Design Your Business – Plan The Smart Way
By Matthew K. Taylor
Entrepreneurs, startups, and established companies all face many of the same legal questions when starting a business. It’s not a legal requirement, but founders should still write a clear, focused business plan early on. A good plan helps you communicate your goals to lenders, investors, suppliers, distributors, and management.
An effective business plan should:
- Include an executive summary
- Describe the products or services offered
- List company assets, liabilities, budgets, and key timelines
- Summarize management structure, company structure, and goals
- Profile the target customer and analyze the competition and market trends
- Describe marketing strategies
- Forecast sales growth and profits
Before you share a business plan with outside parties, sign a nondisclosure agreement first. This protects sensitive business information. At Taylor Law Offices, we specialize in drafting nondisclosure agreements that keep your confidential information protected.
Business Entity Structure
By Christian S. Martineau
Choosing the right legal structure is one of the most important decisions when forming a new business. It affects liability, taxes, ownership, management, and financing. There are several ways to structure a business, but the three most common are:
- Limited liability companies (LLCs)
- S-corporations
- C-corporations
These structures are popular for a reason: each one limits the owners’ liability. In other words, you can only lose what you put into the company. The key to a strong start is choosing the entity structure that fits your business’s actual needs.
LLCs work well for new businesses that want flexibility and don’t want to follow strict corporate formalities. Corporations have existed for centuries, but LLCs weren’t recognized until the 1970s. They were designed to give owners more hands-on control.
For example, no matter how an LLC’s ownership is structured, its members can choose how the LLC is taxed. Unlike a C-corporation, an LLC isn’t taxed by default — it’s a “pass-through” entity, meaning the tax burden passes through to each member’s personal income instead.
S-corporations share this pass-through feature. Pass-through taxation avoids double taxation and can save new business owners real money over time.
By default, LLC members pay self-employment tax on their income. Corporate shareholders who also work in the business, on the other hand, are treated as employees — they pay tax on their employment income and on their dividends.
The traditional C-corporation, a solid choice for businesses planning to offer shares to the public, faces double taxation: the corporation pays tax on its annual earnings, and shareholders pay tax again on dividends. The same income gets taxed twice.
Ownership and management also differ between LLCs and corporations:
- Corporations are owned by shareholders; LLCs are owned by members.
- LLCs can offer ownership in exchange for money, property, ideas, equipment, or sweat equity — corporations generally can’t.
- Corporation ownership is tied directly to how many shares someone holds. Only C-corporations can create different classes of shares with different rights.
- Corporations are run by a board of directors and officers, who don’t need to be shareholders.
- LLCs are managed by their members, in whatever way the members choose.
There’s a lot to weigh when choosing a business structure. At Taylor Law Offices, we’ve helped hundreds of new businesses work through these factors and find the entity structure that fits.
Selling Your Professional Company
By Christian S. Martineau
When buying or selling a professional company, due diligence often misses one key factor: whether the deal is even legal. Under Idaho law, a “professional entity” is a company formed specifically to provide professional services.
Like most states, Idaho lets professionals — doctors, dentists, attorneys — form either a professional entity or a regular one. That’s why you’ll see a “P” in front of some company names, like Taylor Law Offices PLLC. The “P” means only licensed professionals own the company.
Professional entities and regular entities are nearly identical under Idaho law, with one major exception: strict rules govern who can buy or sell a professional company.
Idaho law requires that a professional entity be owned only by other professional entities, or by licensed individuals in that same profession. That means owners can’t sell the company — or their share of it — to anyone who isn’t licensed.
For example, the fictional “Idaho Family Medicine PLLC” can’t sell to an unlicensed person or to “Boise Family Medicine LLC.” If a sale like this happened, either party could ask an Idaho court to void the deal for illegality — which could trigger an expensive legal battle between buyer and seller.
For decades, the Idaho Board of Medicine held that unlicensed entities couldn’t employ physicians to treat patients. This rule is known as the “corporate practice of medicine,” and it shaped Idaho law from the early 1950s onward.
In 2016, the Board passed a resolution saying it would no longer discipline physicians for working for unlicensed entities. That resolution effectively set the old rule aside, opening the door for non-professional entities and unlicensed individuals to invest in, buy, or open medical practices.
Still — the Board choosing not to discipline a violation doesn’t make that violation legal.
If you’re thinking about selling your professional company, start due diligence by checking the buyer’s licensing status. Doing this early avoids the risk of the sale being unwound later for illegality.
If you’re a professional considering the purchase or sale of a professional entity, reach out to Taylor Law Offices. We’ll guide you through the deal and help make sure it holds up legally.
The Changing Bankruptcy Landscape
By Max T. Williams
Debt is part of everyday life for most Americans, and it can fund a standard of living that would be hard to reach on ordinary income alone. But with that comfort comes risk. Some people pay off their debts easily. Others spend more than they earn — and that’s where bankruptcy comes in.
Bankruptcy is a legal process, built into the Constitution, that gives debtors a fresh start. It’s designed to distribute a debtor’s assets fairly among creditors.
Bankruptcy filings have risen over the years — especially Chapter 7 filings, also called asset liquidation filings, which are the most common type. Chapter 7 lets a debtor discharge (wipe out) debts once the court approves.
As Chapter 7 filings rose, credit card companies and lenders grew more concerned about getting repaid. Heavy lobbying from lenders led Congress to pass the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 — known as BAPCPA 2005.
What BAPCPA 2005 changed:
- It’s now harder for higher-income individuals to qualify for Chapter 7. Instead, many are pushed into Chapter 13, which requires a repayment plan (approved by creditors) to pay back all or most debts over a five-year period.
- In practice, this means someone who earns above the median income, with money left over after living expenses, likely won’t qualify for Chapter 7 anymore.
- Certain debts became harder to discharge after 2005. The most common examples for everyday consumers:
- More than $750 in cash advances on a credit card taken out within 90 days of filing
- More than $500 charged on a credit card for luxury goods within 90 days of filing
- Nearly all federal and private student loans (some used to be dischargeable; now most aren’t, unless the debtor proves undue hardship — a high legal bar)
The takeaway: manage your debt carefully so you don’t need bankruptcy court. Discharge wasn’t easy before BAPCPA 2005, and it’s harder now for middle-class Americans. Chapter 7 is no longer a guarantee — many filers are pushed into Chapter 13, which means formulating a repayment plan and paying back creditors before receiving a discharge.
What Types of Insurance Does a Small Business Need?
By Todd C. Amick
If you run a small business — or plan to — you probably already know some of the risks you face. But there are likely others you haven’t thought of. That’s why it pays to dig a little deeper before you sign with an insurer.
To protect yourself and your business, first identify the most common claims made against businesses like yours. Then get coverage for those specific risks. It sounds obvious, but most business owners we work with skip this step — and it costs them.
Identifying risks. The best ways to spot risks: draw on your own experience, ask others in your field, talk to insurance agents, and talk to attorneys who’ve sued or defended similar businesses. You won’t catch every risk this way, but you’ll be ahead of most competitors.
The next step — arguably the more important one — is confirming with your insurer, in writing, that you’re actually covered.
Understanding your coverage. Insurers make money by collecting premiums, not by paying claims. So just having a policy often isn’t enough.
Few things sting more than a letter from your insurer saying, “This claim is not covered due to X exclusion.” That means you’re on the hook not just for the claim, but for hiring and paying an attorney to defend your business. Even a modest claim ($5,000–$20,000) can cost $10,000–$20,000 in legal fees.
Once you’ve identified your likely risks, call several insurance agents, walk through those risks, get their assurance of coverage, and request quotes. Even after doing this, you may still end up uncovered — agents are focused on signing you up, not handling claims, so they may not know every exclusion buried in the policy.
That said, insurers are generally bound by what their agents tell you, if the agent’s statement conflicts with the policy. So, it’s smart to follow up: send the agent a letter or email summarizing your conversation and the risks discussed, and ask them to confirm in writing that those risks are covered.
Coverage to Consider
At a minimum, most small businesses should carry:
- General Liability insurance
- Business Property insurance
- Or a BOP (Business Owner’s Policy), which bundles both
Add these as needed:
- Workers’ Compensation — if you have employees (mandatory in most states)
- Commercial Auto — if you or employees drive for work
Once your primary coverage is in place, look at the risks unique to your business and fill any remaining gaps.
Types of Insurance, Explained
Liability Insurance is a must-have. It comes in several forms — the two most common are General Liability and Professional Liability.
General Liability Insurance covers claims against your business for bodily injury or property damage. Example: a customer slips and falls in your store and files a claim for medical costs — General Liability helps cover it.
It also covers claims that your business damaged someone else’s property.
Professional Liability Insurance (Errors & Omissions, or “E&O”) covers claims that your business made an error or omission in the products or services you provided. Example: a hair stylist’s client claims her color treatment turned her hair the wrong shade due to a processing error — E&O coverage can help settle the claim.
It also covers clerical mistakes made by employees, not just owners. Example: a dental office receptionist books a patient for the wrong procedure, and that procedure is performed — E&O can help cover the resulting claim.
Small Business Insurance covers liability and property damage claims, and can replace lost income if a covered incident forces you too temporarily close. You have to opt in and pay for this coverage. Because it covers a wide range of situations, it can usually be tailored to your specific business.
Workers’ Compensation Insurance provides benefits to employees who are injured or become ill on the job. If an employee dies from a work-related injury or illness, benefits can go to their family.
Commercial Auto Insurance covers accidents involving you or your employees while driving for work.
Business Income Insurance replaces lost income if you have to temporarily shut down because of a covered incident.
Like Santa Claus and the Easter Bunny, the idea that your insurer is simply “there to help” eventually needs a reality check. Trust, but verify — that should be your mantra with insurance. A few hours with your attorney, plus some research on your own, can save you significant time, money, and stress down the road.
Disclaimer
By Matthew K. Taylor
The articles in this publication are for informational purposes only and are not legal advice. Contact your attorney for guidance on any specific issue. Nothing here creates an attorney-client relationship between you and Taylor Law Offices PLLC. Opinions expressed are those of the individual author and may not reflect the views of Taylor Law Offices PLLC or any individual attorney. Portions of this publication may be considered Attorney Advertising under some states’ rules. Prior results do not guarantee a similar outcome.
To schedule a free consultation, call Taylor Law Offices at (208) 342-3006.
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