Crowdfunding – a new investment opportunity coming to Illinois

Paul Marks Attorney, Sivia Business & Legal Services

There has been a growing force in investments the past five years, and now Illinois is prepared to offer the ability for small businesses to receive funding from a large number of individuals via a strategy known as crowdfunding. The Illinois Crowdfunding Law allows companies to raise up to $4 million from Illinois nonaccredited investors—those who do not meet income or net worth requirements.

Crowdfunding opens new investment opportunities to the little guy. “Crowdfunders” receive equity or a debt position in the company. They are not mere donors offering support, receiving only a nominal reward in return.

Crowdfunding itself is not a new strategy. In fact, real estate deals have utilized the equity available through crowdfunding for years, in part due to the ease of assigning a value to projects. This Illinois legislation, however, widens the types of companies equity crowdfunding can support.

Equity crowdfunding opens new horizons for small investors, allowing ordinary people from Illinois to put in up to $5,000 for a small piece of a promising company.

Crowdfunding may revolutionize how local business raise capital. Locals can invest in their favorite restaurant or renovate an apartment building, forging a deeper sense of loyalty and building brand awareness within the community.

Perhaps more importantly, it is estimated that crowdfunding creates one new job for every $37,702 invested. Crowdfunding is projected to contribute $500 billion in funds by 2020, according to Illinois Intrastate Equity Crowdfunding Resource Center. Experts believe it could take three to 10 years before we get an accurate, long-term picture of how crowdfunding performs.

There are, however, risks associated with crowdfunding. The additional complexities inherent when hundreds or thousands of small investors are involved can deter the seasoned investor.

As with any business venture, losses, failures and bankruptcies will occur and could receive increased exposure due to the novelty of the practice. Further, there are legal considerations, including tax implications, as well as the possibility of contract and fraud pitfalls.

Due to the complexities and the relative novelty of the law, it is a good idea to consult with an attorney before utilizing crowdfunding as either a form of investment or deciding to invest in a crowdfunding venture. In the future, I hope to write on recently enacted federal law on crowdfunding.

This article is to inform and raise awareness. It should not be considered legal advice. For specific legal advice, please contact Sivia Business & Legal Services at 618-659-4499 or email at info@sivialaw.com.

 

Understanding delivery fees can be taxing

Paul Marks, Attorney, Sivia Business & Legal Services

In a case recently filed in Madison County, Illinois, a consumer, represented by another firm, sued a local business for collecting sales tax of 16¢ on a separate delivery charge. According to Illinois law, tax can only be collected on a delivery charge if the delivery charge exceeds the actual cost of delivery. While it is currently unknown if the delivery charge exceeded the actual cost of delivery, the $2.39 delivery charge was rather low and precise, giving the appearance the delivery charge may not be subject to calculation for tax liability. If the delivery charge equaled the delivery cost, the buyer did not need to pay tax (86 Ill. Admin. Code 130.415(b-d).

This leads to a second issue: if the delivery charge was higher than the actual delivery cost, and tax was collected, it should have then been remitted to the Illinois Department of Revenue. Here, even if that was just 16¢, that amount can add up for a seller, who may not pass it on to the Illinois Department of Revenue when paying the Retailers’ Occupation Tax.

In most cases, delivery charges and transportation charges are a normal part of business. These fees are considered to be freight, express, mail, truck or other carrier, conveyance or delivery expenses. Other times, these charges are sometimes designated as shipping and handling charges (86 Ill. Admin. Code 130.415(a) (emphasis added).

If the delivery charge is included in the sale price, the delivery charge may not be deducted in computing the tax. If the delivery charge is separate from the sale price, the delivery charge does not have to be included in computing the tax (86 Ill. Admin. Code 130.415(c-d). While it may be unusual for a business to inappropriately tax a delivery charge, it can happen.

There are several lessons to be learned here. First, for consumers, it is wise to look at any delivery charges paid to see if tax was collected and for the right amount. For businesses, it is a good idea to re-evaluate the current delivery charge system to ensure the tax falls within the parameters of the law.The law is complex, and whether or not the merchandise must be picked up versus may be picked up can affect the taxability of the delivery fee. In the future, I will address the question of the necessity of the delivery in determining the tax, such as in an internet-only purchase with no pick-up option in order to delve deeper into the specifics of the law.

This article is to inform and raise awareness. It should not be considered legal advice. The analysis for calculation of Retailer’s Occupation Tax for delivery charges is complicated and has been previously litigated. For specific legal advice, please contact Sivia Business & Legal Services at 618-659-4499 or email at info@sivialaw.com.

 

 

 

How to Create a Hacker-Resistant Password

By: Paul A. Marks
Associate Attorney
Sivia Business & Legal Services

Picking the perfect password is tricky business. Hacking both corporate and personal accounts is increasingly more common, so it is critical to protect your email and financial information with well-constructed passwords. But striking the perfect balance between passwords you will remember, and passwords no one else will guess, is no easy task.

The first step is to immediately stop using obvious choices such as “password,” “123456,” your birthday or your anniversary; even using your first name and birth year is easily cracked by cyberthiefs. I have also noticed many online accounts are requiring passwords to include letters, numbers, one capital and a symbol. While this strategy does make it more difficult, how can you remember these random collections?

The best way to create difficult passwords that you will actually remember. The first suggestion is to create a “word” out of your passwords. For example, “H@$hT@g1” is “HashTag1.” Adding commas before and after the password also strengthens your password—“,,,H@$hT@g1,,,”

Finally, type up a list of all of your passwords and keep a copy in a safe or safe deposit box. If you have a secure cloud access, you should save a copy there, too. But be sure to name the document something inconspicuous such as “Recipes” or “To-Do List.”

A good password is critical to protecting your client database, as well as personal information. For more simple ways to protect your business, and yourself, from potential litigation issues, contact me at 618-659-4499. You can visit us online at www.sivialaw.com.

Trademarks For Smells?

Paul Marks
Associate Attorney
Sivia Business & Legal Services

There is an interesting new trend in attempted registered trademarks: scents.

Trademarks, typically, are used to protect names, slogans, or unique phrases. In recent years, however, trademark protection has expanded to include textures, sounds, and shapes.

Despite the complications inherent when trademarking something as idiosyncratic as a scent, some businesses are trying it anyway. Consider this: scents are subjective. Someone may think a newly formulated scent is unique; you might think it smells just like the latest designer perfume. So how does one decide if a scent is “distinctive” enough to be considered worthy of a trademark?

In the United States, detailed written description of the scent is required and the scent must not be “functional or natural,” but the scent becomes a functional or distinctive “identifier” of a product or service.

For example, the scent of plumeria (the flowering plant) is common and cannot be trademarked. However, in the 1990s, the scent was trademarked for use in a company’s threads and yarns because the fragrance “received distinctiveness through use” in the products.

Scents that have not met the “distinctive” qualification can be registered on the Supplemental Register. It is still more common for fragrances to receive approval to this list. Lavender and vanilla for office supplies have both received registrations on the Supplemental Register.

The practice of trademarking scents is still a relatively new concept, but possibilities for future growth are available. If you have questions regarding trademarks or other intellectual property—whether they be scents or something more tangible—feel free to contact me at 618-659-4499 or email me at info@sivialaw.com. You can also visit our website at www.sivialaw.com/businesslaw.html.

When a Small Businesses Faces Litigation

Paul Marks
Associate Attorney
Sivia Business & Legal Services

Litigation, especially for business owners, can take you by surprise and threaten your business’ bottom line. It is often expensive and time consuming, but there are a few steps you can take to minimize your exposure. Here area few common legal headaches facing small business owners:

1. Disgruntled Employees

If you terminate an employee, make sure he/she signs documents making the terms of dismissal abundantly clear. Consider having the forms drafted by an attorney. Letting an employee go without any signed documentation leaves the door wide open for legal action.

It is also a good idea to provide a comprehensive Employee Manual to each new employee you hire. Include a signature line for each employee to sign and date, then make a copy of the page and include it in the employee’s file. If you clearly state the terms and expectations of employees, this document may provide you a layer of protection against unfounded claims.

2. Discrimination/Harassment Cases

Discrimination and harassment claims against your business may cause irreparable harm. Enforcement agencies and the court system takes alleged discrimination – sexual, racial, age, etc., seriously. Keep all the applicants’ resumes on file, should allegations of discrimination arise, to prove that you hire the most qualified individuals, regardless of gender, ethnicity or age.

It is also a good idea to schedule annual or semi-annual diversity training for the entire staff—yourself, included. Regular meetings and education programs provide a greater understanding of others, and the best way to monitor potential harassment or discrimination issues. Consistent supervision creates opportunities to police any offenses and quickly eliminate them.

3. Unhappy Customers

Discontented customers or clients can—and often do— file lawsuits against companies. Lawsuits can do more to tarnish your brand’s reputation than any individual or corporation.

Avoidance is the best cure. Be proactive in building relationships with your customers, in person, on social media, on online message boards and with e-mail. Promptly address customer complaints.

It may be impossible to avoid litigation, but if you have built a solid foundation of transparency, reliability and documentation, you may decrease litigation’s lasting effects.

If you would like more information about corporate litigation, contact me at 618-659-4499, email me at info@sivialaw.com or visit online at www.sivialaw.com/businesslaw.

Stay tuned for an upcoming article on when a small business owner may need to sue another business owner.

* The above selection does not constitute legal advice or a client/attorney relationship.

What to Know Before Filing a Corporate Litigation Claim

Paul Marks
Associate Attorney
Sivia Business & Legal Services

As a corporate litigation lawyer, I am sometimes asked what “Corporate Litigation” means.  “Litigation” involves contested proceedings where some type of lawsuit is filed with the court. Basically, it occurs the moment a complaint is filed with the court. “Corporate Litigation” refers to a legal controversy related to a business issue. For example, it could involve breaches of contract, payment disputes, debt collection, or government issues.

Typically the first question is only an introduction to the real question—How do I know if I have a valid case? The only way to know if you potentially have a valid claim is to talk to a lawyer. There a lot of moving parts involved with a law suit, and only a lawyer will be able to see the big picture and explain the “legalese” involved with legal proceedings.

If you do decide to discuss the situation with an attorney, bring any documents that may apply to your case. More is better. Documents such as contracts, deeds, leases, and insurance policies, will be needed to help the lawyer understand the matter, and they could be needed for the court file should a case develop. Don’t throw things away!

The best advice I can give to anyone considering, or in the middle of a case, is to be patient. While the case may be resolved in just a few months, it usually takes a few years. You must remain determined and confident that your attorney is working as efficiently as possible. I also recommend developing a good relationships with the secretaries or paralegals assisting with the case. They are fabulous resources for status updates and keeping the process on schedule.

If you are considering filing a claim, or want to know if you have a basis for a case, you can reach me at 618-659-4499 or email me at info@sivialaw.com. You can also review our Litigation section on our website at www.sivialaw.com/litigation.

Does Your Company Have an Employee Handbook?

Paul A. Marks, Attorney at Law

By: Paul A. Marks

It seems to me that many small businesses feel writing an Employee Handbook is more trouble than it is worth. A handbook, however, can clearly establish workplace rules for the benefit of both employer and employee expectations.  It can also protect your business from litigation or during litigation.

Despite a somewhat tedious reputation, an employee handbook is more than a bunch of legal mumbo-jumbo. A handbook ensures consistency among all employees, managers, and franchises. Having this information in a concise, accessible form may help you win unemployment claims or lawsuits. Whether you have one employee or 100, an employee handbook is critical to the protection of your business.

Establish Expectations

An employee handbook should dictate employee actions in various situations: calling in sick, overtime, customer service, employee benefits, reporting a theft or workplace violence, drug/alcohol policies, filing complaints, dress code, legal compliance, disaster planning, etc. Your handbook should also outline for employees how to perform and the consequences for failing to meet those expectations. It also informs employees about how they can succeed in their jobs and the reward system for excellence.

Retain & Recruit Employees

An employee handbook can also help you recruit high-quality employees. You undoubtedly spend a significant amount of money on every employee in ways that they do not always see or appreciate. A handbook allows you to take credit for all that you do for workers. Your handbook should list all of the benefits provided by you at no cost to the employee, which may include: workers’ compensation, subsidized medical insurance, tuition reimbursement, adoption credits, 401(k), or short-term disability insurance. You should also describe the types of paid and unpaid time off offered to employees.

Protection Against Lawsuits

If necessary, a well-written handbook is the first step in a successful defense of unemployment or other legal claim. In most states, winning an unemployment claim requires proof that the terminated employee was given notice of a rule violation, and warning that such a violation could lead to disciplinary action up to and including termination. The page of the handbook containing the applicable policy, as well as a signed acknowledgement form, could be critical to the defense. Certainly, you can expect that these documents will be exhibits in any litigation and they can help you win, or at least minimize, damages.

Personalized to Your Business

A handbook should be tailored to your organization and should reflect how you conduct business. Copying another business’ handbook or using an online template might do more harm than good. No two businesses are identical. Having an up-to-date, well-written handbook is for your benefit, as well as for your employees’ benefit.

 If you would like more information about how an employee handbook can help your business, contact me at 618-659-4499 or e-mail me at info@sivialaw.com. You can also visit our website at www.sivialaw.com.

 

Medicaid Revision May Affect Personal Injury Cases

Paul A. Marks, Attorney at Law

The Bipartisan Budget Act of 2013 provided the Centers for Medicare & Medicaid Services (CMS) the legal right to seek reimbursement of all Medicaid funds awarded a qualified individual—even those funds unrelated to a personal injury case—by claiming the plaintiff’s personal injury award.

Basically, anyone pursuing a personal injury case seeking reimbursement of medical expenses and /or damages for loss of a normal life, risks CMS claiming all, or most, of the monetary award.

The good news is that Congress agreed to delay the implementation of this law until October 2016. This means that anyone considering filing a personal injury claim, or in the process of an injury suit, is affected but has a window of opportunity to create a special needs trust or to avoid the harmful impact of the law.

The takeaway here is to plan your special needs trust as soon as possible. If you are unsure if you have a valid claim, have questions about how a special needs trust can help you, or would like additional information regarding the changes to Medicaid, please contact us at info@sivialaw.com or call us at 618-659-4499.

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