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What You Need to Know About Overtime!

Posted By Kenyatta Turner, LegalShield Independent Associate, Monday, June 26, 2017
WHAT YOU NEED TO KNOW ABOUT OVERTIME

 

If your employees work more than 40 hours per 7-day workweek they may be entitled to overtime pay. New overtime rules were set to take effect late in 2016. These regulations would have expanded the number of employees eligible to receive overtime pay but they are currently tied up in federal court. It is vital that you observe the current regulations to avoid potential fines or litigation. If you have questions about state or federal overtime rules, contact your LegalShield provider law firm.

  • Current Rules - Federal overtime regulations are part of the Fair Labor Standards Act (FLSA). The FLSA entitles employees working more than 40 hours in a workweek to one and one-half times their regular pay rate. If your business has, “an annual gross volume of sales made or business done of $500,000 or more” you are required to pay overtime. All schools, hospitals, medical facilities and public agencies are required to pay overtime. Click here to determine whether FLSA applies to your business.
     
  • State Regulations - Many states set additional rules for overtime pay. California, for example, requires overtime for those who work more than 8 hours in a day and double pay for those who work more than 12 hours in a day. Other states set specific thresholds for businesses that must comply with overtime rules. Arkansas requires employers with more than 4 employees to pay overtime. Click here to view a map highlighting current state overtime laws. It is important to understand both the federal and states regulations where you do business.
     
  • Exempt Employees – There are exemptions for some executive, administrative, computer professionals and other professional service employees.

From the Department of Labor:

A. Currently, to qualify for exemption, a white-collar employee generally must:

  1. be salaried, meaning that they are paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the "salary basis test");
  2. be paid at least a specific salary threshold, which is $455 per week (the equivalent of $23,660 annually for a full-year employee) in existing regulations (the "salary level test"); and
  3. primarily perform executive, administrative, or professional duties, as provided in the Department's regulations (the "duties test").

Certain employees are not subject to either the salary basis or salary level tests (for example, doctors, teachers, and lawyers).

  • New Rules from 2016 – Overtime exemption thresholds were set to nearly double in December of 2016; however, the new rule is currently tied up in court. There is a great deal of speculation about the fate of the new rule with many expecting a change in direction from the new administration. The U.S. House of Representatives recently passed a bill that would allow certain employers to offer comp time instead of overtime pay. The bill still must pass the Senate but it is yet another sign that changes are coming. It is important for all businesses to follow these changes carefully.  If you have any questions, contact your LegalShield provider law firm or Kenyatta Turner at 602-367-1069 or kenyattaturner@legalshieldassociate.com.

Tags:  Accounting  business owners  business resources  business risk  business services  employees  Employers  Hiring  HR  human resources  labor  legal  legal services  management  small biz  small business  small business owner  startup  tax  wage hour lawsuits  women-owned business 

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PET PLANET ~ Offers Thoughts on Your Pet's Allergies

Posted By Kristen Cherry, Pet Planet, Thursday, August 11, 2016

 

PET PLANET ~  Your Pet’s Natural Grocer



Pet Allergies ~

Just like humans, pets can suffer from allergies to irritants in their environment:  pollen, mold, grass, cleaning products or a specific types of food or food ingredients.


Environmental Factors ~

About 90% of allergy symptoms in pets are caused by environmental factors ~ indoors and outdoors.

If your pet is allergic to something at home, they’ll exhibit symptoms throughout the year. If allergic to something outdoors, symptoms will be seasonal. It is important to remember that unlike us, our pets can’t remove themselves from environmental irritants, especially indoors.


The most common signs of an allergic reaction are frequent itching, chewing and biting.  When environmental allergens are inhaled, results may be sneezing, coughing and watery eyes.

Unfortunately, allergy testing through your veterinarian can be costly. An alternative solution is to follow a process of elimination to determine whether the allergy is environmental or food related.


Creating a healthy living environment for your pet ~

Our pet’s noses are very sensitive to allergens lurking in your home so it’s important to create a healthy living environment. Suggestions to lessen your pet’s exposure to environmental toxins include making sure no one smokes inside, using non-toxic, unscented natural cleaners and chemicals and investing in an air purifier to keep the dust down. Outdoors, eliminate your pet’s exposure to pesticides, fertilizers and natural allergens such as pollen and grass.


Environmental allergies?

• Supplement with Omega-3 and Omega-6 fatty acids,they offer relief from inflammation.

• Because dogs and cats sweat through their noses and the bottom of their feet, they can pick up a lot of debris like pollen, dust and cleaning agents. Regular bathing is a great way to rinse away allergens and relieve itchy skin. A nice cool bath using an oatmeal or tea-tree, oil-based shampoo/soap is very soothing.

• Use a natural antihistamine rather than prescription antihistamines/steroids because long term exposure can compromise your pet’s immune system.

• Keep pets away from the offending allergen, even if they’ve had an allergy shot.

• Reduce the possibility of mold forming by using a dehumidifier.


Food allergies?

Only about 10% of allergies in dogs and cats are caused by food. If your pet has a true food allergy, he’ll exhibit symptoms such as itchy skin on the face, feet, ears, forelegs and could  have chronic or recurring ear infections.


WARNING:  Commercial, low-quality pet foods found in grocery stores lack essential fatty acids and usually contain chemical preservatives, artificial coloring, low-quality proteins and common food allergens such as corn, wheat and soybeans.


Tags:  career change  entrepreneurship  family-operated business  family-owned businesses  Franchising  small business  small business owner  starting a business  Tucson  women owned businesses  women owned small business  women-owned business 

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How To Get More Money Out Of Your Business

Posted By Jason Trujillo, Woodbury Financial, Thursday, January 29, 2015

How To Get More Money Out Of Your Business

Article originally appeared on Forbes.com on January 26, 2015.

Click here to read original post.  

Last week, I spoke at the Arizona Institute, a longstanding academic conference for top financial service professionals – the best of the best.

That’s why I was surprised when they were surprised about my contention that there are many ways a business owner can get liquidity out of a company without sacrificing control. Many of these advisors thought liquidity in a privately held business is simply something an owner can’t unlock until the business is sold.

Let me suggest just a few popular methods available for business owners to free up wealth from their businesses. Put them under the four-word banner headline:

    CASH NOW, EXIT LATER

To make these techniques more understandable, I’ve put some realistic numbers together and given a name to our theoretical client.

Charles Goodwin* is a 100% owner of Goodwin Industries. He’s 52 and has a daughter who is active in the business. The business is worth $15 million, is growing and profitable. There is a $2 million loan outstanding for which Charles is a personal guarantor. Charles is at a stage in life where he would like to unlock a large amount of the company’s wealth and have the proceeds available for various personal projects. And though he has no interest in exiting the business currently, he wants his daughter to eventually own and run the business.

  1. Private equity – One approach would be to seek out a private equity company interested in making a non-control investment in Goodwin Industries. Contrary to popular press characterizations, not all private equity companies are corporate raiders bent on firing staff and taking assets off-shore. Many private equity companies are seeking out profitable companies who have owners who want to free up capital without giving up control. The private equity firm provides liquidity. The owners continue to provide expertise and profit. In Charles’ case, he might sell a non-controlling interest in his company to the private equity firm (something less than a $7.5 million stake), using the after tax proceeds of the sale for his personal projects. This liquidity might also help relieve Charles of his personal guarantee on the $2 million business loan.
  2. Employee Stock Ownership Plan (ESOP) – Although an ESOP is structurally a qualified retirement plan, functionally it can be a great way to generate liquidity for a business owner. Because of its significant tax advantages, an ESOP is a corporate finance vehicle that can help both the owner and the employees. The owner frees up cash, and the employees gain an equity stake in the business. Charles could create an ESOP for the benefit of the employees and sell a non-controlling interest in the business to the ESOP. Goodwin Industries would borrow the money needed to fund the ESOP, and the ESOP would then use these contributions to buy a stock interest from Charles. This transaction would not defeat his hope to eventually have his daughter take over the business. She can still buy or inherit the controlling interest in the business from her father.
  3. Recapitalization – Now that business lending has returned to some degree of normalcy, recaps are once again popular in business liquidity strategies. A recap can come in many forms, but when the goal is to get business liquidity to an owner, there are two basic strategies. In one case, commonly referred to as a “leveraged stock buy-back,” the business would generate liquidity by borrowing money against the value of the business and distributing that cash to the owner through redemption of the owner’s stock. So, in Charles’ case, Goodwin Industries would borrow several million dollars and use those proceeds to redeem an appropriate amount of his stock. Charles would remain in control of his business, but now, he would have several million dollars of liquidity in his pocket. The other form of recap, known as a leveraged dividend recap, is what Charles actually did with his business. Time to break this transaction into more detail.

What I’d recommend in this case

I’d recommend Option No. 3 in this case. Charles engages an investment back to obtain $8 million in senior and subordinated debt from a bank and private investor.

He uses the opportunity to remove the personal guarantee on the existing loan, and he begins discussions with his daughter about an eventual sale of the business to her. After netting out the costs of the transaction, Goodwin Industries pays out a special cash dividend to Charles.

Here is how the numbers work out:

  • $8 million in loans
  • Less $500,000 expenses for investment bank and related costs
  • Equals $7.5 million available for a special dividend to Charles

After, the value of the firm for purposes of negotiating a sale of the business would be $7 million ($15 million original valuation less expenses and loans).

Charles should be pleased with the transaction. He both frees up capital for personal use and lowers the value of the business to make it easier to affect an eventual transfer of the business to his daughter.

This strategy is not without challenges:

  • High transaction costs
  • A hefty one-time tax to Charles
  • Significant debt service for the company

In a case like this, however, the positives would outweigh the negatives.

* All information in the case study is fictitious and is used to illustrate business liquidity options. Any resemblance to real persons, living or dead, is purely coincidental.


 

Tags:  Arizona Institute  business lending  business owners  cash dividend  employee stock ownership plan  ESOP  investment  leveraged stock buy-back  liquidity  personal guarantor  Principal Financial Group  private equity  privately held business  recapitalization  small business owner  Steve Parrish 

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3 Tips To Avoid A Majority/Minority Stockholder Smackdown

Posted By Jason Trujillo, Woodbury Financial, Tuesday, December 2, 2014

3 Tips To Avoid A Majority/Minority Stockholder Smackdown by Steve Parrish.

Article originally appeared on December 1, 2014 on Forbes.com.

Click here to read original post.

“All animals are equal, but some animals are more equal than others.”

- Animal Farm, George Orwell

Most of us had to read Animal Farm in school. The basic idea is that animals rise up to take over a farm, and through various political maneuvers, they end up running the farm much as their former human rulers did.

Whether you consider the book a dystopian allegory … or just a good read… the point is that those in control get to define the meaning of “equal.”

This cynical view of things certainly doesn’t apply to most aspects of business management. But it is a reminder that those business owners who are in control get to determine what’s fair and not fair for the other owners.

Being a shareholder in a privately held business is usually a voluntary condition, and typically, the shareholders know each other. Accordingly, in most situations, the issue of control is not a problem for these owners. The majority shareholders and their management team run the business, and the minority shareholders are employees, family members or passive investors.

As long as the business is doing well, conflict is rare.

Still, in the business world, control has value, and lack of control has disadvantages. When a major issue bubbles up, it’s the controlling interest that determines the outcome. This is one reason why the IRS often imposes a valuation premium on a controlling block of stock and allows a valuation discount for minority stock ownership.

Majority vs. Minority

Occasionally the control issue erupts into a legal challenge. There is a long history of minority shareholders claiming that the majority owners are acting unfairly.

Shareholder disputes may involve corporate policy, dividend policy or stock valuation. And some of these cases end up in court. Consider two derivative shareholder cases:

  • One that’s 95 years old.
  • One that’s only a year old.

Dodge vs. Ford Motor Company

In Dodge v. Ford Motor Company, the Michigan Supreme Court held that Henry Ford owed a duty to the shareholders of the Ford Motor Company to operate his business to profit the shareholders, rather than the community as a whole or employees.

The essential dispute was that the Dodge brothers, who at the time owned 10 percent of Ford Motor, wanted a higher dividend payout while Henry Ford wanted to share the company’s significant surplus with a broader audience.

After winning the case, the Dodge brothers used their increased dividend payout as capital to build their own business.

You may be familiar with that Detroit-based business.

Baur vs. Baur Farms, Inc.

Fast forward to 2013 where in Baur vs. Baur Farms, Inc., the Iowa Supreme Court also held in favor of the minority shareholder.

In this decades-long dispute between cousins, the court declared that a minority shareholder who wants out needs to be offered a fair return on his investment. Essentially, the case established that the majority shareholders can’t simply use their voting control to impose an unfairly low buyout price on a minority shareholder.

Avoiding Disputes

These cases should not overly concern business owners.

Courts give businesses a wide berth in determining how and when to pay out dividends and how to determine the value of shares when a buyout is involved. Still, who wants a smackdown between shareholders?

No business benefits when the owners are in conflict.

These cases remind us that planning is the best way to avoid conflict. There are some common-sense planning steps to avoid, or at least mitigate, clashes between majority and minority shareholders.

1. Determine and update the value of the business.

Closely held businesses do not trade on a public exchange. Consequently, valuation is always in question. Yet these businesses need to determine their value in order to, among other things, obtain loans, create executive compensation plans and execute buy-sell agreements.

Updating the value of the business, even informally, can help shareholders mutually understand the wealth and challenges of the business they collectively own.

2. Make sure the buy-sell agreement reflects the actual value of the business.

Updating the value of the business alone is not sufficient to assure a conflict-free transfer of shares.

Too many buy-sell agreements state a sale price for shares, but fail to update that price to reflect current conditions. A best practice is to have the buy-sell agreement:

  • State the financial basis for the valuation.
  • State the actual value to be used in the buying and selling of shares.
  • Determine how often that stated value will be updated.
  • Provide a backup method in case the value has not been updated.

3. Communicate.

Control of a closely held business will evolve with changes in marital status, family additions and owner departures. Further, because of possible voting blocks, preferred share classes, management changes and myriad other corporate conditions, there is not always a clear delineation between majority and minority shareholders.

The best solution is ongoing communication.

The corporate formalities of shareholder communication and meetings need not be just bureaucratic necessities. They can be a way to head off trouble.

If everyone knows how the business is doing financially, differences can be managed quickly, and major disputes can be averted.

Company shareholders have an equal interest in seeing their business prosper, but they don’t necessarily share equally in that success. Some shareholders are “more equal” than others, to paraphrase Animal Farm. Much of this can be worked out as long as the affected parties know what’s going on. Through planning and communication, most problems can be kept from turning into a battle.

 


Tags:  Animal Farm  block of stock  business valuation  buy-sell agreement  capital  communication  dividend payout  Dodge  Forbes.com  Ford Motor Company  George Orwell  IRS  Principal Financial Group  shareholder  small business  small business owner  Steve Parrish  stockholder 

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