troxel_fitch

The Importance of Hiring an Attorney When Selling Your Business

Wed, 18 Sep 2024 15:04:26 GMT

If you are looking to sell your business it’s important to have trusted attorneys by your side. You've invested considerable money, time, and effort into building and growing your business, so while selling it might be emotional, a good attorney can help to make the transaction smooth and successful. Hiring an attorney can alleviate the stress of dealing with uncertainties and significantly reduce your risk of financial liability, even after the sale is finalized.

Let’s take a look at how business attorneys help assist their clients in the sale of a business.

As a business owner, your focus is rightfully dedicated to the details that make your company successful, but there are many complex steps to selling a business that require specific knowledge and careful planning. A mergers & acquisitions attorney understands the business sale process thoroughly. They will guide you through each stage of the process, ensuring you are advised of potential threats, presented with strategic advantages, and prepared to handle the transaction efficiently and effectively.

A good attorney doesn’t simply draft documents, they can help you improve the structure of the transaction itself. From optimizing the tax impact to the owners, to limiting your financial liability post-closing, good legal representation can help you earn, and keep, the highest return on your years of hard work. Selling a business is almost never a handshake deal or an as-is sale, and if you don’t have a full understanding of the multitude of promises implied by the sale of a business, you could find yourself liable for broken promises you didn’t even know you made.

In structuring a sale transaction, a good attorney can help you determine the most mutually beneficial way to receive the fair value of your business. With creative planning of the payment mechanics, you can increase your ultimate payout, limit costly contingencies, and even plan for unknown elements of future-value, enabling you to receive fair compensation for difficult-to-value aspects of your business.

When it comes time to draft the documents, an attorney can help you negotiate the terms, and create a contract that is clear, thorough, and easy to understand. A professionally-drafted transaction agreement not only aids in achieving your goals and objectives, it protects the parties by establishing clear expectations, deliverables, and timelines. This helps to ensure there are no surprises or misunderstandings, paving the way to a smooth and amicable closing.

In addition to the documentation between the Seller and Buyer, third-parties are often heavily involved in the sale of a business. In many cases a successful sale requires the involvement of a landlord, government agencies, banks, franchisors, or other service providers like vendors or licensors. If any of these important relations of the business are forgotten or left behind, the liability for any related losses usually falls on the Seller. Good legal representation is critical to keep track of all the details to ensure that nothing, and nobody, slips through the cracks.

On Closing Day, an experienced attorney can mean the difference between an exciting day worthy of celebration, or a day full of unwelcome surprises and stressful emotions. By the time the closing arrives, the Buyer and Seller have worked collaboratively, often for months, to create a profitable opportunity for the Buyer and a lucrative exit for the Seller. Missteps at this point can create mistrust, disappointment, and feelings of betrayal, all which can detriment, or destroy, the post-closing relationship. With the help of an attorney, you can rest assured that the Closing will go off without a hitch, and that your hard work getting to the finish line is rewarded.

Finally, a good lawyer can make sure your post-closing obligations are fair and don’t overly impact your post-closing plans. It is common for the Seller to make non-competition promises, or to agree to assist the Buyer with training. However, treating these important obligations as afterthoughts can lead to frustration and litigation, creating costly losses and souring the experience. Careful planning with your objectives in mind can ensure that the process after the Closing is as smooth as the transaction before it. A good attorney doesn’t stop looking out for you once pen is put to paper, they will continue to protect your interests until all the dust has settled, and long after.

Whether you're experienced in selling a business or not, having an attorney's support is invaluable. They will ensure nothing is missed during the sale, giving you confidence and peace of mind. With your interests safeguarded, you can move on to your next chapter with success. If you're thinking about selling your business, reach out to us today. We're passionate about helping business owners sell and make successful transitions.

Protecting Your Intellectual Property

Thu, 04 Apr 2024 17:23:52 GMT

As society’s reliance upon information technology and the service economy continues to expand, businesses increasingly depend on innovative ideas to achieve brand differentiation in the marketplace. The development of intellectual property gives companies a competitive edge over their counterparts.

When properly protected and deployed, intellectual property can become the most valuable asset in a Company’s possession, underscoring the importance of understanding the various forms of IP protection available. Safeguarding your company's IP enables optimal asset utilization with minimal risks.

The name of your business, along with its products, services, and other technical and creative works, is typically protected by one or more forms of intellectual property. Let's explore the most prevalent methods to shield your intellectual property against competitive usage from individuals within, outside, and affiliated with your company.

Trademarks provide protection for brand names, service marks, phrases, and logos that differentiate goods and services. The United States Patent and Trademark Office (USPTO) manages the trademark application procedure.

For business owners aiming for exclusive rights to their business name or logo, federal trademark registration with the USPTO is crucial. With a registered trademark for your brand name or logo, only your company is authorized to use that specific brand name or logo on its products or in connection with its services. There are different types of trademarks with varying levels of protection, so it’s important to understand which is right for your business. Once obtained, trademark rights must also be enforced and maintained, so full protection of your brand identity can require your ongoing attention.

Copyrights protect original creative works. These protected works encompass literature, visual art, music, and audio recordings, to name a few, with a copyright serving as a deterrent against unauthorized reproduction. Federal copyrights are conferred by the U.S. Copyright Office, which manages copyright registration and addresses cases of copyright infringement. The owner of a copyright has the exclusive right to use or monetize the copyrighted-work, and can therefore generate value from the copyrighted-work immediately and long into the future. Recently, country music star Luke Combs covered the song “Fast Car” originally by Tracy Chapman, and because Tracy Chapman holds the copyright to the song, she profited along with Luke Combs when the song became a huge hit.

In addition to registered intellectual property, certain intellectual property can be protected by contracts.

Licensing agreements are legal contracts established between an owner of intellectual property, and an intermediary, customer, or end-user. Such agreements involve the owner of the IP, known as the licensor, granting the licensee permission to use their intellectual property, subject to conditions set forth in the licensing agreement. Rather than granting joint ownership rights, licensing agreements allow the owner of intellectual property to share the burden of commercializing the IP, while still retaining complete ownership. While most people are familiar with “End User Licensing Agreements” in software, many people do not realize that even small companies can take advantage of licensing agreements. Anytime you see an “authorized retailer” of a product, that retailer is licensing the right to sell a manufacturer’s product, usually on the condition that they present and market the product in a professional and flattering manner.

Proprietary Information and Inventions Assignment Agreements (PIIAAs) are contractual arrangements that grant the employer specific rights to information developed or inventions conceived by an employee during the course of their employment. Typically, this agreement requires an employee to disclose any such inventions to the employer, transfer ownership rights (via legal assignment) of such inventions to the employer, and assist the employer in obtaining patents or other IP protection for these inventions. These agreements are critical because, by default, an invention belongs to the inventor. Without PIIAAs, companies that try to sell or commercialize IP developed by an employee might find out that they don’t actually own the IP, and therefore don’t have the right to sell it. Even worse, they might realize that their critical IP walked out the door with a former employee. For that reason, PIIAAs are critical to any company that is in the business of developing intellectual property.

Finally, even amorphous “know-how” can be protected under the law of Trade Secrets. If your company has a unique way of doing things, a certain je ne sais quoi that makes you different, even that can be protected and in some cases, monetized. With the right procedures in place to establish a Trade Secret, and protect it, you can turn your secret sauce into a marketable product.

In today's landscape, safeguarding intellectual property through legal means is more crucial than ever. This process transforms a company's intangible assets into exclusive rights, preventing competitors from capitalizing on their innovations.

It provides the property owner with the chance to showcase their creations with minimal competition while safeguarding the company's unique selling points. Intellectual property rights can serve as highly valuable negotiating assets and can be traded for financial gain. Protecting intellectual property enhances the value of a company's assets and augments future productivity. Investors and potential acquirers frequently regard the intellectual property portfolio of a startup as a crucial factor in their decision-making process. It significantly contributes to the overall value of a startup.

Engaging a business attorney is essential for determining the optimal strategy to safeguard your company's intellectual property. If intellectual property plays a pivotal role in your business model and competitive edge, seeking legal assistance for IP applications is crucial. Failing to protect your IP can lead to costly infringement issues that could easily be avoided. Contact Troxel Fitch today to see how we can help keep your most valuable assets protected.

Demystifying Small Business Financing

nicholas.troxel@troxelfitchlaw.com (Nicholas Troxel) — Tue, 17 Oct 2023 15:51:43 GMT

Don’t let the fear of raising money stop you from taking the next step with your business.

As entrepreneurs we know that one of the most exciting parts of this journey is expanding our business. Whether that’s exploring a new business opportunity, acquiring a competitor, or purchasing real estate, growing and strengthening your company is the dream you’re after. You have the drive, passion and creativity, so what’s stopping you? Your first thought might be about raising capital to make this next move. It might seem risky but it doesn’t have to be. Don’t let the fear of raising money stop you from taking the next step. Let’s explore how.

With interest rates on the rise and bootstrapping leaving you potentially limited, raising money through a private placement is a great option. What does that mean exactly? Raising capital through a private placement is the process by which private companies raise money from third parties without engaging in an initial public offering.

One major benefit of raising capital through a private placement is that you have the opportunity to raise unlimited capital from accredited investors. According to SEC Rule 506(c), a company can broadly solicit and generally advertise offerings of that company’s equity to accredited investors and raise an unlimited amount of money from those investors, so long as the company has well put together legal documents and makes the correct filings with the SEC. With this verification in place a company’s risk is reduced substantially, which in turn opens up a huge opportunity for you to raise as much capital as you need to expand your business the way you want.

But what about the risks for you as the issuer? It’s important to be up to date on the law surrounding the sale of stock to investors because these types of transactions are highly regulated by the SEC. Securities laws prevent fraudulent activities in connection with the offer, purchase or sale of securities. These laws ensure truth and fairness, deter misconduct, hold wrongdoers accountable, and provide resources to help investors evaluate their investment choices. A violation of any statute concerning securities can result in a felony offense so it is important that you are aware of the regulations in place so that you can mitigate your risk when raising equity. That’s where having a strong legal partner for this process comes into place.

Setting up a consultation with Troxel Fitch should be one of the very first steps in your business expansion plan. We can help to demystify raising money so you are aware of the risks and rewards of the entire process. Let us guide you through the steps to making this a reality and protect you along the way. We can help keep you compliant with legal documentation and make sure you have the right knowledge to make the most informed decisions. With the right legal partner you can be on your way to expanding your business in ways that you’ve always dreamed about!

Employee Misclassification

nicholas.troxel@troxelfitchlaw.com (Nicholas Troxel) — Mon, 15 May 2023 14:58:41 GMT

How do you know if you have an employee or independent contractor on your team?

Studies estimate that 30% of employers misclassify their employees as independent contractors, which indicates that several million workers nationally may be misclassified. This is a result of lack of awareness, cost savings for the business, convenience, and ignorance of consequences. Let’s dive in and take a look at the risks of misclassification and how to go about correctly identifying those who work for you.

Why is correct classification so important? If the IRS or another government entity deems a worker to be misclassified, the business owner(s) may suffer costly penalties, as well as facing liability based on labor laws and benefit violations. Further, when workers who should be classified as employees are classified as independent contractors, they miss out on critical benefits and labor protections including minimum wage, overtime pay, contributions to Social Security, workers’ compensation, unemployment compensation, and certain protections from discrimination. Therefore, it is very important not only for the business owner(s), but also for the workers themselves, to understand the process of correctly identifying workers as either an employee or an independent contractor.

Correctly classifying your workers is more detailed than you might think. The status of a worker is determined by very specific tests that look at the reality of the relationship between the worker and the employer. Compliance is often complicated by the fact that there are several tests. However, ultimately what it boils down to is a fact-based analysis to assess the amount of control a company has over the manner and means by which the worker accomplishes the work.

Here is a brief overview of one of the tests. The “Economic Realities Test” considers 7 factors that were originally identified by The US Supreme Court. Here is an outline of the factors as stated on the Department of Labor’s website.

The extent to which the services rendered are an integral part of the principal's business.
The permanency of the relationship.
The amount of the alleged contractor's investment in facilities and equipment.
The nature and degree of control by the principal.
The alleged contractor's opportunities for profit and loss.
The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.
The degree of independent business organization and operation.

Other tests include the IRS “Control Test” and the common law “Darden Test”, both of which review factors similar to the Economic Reality Test and focus on a worker's economic dependence on an employer, considering the totality of the circumstances. To get the full picture you will also need to understand state law requirements in the states where each worker works. Again there are a number of tests and factors that make this a more complicated evaluation.

Many organizations try to manage classification decisions manually, which increases the risks of incorrect decisions and overlooked factors. It also makes the decision process more costly. A business attorney can help provide guidance on classifying workers correctly. Additionally they can draft written agreements that outline the working relationship between the employer and employee which will provide clarity and can prevent potential legal issues down the road. It is important to stay compliant with these regulations because misclassifications can have serious legal and financial consequences. If you are unsure about the classification of a worker, reach out to us today.

The Silver Tsunami: Entrepreneurship Through Acquisition

nicholas.troxel@troxelfitchlaw.com (Nicholas Troxel) — Mon, 06 Mar 2023 16:06:34 GMT

There is a huge shift that is taking place in the small business world and our economy. Baby Boomer business owners are retiring at record numbers. About 60% of them have no exit plan from their business and need to transfer their company into good hands. This is presenting a golden opportunity for entrepreneurs. If you’ve ever thought about having your own business, now is a great time to look into purchasing one from a Baby Boomer.

To get a bigger picture of what is going on let’s take a look at some stats.

How many Boomers are retiring and how many businesses are we talking about?

Experts estimate t hat roughly 10,000 Baby Boomers retire each day and 19% of those own small businesses. Which comes out to about 4 million companies.

What is the timeframe for these boomers to sell?

It’s estimated 83% of the 4 million businesses are expected to change hands over the next 5-10 years.

How much in assets is involved?

Retiring Boomer business owners will sell or bequeath $10 trillion worth of assets over the next two decades.

About the Boomer businesses:

78% of boomer businesses are profitable, making them the most profitable age group of small business or franchise owners.

This being said, one of the major concerns for the retiring Boomers is leaving the company they've worked so hard to build in good hands. On the other side, Millennials are over the corporate grind and want to be their own boss. They seek flexibility and independence making this a perfect match.

The advantages of purchasing an existing business are significant.

These Baby Boomer businesses often have no debt, loyal customers and tested and proven business models. The person selling the business is also often willing to stay on as an advisor since they spent their entire life building that business. In certain circumstances you might not even need to go to the bank, as the seller may be the one financing the sale of the business. So, you can hit the ground running as an entrepreneur, and a Baby Boomer can retire with an ongoing annuity while still overseeing things.

Secondly, acquisitions tend to have attractive financing options like the Small Business Administration (SBA) 7(a) loan program. These loans are flexible and aren't as restrictive as other commercial lending options.

Additionally acquisitions are a viable growth path for savvy entrepreneurs. They allow for expansion into new markets or the opportunity to create more value for existing customers. This established business might also come with assets such as modern technologies, warehouse space, well-trained staff or valuable intellectual property.

Sounds interesting right? So where to start? When starting your search for a business for sale a great place to start is with a business broker, your CPA, commercial real estate brokers, local community bankers, or chamber of commerce. Once you find a business that strikes you it is imperative that you have a business lawyer help guide you through the process before signing on the dotted line.

Business attorneys are not only used to complete the transaction smoothly and effectively but they also help to evaluate your risk. There is a huge upside to buying an existing business but you must do your research! A business attorney can help you better understand if this opportunity is a good buy for you. They will properly guide you through the process, mitigating risks at every stage.

Understanding the Importance of an Operating Agreement

nicholas.troxel@troxelfitchlaw.com (Nicholas Troxel) — Tue, 10 Jan 2023 19:03:33 GMT

Whether you’re new to business or a seasoned entrepreneur, you might have a basic understanding of what an operating agreement is. Today we are going to explain just how an operating agreement protects you and your business and the importance of having one in place for the success of your company.

Let’s start by reviewing what an operating agreement is.

An operating agreement is a written document used by LLCs to outline the rules and regulations of the business. Its purpose is to govern the decisions that are made for the business, the relations between its members, and provisions for internal operations. Once this document is signed by the company’s members it is an official contract binding them to its terms.

There are many reasons to have an operating agreement but today we are going to focus on three ways this agreement protects the business and its members.

First and foremost, the operating agreement is a legally binding written contract that all members agree to. This is useful for many reasons. First, it helps to avoid misunderstandings or miscommunications among members. When there is a disagreement, and emotions are high, it is best to be able to reference a document that was written and agreed upon prior to help sort out the conflict. An agreement with written decisions and rules helps to clear up the situation quickly and efficiently. Having a description on how disagreements will be handled provides clarity and confidence on how to move forward. The guidelines in an operating agreement are also extremely helpful when there is an impactful change happening to one of its members such as death, divorce or becoming disabled. It is extremely important to be able to reference clear guidelines on how to handle these types of situations.

Next, an operating agreement helps to protect the limited liability status of the business. This means that its members will not be personally liable for the acts of the LLC. One of the main reasons business owners register as a limited liability company is to avoid being personally liable for lawsuits against their company. If the members do not have an operating agreement in place they could remain personally liable to lawsuits that result from business activities. When an operating agreement is in place the court of law is more likely to keep the limited liability protection in place because the business and its members are separate and distinct.

Finally, an operating agreement protects your business from inadvertently being governed by statute. When an LLC does not have a written operating agreement, the rules of how the business operates default to the state’s governing rules. Having an operating agreement written by a lawyer specific to your business needs will allow you to avoid default rules being applied to your company. This could be extremely beneficial for the business and its members so that all parties agree on how the business will operate.

In the absence of an operating agreement, you are risking disagreement amongst members, litigation, loss of money and time, and potentially the business as a whole. Ensuring that you have a properly drafted operating agreement can be extremely beneficial for avoiding the stress that litigation can bring. Even when you believe you have a handle on the way the business will operate and how members will interact with the business, it's important to have a written agreement to back up those ideas in times of turmoil. We never want to think about the complications that come with running a business but it is important not to turn a blind eye to the most visible risks.

While you can find simple operating agreements online, it is always best to consult with a business attorney to understand the unique needs of your business and make sure those needs are addressed in the agreement. Having a good understanding of the potential legal issues your business might face will ensure that the operating agreement adequately protects against those situations. If you have an agreement that is not clearly written or understood you could potentially spend more in lawyer fees down the line. Getting this agreement right from the start is the best option to avoiding risks.

Colorado Overhauls Non-Compete Agreements

nicholas.troxel@troxelfitchlaw.com (Nicholas Troxel) — Mon, 15 Aug 2022 14:14:13 GMT

Restrictive Employment Agreements Act (HB 22-1317)

A ttention employers! Colorado has overhauled the state law governing non-compete agreements and

other restrictive employment agreements. HB 22-1317 (the “Act”) went into effect on August 10, 2022,

and employers must be prepared. The new law allows strict penalties against employers for violating the

statute, and requires additional measures from employers to enforce non-compete agreements.

Non-compete agreements protect employers from unfair competition when a worker leaves to work for

another employer. In Colorado, the general rule is that a non-compete agreement is void unless it fits

into an exception. Moving forward, non-compete agreements are only enforceable (i) against highly

compensated individuals (making over $101,250 per year) for the purpose of protecting trade secrets, or

(ii) against an individual who sells their business. Non-solicitation agreements are enforceable against

the previously mentioned individuals, as well as against individuals making over $60,750 per year for the

purpose of protecting trade secrets. These numbers are provided by the Colorado Department of Labor

and Employment and can change. Notably, the Act removes ambiguous language regarding “executive

and management personnel” that some employers previously relied on to subject workers to non-

compete agreements. Additionally, non-compete agreements will require a strict notice process. An

experienced attorney can help ensure that non-compete agreements will be enforceable by reviewing

employment contracts and guiding you through the notice process.

If employers try to enforce invalid non-compete agreements, employers can be subject to fines,

penalties, damages, injunctions, and attorney fees. Furthermore, using force, intimidation, or threats to

prevent workers from choosing other employers is a Class 2 Misdemeanor.

To avoid legal trouble, employers should educate themselves, human resources, and hiring managers to

stay up to date with the new requirements. Additionally, employers will want to review existing

employment agreements to ensure compliance should there be any changes to the employment status

of current workers. Doing so can help avoid legal matters in the future, and help ensure that your

workers cannot unfairly steal business if they leave.

Whether you have current workers or are thinking about hiring, employers must comply with the new

law to avoid significant legal issues and financial repercussions. The best way to stay ahead of these

changes is to speak with an experienced attorney. Troxel Fitch is here to help. We are available to

answer any questions you may have. Schedule a free 15-minute call with your Denver Business

Attorneys today.

Tracking Technology Trends

nicholas.troxel@troxelfitchlaw.com (Nicholas Troxel) — Mon, 06 Jun 2022 14:29:59 GMT

Welcome! Today, we are bringing you the projection of this year’s technology. The research of the newest trends included here will expand you and your colleagues' technological knowledge. After reading, we hope you will have gained valuable insight on how to lead your company towards the most cutting edge year yet!

Let’s dive into how you and your team can map out a plan for your business to prepare for the latest technology trends throughout this year and many years to come.

Refining Remote Work

With a rapid rate of growth in the realm of remote work, predicted only to continue to rise, the remote space must continue to be upgraded and refined. Homes, coffee shops, and coworking spaces are now being used as full time offices, with the majority of these locations serving the needs of multiple individuals. Polishing the experience of remote work will include revamping remote friendly platforms, improving connectivity, and building upon cyber security.

Remote Friendly Platforms

“Some of the most popular remote work platforms include Dropbox Business, Google Drive, Slack, Monday.com, Trello, Zoom, Basecamp, and ClickUp.” These platforms have grown significantly in quality and quantity over the last two years and will continue to expand throughout 2022. Choosing the right platform for your remote workplace is necessary to your team's success. The platform your business chooses must be reliable, effective, and allow employees to operate at high performance levels. Remote friendly platforms enable individuals from across the globe to collaborate on projects and tasks. These platforms facilitate communication, file sharing and time tracking, resulting in a more efficient workplace and savings to the business.

Better Connectivity

“From stable routers to new adaptive Wi-Fi technology, the way we connect and the tools we use to do so will need to improve moving forward.” As remote work expands, the capabilities of Wifi and connectivity will need to grow along with it. Prior to the increase in working from “home”, employees were typically powered by one connection in an office. The reorganization of the work environment means that we now need many, smaller reliable connections across multiple locations. To ensure that your business is efficient, productive, and secure, an experienced IT person is an asset in protecting your business.

Safe and Secure

Cyber attacks are a real threat to all businesses. With the increase in remote work there has been a corresponding rise in the risk of cyber attacks. Your business's security plan should be evaluated regularly. Ensuring that the programs, platforms, equipment, and databases are secure from all cyber threats should take precedence. A few of the top security suites for 2022 include Norton, Bitdefender and Kaspersky. Investing in an all-in-one security suite is the best way to be certain you are getting the most comprehensive security for your business.

2022: Dynamic and Deliberate

“Taking a dedicated approach to data collection and analysis provides organizations with the clarity to cut through the fog and make educated decisions. Big data makes it possible for businesses to identify trends even from seemingly random or chaotic events. When new policies or supply chain disruptions impact a company's operations, real-time data resources can allow them to adjust their predictions and ensure continued success. For businesses that invest wisely in their data solutions, 2022 will be a year of personalization, clarity and reliability.”

Whether launching a new company or growing in an established business over the next year and beyond, it is critical to adapt to the growth of technology and continue to watch for the upcoming trends of technology as they change the future of business.

1 https://teambuilding.com/blog/remote-work-software

2 https://www.fastcompany.com/90706854/how-remote-work-will-force-technology-to-improve-in-2022

3 https://www.forbes.com/sites/forbestechcouncil/2022/02/01/from-fog-to-clarity-four-business-and-tech-trends-to-watch-in-2022/?sh=35c359797eb4

Troxel Fitch was featured in Forbes Magazine!

nicholas.troxel@troxelfitchlaw.com (Nicholas Troxel) — Wed, 13 Apr 2022 16:01:29 GMT

Inspirational Success Stories of Local Entrepreneurs

nicholas.troxel@troxelfitchlaw.com (Nicholas Troxel) — Fri, 25 Mar 2022 20:08:49 GMT

We know that it can be hard to escape the exhaustion of being a business owner. The hours are long, the work seems endless, and the list of “to dos” can run a mile long. But successfully owning your own business brings more benefits than it brings headaches, and it is a one of a kind accomplishment.

If you are a business owner, or aspiring business owner, in need of some inspiration, we've got you covered! Check out these Colorado based businesses that started from nothing but an idea, and have now made it big.

One Idea Could Change It All

First up we have the well known couponing app, Ibotta. With this app, consumers can receive cash back on everyday purchases in store and online. This genius idea caught on quickly and has only continued to rise in popularity. The savings focused app was founded in Denver, in 2012, by Bryan Leach. With no experience in running a company, Bryan began with just an idea and words of encouragement from a close friend. While on an international flight, Bryan watched as another passenger uploaded a receipt for an expense report. “He thought, what if you could simply upload a picture of a receipt and get instant cash back? What if there was a single starting point on your phone where you could earn cash for anything you bought, regardless of whether you shop online or offline?” At that moment, he knew he wanted to make finding and receiving savings easier for consumers, both online and in store. Bryan realized that he wanted to create a company that would allow consumers access to a one-stop-shop, where they could see many different retailers and all of the discounts they offer in one simple app.

Ibotta has paved the way for consumers to purchase everyday items at their normal stores, while simultaneously putting money back into their wallets. In 2020, for the third year in a row, Ibotta made the Inc. 5000 list of fastest-growing private companies in America. Ibotta has partnered with over 1,500 brands and retailers, paid back over $1 billion to users, and the Ibotta app has been downloaded by over 35 Million people. The company has over 800 employees, with 2022 being its most significant year of hiring yet.

An Entrepreneurial Spirit From a Young Age

Dylan Jacob, a Forbes 30 Under 30 alum, founded his third successful company, Brumate, in 2016 at only 21 years old. From a young age, he followed where his entrepreneurial spirit led him. However, his path to success wasn’t always easy or clear.

Dylan’s mother raised three children on a minimum wage income while Dylan worked multiple jobs to help where he could. His entrepreneurial spirit first came to light when he was just 9 years old and started his own lawn care company. Within months, Dylan was mowing 6 yards on a bi weekly basis, making around $250 a month. This was just the beginning of his love of business.

Dylan opened his first “real” business, GV Supply Co., just before beginning high school. He bought broken cell phones online in bulk, ordered replacement parts for the devices, and turned around to sell them online after fixing them. “By my first semester of college, GV Supply Co. was doing over $250,000 in sales and served over 60 repair shops across the nation.” Dylan was running a successful company all while enrolled at Purdue University, studying engineering. “I ran the company out of my college apartment first semester, realized I was making more money now than I would be 4 years from now with a degree, and ultimately decided to take a semester off to focus on my company. Just 4 months later, in May of 2014, I sold the company for 6 figures to a franchise repair chain in the midwest.” A short while after the sale of GV Supply Co.,he was on to his next business venture - Vicci Design, a high-end glass tile company. Dylan sold Vicci Design in 2017 after a successful run, and the company is still in business and thriving today.

But Dylan’s first two exits did not satisfy his entrepreneurial itch. With the belief that innovation is a core component of every successful company, Dylan started Brumate at the age of 21. The idea sparked for Dylan in 2015 while at a Christmas party. “I was drinking a 16oz beer, forgot about it for around 15 minutes, and came back to an undrinkable warm beer. I hate warm beer. Actually, everybody I know hates warm beer, yet nobody was doing anything about it. I used my background in sourcing, e-commerce, and product development / design and hit the ground running.” BruMate had $36 million in revenue in 2019 and was named on Inc. 's 5000 List, being Colorado’s top Company, in 2020.

We hope that these business success stories ignite a spark or bring some inspiration for you. If you have started or are thinking of starting a business, feel free to reach out to us and make sure your business and ideas are protected. We work with entrepreneurs and business owners in many stages and industries to make sure they are set up for success.

1 https://home.ibotta.com/about/company/#:~:text=Founder%20Bryan%20Leach%20had%20the,and%20get%20instant%20cash%20back%3F

2 https://home.ibotta.com/about/company/

3 https://www.builtwithshopify.com/posts/brumate

4 https://www.builtwithshopify.com/posts/brumate

Inflation Around The Nation

nicholas.troxel@troxelfitchlaw.com (Nicholas Troxel) — Sat, 19 Feb 2022 20:00:12 GMT

It’s hard to ignore the price increase of things all around us. Businesses and individuals across the country are feeling the impacts of inflation, and it is hitting hard. While costs have been, and continue to, rise, we find that inflation is affecting nearly every facet of Americans' lives. From gas to groceries to the purchase of a vehicle, it seems a bit inescapable.

“Prices rose at the fastest pace in four decades in December, increasing 7 percent over the same period a year ago, and cementing 2021 as a year marked by soaring inflation wrought by the ongoing coronavirus pandemic. On an annual basis, 2021 still saw the fastest price inflation since the early 1980s, as broken supply chains collided with high consumer demand.” 1

Let’s dive a bit deeper into the reasons why inflation is occurring throughout all aspects of our economy.

More Money to Spend

“When the pandemic struck, the Federal Reserve and Federal government, together, flooded the economy with more dollars.” 2 Stimulus packages were signed and checks were sent out to households around the country. With the lockdowns continuing and more money in hand to spend, people were spending their cash faster than they normally would. “While this may have boosted the economy and helped avoid a more serious recession, it also contributed to higher inflation.” 3

Consumer Demand

While people spent less on services such as travel and entertainment, more money was spent on merchandise and goods. This led to shortages across certain markets. An area that saw a major increase in consumer demand was home renovations. The demand for contract work, various home supplies, and new appliances went up drastically. Items such as windows, lumber, and appliances were, and continue to be, on back order for months. This drastic increase in demand caused prices to increase.

A Hiccup in the Supply Chain

More money in circulation and a rapid increase in consumer demand led to a large break in the supply chain. Pre-COVID, a factory would typically operate by storing a minimum amount of supplies to keep the costs of storage low. The lack of surplus supplies, combined with increased consumer demand, created a supply chain issue. The labor shortage further exacerbated this growing issue. While employees were out of work for various reasons, factories were forced to shut down and could no longer fulfill the demand needed. Even if goods could be made, there were other issues in getting them to consumers, including the fact that cargo ships were stopped and anchored off the coast, unable to deliver the goods they were carrying. 4

While there is no certainty if, or when, the economy will return to its pre-COVID state, there is an optimistic view from most Americans that things will improve. A January 2022 Gallup Poll revealed the following takeaways: “Americans have not had to deal with sharply rising inflation in decades, and the vast majority expect the price of goods to continue to go up for at least the next six months. Nevertheless, they remain generally optimistic about the stock market and unemployment, and arguably, economic growth.” 5

1 https://www.washingtonpost.com/business/2022/01/12/december-cpi-inflation/

2 https://www.forbes.com/sites/mikepatton/2021/06/10/buckle-up-3-reasons-why-inflation-is-rising/?sh=acaa08a2f80b

3 https://www.forbes.com/sites/mikepatton/2021/06/10/buckle-up-3-reasons-why-inflation-is-rising/?sh=acaa08a2f80b

4 https://www.vox.com/2021/10/24/22743104/supply-chain-inflation-shortages-2022

5 https://news.gallup.com/poll/389129/americans-expect-inflation-persist-next-six-months.aspx

Today's Hiring Struggle

nicholas.troxel@troxelfitchlaw.com (Nicholas Troxel) — Sun, 16 Jan 2022 21:03:49 GMT

Jobs are in abundance while employees are not. Businesses, specifically those looking for a particular skill set, are struggling to find qualified workers. As this shortage of workers becomes a reality, businesses and individuals alike are asking themselves, why is there such a discrepancy between the list of open positions and those who want to fill them?

From our research we’ve found that there are a few distinct reasons that finding the right candidate to hire has become a challenge for many.

PANDEMIC FRUSTRATIONS

The COVID-19 pandemic has brought about a new learning curve for businesses and their employees. In this unprecedented time, many have been riding the wave of uncertainty. While many businesses were forced to lay off their employees two years ago, those same businesses may now be experiencing a shortage of workers. As the roles have changed, we ask ourselves why.

With the ever changing complexities of COVID, many are wondering if it is safe to return to work. Though vaccines are available to most, along with more easily attainable PPE, there are still some folks that aren’t ready to return to work and, in turn, be around larger groups. The option of remote work has become much more desirable for all.

“The economy is also experiencing a record number of resignations and job changes as employees rethink why they work and what they want out of a career.” In addition to moving over to remote work, some people are switching their careers completely. These past two years have, in many cases, brought people to rethink the career they are in and find something that more closely aligns with their needs.

FAMILY CARE DILEMMAS

Many who relied on child care pre COVID have found that they can no longer do so. As daycares and schools have closed across the country over the last two years, child care has been inconsistent for many parents. This has led many families to find other options - whether they be remote work, part-time jobs, or staying home, and out of the workforce, all together.

In addition to the struggles of finding reliable child care, there are those who have had to step aside from their work to take care of a parent or spouse during this time. This leaves them unable to both care for the family member and work a full-time job outside of the home.

ENTREPRENEURS EVERYWHERE

It’s not a new concept that people want to be their own boss, but the uncertainty brought about by the pandemic has made many individuals more willing to take the dive into entrepreneurship.

“The US reached its highest number of unincorporated self-employed workers during the pandemic in July 2021 — also the highest number since the last big crisis to hit our country in 2008.”

Working for yourself has made sense for so many during the last two years. Being your own boss can bring along endless benefits such as flexibility to set your own hours, the ability to set your rate, and the advantage of choosing your clients. Starting your own business likely means that you are p ursuing something you love, which leaves much less time for doing something that you don’t.

“There are almost 11 million openings, and only 8.4 million Americans looking for work. That imbalance, and workers reassessing what they want out of a job, is putting leverage into the hands of job seekers we haven't seen in decades.”

With the abundance of job openings and the shortage of workers, employers may find themselves needing to increase the value they offer potential employees. Whether it be offering a higher salary, more advantageous vacation time, health care benefits, or remote work options, employers must adapt as the best candidates have a major upper hand.

1 https://www.cnn.com/2021/11/02/perspectives/linkedin-jobs-labor-shortage/index.html

2 https://www.businessinsider.com/potential-reasons-explain-labor-shortage-open-jobs-not-enough-workers-2021-12#employers-also-filter-out-workers-because-of-preexisting-biases-and-inequities-11

3 https://www.wxyz.com/news/worker-shortage-leading-to-benefits-for-job-seekers-like-higher-wages-better-vacation-more

Sole Propietor vs LLC

Mon, 09 Nov 2020 16:00:02 GMT

Forming a business might be the biggest decisions of a person’s life.

But the decisions don’t end with just deciding to be your own boss.

New business owners can know everything there is to know about their particular field, but creating a business from scratch can leave the newly-minted owner scratching their head with questions. If you’re a solo entrepreneur, trying to navigate through all of the questions surrounding the formation of your business can be daunting.

Most businesses in the United States are small businesses. Generally, a small business is described as having less than 500 employees, and a whopping 97.6 percent of all businesses fall into that category, according to the United States Small Business Administration. You most certainly fit in that category if you’re starting the journey on your own, but that doesn’t mean you are alone.

One of the most important decisions is determining how to legally structure your business. There are a number of different options, and business formation lawyers can help explain all of the differences. But for small businesses, the two most common are the Sole Proprietorship and the Limited Liability Company (LLC).

Each has advantages and disadvantages, and it’s important to discuss the differences with a business formation attorney. But here is an overview of the advantage and disadvantages of each.

A Sole Proprietorship means the business owner and the business entity are the same. The business’ profits and losses are taxed on the personal tax return of the owner. The sole proprietor takes on all liability, meaning they are held responsible for all debts incurred by the business, legal action against the business and other obligations.

In a Limited Liability Company , the owner and business entity are separate, relieving the owner of some of the previously mentioned liabilities, and putting them on the business. Assets in the business are separate from the owner’s personal assets. However, the business records and personal records must be kept separate. It is not a separate tax entity like a corporation, but can elect to be taxed as such.

Deciding which one of these designations – or perhaps a different designation altogether – is best for your business really comes down to determining how you want your business to operate. Both have different benefits, but consulting with business formation lawyers and choosing the correct one can help you achieve what you want in your business.

T his is just an overview of both the Sole Proprietorship and the LLC, and a more in-depth discussion with a business formation attorney can help determine which might be the best for you. Get in touch with the business attorneys at Troxel Fitch, your legal experts on business formation in Denver.

The importance of a Contract

Mon, 02 Nov 2020 16:00:02 GMT

Every new business owner comes up with a checklist of things that need to happen before the business can really get rolling.

You’ve got your idea, a business plan, and have even set up your Limited Liability Company all on your own. Now you are starting to get clients. Everything appears to be moving in the right direction, but do you really have everything in place?

In the scramble to generate revenue in the early days of a business, many new business owners make deals with potential clients without a contract. Promises and other oral agreements are common, particularly when working with someone the business owner knows or trusts.

But when things don’t go the way one of the parties envisioned, it’s difficult to prove an oral agreement existed. Even if that oral agreement is proven, each party may have a different expectation that came out of the agreement. That’s why it’s vital that all business agreements are put into a contract.

Business formation isn’t just getting the right designation and opening your doors. Talking with a business formation attorney about the importance of contracts should be on your starting checklist, even if you were able to do everything else to form the business on your own.

Contracts give both sides a full understanding of the work that is expected to be completed, so that there won’t be any confusion. Getting help from a business formation lawyer can help ensure that your contracts are legally binding, and legally enforceable.

There are plenty of benefits with written contracts. They display expectations, prevent misunderstandings and can help you avoid what could potentially be expensive legal proceedings. An official record of the agreement you’ve entered not only provides proof of what you’ve agreed to do for your client, but it also gives both sides peace of mind for those expectations.

Many business owners believe that they won’t need a contract, or can come up with something functional on their own. That may be the case, but having a business formation attorney look at it can eliminate a lot of holes in what you might think is a solid contract.

As a new business owner, you expect people to use your services because you’re an expert at what you’re doing or creating. Use that same logic and speak to a business formation attorney and discuss with experts the necessity of having a strong contract. Not all businesses need contracts, but finding out whether or not your new venture does can save a lot of headaches.

There are a lot of pitfalls for business owners out there. Don’t let the absence of a legal document prevent you from getting paid for services rendered. Reach out to the attorneys at Troxel Fitch, your legal experts on business formation in Denver.

Forming a Business with Friends

Wed, 28 Oct 2020 15:00:02 GMT

Starting a Busines s with Friends

You and a group of your friends just came up with a great business idea. You are all tired of your current employers and decide to take the plunge into creating your own business.

Congratulations! You have mountains of work to do! But before you start digging in, one of the first things you should do – especially when forming a business with multiple owners – is contact a business formation attorney.

Even if you feel like you don’t need a lawyer’s help, a consultation is still a good idea to provide some insight. A common misconception when creating businesses with those close to you is “We’ve been friends for 20 years! We’ll be able to work anything out.”

If that’s the case, then great. That means ironing out the legal details of your business should not take much time at all. But even though a lot of businesses start out that way, that isn’t the way a lot of them end. Just like insurance protects you against the unknown, getting a proper operating agreement can ensure against the unknown, as well.

Lives change. Things happen. People have disagreements, and eventually, people want change. Avoiding the sticky nature of these situations is what business formation lawyers do. It’s easier to have these discussions when everybody is in agreement on the future of the business. Tones change when relationships have gone sour.

A lot of friends that go into business together don’t think of the potential problems that could arise, and often times don’t even know about some of those problems. Protecting yourself – and your business partners – from those problems is paramount, and having those protections in place early can go a long way in fostering the success of your business.

Remember, by the time one of the partners decides to take legal action, it’s already too late. When forming a business with partners, nobody thinks anything is ever going to go sideways. Anybody can launch a business, the key is launching one that can continue to thrive for many, many years. Sometimes that means thriving with your friends, but sometimes that can mean breaking up the band.

If the latter is doomed to happen, it’ll be a lot easier if the business has already covered the legal bases. What protections does your brand new business need? That’s difficult to say, because every business is different, and every business partner has different needs and expectations.

Contact the business attorneys at Troxel Fitch, your legal experts on business formation in Denver.

Forming a Business in Colorado

Mon, 26 Oct 2020 15:00:04 GMT

Colorado is a great place to live. But it’s also a great place to start a business.

There are a number of advantages to starting a business in the Centennial State, including a number of programs offered by the state to give you a boost when getting started.

Every year, more than 50,000 new LLCs are formed in Colorado. That puts the state in second on the list of top 10 states for entrepreneurship and innovation, according to the United States Chamber of Commerce. That’s a positive place to be if you’re thinking of starting a business in Colorado.

Because of the high volume of new business formations in Colorado, there are a number of resources to help with the process. From Colorado Small Business Development Centers all over the state, to accelerator programs like Boomtown and Techstars, there are a number of options to help small businesses develop the foundation for success.

To help facilitate the growth of small businesses, Colorado has a couple of programs for those just getting started. The first is the Microloan Program, which offers small loans to small businesses and startup companies in the state. Created by the state’s Economic Development Commission, the loans can vary from $5,000 to $5,000,000.

Loans are also available through the Colorado Credit Reserve that offers credit options through the Colorado Housing and Finance Authority (CHFA), and the Colorado Office of Economic Development and International Trade (OEDIT).

Funding helps, but more than just money is needed to make a business successful. One of the main reasons the state provides things like this is because many new businesses won’t make it. These things can help get your small business started, but there are plenty of other hurdles to clear along the way.

Making sure that your business is protected from outside creditors and predators means making sure everything is covered from a legal standpoint, as well. There are multiple business designations, and each one provides different benefits and advantages. Deciding which business designation is appropriate when forming a business in Colorado is something that should be done with consideration and research.

There are a number of things that might sound simple, but things like establishing legal guidelines between business owners and investors is something that needs more than a handshake. Discuss these specifics right from the outset with a knowledgeable business formation lawyer.

Creating a business is difficult enough, so making sure you utilize all of the benefits out there can help set you up for success. But you don’t have to navigate those alone. All of these are important topics to discuss with a business incorporation lawyer. Reach out to the business attorneys at Troxel-Fitch, your legal experts on business formation in Denver.

Leap of Faith

Tue, 20 Oct 2020 22:01:59 GMT

Becoming your own boss after a layoff.

You got laid off. Now what? It is disheartening and stressful to lose your job because of forces outside of your control. However, it might be the motivation you need to take that control and start your own business.

If you have decided that the next step in your working life is to create something for yourself, an important early step is to make sure your new business is covered from a legal standpoint. Getting legal advice from a small business lawyer is a smart way to get things off on the right foot. A good business lawyer can guide you through the process of getting this set up correctly, and mitigating the various risks that you might be exposed to when getting started.

While it might be exhilarating to start your own business, there are a number of steps to go through before hanging your ‘Open for Business’ sign outside for all to see. Creating a business is more than just having a good idea and acting on it.

One of the first, and potentially most important, choices business owners make is on the specific business structure. There are legal and tax ramifications for whatever you choose – from sole proprietorship to LLC to corporation or nonprofit. Getting placed in the right structure from the start is paramount for setting your new business up for success. But the differences can be confusing and intricate, making legal advice from a lawyer very important.

Your business formation lawyer can make sure you have the right contracts in place, protect your intellectual property and set up a guideline for how decisions will be made within the business. They can also provide a roadmap for continued success throughout the lifecycle of your business.

Depending on the type of work you plan on doing, there could be a number of legal hurdles you have to clear to get started. There are a variety of employment laws that might apply to your new business – on both the state and federal levels. Complying with these from the outset is vital to the continued growth and success of your new business.

The most crucial aspect to speaking with your business attorney is making sure you are mitigating as much risk as possible. Staying in compliance with the countless rules and regulations for your individual industry can sometimes be a bit overwhelming. A good business attorney can keep you out in front of a lot of those hazards, and make sure that processes are in place to protect you, even if you inadvertently violate them.

There are plenty of pitfalls to starting a new business, but it’s important to remember that there are ways to avoid almost every single one of them. All of these are important topics to discuss with a business incorporation lawyer. Reach out to the business attorneys at Troxel-Fitch, your legal experts on business formation in Denver.

Forming During Recession

Tue, 20 Oct 2020 21:42:31 GMT

Forming a Business During a R ecession

During a recession, the last thing on most people’s mind is creating a new business venture. However, there are countless success stories about companies that started in a recession and became very well known.

It can be done, of course, but the proper steps need to be taken to ensure it is done right. All businesses are created out of the perception that they are filling a need that isn’t currently in the marketplace, or that they are performing a current service, just better.

At times of recession, the marketplace is often fraught with specific needs, but uncovering those needs and implementing your business quickly enough to capitalize can be tricky. Forming a business that can supply one of those demands can be lucrative.

One is example is Airbnb, which started as an app to facilitate short-term housing problems. But when the Great Recession of 2008 hit, usage of the app exploded and now Airbnb is known throughout the world and is a billion-dollar business.

That type of growth isn’t the norm, of course, and your business is probably going to need some help. It’s always important to set yourself up for success when starting a new venture, but those steps are amplified when creating a business during a recession. That’s where advice from a business formation lawyer can be invaluable.

Recessions hit everybody, including prospective business owners. You don’t need to speak with a business formation attorney to create a business, but they can help minimize your exposure to personal liability and taxes. They can also provide structure to your business that can help shield you against a lot of the dangers business owners face – particularly during a recession.

If you have flexibility, maybe the timing would be better to wait it out. But maybe that option isn’t available, and this business was formed out of immediate necessity. Either way, consulting a business formation attorney is a good idea. They can tell you what to expect, what the law entails, and get you guided in the right direction down the path of creating your own business. This advice can be vital when trying to navigate the ever-changing economy.

Business formation attorneys can help determine proper timing, as each individual case has different circumstances. There are plenty of considerations when forming a new business, and legal hurdles. Getting advice from a lawyer when forming a business is always important, but it’s even more important during the delicate economic times of a recession. Reach out to the business formation attorneys at Troxel-Fitch, your legal experts on business formation in Denver.

Basic Legal Issues

Tue, 20 Oct 2020 21:09:27 GMT

Starting a business can be exciting and daunting, invigorating and tiring – all at the same time. All business owners go into their new venture with a plan, but there are still plenty of mistakes made along the way.

Some of those mistakes are trial and error, but some of those mistakes are completely preventable. There are a number of legal mistakes new businesses owners make that can be avoided.

One of the major mistakes, right from the start, is selecting the correct business designation. Each one has advantages and drawbacks, but consulting a business formation lawyer will help get the correct one to mitigate risk. Another mistake along similar lines is making sure the business owner is following the correct tax laws. Each formation faces different tax requirements, and your business formation attorney can explain that, as well.

Another early mistake made by business owners is failure to obtain all of the correct licenses for their business. There are different rules for different industries, and those rules can differ from state to state – and change with legislation. Staying abreast of those changes while staying atop of your business can be daunting, but it’s necessary.

Similarly, many new business owners don’t take the necessary steps to protect their intellectual property. Securing copyrights, trademarks and patents can be a daunting process, but if any of that gets copied or utilized by another, it’s important to have legal remedies. It’s important to know the law and protect the assets that make your business unique.

There are a lot of moving parts to running a business, and every business owner is expected to know and follow all of the rules and regulations to remain compliant. But having a business formation lawyer in your corner from the time the business is created can get you ahead of the game.

This may sound simple, but a mistake a lot of new business owners make is not consulting a business formation attorney. A lawyer can do more than just guide you into the correct business structure. A number of new business owners think they won’t face the same legal requirements as much larger enterprises. However, thinking you can always bring in a business attorney after the fact is a mistake. Having that resource in place from the beginning of the business is crucial.

There are a number of reasons why people shy away from consulting attorneys. However, when dealing with your business, performing the due diligence of consulting with a business formation attorney can make a big difference. Your business is your livelihood, and taking steps to protect it can save lots of money, stress and heartache down the road.

It’s important to discuss all of these legal pitfalls with a business formation lawyer from the start. Contact the business attorneys at Troxel-Fitch, your legal experts on business formation in Denver.

Families First Coronavirus Response Act:

Wed, 01 Apr 2020 20:55:26 GMT

What does it mean for small businesses?

The COVID-19 pandemic has rocked the world over the last three months, and has hit the U.S. especially hard over the last three weeks. Small business owners are struggling to keep their doors open due to widespread shelter-in-place orders and general uncertainty in the economy. In addition, a number of new laws are being passed that have a great impact on small businesses
owners.

One of these new laws is the “Families First Coronavirus Response Act (FFCRA)” which primarily impacts small business owners (for purposes of the FFCRA, this means 500 or fewer employees) in two ways. First, it includes the Emergency Family and Medical Leave Expansion Act, which requires employers to provide additional paid time-off to any employee who cannot work because they must stay home to care for a child whose school is closed due to COVID-19. Second, it includes the Emergency Paid Sick Leave Act, which requires employers to provide paid sick time to employees who are unable to work due to COVID-19. Now let’s take a deeper look at who these Acts apply to and what kind of impact a small business owner might expect.

To begin, let’s take a deeper dive into the requirements put in place by the Emergency Family and Medical Leave Expansion Act. One of the primary purposes behind this Act is to provide relief, via additional paid time-off, to employees who are unable to work due to their child’s school or child-care being closed due to COVID-19. However, this will simultaneously put a strain on many small business owners that are unable to operate but may still be required to provide employees paid time-off.

Specifically, any small business with 500 or fewer employees must provide up to 12 weeks of paid time-off for any employee who cannot work because they must care for a child whose school or child-care provider is closed as a result of COVID-19. Employers are not required to pay employees for the first 10 days of such time-off. However, an employee may use accrued paid time-off during such time. After the first 10 days, employers must pay not less than two-thirds of an employee's regular pay for the number of hours per week the employee normally works. However, this compensation is capped at a maximum of $200 per day and $10,000 total for each employee. Additionally, employers will have to restore an employee’s former position following such paid time-off unless:

The employer has fewer than 25 employees; and
The employer has made reasonable efforts to retain the employee’s position but such position no longer exists due to economic conditions caused by COVID-19.

Employers of health care providers or emergency responders may exclude employees from the requirements of the Act.

Next, let’s take a deeper look at the requirements rolled out in the Emergency Paid Sick Leave Act. One of the primary purposes behind this Act is to encourage employees to stay home to slow the spread of COVID-19. However, this again puts a major strain on those small business employers who have not been deemed an “essential business” and must now pay employees during a period when they are making zero revenue.

Specifically, full-time employees are guaranteed eighty hours of paid time-off (part-time employees are entitled to the average amount of hours worked in a two-week period), available immediately if the employee:

is subject to a governmental quarantine or isolation order;
has been advised by a health-care provider to self-quarantine;
is caring for an individual who is subject to governmental or self-quarantine;
is caring for the employee's child because the child's school or child-care provider is closed; or
is experiencing a substantially similar circumstance related to COVID-19 as specified by the Department of Health and Human Services, in consultation with the Department of Labor.

With Colorado being one of the many states that has issued a state-wide stay home order, that means every employer with less than 500 employees in the state must be prepared to provide this paid time-off to their employees. Further, employers will be required to provide conspicuous notice in the workplace of these new paid time-off requirements. Employers must pay the
regular rate of pay up to:

$511 per day, $5,110 total, for paid sick time used by an employee who experiences symptoms of COVID-19 or is required or advised to self-quarantine; or
$200 per day, $2,000 total, for paid sick time used by an employee to care for the employee's child or other impacted person

Both the Emergency Family and Medical Leave Expansion Act and the Emergency Paid Sick Leave Act go into effect on April 1, 2020 and expire December 31, 2020. For both Acts, there may be an exemption for employers with less than 50 employees, as both Acts state that the Department of Labor has the authority to enact regulations to exempt small businesses with
fewer than 50 employees “when the imposition of such requirements would jeopardize the viability of the business as a going concern.”

Until more guidance is given, it is wise for all employers with 500 of fewer employees to prepare for the possibility of providing this additional paid time-off. For those small business owners with less than 50 employees who are unable to do so and believe they should be exempt, it would be wise to speak with a business attorney. If this isn’t possible, you should at least put together
detailed financial records for the last year so you have clear evidence of the impact of COVID-19 on your business and why it became impossible to comply with the additional paid time-off requirements.

It is already hard enough to be a small business owner, and the COVID-19 pandemic has only added to that. This has been a brief overview of the major obligations the FFCRA puts on small business owners, but there are many specifics that change how this may impact your business.

With a proper analysis of your unique situation, you will have a clearer path to get through these stormy waters. Even if you are just looking to Zoom chat for a beer and a laugh, we are here for you now as we have always been.

Separated…In Solidarity,

The CARES Act:

Wed, 01 Apr 2020 20:55:17 GMT

What Does it Mean for Your Small Business?

In the wake of the unprecedented outbreak of COVID-19, all of us are left wondering what’s going to happen next. This issue is particularly ripe for small business owners who find themselves stuck at home having a much harder time keeping the business afloat. Thankfully, Congress has acted to provide support for individuals and businesses with the passage of the “Coronavirus Aid, Relief, and Economic Security” Act, or the CARES Act for short.

Let’s cut to the chase…you are a small business owner and you are sweating so much your forehead is about to send your shirt a water bill. Is help on the way?

In short, probably. The CARES Act provides for $1,200 to single individuals, and $2,400 to married couples plus $500 for each child. If you make above $75,000 per year, you will get less and you’ll get nothing if you make more than $99,000 per year.

However, if you own a small business, or are self-employed, there are more opportunities for assistance.

The two most important aspects of the CARES Act for small business are the emergency grants and forgivable loans. The primary purpose of the grants and loans are to enable companies to meet their payroll obligations and retain their workforce. The assistance is available to companies with 500 employees or fewer.

Eligible companies may receive up to $10,000 as an emergency grant for immediate operating expenses. As for the loans, companies may apply for up to $10 million in relief funding. If the money is used for expenses like payroll and rent, basically to keep the lights on and people employed through June, it may be forgiven entirely.

Self-employed, but don’t own a business, per se? The CARES Act still might have something for you. Independent contractors, freelancers, and other members of the “Gig Economy” can apply for assistance from the newly created Pandemic Unemployment Assistance program which will provide unemployment benefits through the end of 2020 to individuals who are out of work due to the outbreak.

There is still much to learn about how funds will be distributed and the impact we can expect to see on the economy. Over the coming days we will be reviewing the associated guidance and keep you in the loop with the things that are relevant to you, but there is still great uncertainty.

Will this emergency relief package be enough? I don’t know… but I know people have made it through much worse with much less, and I know if we continue to lift each other up in the way Colorado entrepreneurs do every day, we can make it through anything.

Tough times don’t last, but tough people do. While you put that entrepreneurial grit on display, Troxel Fitch is here to help you endure and outlast this outbreak in any way we can. Whether you are looking for insight on how our new reality will affect your business, or just looking to Zoom chat for a beer and a laugh, we are here for you now as we have always been.

Separated…In Solidarity,

Employees & Independent Contractors:

Tue, 20 Nov 2018 22:06:15 GMT

The Differences Between Them, and the Importance of Getting it Right

For most entrepreneurs, making your first new hire is an exciting time. It means that your business is growing, and you are in a position to spend money on sustaining that growth. However, you probably aren’t sitting on a huge pile of cash, so you want to acquire this help in the most efficient way possible. This is where the decision of whether to hire employees, or use independent contractors, becomes relevant. While using independent contractors can be attractive to early stage companies due to the low costs and ease of engagement, there are serious risks involved as well. In this installment of “Laying Down the Law,” we’ll cover what you need to know to make the correct decision regarding employee classification, and provide examples of the severe penalties that one can face if you get it wrong.

To begin, let’s explore the underlying reasons for the different classifications, and the objectives behind them. In the most basic sense, employment law is a product of employment disputes. Long ago when labor strikes were common and unions were prevalent, employees had to fight tooth and nail for any protection they received from the government, like they did here . Programs such as social security, unemployment, overtime, and maternity leave are all benefits that were granted to employees after much struggle, because the government recognized that in our capitalistic economy, employees were vulnerable to manipulation, abuse, and divergent bargaining power. It was precisely this vulnerability that led the government to step in and grant protections to employees. Remember this: the government seeks to protect those who are beholden to their employer and vulnerable as a result. If the risk of manipulation and abuse is low, the government is less concerned. Now, moving on to each in turn…

Employees

If you’re reading this blog about startup law, chances are you already know what an “employee” is in the general sense. It’s a person who works for another and is paid for their labor. Most of us have been employees in the past, and our understanding is shaped by our experience. However, from the perspective of an employer, the concept of an “employee” encompasses much more. When you officially hire a person as an employee, you are not only responsible for their wages, but are also responsible for (1) income tax withholdings, (2) social security taxes, (3) Medicare taxes, (4) unemployment taxes, (5) minimum wage compliance, and (6) overtime requirements. In addition, employees might have access to any benefit plans offered by the employer, and are entitled to medical leave, and in some states, paid vacation.

There are quite a few strings attached to “employees,” but in exchange for all of that, you get control. As to an employee, an employer may require anything that is lawful, with unlimited specificity. An employer can mandate that an employee arrive at 7:59am on the dot every morning, that they use a specific font in every email, and that they only take a specific route to the bathroom. As outlandish as these examples are, it goes to show that an employer may control the behavior of an employee to the Nth degree.

Independent Contractors

Independent Contractors are commonly used in business as a substitute for an official employee. Unfortunately, they are also frequently misclassified, which can lead to severe penalties. However, for those in the proper position to use independent contractors, they can be an effective and efficient way to acquire the help you need.

First, unlike with employees, an employer that hires independent contractors is not responsible for any of the following: (1) income tax withholdings, (2) social security taxes, (3) Medicare taxes, (4) unemployment taxes, (5) minimum wage compliance, and (6) overtime requirements. Independent contractors are also not included in benefit or vacation plans. In general, an independent contractor gets nothing but the agreed upon price for their work. You might be thinking this no-strings-attached approach sounds great, and way less expensive, but let’s take a moment to examine the requirements of an independent contractor.

The three major differences between an independent contractor and an employee are (1) behavior control, (2) financial control, and (3) the relationship. When using an independent contractor, the employer may not control the method or means by which the contractor completes the project. The employer may only demand a certain result. Thus, if the employer exercises behavior control over the worker, they are an employee. If the employer only requires that the finished product meet certain specifications, and lets the worker handle achieving that result however they want, that worker is an independent contractor.

Next, financial control affects the classification of a worker. Independent contractors should have their own company, set their own prices, and be able to perform work for whoever they please. Thus, they must have financial control over themselves. If an employer wants the worker to perform services exclusively for the employer, under the employer’s brand, chances are the worker is truly an employee. Thus, to use an independent contractor properly, an employer must be willing to sacrifice financial control over the worker.

Finally, the nature of the relationship affects how the worker is classified. In determining the correct classification, courts and agencies will analyze what the parties believe the relationship to be. If the contractor has always taken the employer’s direction, uses his logo, and hasn’t incorporated his own company, he may be an employee even if he thinks he’s a contractor, and even if he’s signed an independent contractor agreement! It doesn’t matter what a worker thinks they are or what an employer calls them. It is the true nature of their work that determines whether they are an employee or an independent contractor. The IRS provides additional guidance on this topic here .

Penalties for Misclassification

Remember our discussion above about employee vulnerability and manipulation, and the government’s desire to protect them? This is where that becomes relevant. The government wants to protect employees, and if you’ve been hiding someone from them under the guise of an “independent contractor,” they won’t be happy. In the government’s view, an independent contractor who should really be an employee has been robbed of all their benefits, and the government will make you provide them. Therefore, if you get caught misclassifying workers, the government will make you pay (1) income tax withholdings for the entire period of the worker’s engagement, (2) overdue social security taxes (3) overdue Medicare taxes, (4) overdue unemployment taxes, (5) minimum wage compensation, (6) unpaid overtime, and (7) tax penalties on everything you missed. And those are just the fees! You could also face disciplinary action from the Department of Labor or local regulatory agencies. If you get it right, the government doesn’t view independent contractors with their own financial and behavior control as vulnerable as others, so the protections are not necessary. However, many get it wrong. As convenient as using independent contractors can be for some, that benefit is immediately wiped out if you do get it wrong, so your best bet is take the time to get it right.

Getting it right can be complicated, and its often wise to consult a business attorney when you are planning to hire. This has been a brief overview of the major concerns, but there are more risks to avoid, and potential benefits to obtain, with a proper analysis of your unique situation. If your business is in a position to grow and hire, don’t put that growth at risk with hasty hiring practices. The law firm of Troxel Fitch can help you navigate these waters when the time comes, so get out there and grow!

The First Financing: Family, Friends, and Angels

Sat, 20 Oct 2018 00:00:00 GMT

Family, Friends, and Angels

Obtaining outside financing is a big step in any startup’s growth. While television and popular culture glorify the venture-capital-backed startup and big money investors, the reality of outside investment is frequently more humble. In reaching the point where VCs and other institutional investors seek to provide capital, most startups will obtain their first outside investment from family, friends or angel investors. In this installment of Laying Down the Law, we’ll cover where to find your first few thousand in outside investment to get you off the ground.

Family and Friends: Your First Source of Capital

Friends and family loans are the bedrock of startup financing in the United States. Although most deals between family/friend investors don’t make the pages of the Wall Street Journal, they nevertheless comprise the majority of startup investment for emerging companies. Investments from friends and family, whether in the form of a loan or equity investment , typically are made at relatively low dollar amounts, but come with significant advantages for the early-stage entrepreneur. Those benefits fall primarily into two categories: management autonomy and default risk.

First, a major advantage to family/friend investment is management autonomy. Where VCs and other major investors will require substantial control of your company, usually in the form of board seats and preferred stock, family/friend investors will not. Most family/friend investment is no-strings-attached capital, as they invest in you because they believe in you as a person, and they believe in your vision. You will want to honor that vote of confidence from your loved ones with hard work and dedication, but in the event that you do fail, your family and friends won’t foreclose on your house and repo your car. In this way, family/friend investment provides a uniquely flexible route into startup capital that allows you to pursue your vision without outside interference. For the visionary entrepreneur with a vision that requires time to develop, this financing option can buy you time to prove your concept free from meddling investors.

Second, family/friend investment usually involves gentle consequences and low default risk. Professional investors will protect their investment above all else. This is because an institutional investor is spending another person’s money, and therefore is required to report on your growth metrics and answer for any deviations from predicted growth. They care about you to the extent that you are the best individual to protect their investment (and only to that extent). If you default on a VC loan or fail to hit certain growth targets, you will be discarded as CEO in favor of protecting the investment, your company will be swiftly sold, merged, or liquidated, and your position as CEO – not to mention your company – will cease to exist. On the other hand, family and friends are investing in you. Therefore, if your company hits a rough patch, but you’re still committed, your family and friends won’t pull the rug out from under you. They will often allow you to strive for success, even if it sacrifices their investment in your company, because they invested in you. This flexibility can mean the world to an early-stage entrepreneur who will inevitably have clumsy stumbles in the beginning stages.

One company that used family/friend investment to get started was Whole Foods. Originally called “Safer Way,” the grocery store was founded in Austin, Texas with a $45,000 loan from family and friends. That loan ensured Safer Way’s survival until they could merge with another natural grocer to become Whole Foods.

Angel Investment: More than Money

Moving up the food chain one notch, we have angel investors . Angel investors are the bridge between family/friend investment and venture capitalists. They typically invest anywhere between $25,000 and $1,000,000 and can provide additional value in their expertise and vision. The primary considerations for the entrepreneur when evaluating angel investment should be access to future capital and non-monetary value. Angel investment typically comes at a critical moment in a startup’s growth: the point between proof of concept and full maturity. If you are accepting investment near the six-figure range or greater, chances are you have successfully proved your concept and its place in the market. However, you haven’t succeeded to the extent where pure scalability becomes the goal, as is the case with VC investment. Thus, you are at the critical make-or-break point, where your decisions will determine whether you blossom into a company or take your place in the startup graveyard. As such, the moment of angel investment provides an opportunity to gain not only capital, but also a strategically valuable team member.

Access to future capital is an important consideration due to the interplay of angels and VCs . In most deals, VCs will rewrite the deal terms and wipe out many of the angel’s rights. Thus, when you bring VCs to the table, things get serious, and your position as CEO becomes more treacherous. If your angel is capable of floating you with subsequent investment and postponing the involvement of VCs, you’ll have more time to secure your position within your own company. Next, because an angel will accompany you through some of the most trying times in your growth, their non-monetary expertise and vision can have immense value. An angel who knows your industry, has connections, and contributes to your vision will propel you through plateaus that may have trapped you without the additional wisdom. Because angels care about both you and their investment, they provide a fantastic resource in the form of wisdom, in addition to their capital.

In conclusion, there are multiple options for outside financing before you reach the big leagues with venture capitalists. In addition to providing added flexibility, family/friends and angels can bring critical expertise and experience to your team. For that reason, it is wise to deeply investigate the benefits of smaller investment in your company before you knock on the door of giants. If you are contemplating outside investment, it is wise to contact a business attorney who can guide you through the opportunities and threats unique to your business, as well as introduce you to trusted and vetted investors. For more information, contact the law firm of Troxel Fitch.

Outside Investment: Is it right for your business?

Tue, 09 Jan 2018 00:00:00 GMT

“Should I seek outside investment for my company?”

“Should I seek outside investment for my company?”

Most, if not all, entrepreneurs ask themselves this question at some point while building their business. Deciding whether to take on outside investment is a major decision for any business owner, and while it can be the start of what turns a small business into a global juggernaut, it is not right for all businesses.

While there are numerous factors to consider when it comes to taking on outside investment, I want to focus on three major questions that all business owners should ask when determining whether outside investment is the best route for their company. First, is my business scalable? Second, when is the right time to start considering taking on outside investment? Finally, what would I do with the money?

Is my business scalable?
When considering whether your business is right for outside investment, you should first consider whether your business is scalable. Investors invest in companies to make money, and many expect returns of at least 5-10x. In order to provide this level of return, a business must be capable of substantial growth.

There are many great businesses that simply do not offer this type of growth potential no matter how well they are run. Many times, this is due to the fact that the business operates in a market that is too limited to produce substantial growth.

For example, a new, revolutionary business that provides products exclusively used in the unicycle market is not scalable. No matter what percent of the unicycle market the company corners, there are simply not enough people who ride unicycles to create a market where major growth can occur. On the other hand, Facebook is a great example of a company that is extremely scalable, because Facebook’s market is basically everyone in the world.

When is the right time to start considering taking on outside investment?
Even if your company is scalable, it may not be the right time in the growth-cycle of the business to consider outside investment. While investors will occasionally invest in businesses pre-revenue, generally outside investors will not invest in a company unless that company can show some initial traction and profitability.

Also, consider how quickly your business is spending money, as investors will consider this “burn-rate” when determining whether to invest or not. Running a lean operation that can absorb cash quickly and utilize it efficiently is attractive to investors.

For some businesses, outside investment can be a way to branch out into new markets or utilize new technology more effectively. If you are considering undertaking a major project that is capital intensive and profitable, but would leave the company with potential cash flow issues, it could be the perfect time to consider outside investment.

What would I do with the money?
Before you take on any outside investment, you should know what you would use the extra money for. While outside investment is a great way to get a cash infusion into your business, it also comes with additional burdens.

For example, taking out a loan for your business obligates you to pay interest and generally gives the lender the right to seize your property if you fail to make these payments. On the other hand, issuing equity in your company creates additional owners that you will likely have to share decision-making authority with. Due to these additional burdens, outside investment should be avoided if your business doesn’t actually need the additional cash.

Therefore, before accepting outside investment, you should spend some time considering exactly where additional money would be used in your company, and develop a strategy to create the greatest return on the money in the shortest period of time.

Seeking outside investment can be a difficult decision, but it is often a major turning point in the life-cycle of most businesses. Therefore, it is critical that you spend time assessing your business and its potential. Contact Troxel Fitch today so we can learn the ins and outs of your business and provide you with tailored insight into whether your business is one that would benefit from outside investment.

Laying Down the Law: Choosing an Entity Type

Fri, 08 Dec 2017 00:00:00 GMT

"What entity type should I choose for my business?"

"What entity type should I choose for my business?"

When starting a business, one of the first major decisions you make will be selecting an entity type for your business. While you may think there are other, more important things to worry about, not setting up your business correctly from the beginning can have dire consequences. On the other hand, figuring out which entity type offers your company the best advantages can be a great way to start out on the right foot. So what factors should you consider when deciding between different entities? There are many, but we will focus on three of the most important factors to consider: limitation of personal liability, management structure, and tax considerations.

Limited Liability

Generally, when you start a business and do not make a specific decision as to what entity type your business will be, if the business has only one owner it will be classified as a Sole Proprietorship. If there are two or more owners, the business will be classified as a General Partnership. For the most part, operating your business as a Sole Proprietorship or a General Partnership is not advisable. One of the most critical reasons to avoid these entity types is the fact that they do not offer limited liability protection for the owners. Limited liability is a feature of other entity types (including LLCs, Corporations, and certain partnerships), that protects the owners from personal liability for the debts and liabilities of the company. For example, imagine your company is sued and a court determines the company owes money to another party. If the company is set up as one of the entity types that includes limited liability protection, the other party can only go after the assets of the company, not your personal home, automobiles, retirement accounts, etc. However, maintaining limited liability protection also requires you to operate your business in a way that maintains separation between yourself as an individual and your business. This means you must do things such as:

Have a separate business bank account
Only pay for business expenses through your business, no personal expenses
Include “LLC” in your LLC’s name
Include “Inc.,” “Co.,” “Ltd.” Etc. in your corporation’s name
Follow corporate/LLC formalities
Start and maintain the company with adequate capital
Maintain accurate financial records

This list is not comprehensive, but should give you a general sense of how you must operate your business to maintain limited liability protection.

Management Structure

Another factor to consider is how you want your company to be managed. One attractive quality of Sole Proprietorships, most General Partnerships, and LLCs is that the owners of the company are also able to manage the company. While Corporations offer you limited liability protection, the management of a corporation is vested in a Board of Directors, while the owners of the company, the shareholders, do not take part in any of the day-to-day management (assuming the shareholders are not also members of the Board of Directors). This can sometimes create what is called an “agency problem” where the personal interests of the owners and the personal interests of the managers differ. You can read more about the concept of the “agency problem” here.

Tax Considerations

Finally, the exciting information you have been holding your breath for, tax considerations. All jokes aside, tax considerations will play a huge role in determining what entity structure you choose. Sole Proprietorships, General Partnerships, and most LLCs are taxed as “flow-through” entities, meaning that the company itself does not pay tax on its income, and instead that income will flow-through to the owners, and the owners will pay taxes individually on their share of the company’s income. On the other hand, Corporations are considered a separate entity for tax purposes, and all of the income of the Corporation is taxed at the corporate tax rate. Then, when the Corporation distributes its profits to the owners, the owners must also pay tax on the amount of income they received from the Corporation. This creates what is known as a “double-tax,” meaning the same income is taxed twice instead of just once, and is one of the biggest detriments to choosing to run your business as a Corporation.

While this is not meant to be a comprehensive overview of everything that can go in to your choice of entity type, it should provide a good overview of some of the most important factors to consider. Keep in mind that there are many other considerations when choosing an entity type as well as more complex, multi-tiered entity structures that may provide great value to your company. Therefore, it can be very beneficial to consult a business attorney if your company is in a position where doing so makes sense financially. If you are seeking further insight, please contact Troxel Fitch, LLC, and set up a free consultation with us to talk more about your business and how we can provide value to you.