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irs logoWith tax season now in full swing, businesses of all shapes and sizes are in the process of ensuring their books are in order and consulting their tax accountants and attorneys to be certain their practices and policies are in line with the law. This year, they also have a number of new legal changes to take into account as far as their taxes are concerned.

A number of business tax changes are now in effect across the United States and its territories. Many of these changes were signed into law as part of the Protecting Americans from Tax Hikes (PATH) Act of 2015, but others were outlined in other legislation of recent years or established by the Internal Revenue Service. Here’s a look at some of the big changes that have gone into effect this year:

  • Section 179: Under Section 179, businesses may deduct up to $500,000 worth of equipment and software purchases. They may deduct the entire purchase price, even if the equipment has not yet been paid for in full. Although the maximum deduction was to be substantially reduced, the PATH Act made the $500,000 figure permanent.
  • Building improvements: Again as a result of the PATH Act, there are some positive changes involving the ways in which building improvements can become eligible for bonus depreciation. For starters, it no longer matters whether the building in question is a leased space. Improvements that benefit common areas are now eligible as well, and upgrades in general no longer require a three-year waiting period after the property was placed in service.
  • De minimis safe harbor election: The threshold for the de minimis safe harbor election has been increased from $500 to $2,500 per item or invoice. This applies to businesses without applicable financial statements.
  • Other changes: A number of additional changes have been made that impact business taxes in perhaps surprising ways. For example, some small businesses will now be able to claim tax credits for research to offset the alternative minimum tax, payroll tax and regular taxes. In addition, a tax deduction for donations of wholesome food has been extended. There’s even a new policy that allows for deductions of expenses related to putting on smaller theatrical productions.

With these changes and many others going into effect in 2016, your company’s tax situation may be impacted in ways that can be very advantageous—or, if you aren’t aware of them, somewhat damaging. To learn more, consult a dedicated business and corporate law attorney today.

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

From the Chair: Attorney Tom Bolt

 The Board of Editors of Law Practice Today selected technology as the theme for this issue.  In anticipation of next month’s celebration of the 30th anniversary of ABA TECHSHOW and in view of the ongoing transformation of the practice of law through technology, I can think of no more appropriate subject this month for the division to focus on.  Over the last three decades, attorneys have witnessed a revolution in the practice of law through technology.  The pace of this conversion has accelerated exponentially, helping practitioners meet the concerns and expectations of clients.  But with this transformation comes much uncertainty. Where will this technology lead?  What will the practice of law will look like in the near future?

Immediate past president of the American Bar Association William Hubbard, in appointing the ABA Commission on the Future of Legal Services, noted that “the ground upon which the practice of law has been built is shifting beneath our very feet.”  A 2016 Client Advisory from Citi Private Bank and Hildebrandt Consulting LLC noted that “while the demand for traditional law firm services has remained relatively soft, the supply of legal service providers has increased, creating a hyper-competitive market, and forcing law firms to rethink how they deliver services.”  Technology is one of the leading solutions providing many attorneys the edge needed in this new and challenging market to help deliver legal services more efficiently and effectively for the benefit of the legal consumer.  But at the same time, some view elements of the new technology as threatening to the fundamentals of practicing  law as we know it.

One aspect of technology that is increasingly being discussed is the rising use of artificial intelligence or “AI” in law firms.  It is anticipated that various artificial intelligence systems will increasingly assume the role currently provided by many paralegals and junior associates, such as document review.  To personalize this new technological threat, some pundits have begun to identify  these various artificial intelligence systems as “robot lawyers.”

This past month, Martha Minow, dean of Harvard Law School, in a presentation on “Challenges Facing the Legal Profession and Strategies to Address Them,” noted that these new robot lawyers may potentially facilitate closing the justice gap in the delivery of legal services, but that it is not anticipated that they would have a role in matters that require subjective legal judgment.

“Assessment and critique of justice and justice mechanisms, I don’t see AI taking that on.  Nor do I see AI taking on ethics”, Dean Minow stated.  “I don’t mean to suggest there is no relation between AI and ethical suggestions, but I don’t think you’ll ever get rid of the human being.  There will always be a need for human beings.”

Professors John McGinnis of Northwestern University School of Law, and Russell Pearce of Fordham University School of Law. in a 2014 Fordham Law Review article, “The Great Disruption:  How Machine Intelligence Will Transform the Role of Lawyers in the Delivery of Legal Services” differ with Dean Minow, citing  five distinct areas of legal practice where it is anticipated that AI will take a larger role:  discovery, legal search, generation of documents, creation of briefs and memoranda, and predictive analytics.  The professors opined that AI will “trigger the end of lawyer’s monopoly and provide a benefit to society and clients as legal services become more transparent and affordable” to consumers, and accordingly enhancing the access to legal services.

LP actives Sharon Nelson and John Simek with Sensei Enterprises also note the threat of AI to lawyers in their blog article, “How will Watson’s Children Impact the Future of Law.”  Nelson and Simek introduce us to Ross, the son of IBM’s Watson.  Ross, the latest iteration of a robot lawyer, can predict the outcome of litigation with a confidence rating, assess legal precedents, and suggest various readings to prepare cases.  Ross is being funded by Dentons, the world’s largest law firm, which anticipates that he “will become a senior partner in every single practice area.” Nelson views Ross and AI as a potential substitute for lawyers, replacing paralegals and junior associates over time.

Professor Ben Barton of the University of Tennessee School of Law, in his Fordham Law Review article, “The Lawyer’s Monopoly – What Goes and What Stays,” argues that the market for legal services is changing radically and that the portion reserved for lawyers in shrinking, but that this new paradigm in legal services will inure to benefit of consumers.

Barton cites McGinnis and Pearce’s scholarship stating that we are in the very early stages of AI, the computerization of legal services.  What is considered state of the art will be deemed “crude and rudimentary in the near future.”

Indeed, technology is changing the legal practice landscape through artificial intelligence and yes, robot lawyers.  This shift is just beginning, but is anticipated to grow substantially in the near future.  Lawyers who do not want to be sidelined will embrace artificial intelligence and how to integrate it into their practice.  As chair of the ABA Law Practice Division, I believe that a first step to seizing technology to the benefit of your practice is to utilize the many benefits of the ABA Law Practice Division through the ABA Legal Technology Resource Center, its blog – Legal Technology Today, LP’s wonderful publications and CLEs, this webzine, Law Practice Today, Law Practice magazine, and yes, attending the 30th Anniversary ABA TECHSHOW, March 16-19th in Chicago.  Come join us and be a part of this adventure in uncovering your future.  We look forward to seeing you there.

About the Author

BoltTom Bolt is the chair of the ABA Law Practice Division and the founder and managing attorney of BoltNagi PC in St. Thomas, U.S. Virgin Islands where he concentrates his practice in banking, real estate development, estate planning and government relations.

 

 

 

state dept logoIn January, the U.S. Department of State implemented some key changes to the Visa Waiver Program (VWP), which may have an impact on individuals who have either traveled to or are joint nationals of several countries with known connections to global terror networks.

The VWP is designed to more easily facilitate travel to the United States or its territories from a select group of countries by allowing their nationals to register with the Electronic System for Travel Authorization (ESTA), in lieu of obtaining visas. The 38 countries participating in the VWP include most European nations, along with Australia, New Zealand, Japan, South Korea and Singapore.

What has changed?

Under the new rules, there are new restrictions on anyone who has traveled to Iraq, Iran, Syria or Sudan since March 1, 2011. Those individuals are no longer able to travel to the United States without a visa, and if they were registered with ESTA, their registrations will be revoked. Similarly, individuals who are both nationals of VWP member countries and nationals of the four countries in question—whether they have traveled to those countries or not—are also barred from traveling without a visa.

State Department officials also indicated that the agency might add other countries to the list in the future, raising the possibility that even more individuals may be affected by the changes.

There are some exceptions, however, that may allow certain individuals to continue to travel without a visa, even if they have visited the four restricted countries. Those who meet any of the following criteria may have their restrictions waived on a case-by-case basis:

  • Traveled to any of the four countries for international or regional organizations, or on official duty for a sub-national government
  • Traveled to any of the four countries on official duty for a humanitarian organization
  • Traveled to any of the four countries in a journalistic capacity
  • Traveled to Iran (after July 14, 2015) or Iraq for legitimate business purposes

What this means for travelers

The point of the VWP is to ease the burdens associated with international travel. Unfortunately, the new restrictions for those who have traveled to Iraq, Iran, Syria or Sudan will result in increased wait times, as those individuals are now required to obtain visas for travel to the United States. The State Department recommends allowing additional time for the application process—and starting that process much further in advance than was necessary in the past.

For assistance with navigating the immigration process, or for information about how the new changes to the VWP might affect your or your company’s ability to conduct business, consult an experienced U.S. Virgin Islands immigration attorney today.

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

sba logoMaking the jump to international markets can be a tough one for small businesses, but a relatively new U.S. Small Business Administration program is offering some excellent opportunities.

The agency’s State Trade and Export Promotion (STEP) Program is a pilot program that provides matching federal funds to U.S. states and territories, with the goal of encouraging small businesses to enter global markets—and help them succeed in doing so.

First authorized in 2010 as part of the Small Business Jobs Act, the STEP Program provides funds to states and territories, which then provide financial assistance to local businesses with ambitions to provide products and services to international customers. Federal funding accounts for 75 percent of the award, while non-federal funding makes up the other 25 percent. (In states with heavier export activity, the ratio is 65 to 35.)

Since it first began awarding funds in 2011, the STEP Program has provided $84.4 million to 167 small businesses, which amounts to an average award of $505,389. Although the award amounts and number of businesses vary from year to year, the impact these funds can have in assisting businesses as they expand to international markets is indisputable.

Qualifying for the STEP Program requires that a business meets a variety of eligibility criteria:

  • The business needs to have been in operation for at least a year.
  • The business must be operating profitably.
  • The business needs to be able to prove it understands the costs involved with conducting export business. (Costs include packing and shopping, freight forwarding and working with customs brokers.)
  • The business must have a plan in place that relates to its proposed exporting.

Business owners interested in applying for funding through the STEP Program should understand that the process is highly competitive. However, there are certain types of project proposals that have been favorably considered during the funding process—among them the creation of international marketing materials, participation in export training programs and travel to other countries for trade shows. To learn more, business owners should contact the appropriate state or territorial agency that works with the STEP Program.

The possibilities provided by the STEP Program are numerous, but the fact remains that making the leap into the international marketplace and the export process brings a host of legal issues to the table. Business owners who would like to explore the opportunities that exist in engaging overseas customers should consult with an experienced and knowledgeable business attorney to ensure they get the guidance they need, along with access to the appropriate resources.

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

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

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

Understand your legal entity

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

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

Maintain accurate records

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

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

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

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

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

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

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

Proper planning and corporate formalities

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

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

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

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

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

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

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

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

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

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

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

How to protect yourself

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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