This week I gave a lecture on what a small business needs to do to comply with the new Affordable Healthcare Act. If your business has under 50 employees, the surprising answer is....not much! A business with less than 50 employees is not required to provide health care coverage.
If the employer is covered by Fair Labor Standards Act, then one must provide notification to their employees about the new Health Insurance Marketplace; inform employees that they may be eligible for a premium tax credit if they purchase coverage through the Marketplace and advise employees that if they employee purchase a plan through the Marketplace, they may lose the employer contribution (if any) to any health benefits plan offered by the employer. This notice must also provide to all new employees going forward. To get a copy of the notice you should send, go to the Department of Labor's website.
Many businesses start out on the fly. You start making a product, your family and friends love it, you decide to start selling it and boom! you have a business before you even know it. In an effort to save on some start up costs, you might delay incorporating or even getting insurance for your business. This is a bad idea and can expose you and your assets to claims.
What's a boot strapping new business owner to do? If your state has them, form an LLC! An LLC is a limited liability company and its purpose is to do just that, limit the owner's liability. Many people mistakenly think it's a corporation and there will be all kinds of complicated tax issues. Not so. Unless you elect otherwise, an LLC is taxed just like the owner, which means you just report your profits and losses on your personal income taxes. Eventually, if you are dealing with a large number of profits, you may want to elect to be taxed otherwise, but make sure you have a good accountant in place to help you make the switch.
In the meantime, any liability incurred by the LLC is assigned to the LLC, not the owner of the company. It's a win win for most small business owners. Does this mean you don't need liability insurance? No! You should still get the proper insurance, especially if you own a brick and mortar business. For example, if someone slips and falls and brings a lawsuit, your liability insurance will defend you, covering any claims and attorney's fees. Without the insurance, you'd be facing costly legal fees on your own.
In short, don't save money by not setting up the proper business entity and buying appropriate business insurance. Consult a small business lawyer for advice.
Sarah E. Holmes is a Philadelphia business attorney and strategist that helps start ups and established businesses looking to expand, protect their assets and increase their profits in an approachable, down-to-earth way.