Virgin Islands Law Blog

Virgin Islands Law Blog

U.S. Virgin Islands law & politics

How to Respond to a Low Insurance Settlement Offer

Posted in Insurance

Any time you find yourself in a circumstance in which you’re waiting for an insurance company to issue you a settlement offer, don’t be surprised if the first offer you get seems rather low. The claims adjuster might believe you to be partially at fault for the situation, or if you were injured, the adjuster might conclude your injuries were not serious enough to justify the damages you sought in your demand letter.

However, you shouldn’t just accept the first offer you get from the insurance agency. While it’s understandable to want to get the claims process over with as soon as possible, accepting that initial offer could result in you leaving a lot of money on the table. The adjuster does not necessarily expect you to accept the first offer, but probably hopes you will.

Here’s an overview of how you can respond to an offer you think is too low.

The counteroffer

Whenever you reject a settlement offer and prepare to make a counteroffer, you should seek the assistance of an attorney, who can advise you through the process and maximize your chances of success.

To reject the first settlement offer from the insurance company, send a letter to the adjuster in charge of your case that includes the following:

  • A statement that you do not accept the initial settlement
  • Specific reasons why you deserve a higher settlement offer than the one made to you
  • A demand for a higher settlement offer

The amount of your counteroffer should be a little lower than the one you submitted along with your initial demand letter. This is a signal to your insurance adjuster that you are negotiating in good faith and are willing to make a compromise. However, reducing your settlement demand by too much could, again, result in you leaving money on the table.

How to determine a fair offer

There are some circumstances in which insurance companies will make fair initial settlement offers, though it is uncommon. Therefore, you should carefully weigh every offer you receive, even initial ones, just in case you can settle the case quickly without having to go through negotiations.

In doing so, weigh the initial offer made by the insurance company against the facts you’ve compiled in your case and the total amount of damages you sustained. This will help you determine whether or not your adjuster made a fair offer. Your attorney will be an invaluable resource to you as you evaluate the fairness of any offer you receive, as he or she has likely seen countless settlement offers throughout the course of his or her career.

You should also be careful not to be too demanding. If you decline a fair offer and go to court over your demands for more money, a jury could award you an amount below that which was offered initially by the insurance company.

For more information about how to proceed if you receive what you perceive to be a low or unfair settlement offer from an insurance company, contact a skilled attorney in the U.S. Virgin Islands.

Adam N. Marinelli is an attorney in the Civil Litigation Practice Group at BoltNagi PC, a full service business law firm serving the U.S. Virgin Islands.

Common Sense Strategies to Help Avoid Business Litigation

Posted in Business, Litigation

Just about all successful businesses will find themselves involved in a lawsuit at some point. However, there are many strategies you can employ to help you avoid unnecessary legal disputes and minimize the risks you face. This will help you save money and maintain your focus on your business rather than ongoing litigation.

Here are a few common sense strategies to help you avoid business litigation.

Always follow the golden rule

Whenever you have an interaction with another party that could potentially become hostile, be sure to follow the golden rule (treat others as you wish to be treated). This simple piece of advice can go a long way. You should consider what is objectively correct in the circumstance from a neutral perspective, and empathize with the other party’s situation. By seeking to understand the other party rather than dominate them, you can neutralize some potential arguments and reach agreeable settlements.

Always emphasize outstanding communication

Clear communication from the time a business relationship is formed through the final transaction is absolutely imperative to not just a strong relationship, but also to preventing litigation. You should carefully draft and read all contracts, letters of intent, purchase orders, terms and conditions and general forms of communication such as letters and email. Your business should also keep lines of communication open with the other party at all times so you can clarify issues as they arise. Litigation often occurs as a result of poor communication, so in theory you should be able to avoid it by being a good communicator.

Act as soon as you discover possibly threatening developments

You should aim to cut off business disputes in their early stages—don’t just sit and hope they will resolve themselves. Implementing a clear review procedure can help ensure you allocate the necessary resources to a dispute in its early phases, helping you avoid litigation. Examples of such review procedures could include:

  • Developing reporting procedures for your employees to report possible risks
  • Identifying risk stages and developing plans for risk evaluation
  • Ensuring follow-up after risks are reported
  • Identifying, interviewing and evaluating potential witnesses
  • Identifying and collecting relevant documents and information, as well as disputed and undisputed fact issues that could be an issue in the case

Maintain detailed records

Even just producing crucial documents can help you prevent expensive, time-consuming litigation. Emphasize outstanding record keeping so you can save money and time down the road and prevent litigation from upending your business.

Focus on positive outcomes for both parties

You can avoid a lot of potential litigation risk simply by only entering into agreements that will result in positive outcomes for both parties. If you care just as much about the outcome the other party to the agreement gets as you do the outcome for your company, you’ll almost certainly be able to avoid litigation.

For more information and strategies to help you avoid business disputes, contact our corporate planning attorneys in the U.S. Virgin Islands.

Ravinder S. Nagi is Assistant Managing Attorney of BoltNagi PC, a full service business law firm on St. Thomas, U.S. Virgin Islands.

What is the Difference Between a C Corporation and an S Corporation?

Posted in Business

If you’re filing articles of incorporation for a business, chances are you’ve done a lot of research on what type of business structure is going to best fit your plans. If you’re filing as a corporation, you’ve likely come across two very specific types of corporations: a C corporation and an S corporation.

If you’re confused, don’t worry—they’re two sides of the same coin. Understanding what makes them different, however, can help you make decisions about how you want to run your corporation.

Similar, yet different

C corporations and S corporations actually start out the same: as a C corporation. The default status of any corporation is C. A corporation only becomes an S corporation in the event that all shareholders vote to do so. And, after making the transition, the structure of the business stays relatively the same—the only real change involves the way the business is taxed and the flexibility of the ownership.

Taxation differentiations

One of the known drawbacks of a C corporation is in how it’s taxed. Because the business is taxed at the corporate tax rate and any dividends issued are further taxed at the personal income level, there’s a situation known as “double taxation.”

S corporations, on the other hand, are not taxed at a corporate level. Instead, profits and losses are distributed among shareholders and taxed as such at the personal income level. This strips the double taxation anomaly away and, in most cases, guarantees a lower taxation rate.

Structural stipulations

Because there’s such a dramatic difference in how C and S corporations are taxed, there are also stipulations in how these businesses can be structured as well. Some examples include:

  • C corporations are allowed to divvy up voting rights based on different classes of voting shares; S corporations are not and can only have a single share structure for equal voting rights across shareholders.
  • S corporations are not allowed more than 100 voting members, therefore, are not allowed to issue more than 100 shares of stock. Moreover, all shareholders must be U.S. citizens. C corporations, on the other hand, have no restrictions on the number of shares that can be issued and shareholders can be global.
  • There are also several types of business that are not permitted to file for S corporation status. These include insurance companies, banks and other financial institutions.

Understanding the pros and cons

As with any decisions made during incorporation, it’s important to think about the future of your business and what your ultimate goals are. If, for example, you’re planning on an IPO in the future, a general C corporation is the best option. On the flipside, if you’re looking to avoid double taxation and have a core group of shareholders, an S corporation filing may be the better decision.

When in doubt, consult with an accountant, attorney or business advisor on what your vision for your company is and which corporation type is best suited to help you achieve that reality.

Steven K. Hardy is an attorney in the Corporate, Tax & Estate Planning Practice Group at BoltNagi PC, a full service business law firm serving the U.S. Virgin Islands.

Avoiding Financial Liability as a Small Business Owner

Posted in Business

Many small business owners do not necessarily think about their financial liability when they first start their company—they tend to focus more on market research, securing funding and building up the infrastructure of their new business. However, it is important to understand the financial risks you face as the owner of a new company.

If you are a sole proprietor, those risks are significantly greater, because there is no structure standing between you and your business. If your company were to be sued and the business was unable to pay, the court would come after you and your own personal assets.

Structures that will reduce your financial liability

Fortunately, there are ways you can reduce the liability you face as a small business owner. The best way to do so is to establish your business in a structure that includes some liability limiting capabilities.

  • S Corporation: The S Corporation is a great option for smaller business to reduce their liability while also being incorporated. There are other additional benefits to this structure, including pass-through taxation, but you will be required to start a board of directors, have annual board meetings and file extra paperwork to ensure your compliance.
  • The limited liability company (LLC): This is the most popular option for small business owners to limit their liability and protect their personal assets. The same benefits as the S Corp exist in this structure, but there are fewer regulatory requirements and less paperwork involved. However, if you decide you will seek funding form outside investors, you’ll likely find those investors want you to be incorporated, so there is an extra challenge in that regard.

However, it is important to note that even if you do create an S Corp or an LLC, you are not completely protected from financial liability. There are several circumstances in which your assets could become vulnerable, including if your business entity itself is noncompliant with federal rules, if you decide you will personally guarantee a business loan, if you sign a business contract under your name or if you commit a crime.

Therefore, your best bet to avoid any chance of being liable financially is to work with an attorney. Your business attorney can provide you with advice about how to act in certain situations and how to set up your company in a way where you do not have to constantly have this financial liability hanging over your head.

For more information about reducing your liability as a small business owner, contact a knowledgeable corporate planning lawyer in the U.S. Virgin Islands.

J. Nash Davis is an Associate Attorney in the Corporate, Tax and Estate Planning Practice Group at BoltNagi PC, a full service business law firm serving the U.S. Virgin Islands.

U.S. Treasury Approves Capital Tax Break Zones in U.S. Virgin Islands

Posted in Tax

This April, the United States Treasury announced it approved 14 different neighborhoods on St. Croix and St. Thomas as being Qualified Opportunity Zones, meaning they are eligible for federal tax breaks under the Tax Cuts and Jobs Act, passed by Congress and signed into law by President Donald Trump in December.

In a statement, U.S. Secretary of the Treasury Steven Mnuchin said the Trump administration “will continue working with states and the private sector to encourage investment and development in opportunity zones and other economically disadvantaged areas and boost economic growth and job creation.”

Governor Kenneth Mapp said the development of these new Qualified Opportunity Zones in the Virgin Islands is great for the territory’s economy. He said it will help the territory attract brand new investments in retail businesses, hotel development and other forms of industry in some of the Islands’ most underserved communities, while also helping those communities continue to rebuild after the devastation of last fall’s hurricanes.

Senator Tim Scott (R-S.C.) led the way in developing the legislation that made these opportunity zones possible for the U.S. Virgin Islands. The original legislation did not include the Virgin Islands or other American territories. After meeting with Mapp, Scott agreed to expand the scope of those eligible zones so low-income communities in American territories would be included.

How do Qualified Opportunity Zones work?

An area designated to be a Qualified Opportunity Zone keeps that designation for 10 years. Investors are allowed to defer taxes on any prior gains until the end of 2026, as long as they reinvest those gains into a Qualified Opportunity Fund, a type of investment method designed specifically to bring financial investment into Qualified Opportunity Zones. If the investor keeps his or her investments in that fund for at least 10 years, the investor is then eligible for an increase in its basis that is equal to the investment’s fair market value on the day it’s sold.

However, these types of tax-break zones are only available for qualified low-income communities. Mapp nominated Christiansted, all of western St. Croix and most of southern St. Thomas to be included as Qualified Opportunity Zones.

Congress has a history of pushing territories to increase development within their boundaries using these types of special tax breaks. These new tax breaks made possible by the Qualified Opportunity Fund will be added to the already existing 90 to 100 percent tax breaks on corporate income tax, property tax, gross receipts tax and excise tax the territory offers through the University of the Virgin Islands Research and Technology Park and the Economic Development Commission.

In total, 18 states and territories had regions approved in the Treasury’s first round of tax break zones.

For more information about Qualified Opportunity Zones and what their implementation in the U.S. Virgin Islands could mean for the territory, talk to a financial planning attorney today.

Tom Bolt is Managing Attorney of BoltNagi PC, a full service business law firm on St. Thomas, U.S. Virgin Islands.

How to Prepare for a Business Acquisition

Posted in Business

One of the most effective ways for you to significantly grow your company is to acquire other competitors within your market. Of course, this process is easier said than done—business acquisitions take a lot of planning, not to mention money.

Here are some tips to help you prepare for a business acquisition as a buyer.

Have a strong balance sheet

Your balance sheet will provide a thorough summary of your assets, liabilities and shareholder equity. To provide you with some extra leverage as you prepare to make your acquisition, your balance sheet should be as thorough and organized as possible. This will make it easier for you to demonstrate the profitability of your company based on its current operations, which will in turn allow you to get the loans you need to make the transaction happen.

What do lenders like to see on a balance sheet? Here are a few examples:

  • A relatively low overall debt ratio
  • Working capital needs that are based on a line of credit rather than being tied up in debt
  • Debt amortization estimates that match the economic life of assets to provide you with greater leverage
  • Paid-off debt that was not particularly necessary. In addition, you should make sure you have a business structure that will allow you to avoid being taxed twice so you can keep cash in your business. Take a close look at your structure and consider making a change to that structure long before making an acquisition if you believe it will help you financially.

Know what you’re looking for in an acquisition

You shouldn’t just buy up a business for the sole purpose of getting an acquisition. You should ask yourself if the acquisition will help you diversify your customer base, if it will allow you to expand your business into a wider geographic area, if you have a certain target number of employees or revenue in a potential acquisition and, most importantly, if you can actually afford to make the acquisition.

Make sure you have strong leadership and plenty of advice

You will not have a successful acquisition without a strong management team in place. This team will ensure you come out of the acquisition financially healthy and operationally secure. Having a team of advisors such as attorneys or respected business peers can also help you more smoothly conduct the acquisition, especially if it is your first time acquiring another company. Consider meeting with lenders in advance as well so they can get more familiar with your business, get a better sense of your goals and provide you with more personalized advice about how best to proceed with the acquisition.

For more information about how to make a business acquisition go as smoothly as possible, contact an experienced corporate planning attorney in the U.S. Virgin Islands.

Steven K. Hardy is an Associate Attorney in the Corporate, Tax and Estate Planning Practice Group at BoltNagi PC, a full service business law firm serving the U.S. Virgin Islands.

Steps for Changing Your Business’s Structure

Posted in Business

Considering changing the structure of your business? There are a number of scenarios in which it might be sensible or beneficial to do so. Changing the structure could afford you more growth potential, or limit liability you would face in certain circumstances.

If you have decided you wish to change your business’s structure, you might be wondering where to start. Here is a quick overview of some of the steps you’ll need to take to make that structure transition happen.

Carefully consider your options

First and foremost, spend some time developing an understanding of the various types of business structures. The structure you choose will determine how much (and what types of) regulatory paperwork you will be required to file, as well as the liability you will bear personally for your business decisions and how your business income will be taxed.

Learn the differences between sole proprietorships, partnerships, corporations (C- and S-corporations) and limited liability companies and figure out which structure makes the most sense for your business and its goals.

Businesses most frequently change their legal structure because there has been a change in the needs their business has. You might need more or different liability. Perhaps you experienced some significant growth in your business. Whatever the situation, carefully consider all of the pros and cons of your current business structure and weigh them against the structures listed above. Characteristics to think about include taxation, liability, investment requirements, fees and forms and operational continuity.

Know what to expect

You should have a general idea of what you can expect out of a structural change before you actually make that change official.

For example, when changing from a partnership or sole proprietorship to a corporation or LLC, you should know that your business will change from having unlimited personal liability to limited. This means you will be required to file more paperwork, and will have greater fees and expenses to cover. You will need to draft bylaws and articles of incorporation for your company.

If you are shifting from an LLC or corporation to a partnership or sole proprietorship, the transition is much more difficult to accomplish. You will need to first be able to convince your shareholders to support this plan, and will also need to liquidate your business’s assets. There are also state and local policies involving licensing requirements you will need to be familiar with.

Map out your next steps

Once you’ve determined the type of change you will make, work with a business attorney to map out how you will proceed from here. This plan should include registering your business with the IRS, filing a DBA with the government, reapplying for some licenses that might not carry over in your structural change and notifying your insurance providers and banks of the change.

For more information about changing the structure of your business, contact an experienced corporate planning attorney in the U.S. Virgin Islands.

Nash Davis is an Associate Attorney in the Corporate, Tax and Estate Planning Practice Group at BoltNagi PC, a full service business law firm serving the U.S. Virgin Islands.

How to Establish a Strong Harassment Policy in Your Company

Posted in Sexual Harassment

Workplace harassment is something we continue to hear more and more about these days. From the #MeToo movement, to the widespread allegations of misconduct in Hollywood, to workplace lawsuits receiving national attention, people are fighting back against their harassers in a very public way.

As people continue to identify and fight back against harassment, it’s more important than ever for businesses to create and enforce zero tolerance policies regarding all forms of harassment by their employees—both in the workplace and beyond it.

Clearly define harassment, in all its forms

The first step in eliminating harassment from your workplace is to clearly define it. This goes beyond just addressing ‘harassment’ as an umbrella term—really make clear what constitutes harassment. This includes all of the following:

  • Quid pro quo harassment: ‘This for that’ scenarios, where an employee is pressured into giving something in return for a favor.
  • Hostile working environment: A workplace where someone feels uncomfortable, generally due to discrimination of age, race, sex, religion or creed.
  • Sexual harassment: Unwanted comments or advances of a sexual nature, whether made inadvertently or intentionally.
  • Retaliatory harassment: When a person (or people) seeks to punish someone who previously voiced concerns of harassment or who felt discriminated against.
  • Unlawful harassment: This encompasses forms of assault or abuse that are considered unlawful and punishable through prosecution.

Employees who understand the different forms of harassment will better understand what’s acceptable vs. unacceptable in their workplace.

Give explicit examples

Introducing the different concepts of harassment is only the start. Examples can help drive these concepts home. Use real-life, explicit examples to make sure there’s a clear understanding, whether they stem from recent incidents at your company or from other publicized events. The goal is to engrain the details of harassment in a way that’s relatable, so there’s no mistake in recognizing harassment. Seminars and training sessions are a great way to get these points across.

Put it in writing and make it accessible

Every company, without exception, needs a formal harassment policy in place. This policy needs to be written, reviewed and made available to everyone at your organization, so they may familiarize themselves with it. Incorporate it into new hire onboarding processes and make sure to recap and revise it annually. The bottom line is this: there should be a core resource that everyone is familiar with when it comes to your business’ policy on harassment.

Enforce your policy to the letter

With training and a formal policy in place, the only thing left to do is make sure your zero-tolerance stance on harassment is enforced. Take all claims seriously and investigate them thoroughly. If there’s a situation where harassment is proven, take swift and meaningful action and make the offender an example. A zero-tolerance policy is only effective if it’s recognized as a zero-tolerance policy!

Whether offenders are let go, suspended, sent to sensitivity training or dealt with in some other way, make sure to also pay mind to the victim. Letting them know they’re supported and that proper action has been taken can go a long way towards fostering a work environment that’s inclusive, safe and comfortable for everyone.

 

Ravinder S. Nagi is Assistant Managing Attorney and Chair of the Labor and Employment Practice Group at BoltNagi PC, a full service business law firm serving the U.S. Virgin Islands.

The Most Common Mistakes Made During Business Formation

Posted in Business

The process of starting up a brand new business can be quite daunting, especially if you are a new entrepreneur. You have likely heard that most small businesses fail within their first three years of operation. You can make your business much more likely to succeed by avoiding some of these common mistakes during the business formation process:

  • Not getting legal advice right away: As soon as you decide you are going to launch a company, you should get legal assistance. Attorneys are highly knowledgeable about all the paperwork you need to fill out, the financial liability you will have with different business structures and the tax-related issues you need to account for, among other issues. A business attorney will be an invaluable assistance to you as you work to get your company off the ground.
  • Not completing important business-related documents: There are certain pieces of business-related paperwork you need to fill out and file with the proper government agencies. Your attorney can help you in this process. You should also make sure the forms are signed, dated, copied and initialed by all parties required for every transaction or document.
  • Not securing enough capital: You can’t run a business without money. There are some businesses that will require more capital than others to get off the ground, but in most cases, a lack of money will be the main cause of failure. You should make sure you have a solid plan in place for raising the sufficient capital to launch your company.
  • Not planning for failure: Every new entrepreneur has big dreams for his or her business, but it is an unavoidable fact that something will, at some point, go wrong. You must be able to stay flexible as a business and navigate the difficult times. This means having contingency plans in place, especially when money becomes tight.
  • Not performing enough market research: You could have an extremely thorough knowledge of your industry but still fail as a company simply because you don’t know your market well enough. You have to know a) whether people will actually pay for your specific product or service and b) how you can connect with the people who will. Get to know your target customers, what makes them tick and how they will respond to what you have to offer them.
  • Trying to do everything by yourself: You are only one person. Even if you fully devote yourself to your business, you’ll need some extra help to make sure your company will be successful. Beyond working with an attorney, this means having an accountant or banker with whom you have a working relationship, and having at least one other person you can count on to help you out with business-related tasks. This doesn’t have to be someone you’re good friends with or related to, and in many cases should not be.

For more information about what to do (and what not to do) when starting a new business to set yourself up for success, contact a trusted corporate planning attorney in the U.S. Virgin Islands.

Steven K. Hardy is an Associate Attorney in the Corporate, Tax and Estate Planning Practice Group at BoltNagi PC, a full service business law firm serving the U.S. Virgin Islands.

Tips for Virgin Islands Business Owners to Get Ahead on Their Taxes for Next Year

Posted in Tax

Although the Internal Revenue Service has extended the tax filing deadlines for 2017 income tax returns with the Virgin Islands Bureau of Internal Revenue until June 29, 2018 due to Hurricanes Irma and Maria, but it not too early to prepare get ahead on your 2018 tax filing due April 15, 2019. When it does finally arrive, it’s important to be prepared.

You can help yourself better prepare for next season by beginning those preparations now while this year’s tax season is still fresh in mind. If you had any challenges to overcome in filing this year’s return or things you wish you would have been able to do differently, now’s the time to make those adjustments before the rest of the year flies by and you’re suddenly left to play catch up.

With this in mind, here are a few tips to help small business owners get ahead on their taxes for next year:

  • Develop a system now for tracking your expenses: If you were unable to list all of your business expenses on your tax return this year, it’s important you better organize your company’s expenses for next year. Save all your receipts and keep them in an organized filing system. It can help to digitize them as well. Make sure all expenses are entered into business spreadsheets or bookkeeping systems so you do not get behind with logging.
  • Budget money specifically for taxes: You should meet at least a couple times a year with a CPA to get a stronger sense of what your business’s taxes will look like in the coming year. This will help you also to form a clearer financial picture that will make it easier for you to budget the right amount of money for your next year’s tax payments.
  • Develop an emergency fund: Businesses should always have an emergency fund that will aid them with any unexpected expenses, such as market downturns, losses of major clients, sudden emergency building repairs or, in some cases, tax payments that are much higher than you might have expected. In your meetings with your accountant or your financial planning attorney, take some time to determine what is a reasonable figure to save up in your emergency fund this year.
  • Track your miles: If you travel a lot for business, one of the easiest ways you can save money during tax season is to claim a mileage deduction. To be able to do this, however, you must track your miles throughout the year. When driving, for example, you can deduct business travel mileage at a rate of 54 cents per mile. You can also deduct based on actual expenses, which include gas, maintenance, vehicle repairs, vehicle depreciation and other costs. Other travel-related expenses can also be deducted, including hotel stays, parking fees, meals while on business and more.

For more information about ways you can better prepare yourself for next year’s tax season, contact an experienced U.S. Virgin Islands financial planning attorney.

Adam N. Marinelli, Esq. is an Associate Attorney in the Corporate, Tax and Estate Planning Practice Group concentrating his practice in tax at BoltNagi, a full service business law firm serving the U.S. Virgin Islands.