Virgin Islands Law Blog

Virgin Islands Law Blog

U.S. Virgin Islands law & politics

Intellectual Property Commonly Overlooked in Business Valuations

Posted in Corporate & Financial Services

2015_intellectual_property_flickr_Robert_NunnallyThe process of business mergers and acquisitions can be time-consuming and complex, and sometimes the move needs to happen so quickly that key items are ignored, given a short shrift or are just forgotten altogether. This is often the situation with intellectual property, which can be an extremely valuable aspect of a company’s operations.

Why is intellectual property so often overlooked during the business valuations that occur as part of mergers and acquisitions? First, the focus is often on the parts of the business that actually make money. Another issue is that exactly what constitutes intellectual property is not always clear to everyone involved.

Most people, when they consider intellectual property, probably think of its definition in the arts, in which a copyright protects the products of artistic creation. However, in business, trademarks, patents, trade secrets, industrial designs, marketing plans and materials in print and online can all be considered intellectual property.

Intellectual property holds real value

The problem with failing to account for intellectual property in business valuation is that this property, while often not technically a moneymaker on its own, can still make a huge difference in a company’s revenues. Consider a marketing plan, for example — it doesn’t generate revenue by itself, but it provides definite value to the business. During mergers and acquisitions, when a full accounting of all of the companies’ assets is necessary, it is important that intellectual property is included in the process.

Because intellectual property holds such value for a company, a well-respected valuation analyst should examine it. In determining the value of intellectual property, several factors should be taken into consideration. Among these are the uniqueness of the asset and the amount of money the asset has generated in the past, along with what it might be expected to generate in the future. Not surprisingly, determining the financial benefits related to a trademark or a simple business website can be extremely complex and demands the involvement of an experienced valuation analyst or a skilled business attorney.

When your company is preparing for a merger or acquisition, no matter which side of the deal you’re on, it’s critical to ensure that all intellectual property is accurately and totally accounted for. To make sure this aspect of the process goes smoothly and nothing gets left out, it is a wise idea to seek counsel from an experienced intellectual property lawyer. This is the best choice for your company, as well as the most surefire way to make sure your intellectual property is treated with the care and attention it deserves.

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

Legal Steps to Leaving Your Business in a Will

Posted in Tax & Estate Planning

2015_business_card_wikipediaWhen you own a business, you may become be so consumed with running it from day to day that you don’t really think much about what will happen to it after you are gone. While preparing for one’s own passing is often unpleasant to consider, particularly if you have reason to expect to live for many years to come, it’s still important to make sure you have legally documented your wishes — for the good of you, your beneficiaries and your business.

One of the key reasons to make sure your will covers your business is that, if it does not, your close family members may end up inheriting your business, whether or not they want to and regardless of whether you had other plans for your company.

Even in cases in which your children are minors, they could still inherit your business, and without an adult in place to take care of its operations, your business may essentially dissolve when you pass away. Particularly if your business is valuable, a failure to provide for its future in your will doesn’t just hurt your business, it also negatively impacts your family.

Executors can help protect your investment

Because of the risks involved with not leaving your business in a will, ensuring you’ve put everything in place ahead of time is essential, and it’s one of the best ways of providing security for your business and your loved ones. Among the key steps in preparing your will, as far as your business is concerned, is naming an executor to handle decision-making related to the company after your death. This is crucial because, without an executor in place (or if you don’t have a will in the first place), the court will appoint an executor.

To ensure your business is transferred or sold according to your wishes, you want to be certain that the person in charge understands your wishes and their duties. The risks associated with a court-appointed executor are too great to leave anything to chance.

Another task you may need to complete is to consider restructuring your business. If you are the sole proprietor, your business cannot simply be left to somebody else in your will. To avoid having your life’s work disappear after you’re gone, it may be necessary to restructure your business as a closely held corporation. As a separate entity, a corporation continues to exist after you die, and you can leave your controlling interest to a person of your choosing. Although your estate will still be taxed on the value of your share, this approach at least allows your business to continue to operate without you.

The process of preparing a will and establishing what you want to become of your business in the event of your passing is often complicated, stressful and just about the last thing many business owners want to address. That’s why it is so important to go through the process with an experienced business attorney, whose knowledge of the process and understanding of estate planning and business law can help you reach your goals and give you the peace of mind you need for the future.

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

USVI Labor Relations Act Includes Regulations on Employee Breaks

Posted in Labor & Employment

2015_break_pixabayFor business owners and employees alike, one of the most frequently debated aspects of the average workday involves the negotiation and scheduling of employee meal breaks and brief resting periods. Many workers cherish their break time, while others may be indifferent — and it can create complications for employers when attempting to schedule their staff members for the day. Some employers take a very casual approach to break time, whereas others prefer not to take any chances and have everything scheduled down to the minute.

Perhaps not surprisingly, the U.S. Virgin Islands Labor Relations Act outlines the specifics of the law as it concerns both mandatory rest periods and meal breaks. For every four hours of continuous work, an employee is entitled to a paid break of at least 10 minutes. This break may not take place at the beginning or end of a shift, and it cannot be tacked onto a meal break.

Failure to provide a short break entitles an employee to make up his or her break time either on the same workday or the same pay period. Otherwise, for every break period not provided, the employer must pay the worker for a half-hour’s work at the regular pay rate.

Requirements and exceptions

It is important to note that 10-minute breaks do not have to be provided under the following conditions, provided they exist simultaneously:

  • The employee is at least 18 years old
  • The employee is working alone in a retail or service business
  • The employee is allowed to briefly leave his or her post to use the restroom

Meanwhile, a 30-minute meal break is required for any employee working seven or more continuous hours. This break may take the form of uninterrupted mealtime or an “on-duty” meal, during which time the employee continues to work in the event that the job demands it. The burden is on the employer to prove that such circumstances exist.

There are some exceptions to the law. For one, employees may forego any break if they so choose. However, the burden of proof is on the employer if there is a dispute, so business owners need to be able to verify that an agreement with the employee was in place.

There are also some situations in which employers may be exempt from providing mandatory breaks. For example, if providing breaks would negatively affect the business while also not harming employees, an employer may apply to the Commissioner of Labor for an exemption. The Commissioner of Labor, meanwhile, may exempt certain categories of employers from having to allow breaks.

Although the law is fairly straightforward, it’s still a good idea for employers to fully understand how it applies to their businesses. Employers with questions or concerns related to mandatory employee meal breaks and rest periods should seek the counsel of an experienced labor law attorney to avoid any confusion or compliance issues.

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

USVI Government Employees to Contribute More to GERS

Posted in Community Affairs

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Tier II government employees saw a small increase in their contributions to the Government Employees Retirement System (GERS) starting February 5. The 1% increase follows a similar measure for Tier I employees that took effect January 1. These increases are part of a plan to boost funding for the GERS, which was poised to collapse within a decade without major changes.

Under the new plan, Tier I and Tier II employees’ contributions will increase 1% per year for the next three years, ultimately arriving at 11% for Tier I employees and 11.5% for Tier II employees. Meanwhile, the government’s contribution will be increased just once, from 17.5% to 20.5% — a rate that will be in effect for five years.

According to an August study, GERS has an unfunded liability of $1.84 billion, due to a growing number of pensioners and a decreasing number of current employees paying into the system. This situation would ultimately lead to insolvency by 2025 without legislative action. Contributing to the dire situation has been the sluggish economy, as well as the “Economic Stability Act of 2011”, which encouraged government employees to take early retirement and reduce the Government of the Virgin Islands’ payroll. This had the added effect of increasing the monthly benefits paid out from just under $8.4 million in 2011 to nearly $9.3 million in 2013.

Due to some challenges within the central government, the Virgin Islands Personnel Division was unable to adjust the contribution rate for some employees after the first of the year, but assured workers that the adjustment would be made by February 5. Eventually, GERS will need to collect funds from employees whose contributions were not adjusted on time, but the plan for doing so remains to be implemented.

Additionally, increased contributions were also approved for Tier II hazardous duty employees, as well as senators and judges. Hazardous duty employees will eventually contribute 13.625% to GERS, while senators and judges will increase their contributions to 14%.

With these new increases in employee contributions, GERS is believed to be safely solvent through 2032, although with the ratio of active employees to retirees currently at 1 to 1.2, there is still much concern that the system will continue to experience difficulties striking a sufficiently stable balance between the money coming in and the money going out.

The recent action of the Legislature of the Virgin Islands certainly helps, but whether it will be enough — and whether the benefits of the legislation will last as long as expected — remains to be seen.

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

Governor Gives State of the Territory Address

Posted in Government Relations
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Kenneth A. Mapp

In his first State of the Territory Address, Governor Kenneth A. Mapp didn’t shy away from speaking to the Legislature and citizens of the U.S. Virgin Islands with candor, especially when it came to the fiscal situation of the Territory. At the start of 2015, the Government of the Virgin Islands has a budget shortfall of $91.2 million, as well as $176 million owed for hospital improvements, the Government Employee Retirement System (GERS) and other important programs. The current financial situation, according to Governor Mapp, is the worst the Territory has ever experienced and drastic changes must be made to improve its financial footing.

Given the state of the Government of the Virgin Islands’ budget, it’s not surprising that Governor Mapp issued some considerable challenges to how the Territory manages its economy. As the Territory’s relationship with Hess Oil draws to a somewhat contentious close, Governor Mapp reiterated the importance of a more diversified economy to the U.S. Virgin Island’s future prosperity.

Taking into account the Territory’s 13% unemployment rate, Governor Mapp announced his intention to implement a jobs plan to try to bring some life back into the territorial economy. Some of these jobs will come from government itself, in the areas of revenue collection, law enforcement, education and health care. Others will come from a continued focus on building the tourism industry, primarily through hotel development and a push to get more visitors to stay in the U.S. Virgin Islands overnight.

Another key aspect of boosting tourism is creating an even more appealing visitor experience, which Governor Mapp says should include additional attention to sports, events and heritage tourism. The Governor also pointed to the opportunities presented by the opening of Cuba as a travel destination for U.S. citizens, which should help Caribbean tourism overall.

In addition to tourism, the Governor covered some proposals in numerous other industries. He would like to see a renewed focus on growing organic produce for use in schools, hospitals and elder care facilities, and a move away from sugar and processed foods. In law enforcement, the Territory is suffering a severe shortage of personnel and an almost total lack of technology for law enforcement officers to do their jobs. In education and elder care, the Governor intends to focus on building and staffing more schools and healthcare facilities.

Finally, Governor Mapp highlighted the pressing need for improvements in and changes to the health care system, as chronic conditions are on the rise and it has become nearly impossible for many people to pay for health care in the Territory.

For business owners, Governor Mapp’s address also offered an unsettling picture of a Territory in which partnerships between the public and private sectors simply cannot happen until the Government’s financial situation is more stable. In the end, the ability to turn to the government for financing has played a major role in getting the U.S. Virgin Islands to its current state. Governor Mapp said he believes his job is to help get the Territory out of that situation.

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

Tax-Exempt Organizations: Social Welfare Groups

Posted in Corporate & Financial Services

2015_fundraising_wikipediaU.S. tax law rewards a variety of groups with tax-exempt status based on two key factors — the designated purpose of the group and the ways in which it makes and spends its money. A social welfare group, as classified under Internal Revenue Code section 501(c)(4), is a group organized solely for the promotion of social welfare and operating as a nonprofit organization.

There are several ways in which a social welfare group must operate to retain classification as a 501(c)(4). For starters, the main purpose of the organization must be to improve the overall community in which it operates. In other words, the people the organization represents must not be a very small subgroup of the community, and the group must not exist to serve as a social club or offer its facilities as an exclusive meeting place for select groups. Finally, a 501(c)(4) cannot function as a business in the way a for-profit company would.

One seemingly small but quite important factor pertaining to 501(c)(4) organizations is that donations made to these groups are not tax deductible. Because of this, social welfare groups can engage in political activity to a much greater extent than 501(c)(3) groups, to which donations are tax deductible.

Political and advocacy work

As the sole purpose of a social welfare group is to work toward specific goals related to the wellbeing of the general public, these groups do have some permissions — as well as restrictions — when it comes to engaging in political activity. Promoting a legislative agenda is completely within the rights of a 501(c)(4) group, as enacting legislation would have an effect on the entire community. In other words, engaging in lobbying activity is permissible for social welfare groups, and it won’t have a negative effect on their tax-exempt status.

A social welfare group can also take part in political campaigns. However, there are some restrictions that are important to note. For starters, the group cannot give money directly to individual political candidates. Second, there must be a direct connection between the group’s purpose and the specific campaign in which it’s taking part. For instance, campaigning on behalf of a candidate whose stated policy towards the group’s particular cause happens to align with the group’s own platform would be a sufficient connection justifying its participation in the campaign.

Finally, political campaigning cannot account for more than half of a social welfare group’s activity if the group intends to retain its 501(c)(4) classification.

The specifics of the tax code can be confusing and the penalties for failing to abide by the appropriate laws and regulations can be very damaging to any organization with tax-exempt status. Seek the input of an experienced attorney if you have any questions or concerns pertaining to a social welfare group’s tax responsibilities.

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

Workers’ Compensation Laws for U.S. Virgin Islands

Posted in Labor & Employment

2015_injury_pixabay_steinchenAs most business owners know, workers’ compensation is a program that insures both employers and employees in the event a worker suffers an injury or is killed on the job. By compensating injured workers or their families through the Government Insurance Fund of the U.S. Virgin Islands, rather than mandating that compensation be paid directly by employers, the program offers broad protections.

The basic principle of workers’ compensation insurance is that employers will be held financially liable for injuries, diseases and death incurred by workers while performing standard job-related tasks. If a workplace accident occurs, the employer must initiate a claim within eight days of being notified of the incident. Most employers are required by Virgin Islands law to purchase workers’ compensation insurance.

Protecting both employers and employees

Workers’ compensation, as its name suggests, offers substantial protection to injured employees from the considerable financial repercussions that could arise from a serious workplace injury. The law also protects the jobs of injured workers, prohibiting employers from refusing to rehire them, except in cases in which the injury results in a permanent inability to do the job or when employees leaves their job of their own volition. And, even if an employer is uninsured, an employee may still make a workers’ compensation claim.

It’s important to understand that failing to carry workers’ compensation insurance won’t remove the burden of payment from an employer. In fact, uninsured employers must reimburse the Government Insurance Fund for all expenses paid to injured employees, plus a 30 percent fee. Thus, workers’ compensation insurance protects employers just as much as it does their employees. By purchasing workers’ compensation insurance, an employer does not have to shoulder the burden of compensating an injured worker for medical costs, lost wages, pain and suffering and other damages.

An employer’s best course of action is, first and foremost, to comply with the letter of the law by carrying a workers’ compensation insurance coverage in the Territory. Given the financial penalties for failing to have such a policy in the event of a claim being filed, and the damage that can be done to a company’s reputation and finances as a result, it’s best not to take that risk.

Even if your business is covered, you should still be proactive about reporting any accidents to the Virgin Islands Department of Labor in a timely fashion, as it reduces costs and promotes a safer workplace for all.

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

How the Fair Labor Standards Act Applies to USVI Employers

Posted in Labor & Employment

2015_labor_wikipediaFor business owners in the U.S. Virgin Islands, the laws governing employees’ hours and pay are based for the most part upon the standards set forth in the federal Fair Labor Standards Act (FLSA). A landmark piece of legislation, the FLSA includes firm requirements that impact both public and private sector employees.

The original statute was enacted in 1938, but it has been amended on several occasions in the subsequent years. Minimum wage, the number of hours worked, child labor matters, overtime pay and recordkeeping are all covered under the law. The following is a rundown of these requirements:

Minimum wage: The current federal minimum wage of $7.25 an hour applies to most businesses in the U.S. Virgin Islands. However, employers are permitted to pay employees at lower rates in some circumstances. For example, very small businesses that have gross annual receipts amounting to less than $150,000 are allowed to pay a minimum wage of $4.15 per hour. New employees under the age of 20 have a minimum wage of $4.25 per hour for their first 90 days of employment. And full-time students working up to 20 hours per week in certain jobs may be paid $6.16 per hour.

For employees who earn tips, the minimum wage is $2.13 per hour — although employers must ensure that their total pay, with tips, amounts to at least $7.25 an hour.

Overtime pay: When working more than 40 hours in a week, employees are entitled to at least 1.5 times the minimum wage. U.S. Virgin Islands law also requires employers to provide time-and-a-half pay for any time worked above 8 hours in a single day. However, many employees would like a change to this law so that they can enjoy greater scheduling flexibility.

Employees 16 years of age or older may work an unlimited number of hours per week, provided overtime pay is properly provided. Overtime pay is not required for holiday or weekend work unless overtime hours are actually worked.

Hours worked: The FLSA standard for hours worked states that the time in which an employee is either on the employer’s premises, on duty or working off-premises at an arranged workplace are considered hours worked for the purposes of wage calculation and scheduling.

Recordkeeping: The FLSA mandates that employers keep accurate and thorough accounts of employees’ hours worked, as well as accurate records of pay. Businesses and organizations must also post FLSA information in a location accessible to all employees.

Child labor: Minors are prohibited from working in certain jobs and conditions that could be hazardous to their physical health or wellbeing.

Remaining in compliance with the Fair Labor Standards Act is critical for all business owners, but the specifics of the law can be complex, especially for certain types of businesses and organizations. If you have questions about how the law applies to your business or believe your organization might be exempt from certain provisions of the FLSA, speak with a skilled employment law attorney.

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

Using a Professional Corporation to Protect Owners from Liability

Posted in Corporate & Financial Services

2015_ice_cream_gratisographyFor many years, one of the perils of being a doctor or lawyer was having to shoulder total responsibility in the event of any sort of professional mistake, and knowing that there was broad public support behind such consequences. It used to be that such professionals were barred from forming corporations, which would provide a limited amount of security should a physician or attorney be accused of malpractice, misconduct or other error related to their area of practice.

Now there are a growing number of professional corporations, which are able to provide backing, support and other professional services to shareholders. The shareholders in a professional corporation — also known as a professional service corporation or professional association — must be licensed within their state or territory, and they must be actively working in their particular field. In addition to the legal and medical professions, accounting and engineering professionals are among those who are likely to form professional corporations.

The advantages of a professional corporation include limited liability for shareholders and some benefits related to taxation. Should a shareholder become the target of a lawsuit, no other shareholder may be sued in the process. Similarly, should the corporation itself be targeted, no individual shareholder can be sued for the corporation’s mistakes, including business debts.

In both of these situations, the protection offered through the professional corporation differs from that provided by many other types of corporations and partnerships. With respect to taxation, a professional corporation may purchase group term life insurance, for which premiums are tax-deductible. In addition, they are allowed to purchase health and accident insurance for their shareholders and deduct those premiums as well, while shareholders can enjoy those benefits tax-free.

When forming a professional corporation, shareholders must file articles of incorporation and state that the corporation’s purpose is solely related to the practice of the relevant profession. The state regulatory or licensing board that oversees the professionals in the state must also approve of the formation and verify that all shareholders are appropriately licensed.

The laws surrounding the establishment of professional corporations can be complicated, and a variety of factors may make your situation different from the norm. An experienced business and corporate law attorney will provide the counsel you need if you have questions about how membership in a professional corporation may affect you and your professional activities. 

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

Tax Incentives Available in U.S. Virgin Islands

Posted in Corporate & Financial Services

2015_taxes_flickr_tax_credits_taxcredits.netFor businesses aiming to expand their reach or those interested in enjoying the benefits of operating in an environment that welcomes them, the U.S. Virgin Islands provides such a location. From an official economic development organization that works on their behalf to the numerous tax incentives they can enjoy, business owners have many reasons to consider the U.S. Virgin Islands as an appealing and attractive place to operate and grow.

The U.S. Virgin Islands Economic Development Authority, a government-affiliated agency charged with promoting economic growth in the territory, has several different components through which it strives to make “America’s Paradise” a site for efficient, cost-effective and dynamic business operations. Of primary interest to business owners looking to launch a company in the Territory is the Economic Development Commission, which oversees a robust tax incentive program in an effort to attract more businesses to the territory.

The EDC program offers numerous advantages to businesses. Most tangible are the benefits provided by the tax incentive program, which offers considerable deductions and exemptions. For example, businesses may receive a reduction of up to 90 percent in federal and territorial corporate and personal income taxes, and up to a 100 percent exemption on various taxes and payments—including excise tax payments, business property tax and gross receipt tax. These and other tax incentives help make the U.S. Virgin Islands an attractive place for new businesses, as well as those looking to relocate or expand here.

Although the advantages offered through tax breaks and exemptions are often easy to quantify, there are also many other, less obvious benefits of operating a business in the Territory. Although the U.S. Virgin Islands may seem like an exotic location to tourists, it’s important that business owners remember how easily it can be accessed from the U.S., Europe, South America and the rest of the Caribbean.

The Territory also boasts a skilled and educated population, strong infrastructure, duty-free exports to the U.S. and all of the benefits associated with sharing a currency and a court system with the United States. To business owners currently based on the U.S. mainland, the Territory will seem familiar in many ways. All of these advantages make it clear just how friendly the Territory is for businesses and explain just why economic activity throughout the U>S. Virgin Islands is on the rise.

The EDC program has had an impact on the Territory through its success in attracting manufacturing, service industry, pharmaceutical, outsourcing and other businesses. By taking advantage of the tax incentives available to them, these businesses have been able to play a key role in the continued growth and development of the U.S. Virgin Islands.

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