Virgin Islands Law Blog

Virgin Islands Law Blog

U.S. Virgin Islands law & politics

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.

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

Posted in Tax

By now you have hopefully filed your business’s 2017 tax return. It probably feels like a big burden off your shoulder, but next year’s tax season will be here sooner than you know it. 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 is an associate in the Corporate, Tax and Estate Planning Practice Group at BoltNagi PC and concentrates his practice in tax matters. BoltNagi is a full service business law firm serving the U.S. Virgin Islands.

Steps to Take if You’ve Been the Victim of a Contract Breach

Posted in Business

If your business is involved in a contract dispute with another party you believe did not live up to its contractual obligations, the first step to resolving the dispute is to provide a notice of breach. This notice will explain why you believe a breach exists and provides a list of actions that must be taken to resolve the issue or end the contract.

Here’s an overview of how to draft a notice of breach and the steps you can take following its delivery to resolve the situation.

  • Include the date: The notice should create a clear record as to the date on which the breaching party was informed of the breach. If your dispute goes to court, this date is important evidence.
  • Analyze the notice clause: Many business contracts contain notice clauses, which include contact information for each party to be used for communication of official notices. Failure to follow procedures laid out in this clause for delivery of official notices, such as a notice of breach, could affect your rights as the case proceeds.
  • Thoroughly describe the breach: The notice should include information about which aspect of the contract was breached. One of three things must have happened for the situation to contact a contract breach: a) the other party failed to perform according to the terms of the contract, b) the other party said it will not continue to perform its obligations in the future, or c) the other party conducted itself in a way that made it impossible for your business to live up to its end of the contract. Be thorough in describing which part of the contract was breached and how.
  • Note if it is a material breach: A material breach is an action by a party that essentially destroys the contract’s value and purpose. These are much more serious types of breaches that typically have larger penalties and stricter consequences associated with them.
  • Offer a solution: It might be too late to actually fix the problem, but your notice of breach can still include a possible “cure” to the damages that have been caused already.
  • Try to work out a deal: Either before or while you send a notice of breach, you should talk to the other party to attempt to work out a solution that will keep you out of the courtroom. You can formally end the contract, but this will require a separate agreement terminating the contract and should involve your attorneys.
  • Head to court: If you are unable to work out a deal with the other party or the other party refuses to comply with the solutions suggested in your notice of breach, litigation will likely be necessary. Your attorney can advise you with regard to how best to proceed according to the circumstances of your case.

For more information about the steps you should take if your business has been the victim of a contract breach, contact a skilled U.S. Virgin Islands business planning attorney.

Mark A. Kragel is a senior attorney in BoltNagi’s Civil Litigation Practice Group. BoltNagi is a full service business law firm serving the U.S. Virgin Islands.

What Virgin Islanders Should Know Before Filing their Taxes

Posted in Tax

There’s still a little bit of time left for you to get your tax return in. If you’ve put it off until the last minute, don’t worry—you’re not alone. Just make sure you have filled out all the paperwork correctly and have maximized the amount of money you stand to get back on your tax return.

Here are a few things to take into consideration before you officially file your taxes:

Income thresholds for tax brackets have gone up

First and foremost, you should be aware that the threshold that determines your tax bracket has gone up significantly. This means if you earned more than the previous tax year, you might not necessarily have moved into a higher tax bracket.

The rates for these brackets are still the same. But let’s say you fell into the 15 percent bracket last year when filing jointly with your spouse. You’d still be in that same bracket even if you earned up to $600 more than last year’s top threshold.

Be sure to look at all the new income thresholds for tax brackets before filing.

The standard deduction has increased

You can subtract the standard deduction from your gross income if you choose not to itemize, though for some people, itemizing makes more sense.

Last year, the standard deduction for a married couple filing jointly was $12,600. This year it raised $100 to $12,700. This might not seem like much of an increase, but it’s still something that will affect your taxes this year, so it’s important to take note of it.

Limits for personal exemption phase-outs increased

You are allowed to deduct a certain amount of money for each dependent (and yourself) from your income. These personal exemptions remained at the same level for this tax year. However, the exemptions are subject to phase-outs, meaning personal exemptions decrease by two percent for every $2,500 your adjusted gross income goes past a specific threshold.

These phase-out limits are adjusted for inflation, which means they increased from the 2016 tax year. Now, for example, the starting threshold is $311,300 for married taxpayers filing jointly.

HSA contributions increased

Your contributions made to a health savings account lower your taxable income. This money can be used to pay for certain medical expenses. There is a yearly limit to the amount of pretax money you can contribute to your HAS, but that limit went up in 2017 by $50. Again, while that’s not a significant figure, every little bit can count when it comes to reducing your taxable income.

Estate tax increased

Under the Republican Tax Cuts and Jobs Act, the estate tax will soon be eliminated. But for now, the threshold for the estate tax has increased for the 2017 tax year. The value of the estate must exceed $5.49 million before any estate taxes are applied to it.

For more information about things you should know before filing your taxes, contact an experienced tax planning attorney in the U.S. Virgin Islands.

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

Issues to Cover in Your Employee Handbook

Posted in Labor & Employment, Uncategorized

Having an employee handbook is a great way to introduce new employees to your company and the various policies you have in place.

There are several issues you are required by law to cover in your handbook. For example, you must have family medical leave policies listed in the handbook under the Family Medical Leave Act (FMLA), as well as equal employment and non-discrimination policies and worker’s compensation policies. Other issues you might be required by law to cover include information regarding accommodation of people with disabilities, policies on military leave and policies for leave of victims with crimes.

But what about issues that are not legally required? What might you want to include in your handbook, or what could potentially be helpful for your employees? Here are a few ideas.

  • A statement that the handbook is the ultimate procedural document: To eliminate any potential for confusion if you had previously used other policy documents, there should be a clarifying statement that your handbook is the final word on all company policies, superseding any previous documents that existed. Be sure to note that its policies are subject to change as needed.
    Employee acknowledgement: To protect your business, you should have a page that your employee signs and returns to indicate he or she acknowledges the policies outlined in the book and that he or she is responsible for knowing and following the rules outlined in it.
  • Company history: It can be helpful to write a brief overview of your company’s history, and include a company mission statement, a market position overview and other information that will help set the tone of the handbook and provide more character and contextualization for your company.
  • Paid time off: If your company has a vacation or PTO policy, you should include that in the handbook. It should indicate the holidays your company observes, how vacation time is earned and how vacation can be scheduled. This is also a good place to discuss sick leave, FMLA leave and military spousal leave.
  • Behavioral guidelines: Lay out general behavioral expectations of employees, including attendance, breaks and employee conduct. Common specific examples include smoking bans, substance abuse policies, internet use policies, dress code and employee harassment and discrimination policies. You don’t need to go into too much detail.
  • Payment: Include information about payment methods, pay grade structure and promotion opportunities. If you have compensation packages such as stock offers, this is where you’ll want to outline them.
  • Benefits: Be sure to outline the various benefits your company offers, such as life insurance, health care, dental, vision and retirement plans. Don’t discuss any specific policies with companies here—your benefit offerings are likely to change. Instead, provide general information about the available benefits, who is eligible for those benefits and the criteria for eligibility for those benefits.

For more information about how to create a thorough employee handbook, contact an experienced corporate planning attorney in the U.S. Virgin islands.

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