It’s Time for That Annual Business Checkup – 2016 Edition
Year-end can be a stressful time for most people, and business owners are no exception. Between holiday gatherings, family events, and vacations, it’s easy to put off focusing on the business. However, the end of a fiscal and calendar year is an ideal time to review a company’s health and fitness. As 2016 winds down, consider a closer look at some aspects of your business that may not have been scrutinized recently:
1. Workforce Review.
• Overtime: In December 2016, the new Department of Labor rules about overtime go into effect. We covered this topic in depth earlier this year (see Business Insights, August 2016) and many companies have certainly reviewed and modified their payroll practices to accommodate the higher exemption threshold that was announced. If you have not done so already, it’s time to review your employee census to make sure you are properly tracking for and paying overtime to your nonexempt employees. As a reminder, employers must pay workers a salary of at least $913 per week, or $47,476 annually, in order to meet the exemption. As the previous rate was $455 per week, many employers must double the minimum salary they pay in order to keep employees exempt from overtime. In addition, in order to meet the highly compensated employees’ exemption, the annual salary threshold has been raised to $134,000 from the previous $100,000 annual salary.
• Satisfaction: On a less technical note, this is a good time to see how your employees are faring. Beyond reviewing performance and giving increases, businesses should spend the time and effort to discuss job satisfaction, future plans, and growth potential, especially with key employees. Service oriented companies such as consulting and technology providers can be devastated by high turnover rates, and an annual check-in may help alert management to potential problem areas.
2. Registrations, Licenses and Permits.
Reviewing the status of current regulatory requirements that may apply to your business operations is necessary at least once a year, especially companies with multistate operations. We are often surprised to find how many businesses, even well-established ones, miss key state or local filings such as these:
• Local Business Licenses: Many cities and counties require any business that stores inventory or leases space within its jurisdiction to obtain a business license. The license process varies significantly between localities but is important to get to avoid penalties for doing business without one.
• Sales and Use Taxes: These are often overlooked by management but can quickly become a major problem. The goods and services covered by or exempt from sales and use taxation vary greatly from state to state, as does the administration of those taxes.
• Corporate Qualifications: States require any company that is “doing business” within its borders to register to do business with the State. The registration may be at the corporate level with the Secretary of State, with the Department of Labor, or with the tax authorities, depending on the nature of the business and the extent of operations. Again, the rules vary from state to state, so check carefully in order to comply.
3. Security and Coverage.
• Cybersecurity: Although this issue is well beyond the scope of this article, the continuing threat to businesses (and everyone) cannot and should not be ignored. Companies of all sizes need to make sure that their systems and operations are as well protected as possible from outside threats. A review of systems by a professional who is current on the state of cybersecurity is a critical component of any business checkup.
• Insurance: Workers Compensation, Key Man, Umbrella Policies, Premises Liability Coverage, Errors and Omissions, and Employment Practices Liability are some key policies that every business should be or should consider carrying. Additionally, policy limits should be reviewed frequently to make sure that the coverage has kept up with growth in staff or operations.
Keeping up with federal, state, and local developments that impact your operations can be hard if not done regularly. Reviewing a business’ health and security at least once a year is an important part of management’s duties to the company, its owners, employees, and other stakeholders.
Business Insights is hosted by the Law Firm of
Kumar, Prabhu, Patel & Banerjee, LLC (KPPB).
Sonjui L. Kumar is a founding partner of KPPB Law, and a corporate transactional lawyer representing companies in all aspects of corporate law, including cross-border transactions.
Disclaimer: This article is for general information purposes only, and does not constitute legal, tax, or other professional advice.
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