and task forces that are available to any members that wish to join. As chair of the ABA Law Practice Division, I invite you to join one of these division entities. Engage with the division, together we can learn and forge a path forward towards a more client centric and fulfilling practice for all.

About the Author

BoltTom Bolt is the founder and managing attorney of BoltNagi PC in St. Thomas, U.S. Virgin Islands, and is the chair of the ABA Law Practice Division.

 

 

 

 

Let Client Service Be Our Watchword (Law Practice Magazine-January/February 2016)

Posted in American Bar Association

In the previous issue of Law Practice, I discussed the Law Practice’s Division theme of building bridges with respect to the attorney-client relationship. In this marketing issue, I think it compelling that the most important aspect of any firm’s marketing strategy is client service. Superior client service is an investment that can drive law firm growth. Investing in talented lawyers and staff with the training and tools that enable them to actively listen and empathize with clients is key to building a solid bridge to clients and providing consistently excellent service experiences.

A client-centered service policy is based upon the recognition that what our clients want most from their attorneys is care and concern. Often satisfaction is based more on how the client is treated than the result obtained or the amount of the fee. As a profession, we should commit to our clients to provide the highest-quality legal services at a value that they perceive as fair and reasonable. We fulfill this commitment by establishing long-standing relationships with our clients based on the fundamental principles of trust, communication and efficiency.

Trust is the backbone of any mutually rewarding relationship. We should strive to fully understand our clients’ businesses and empathize with their needs. We should strive to become members of their “team.” By having a stake in their future, our clients will trust that our counsel is in their best interest.

If a client has a problem or becomes unhappy with some aspect of the service provided, their confidence and trust in the situation must be addressed immediately so the issue does not grow worse. If a client leaves a message expressing unhappiness with some aspect of service, a return phone call must have the highest priority.

To foster client trust, expectations must be managed throughout the process. Any significant change in the course of a matter or a case plan must be shared with the client as soon as possible. If the fee estimate cannot be met, the attorney needs to adjust the manner in which the matter is handled or contact the client to discuss adjusting the fee estimate. Contacting a client in advance if a monthly bill is higher than expected is critical to retaining their trust. Never surprise a client with the amount of a bill.

A successful lawyer-client relationship also depends on consistent and productive communications. I often say that 98 percent of the problems we face today are due to a lack of effective communication. As professionals we must strive to maintain good attorney-client communication, trying to anticipate client needs and problems and collaborating with them to resolve these issues. Representing our clients must be an interactive process. Both attorneys and their staff must develop and maintain a mindset that it is all about the client. Clients should be treated as people, not files. Responding to clients should be a priority, and every client contact should project genuine concern for their matters. By being proactive in communicating with clients, we can often provide innovative solutions to unique problems and help them keep small issues from becoming big ones.

In my previous column, I addressed the issue of client demand for efficiency in the delivery of legal services. Attorneys must be equipped to respond immediately to most challenges that our clients face. Clients deserve prompt and effective legal services, and today clients expect faster service than ever. By allocating our resources and applying different expertise to our clients’ problems, we can work with the client as a member of their team to efficiently address the issues that confront them.

In today’s market, most clients perceive that all attorneys will provide high-quality legal services. What sets a firm apart is client service. One of the most powerful and effective tools to build a successful law practice is client service. Let client services be our watchword!

About the Author

BoltTom Bolt is chair of the ABA Law Practice Division. He is managing attorney at BoltNagi PC, in St. Thomas, Virgin Islands, where he concentrates his practice in business, real estate, finance and government relations. tbolt@vilaw.com

 

 

 

 

 

US Copyright Office Sets Strategic Plan Through 2020

Posted in Corporate & Financial Services

copyrightofficeAs changes take place in the intellectual property landscape due to advances in technology and other factors, the U.S. Copyright Office must periodically revise its approach to protecting creative works. Recently, the agency outlined a strategic plan designed to bring the office into the 21st century, both in terms of its ability to protect intellectual property and its creators and in terms of the ways in which the office’s customers and the public can access information about copyrights and copyrighted materials.

In outlining its plan, the office set out six strategic goals it hopes to implement by 2020:

  • Continue to be an effective, efficient administrator of U.S. copyright laws, to the benefit of both creators and the general public.
  • Improve the ease with which all interested parties are able to access and search copyright records.
  • Provide its expertise to the three branches of government to settle questions of copyright law and related policies.
  • Provide a steady and reliable stream of information, educational programs and other resources to members of the public.
  • Make substantial improvements to the technology that serves the Copyright Office and those with whom it interacts.
  • Step up its recruitment efforts to ensure it integrates the best legal, technology and business minds into the office’s team, while also improving training and development practices.

In addition, throughout 2015, the office evaluated some specific areas in which modernization efforts will be necessary to adapt to the changing ways in which intellectual property law affects both its creators and the marketplace. These efforts have included:

  • The establishment of the Fair Use Index, a resource that allows interested parties to better access judicial documents related to the fair use doctrine.
  • The Orphan Works and Mass Digitation Study, which attempts to find solutions to licensing issues involving works for which copyright owners cannot be determined.
  • A study of the current system of music licensing, in an attempt to modernize and simplify what is currently a complex system.
  • A proposed resale royalty to be paid to visual artists.
  • The proposed establishment of a Copyright Office Tribunal to handle small copyright infringement claims and relieve the federal court system of that burden.
  • An investigation of the potential benefits of bringing pre-1972 sound recordings under the purview of the federal copyright system, which the office concluded would benefit the public as well as library and archive systems.

With changes in technology happening all the time and having considerable impact on the ways in which intellectual property is created, disseminated and used, the Copyright Office believes that efforts like its strategic plan will be necessary in bringing copyright law in line with present day conditions. The office remains committed to making necessary adjustments to its practices, and to advising the government on matters involving intellectual property.

BoltNagi is an established and respected intellectual property law firm serving clients throughout the U.S. Virgin Islands.

USVI Receives Waiver on Unemployment Tax Credit

Posted in Corporate & Financial Services, Government Relations

charlotteamalieThe effects of the 2009 increase in the unemployment rate continue to be felt in the U.S. Virgin Islands, as the territory struggles to pay back the balance of a federal loan taken out to maintain its ability to pay unemployment benefits and fund related programs. However, some measure of relief is on the way, as the federal government recently approved a waiver that allows the territory to be exempted from a decrease in the federal unemployment tax credit.

According to USVI Labor Department Commissioner Catherine Hendry, the remaining balance on that 2009 loan is $72.2 million. Although the territory has been making payments on the loan with consistency, its failure to pay it back in full within five years left the government at risk of experiencing a decrease in the amount credited back to employers once federal unemployment taxes have been paid.

How the unemployment tax credit works

To pay unemployment benefits to those looking for work, and to fund the cost of the programs designed to help them, the federal government collects a 6 percent tax on the first $7,000 paid to employees. This tax is also used to pay back federal loans of the sort the USVI took out in 2009. Federal unemployment taxes may be offset by a 5.4 percent tax credit provided to businesses that file their taxes in a timely fashion and abide by other conditions the government determines.

This 5.4 percent credit, however, can be adjusted in certain circumstances, as it was in 2009 when the credit was cut by 1.5 percent in an effort to help pay back the loan. Now, as the territory retains an outstanding balance on its loan, a further reduction of 2.7 percent was set to be implemented unless the government approved a waiver, for which USVI Gov. Kenneth Mapp applied in June.

Now that the waiver has been approved, employers in the USVI will see only the expected 1.5 percent reduction in the unemployment tax credit.

U.S. Virgin Islands government officials remain committed to paying the loan in full and are still looking to reduce the territory’s credit reduction, but the precise repayment plan and timeline for paying off the outstanding debt are unclear. In the meantime, USVI employers can continue to hope that there is no drastic rise in unemployment (as seen in 2009) and that the government continues to make its loan payments and support the territory’s unemployed workers to the best of its ability.

BoltNagi is a widely respected and well-established government relations law firm serving individuals, businesses and organizations throughout the U.S. Virgin Islands.