Virgin Islands Law Blog

Virgin Islands Law Blog

U.S. Virgin Islands law & politics

S Corp Versus C Corp: The Key Differences

Posted in Corporate & Financial Services

gratisography_wrestleWhen starting a new business or restructuring an existing one, you may choose to set up a corporation. The two most common options are the Subchapter S corporation and the C corporation.

These two varieties of corporations are actually quite similar in many ways — they are structured similarly, they both offer limited liability protection to their shareholders and they both require the filing of documentation and the following of standard formal obligations regarding bylaws, holding regular meetings, issuing stock and filing annual reports regarding finances and other matters. But Subchapter S and C corporations also differ in several key ways. The following are the major differences between the two:

Whether to form a Subchapter S or a C corporation may depend on the size of your business. A Subchapter S corporation is typically an ideal structure for smaller businesses with shareholders that are U.S. citizens and fewer than 100 in number. A C corporation, on the other hand, is often a larger business with more than 100 shareholders. These shareholders may include institutions that have invested in the business.

Taxation is a key difference between S and C corporations. Subchapter S corporations don’t pay corporate income tax. Rather, any profits or losses pass through the business and are accounted for on the personal tax returns of the owners. C corporations, on the other hand, file corporate tax returns and run the risk of being taxed two times over if dividends are paid to their owners, as the owners must also pay personal taxes on dividends. Both types of corporation require the payment of personal income tax on employees’ salaries and any dividends the corporation receives.

S and C corporations have different ownership restrictions. The restrictions on C corps are simple: there are none. This makes them very flexible from an ownership standpoint. Meanwhile, Subchapter S corporations are bound to a maximum of 100 shareholders — limiting opportunities for growth without having to restructure — and cannot be owned by anyone other than the shareholders themselves. This means that another Subchapter S corporation, a C corporation, an LLC or a partnership cannot own a Subchapter S corp. There are also stock restrictions on Subchapter S corporations, whereas C corporations are allowed to have multiple classes of stock.

For business owners and executives looking to start a new corporation or make changes to the structure of an existing business, understanding the differences between S and C corporations will be critical in how they move forward. The best approach to incorporating your business involves discussing the different options with an experienced business law attorney.

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

Key Questions to Ask Your Business Attorney

Posted in Corporate & Financial Services

flickr_Frits_Ahlefeldt_LaurvigOne of the most important relationships business owners and executives have is in working with their business attorney. An experienced, highly qualified legal professional can be an invaluable team member and source of knowledge, advice and wisdom. Cultivating this relationship can reap rewards many times over.

A key aspect of this relationship involves open communication and trust, as it’s only through honest conversations that a truly productive partnership can be built. One of the most important means of communicating with your business attorney is through asking questions and better understanding the way legal issues relate to your business. With this in mind, the following are five of the most critical questions you should be asking your business lawyer:

What do you need to know about my company to best help me?

For attorneys to effectively work with you and your company, it’s crucial that they understand the key aspects of your business. These include the products and services you provide, the company culture and the people behind your organization. Communicate everything important about your business from the start.

How should I be approaching employee benefits, policies and other programs?

Because your employees form the backbone of your company, you want to ensure you’re treating them as the critical assets they are. Discussing your company’s benefits packages, employee policies and any other programs you might offer with your labor and employment attorney can help you make certain you’re in compliance with federal and territorial law and are treating your workers in a positive manner.

How am I protecting my company’s intellectual property?

Handling intellectual property in a way that protects your business can be complicated, as copyrights, trademarks and patents are the subject of much legal discussion and debate. An attorney well versed in intellectual property law can help you ensure that these valuable assets — some of which your business may rely on heavily — are appropriately protected.

Am I up to speed on regulatory and legal changes that affect my business?

Regular communication with your government relations attorney is important for staying up to date on any major legal changes that might impact your business, ranging from taxation and financial developments to laws that impact your workforce. Being aware of and understanding these changes can save you money and unneeded hassles in the long term.

How much do you need to know about my future business plans?

If you are planning major changes to your business, including large purchases, a relocation or the launch of a new product or service, a skilled attorney can help ensure you’re doing so in a legally and financially sound manner.

Securing quality legal counsel is a wise investment for your business, as a full service business law firm you trust will guide you through difficult and challenging times for your company, as well as prepare you for the future. Consider these questions as you begin this very important relationship.

BoltNagi is a well-established and widely respected full service business law firm with attorneys who practices are concentrated in business law, real estate, finance, labor and employment, taxation, civil litigation and government relations.

What to Expect from USVI Governor-Elect Kenneth Mapp

Posted in Government Relations

It was a busy election cycle in the U.S. Virgin Islands, with the passage of a referendum on medical marijuana and the defeat of the proposed increase of senatorial terms by a wide margin. The Territory also has a new Governor-Elect in former Lt. Gov. Kenneth Mapp.

Mapp won a November 18 runoff against Donna Christian-Christensen after the two received the most votes in the November 4 general election. With nearly 64 percent of the vote, it was a decisive victory for Mapp, who has a long history of serving in the Government of the Virgin Islands. He replaces outgoing Gov. John deJongh, who was term-limited and unable to run again.

So what can we expect from the newly elected Governor? For the most part, Governor-Elect Mapp made jobs and economic growth the cornerstone of his campaign, which resonated with voters. He made a campaign promise of creating 1,000 government jobs after his election, along with strategies to reduce energy costs and the revitalization of the towns of Christiansted and Frederiksted.

To achieve his jobs promise, Mapp has proposed recruiting 250 new law enforcement officers, more than 500 teachers and school staff, 75 correctional officers and 125 nurses, revenue agents, emergency medical technicians and other classified government workers. He has argued that excessive overtime in government positions has caused budgetary challenges, and by reducing overtime and filling vacant roles, his job goals will be attainable. In particular, Mapp says, the hiring of revenue agents will help ensure the government collects more of the taxes and fees owed the Government of the Virgin Islands.

When it comes to tourism, Mapp supports the construction of at least one hotel on St. Thomas and has plans for completing the Main Street Enhancement Project to revitalize downtown Charlotte Amalie. He also approves of the construction of a new branded hotel on St. Croix.

Looking at the Executive Budget of the Government of the Virgin Islands, Mapp wants to closely analyze any areas of waste and possible consolidation to achieve greater efficiencies, and to balance the budget by leveraging federal funds in a timelier manner.

Mapp has served in various roles in government, including the Director of Finance and Administration for the Public Finance Authority, Director of the Consumer Services Administration and Assistant Director of the Industrial Development Commission. He also served in the 15th and 18th USVI legislatures and was Lieutenant Governor from 1995 to 1999.

Like many candidates for public office, Governor-Elect Mapp outlined an ambitious agenda on the campaign trail. Although it’s difficult to determine how successful he will be with these initiatives, we do know some of the new Governor’s top areas of focus as he takes office on January 5.

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

Factors Influencing Child Support

Posted in Family Law & Children's Issues

During a divorce, considering the needs of the children is of paramount importance. Making sure kids’ financial, medical, educational and developmental needs are well cared for can be a complex process, and because it’s such an important one, the court will take a variety of factors into consideration in determining an appropriate and achievable child support plan.

The primary factor influencing child support in the U.S. Virgin Islands is always going to be the children’s needs and best interests. As different children require various forms of care and attention, it’s crucial that all of those needs are factored into a child support arrangement. Many things must be taken into account when determining child support, including the children’s ages, any medical or developmental conditions, educational needs and other factors and situations that may result in significant expenses. With this in mind, parents must be able to project likely ongoing and potential future expenses so as to establish a realistic and accurate goal for child support payments.

A second key factor the court will consider is the situation of each of the parents. The custodial parent’s income will often need to be supplemented by the noncustodial parent to ensure that the custodial parent’s needs are met, insofar as they affect the kids. The noncustodial parent’s income is also a major factor driving child support, as the amount this individual able to pay each month is dependent upon how much income he or she makes.

A final major consideration is the family’s standard of living prior to the divorce. When at all possible, courts will try to maintain that standard of living, to the best of their ability, through child support. Because divorce results in a significant change in the children’s life situation, the goal is to keep the standard of living as consistent as possible to maintain some semblance of stability. This can be difficult, as a divorce effectively requires two households to be supported on the income that once supported just one. Thus, maintaining the children’s former standard of living is truly a goal rather than a strict requirement.

The calculation and establishment of child support is a difficult and important aspect of any divorce involving kids. However, just because an initial agreement is reached doesn’t mean that all the work is done. The terms of the agreement and the amount of child support may need to be adjusted over time as the parents’ abilities and the children’s needs change. If this is the case, you or your former spouse may opt to seek a modification to the original agreement.

To make sure you protect your rights and best interests — and those of your children — in a divorce, be sure to work with an experienced family law attorney.

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

What Protections Are Available Under U.S. Copyright Law?

Posted in Litigation

bookU.S. copyright law can be very difficult to truly understand, and the technological developments over the past decade couple decades have complicated matters to the extent that the law is still very much in flux.

In the United States and its territories, the ability to copyright a work requires that the work be the original, fixed and tangible creation of a specific author. This classification covers a variety of works, including literature, music, drama, dance, visual art, architecture, motion pictures and sound recordings. These categories are intentionally broad. Among the materials not covered by copyright are any works that haven’t been tangibly fixed, as well as titles, slogans, phrases, ideas, concepts and works composed of common information.

One of the major factors in this area of the law is the necessity of gaining permission to use copyrighted material. Material that can be used without seeking permission is referred to as being in the public domain. In the U.S., any materials created prior to 1923 are in the public domain and can be used freely — this is why you can walk into a bookstore and find a dozen different versions of “The Adventures of Huckleberry Finn.” However, this particular provision of U.S. copyright law is probably the most straightforward.

Works created and published from 1923 to 1977 are protected by copyright for 95 years. Works published after 1977 are protected for 70 years after the death of the author. In all of these circumstances, there are additional exceptions and quirks that may affect the copyright protection of a particular piece of work.

Another key debate in copyright claims comes down to what constitutes fair use. In determining whether fair use has been violated, the court will look at several factors. Most important is the way in which the material was used. For instance, use that transforms or illuminates the original material — such as in criticism, commentary or scholarly contexts — is usually considered fair. The proportion of material used also makes a difference, with the general guiding principle being that the smaller the proportion used, the more likely the use was fair. Finally, if the material was used primarily for commercial purposes, or to compete with sales of the original, such use is typically going to be considered a violation of the principles of fair use.

As copyright law is changing and new issues are always being brought to the attention of courts, it’s somewhat common to have questions or concerns about the status of your own copyright or about your use of someone else’s intellectual property. Consult an attorney to learn more about your rights and obligations.

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

USVI Senate Considers Expanded Preferred Vendor Status to Local Contractors

Posted in Government Relations

workerBill No. 30-0438, a U.S. Virgin Islands Senate bill approved in committee at the end of October could, if passed, pave the way for local contractors to receive additional priority when bidding for government contracts in the territory.

Local contractors already have significant standing when it comes to government contracts. Under the terms of the “Preferred Provider Act of 1971”, the Department of Property and Procurement is compelled to accept the bids of local contractors, provided those bids do not exceed the amount of the lowest outside bid by more than 15 percent.

The new legislation, sponsored by Senator Diane Capehart, would pull a variety of other agencies under the umbrella of the law. This would mean that, for example, contracts offered up for bidding by the University of the Virgin Islands, the Virgin Islands Water and Power Authority and any hospitals in the Territory would be subject to the terms of the Preferred Provider Act. As a result, a wider range of contracts would be available to local providers.

The law has actually been amended a number of times since its initial passage. Among the changes have been severe reductions to bonding requirements. For bids of less than $300,000, bonds cannot exceed 2 percent, and for bids of more than $500,000, the bond cap is 5 percent. Meanwhile, contractors are also subject to performance bonds of 25 percent of the total bid.

However, some government contractors believe that even these limits result in surety bonds that are difficult for smaller contractors to post, and prevent companies that could perform necessary work from bidding on jobs that they could efficiently and skillfully complete. In response to these concerns, the new proposal allows a means for contractors to avoid bid and performance bonds altogether by offering other options. Among these is a provision that would require 20 percent of the performance bond cap of 25 percent of the bid to be placed in escrow. For a $200,000 contract, for example, a builder would merely need to put $10,000 in escrow rather than the $50,000 that would be required under the existing law.

With the proposed changes in Bill No. 30-0438, local contractors may find themselves with a considerably larger selection of contracts available to them. If the bill becomes law, the role of local contractors in the U.S. Virgin Islands economy could expand significantly in a relatively quick timeframe.

BoltNagi is an established and well-respected government relations law firm serving clients throughout the U.S. Virgin Islands.

Film Shoots Coming to US Virgin Islands

Posted in Community Affairs

film crewPending legislation could mean an increase in the film industry’s already booming business in the U.S. Virgin Islands, according to a source familiar with the industry’s workings in the Territory. The legislation could be passed as soon as the end of the year.

For now, shooting in the U.S. Virgin Islands offers no major tax benefits, but even without the incentives built into U.S. tax code, the Territory has done well in attracting numerous films and television shows. Steve Bornn, Development Manager of Film USVI, notes that his organization has done more than $20 million in business in the past five years, with an increase in local employment opportunities among the top benefits.

In recent years, films such as “Twilight Saga: Breaking Dawn” and “The Curious Case of Benjamin Button,” both shot in the U.S. Virgin Islands, have done much to raise the Territory’s profile within the film industry. This year, a significant amount of the business has come from reality television and advertising. CBS, the Travel Channel, HGTV and PBS have all shot episodes of popular series here, and Princess Cruises, Izod, Seagram and Nordstrom are just a few of the companies that have filmed commercials in the Territory.

Currently, the major attraction for shooting in the U.S. Virgin Islands includes the absence of sales tax, as well as an exemption from taxes, duties and bonds associated with importing film equipment and accessories. According to Bornn, the proposed legislation would bring the Territory more in line with many U.S. jurisdictions in terms of the incentives provided for film production. Among the proposed perks are a variety of tax credits and rebates.

In addition to the job creation, having a thriving movie production industry in the U.S. Virgin Islands would likely mean major gains for local businesses, development and much-needed improvements to existing infrastructure, in addition to an increase in tourism. Similar benefits have already appeared in other areas that have taken measures to attract film production, with New Orleans, since Hurricane Katrina, setting a particularly strong example for what can happen when localities encourage the film industry to set up shop in their regions.

As the U.S. Virgin Islands looks to establish the Territory in realms outside of tourism, the legislation now under consideration in the Senate could lead to a boom in the Territory’s film industry.

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

Choosing the Right Business Entity for Your Startup

Posted in Corporate & Financial Services

Creative Commons license courtesy of Gratisography.Of all the important decisions you need to make when starting a new business, the choice of business entity is one that carries a lot of weight and demands a considerable amount of thought. One reason this decision demands such careful planning is because there are so many available options, and they all have different benefits and drawbacks.

The following are the four general options available when choosing your business entity:

Sole proprietorship

If you’re looking for a simple arrangement that involves no one but yourself, a sole proprietorship might be the way to go. With this entity, your business expenses will come directly from your personal funds. Although it may appear to simplify things in the short term, it can make your tax situation more complex. A lawsuit or any business-related financial trouble can thus have serious impact on your personal finances, as your funds are not separated.

Partnership

A partnership brings with it the stability of having more people than just yourself involved in your startup, as well as the increased funding that your partners may provide. Determining roles and responsibilities can be complicated, however, and there’s still the challenge of keeping business and personal finances separated. A related option is a limited partnership, which involves the selling of limited partnership interest and has the advantage of providing additional funding without requiring too much involvement from your limited partners.

Limited liability company

The first major benefit of a limited liability company (LLC) is the separation of your personal and business finances. Managing an LLC can often be left to all of the members, but some LLCs choose to appoint a specific individual to the top management role—or even several individuals to fulfill specific roles, such as president, treasurer or any other traditional official role. It’s important to establish, in writing, the specific roles to be performed by the members of any LLC.

Corporation

Forming a corporation is more expensive and carries considerably higher tax burdens than other types of business entities, but for startups in search of funding from venture capitalists, it may be a great option. Corporations also require more official structuring and the completion of a variety of legal and financial requirements. But once a business is able to incorporate, the status that comes along with it can offer numerous benefits.

These are just several of the options available, and other possible business entities could also be on the table for your startup. To find out more about your options and to discover what’s best for your situation, speak with an experienced business law attorney.

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

How Can Businesses Defend Against Wrongful Termination Claims?

Posted in Labor & Employment

Creative Commons license courtesy of Gratisography.Most states and territories throughout the U.S. operate under the concept of employment at-will, meaning that an employer can terminate an employee for virtually any reason or for no reason at all, as long as the reason for termination is not related to federally protected categories such as race, sex, disability or age — or to the employee’s status under the Family and Medical Leave Act.

The U.S. Virgin Islands, however, has legislation on the books that specifies the conditions under which an employer may terminate certain workers. A termination for other reasons may be considered wrongful and could leave the employer open to a lawsuit.

The U.S. Virgin Islands “Wrongful Discharge Act” applies to employers with five or more workers, and only protects non-supervisory employees who have worked for more than six months at their job. Under the law, employees may be terminated for a number of very specific reasons. These include working for a competing business, poor behavior toward customers, substance abuse, failure to follow instructions, poor work habits, frequent absence, incompetence or inefficiency, dishonesty and conduct that alienates other employees. A business that ceases operations or is forced to cut back on its workforce due to economic hardship may also terminate workers.

Naturally, the precise language of the “Wrongful Discharge Act” may be open to interpretation, and employees who feel they have been wrongfully terminated could seek legal action. Because no company wants to be involved in a wrongful termination claim, it’s important that business owners protect themselves against such claims by preparing in advance for the possibility of litigation. Fortunately, this can be achieved by taking some routine actions during an employee’s time with the employer and prior to terminating the worker.

First, an employer should establish clear, fair and consistent standards for documenting an employee’s performance, including attendance, verbal warnings or discussions, incidents involving customers or other employees and anything else that may be relevant. The key is making sure that the standards for documentation are equally applied to all employees. Unequal documentation could result in the employer being accused of discriminatory practices.

Second, use the employee’s regular performance evaluation as an opportunity to ask open-ended questions to glean information that might indicate whether the worker believes they are being subjected to any type of discrimination or harassment in the workplace. Employers can use this information to aid in remedying negative workplace behaviors, and evidence of effort on the employer’s part can protect a company against claims of discrimination and harassment. At the same time, an absence of evidence of such problems can also protect the employer from wrongful termination claims.

Finally, it’s a good idea for an employer to seek legal counsel prior to terminating an employee, especially when termination may seem contentious. Having the appropriate documentation ready will allow the employer to proceed with confidence and hopefully avoid a difficult lawsuit.

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

Zozaya: Putting Politics Aside Would Help USVI Tourism

Posted in Community Affairs, Government Relations

marketAt the 2014 State of the Industry Conference organized by the Caribbean Tourism Organization in St. Thomas, keynote speaker Apple Leisure Group CEO Alex Zozaya emphasized the importance of keeping politics and bureaucracy out of the tourism industry if it’s expected to grow. Instead, Zozaya said, tourism should be run like the business that it is, with emphasis on attracting tourists with ease of access and the promise of an authentic, unique experience.

In bemoaning petty political squabbles, Zozaya made clear the importance of keeping politics, for its own sake, out of areas that are particularly prone to the effects of conflict. While labor, investment and trade laws might be necessarily political in some ways, Zozaya challenged conference attendees to focus more on the importance of tourism as a product. Policies that affect tourism should be structured to improve the product rather than to achieve political ends.

Zozaya noted that one of the major factors for international tourists in determining where to vacation is the severity of visa requirements. Less restrictive visa requirements make a location much more attractive to travelers, especially those who may have little travel experience under their belts. On a related note, Zozaya mentioned that 40 percent of travelers who used the services of Apple Leisure Group in the past couple years have been Americans traveling abroad for the first time. The proximity of the U.S. Virgin Islands and the entire Caribbean region to the United States, he said, is an asset other tourist destinations would love to have.

However, the importance of preserving the unique cultural identity of every Caribbean island should also be a part of the long-term plan for attracting and keeping tourists. The tourism experience on each island needs to authentically reflect the territory’s culture and traditions, discouraging the perception that a trip to St. John amounts to a trip to the U.S. Virgin Islands and, by extension, that a trip to the USVI constitutes a trip to the Caribbean.

In the U.S. Virgin Islands, travel and tourism account for about a third of jobs and nearly a third of the territory’s gross domestic product. It’s also a key source of investment money in the region. The factors pointed out by Zozaya are just some of the things U.S. Virgin Islands policymakers need to think about in the coming years as the Territory looks to increase the efficiency, hospitality and economic benefits of the tourism industry.

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