Basic Information Regarding Limited Liability Companies In Iowa Guest Blogger: Dennis Puckett of Sullivan & Ward, P.C. a West Des Moines business law firm.

The Limited Liability Company is a hybrid form of doing business that combines characteristics of the corporate structure and the partnership structure. It is a separate entity like a corporation and therefore carries liability protection for all of its members/owners, but is generally taxed like a partnership which has the benefit of flow-through taxation.

The owners are called members and can be virtually any entity including individuals, corporations, other LLCs, trusts, pension plans, etc. Some states, like Iowa, permit one-member LLCs, and others do not. If you are going to do business in multiple states, it may be wise to have at least two members of the Limited Liability Company. A husband and wife are considered two members for formation purposes.

The manner in which the Limited Liability Company will be operated is set forth in an operating agreement, which is an agreement between the members. The operating agreement for a Limited Liability Company is similar to the by-laws for a regular corporation.

In many respects, a Limited Liability Company is very similar to a Sub-Chapter S Corporation. However, the Limited Liability Company provides much greater flexibility with respect to owners and the allocation of income to the owners. An S-Corporation may only have one class of stock, while an LLC may offer several classes of member ownership. Any number of entities or individuals may own interest in an LLC; however, ownership interest in an S-Corporation is limited to no more than 75 shareholders. Also, S-Corporations cannot be owned by C-Corporations, other S-Corporation, many trusts, LLCs, partnerships or non-resident aliens. LLCs are allowed to have subsidiaries without restriction, while S-Corporations are not allowed to own 80% or more of another corporation’s shares.

Like a regular corporation, the primary advantages of forming a Limited Liability Company is the liability protection the corporate entity affords its members (shareholders with respect to a regular corporation). The members of a Limited Liability Company are not liable for the debts and obligations of the company. By comparison, in any Sole Proprietorship or Partnership, the owner’s personal assets may be used to pay debts of the business. Another advantage relates to the on-going existence of the company. If an owner of the company dies or wishes to sell their interest, the corporation can continue to exist and do business. If an owner of a Sole Proprietorship or Partnership dies, generally the business or partnership also terminates.

Unlike a regular corporation, the wages paid to the members of a Limited Liability Company will be subject to self-employment tax; however, self-employment tax may be avoided on members who do not participate in management.

Click here for more information on forming a limited liability company in Iowa.

Conduct Free Background Checks Using Iowa Courts Online Web Site

You can conduct a free background check of prospective employees by accessing the Iowa Courts Online Web Site. You should still have all prospective employees sign a release and authorization allowing you to conduct a background search. If you are conducting background searches of your employees you should also make sure to conduct the search before offering employment or make the offer conditioned upon the successful background check.

Please be sure to consult your employment lawyer before conducting background checks using online resources.

Flu Pandemic Planning for Business – Alert Guest Blogger: Mark Landa of Sullivan & Ward, P.C.

In a recent Boston Globe article highlighting the emphasis on corporations planning to meet the challenges to be posed by a flu outbreak, it was asked, "If a super-flu sweeps the globe, who will haul away the garbage? Keep the factories running, making cars and computers and tissues? Stock and sell groceries? Who will keep the electricity flowing?"

A survey of U.S. businesses has revealed that two thirds are not adequately prepared to protect themselves from an influenza pandemic and 39% say there is not much they can do anyway. A national preparedness plan issued by President Bush in November stated that, in a worst case scenario, the country will need about 750,000 ventilators. U.S. hospitals estimate there are 105,000 ventilators available today and 100,000 are currently in use. The nation’s school, long recognized as being incubators for flu and other viruses are being told to plan for the possibility of a flu outbreak. Regardless of the planning for such an event, all federal and world health organizations have warned that we should be prepared to plan for a widespread flu outbreak as if a blizzard is coming – a blizzard that could last up to 18 months.

World and U.S. Health organizations have also concluded that vaccinations will not be available to protect us from the spread of influenza and that the only defense for at least the first six months of any true pandemic will be the health precautions that businesses, schools and churches take to prevent its spread among workers, students and congregations. All organizations are advised to establish a plan to prepare for the likelihood of flu outbreak whether it is limited to a local region or is worldwide.

The Iowa Department of Public Health has recommended that community planning be initiated as soon as possible and that this planning occur at the county level.

Business Owners Should Consider Mediation Before Litigation to Resolve Disputes:

A mediator can help business owners find ways to settle disputes on their own terms. Unlike an arbitrator, the mediator does not decide who is right or wrong. Rather, the mediator enables people to retain their decision-making power and use their creativity to find an acceptable solution for all parties.

Successfully mediated settlements commonly result in:

A cost-effective, speedy resolution
Reduced levels of stress and animosity among parties
Enhanced respect between the disagreeing parties
A sense of cooperation between parties
A feeling that the settlement is fair, reasonable, and cost-effective.

Click here to find out more about mediation to resolve disputes.

Tips to Protect Your Business and Customers from Identity Theft

If your business maintains people’s information, you must protect that information from misuse. Here are some basic tips from the Better Business Bureau, National Cyber Alliance and Federal Trade Commission.

1. If you do not need the information, do not collect it. The more information you have, the more tempting it becomes to a thief and the more damaging it is to your customers if the information is stolen.

2. If you need it once, do not save it any longer. Companies sometimes collect information that’s necessary to complete a single transaction, then file that information away (either in a paper file or in the computer file). For example, what about job applications for people you do not hire? These contain all sorts of information, including social security numbers. If you don’t keep it, it cannot be stolen. You should also have well-drafted document retention policies regarding all company and employee documents.

3. If you have got it, but you don’t need to save it, dispose of it carefully. A good deal of identity theft happens in the trash barrel or dumpster. Even the small business can afford an inexpensive paper shredder (preferably the cross-cut kind). Make sure you use the shredder to dispose of customer or employee records.

4. If you have to keep it, think security. First, make sure those paper records that contain personal information are kept under lock and key. Make sure computer terminals are password protected. Limit the eyeballs that have access to these records – only those who have an absolute need-to-know should have access to personal information. Don’t allow customers or others to wander around the private areas of your business.

5. Do not broadcast personal information. How often have you stood in line at an office or store behind someone who was being asked to give his/her social security number, telephone number or birth date? How many times have you watched a company’s employee pull up personal information on a computer screen that is visible to other customers? Or have you seen personal information on a file that was left open on a desk or counter? Instruct your employees to be sensitive to these issues. Turn computer screens so they can’t be viewed by anyone other than the operator. Instruct employees who need to have personal information to have customers jot that information down, and do not repeat it out loud where it can be overheard by others. (Dispose of the writing with a shredder). Do not put personal information like account numbers in billings or letters where that information is visible through windows in the envelope.

6. Do not use Social Security Numbers as account numbers. This practice is just downright dangerous – to you and your customers.

7. Do not give out employee or customer information to anyone whose identity cannot be positively confirmed. Information thieves and stalkers tell authorities over and over how easily they were able to obtain all sorts of valuable information simply by calling small business owners or personnel departments and asking. Posing as government agencies or credit grantors or health insurance providers, these thieves have found that a well-crafted, believable story can often get you past the best locking file cabinets or pass-word protected computers. Your organization should have very strict policies on when and how employee or customer information is shared.

8. Locks and alarms are a real deterrent. If you have done everything suggested, you will be more secure during business hours. Make sure your business is just as secure when your business is closed. Make sure all vital records and offices are locked during non-business hours. Exterior doors should have deadbolt locks. Hinges on exterior doors should be secured to prevent removal. Exposed windows should have shatter-proof glass. Your business exterior should be adequately lighted from dark to dawn. Naturally, the business should be protected with an alarm system, preferably one that is monitored by a security company. Your business insurance company — or, in some cases, your local police – may be able to assist you with a security assessment.

How to Avoid Incorrectly Treating a Worker as an Independent Contractor – Part II.

In yesterday’s blog I decribed the factors which often demonstrate a worker is an employee. If you answer "Yes" to the following questions you probably have an independent contractor.

1. Does the worker furnish significant tools, materials and equipment?
2. Does the worker have a significant investment in facilities?
3. Can the worker realize a profit or loss as a result of his or her services?
4. Does the worker provide services for more than one firm at a time?
5. Does the worker make his or her services available to the general public?

A human resource audit may help you avoid incorrectly treating a worker as an independent contractor.