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Right out of law school, I got a great job in a big law firm handling insurance defense. Being young and arrogant, I used to say that my job was to “deny claims.”matthew-waring-MJAoiige14E-unsplash.jpg


Now, years later, that embarrasses me.


Denying claims was not my job and not what I was expected to do. I was

expected to read the file and figure out whether the claim was legitimate and whether the company had reasonable grounds to deny the claim.


Here is what I know now: By the time a business insurance claim gets to the point that it is being litigated over, you are in trouble. Either the business bought the wrong insurance and filed a claim that wasn’t covered, or it filed a frivolous claim, or it didn’t have enough coverage, or something else went wrong.


Here is what else I know: Insurance companies do NOT want to deny claims. They are in the business of covering risk and accidents and expect to pay legitimate claims; that is what they do and that is what keeps them in business.


So, what you need is to have a “legitimate claim.” Let’s look at how that works:


Let’s say your business was injured or damaged in some way. The first thing you need of course is a policy. But not just any policy, you will need a policy that covers – and doesn’t exclude – the type of damage you have. (More on that exclusion word in a sec.)


Small business can get all sorts of different types of coverage, for example:


  • Liability: Comprehensive General Liability (CGL) is a type of catch-all policy. It is “a standard insurance policy issued to business organizations to protect them against liability claims for bodily injury and property damage arising out of premises, operations, products, and operations.”
  • Commercial auto
  • E&O: Errors and Omissions insurance is for professionals and service businesses for claims arising out of allegations of sub-standard work, i.e., negligence and professional malpractice
  • Property: Protects business property and assets
  • Business interruption insurance: If a disaster or catastrophic event does occur, your operations and income may be interrupted. This covers that.


The first thing is to buy the insurance that provides the widest net for the types of foreseeable risks that your business may encounter.


As for exclusions, almost every policy will exclude certain risks/coverage. It is akin to a health insurance policy that excludes certain types of drugs, surgeries, etc. Make sure the exclusions in your business policy do not prevent the type of claim you may have.


Next, consider the amount of coverage. The amount and types of things covered are often constrained by what you can afford. Of course, you can’t insure against everything but the risk is not buying enough insurance. If you buy some cheapo policy that limits coverage of a claim to $10,000 and your damage is $100,000, you are out of luck.


Best practice: Buy as much insurance as you can afford.


Finally, consider the deductible: One common way to reduce costs is to have a high deductible. Smart, until you need to file a claim.


This is how it is supposed to work: You buy some insurance. Something happens that damages your business. You file a legitimate, covered claim. Your insurance reviews it and pays you the amount of your damage, less the deductible.


As you may gather, a lot can go wrong in that process. It could be that your deductible is too high, or your coverage is too low, or your type of claim is excluded, or that you may have waited too long (the statute of limitations has run).


There are two additional things you can do to protect yourself:


  1. At the start, before you buy, meet with an insurance broker. As opposed to an agent, who only represents one company, a broker can steer you to the right company and the right type of coverage.
  2. If your claim is denied, hire a lawyer. Period.


And hopefully, your attorney will understand insurance better than I did when I began those many years ago.




About Steve Strauss


Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert  Steve+Strauss+Headshot+SBC.pngcolumn is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest, The Small Business Bible, now out in a completely updated third edition. You can also listen to his weekly podcast, Small Business SuccessSteven D. Strauss.


Web: or Twitter: @SteveStrauss

You can read more articles from Steve Strauss by clicking here


Bank of America, N.A. engages with Steve Strauss to provide informational materials for your discussion or review purposes only. Steve Strauss is a registered trademark, used pursuant to license. The third parties within articles are used under license from Steve Strauss. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.


Bank of America, N.A. Member FDIC. ©2017 Bank of America Corporation

As small business owners, we are often so focused on the day-to-day running of our businesses that we overlook benefits we can be creating and receiving – at a low cost – for ourselves and our employees.


We also overlook the importance of planning for ourselves and our loved ones. As Baby Boomers age, more entrepreneurs’ and employees’ lives are disrupted by having to become caregivers for parents and grandparents. And, as individuals age, the costs of caregiving for ourselves can make a big dent on our financials. 


As my Future File legacy planning business is all about preparing families to deal with emergencies, aging and end-of-life issues, I spend each day talking about the importance of planning for long-term care. And, as there is a way to deduct premiums related to long-term care coverage, I thought it was important to spread the word.


I talked to Marc Glickman, a Long-Term Care expert, Actuary, and CSO of LifeCare Assurance, to share some of the reasons why this is important and how you can go about taking advantage of this benefit as a business owner.



Carol Roth: Why should small business owners be thinking about fundingLong-Term Care insurance now?


Marc Glickman: The risk of outliving our money has become a reality as we live longer. As we age, everyday costs can increase because we may need caregivers to help us with our activities of daily living (aka “long-term care”). Long-term care may even be needed at younger ages because of an accident or disabling disease like dementia.


Often, family will step in to provide informal care rather than paying for professional help. Initially, this might be manageable, but extended long-term care often disrupts the life of the caregiver.


Therefore, everyone should have a plan to protect their loved ones from the devastating consequences. It may make sense for a family to pay a professional caregiver. However, full-time caregiving services are expensive, typically ranging from $50,000 to $150,000 per year. An extended care event has the likelihood to drain income and deplete life savings for the family.


Long-Term Care Insurance (“LTCI”) can fund professional caregiving services provided in the home or in a long-term care community or facility. LTCI can be very affordable when purchased while individuals are younger and healthier. Plans are available starting for well under $100/month and provide maximum benefits of hundreds of thousands of dollars for an extended care event.


CR: Why does Long-Term Care insurance make a great benefit for small business owners to take for themselves or to provide to their employees?


MG: The government allows businesses to treat LTCI premiums similar to health insurance. The premiums paid by the business for employees are tax deductible as ordinary and necessary business expenses. The benefits received by the employees are generally received tax-free even after taking the tax deduction.


Therefore, one of the most efficient ways to fund an LTCI plan is through the employer.


Business owners can carve out plans based on criteria of their choosing for only themselves, for key executives or for everyone in their organization. The plan can also include coverage for family members. Most insurance companies provide discounted premium for couples applying together and the spouse’s coverage is tax deductible for the business, too.


This provides many benefits and protects businesses from losing key employees who could unexpectedly become a caregiver if they have bought family plan coverage. LTCI is also regularly surveyed as one of the most attractive benefits to reward and retain key employees.


CR: How do the tax benefits of issuing LTCI work for different business structures, especially knowing that most small business owners are S-Corps, LLCs, sole proprietorships and partnerships?


MG: C-Corporations are allowed to deduct the full premiums for all employees including the owners of the business assuming the deduction is considered reasonable compensation.


S-Corporations, LLCs, partnerships, and sole proprietorships can also deduct the premiums as a necessary business expense. For less than 2 percent of owners, premiums can be fully deductible. For greater than 2 percent of owners, the LTCI deduction for the business is generally passed through as income to the owner’s individual tax return. However, the owner can typically deduct this premium on line 29 of the 1040 as a “self-employed health insurance deduction” up to the lower of the actual premium paid or an annual limit based on the age that the IRS refers to as “Eligible LTC Premium.” This is not an itemized deduction and so, it can be taken on the first dollar of premiums.


For premiums paid in 2018, the deduction is up to $1,560 per person between ages 51-60 and $4,160 between ages 61-70. For a typical small business owner and their spouse, much of the LTCI premium is deductible on their individual tax return on line 29.


Tax reform has made the deduction relatively more valuable for small business owners who would otherwise pay a higher federal and state tax rate on their individual income.


CR: If a small business owner wants to explore getting LTCI, who should they speak with?


MG: Business owners will want to consult with an insurance agent or advisor who specializes in Long-Term Care insurance and is familiar with all the plans in the market. These agents can be found through referrals from your CPA, financial advisor or through web searches.


CR: Are there any pitfalls or mistakes that small business owners make in getting or structuring LTCI that can affect their benefits or their business?


MG: The most common mistake is waiting to get coverage. Many individuals can qualify for affordable plans while they are working but may lose the ability to qualify for these plans if they are diagnosed with a serious health condition.


Buy what you are comfortable spending now. As long as you are healthy, you can usually buy more coverage later. Even a small amount of protection today will provide your family time and begin the foundation for a long-term care plan.


While LTCI has become more popular as an add-on to life insurance or annuities, life and annuity plan premiums are not generally tax deductible for businesses.


There are new LTCI plans that come onto the market every year, each that provide their own value propositions and accept individuals with different medical conditions. Your agent or advisor can help you find the plan that is right for you.


Entrepreneurs know more than anyone the importance of planning and having a tax-friendly way to approach your long-term care is a great way to plan in a financially savvy way.



What to read next:

          The importance of employee perks and how you can offer more than you think 

          6 Things Entrepreneurs Can Do to Attract and Retain Good Employees

          Four Things Small Business Owners Should Consider Before Offering Employee Healthcare


About Carol Roth


Carol Roth Headshot for post.png

Carol Roth is the creator of the Future File ® legacy planning system, “recovering” investment banker, billion-dollar dealmaker, investor, entrepreneur, national media personality and author of the New York Times bestselling book, The Entrepreneur Equation. She is a judge on the Mark Burnett-produced technology competition show, America’s Greatest Makers and TV host and contributor, including host of Microsoft’s Office Small Business Academy. She is also an advisor to companies ranging from startups to major multi-national corporations and has an action figure made in her own likeness.


Web: or Twitter: @CarolJSRoth.

You can read more articles from Carol Roth by clicking here


Bank of America, N.A. engages with Carol Roth to provide informational materials for your discussion or review purposes only. Carol Roth is a registered trademark, used pursuant to license. The third parties within articles are used under license from Carol Roth. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.

Maybe the only thing worse than paying for insurance that you never use is not having insurance when it is needed. Insurance is one of those aggravating and pricy business Small Biz Insurance.jpgitems that are both important and responsible to have.


Buying insurance requires a cost-benefit analysis because you probably cannot afford all the insurance you would like to get. So, which insurance is vital, which is nice to have, and which can you (almost) safely pass on?


Starting with the basics, there are two types of insurance that all businesses need, no matter what: property insurance and liability insurance.


1. Property Insurance


Property insurance is essential. Property insurance protects your business assets from damage – things like the building, equipment, computers, and so on. Even if you run an online business and don’t have an actual brick-and-mortar store, you still have vital business equipment or inventory that surely needs protection.


And this dovetails with an important note for home-based business owners: your homeowner’s insurance will likely not cover any damaged business equipment – don’t make the mistake of thinking you are already protected!


2. Liability Insurance


Liability insurance is the other essential insurance every small business needs. Ultimately, liability insurance helps to prevent you from getting sued. Again, very necessary.


General Liability Insurance: Comprehensive General Liability insurance (often also called CGL insurance) protects your business from any potential liability due to negligence that could cause injury to others. For example, say that one of your employees at your carpet store, driving a forklift, knocks a roll of carpet onto a customer, injuring her. That is where your CGL policy would come into play (and no, I swear, I didn’t hurt anyone when I did this when I was 16 and working at my dad’s carpet store!)


General liability insurance protects your company from being sued by someone who was injured after having used your company’s products or services.


Professional liability insurance: Professional liability insurance isn’t necessary for all businesses. However, if you are a doctor, lawyer, realtor, architect, or computer consultant, professional liability insurance is something you should seriously consider investing in, and of course, may be something required by your administrating organization.


Like CGL, professional liability insurance protects you should negligence injure a client, only in this case, it would be your professional negligence, in which case, you will have a lot more to worry about.


3. Employee Insurance


Workers’ compensation insurance: This insurance is legally required if you have employees. It provides benefits to employees who have been injured on the job in exchange for their right to sue. This is demonstrably less expensive than a lawsuit.


Health insurance: Even if you don’t have a medium-sized company, providing your employees with health benefits is one of the best ways to keep them happy and loyal. Medical, disability, and dental benefits are all great ways to ensure a healthy workplace. Also, know that under the Affordable Care Act, employers with more than 50 employees are required to provide them with health insurance.


4. Miscellaneous Insurance


There are plenty of other types of insurance you can buy for your business. They are not all entirely necessary, but they can certainly prove beneficial.


  • Business Interruption Insurance:
  • Disability Insurance:
  • Key Person Insurance:
  • Data Breach:


The bottom line here, folks? Better safe than sorry.


About Steve Strauss


Steve Strauss Headshot New.png

Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest, The Small Business Bible, now out in a completely updated third edition. You can also listen to his weekly podcast, Small Business SuccessSteven D. Strauss.


Web: or Twitter: @SteveStrauss

You can read more articles from Steve Strauss by clicking here


Bank of America, N.A. engages with Steve Strauss to provide informational materials for your discussion or review purposes only. Steve Strauss is a registered trademark, used pursuant to license. The third parties within articles are used under license from Steve Strauss. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.


Bank of America, N.A. Member FDIC.  ©2018 Bank of America Corporation

Tax legislation enacted in December 2017 introduced a new deduction (Section 199A) available to owners of businesses operated in “flow through” entities, which would include sole proprietorships, S corporations, partnerships, and other entities that are taxed as partnerships for federal income tax purposes, such as LLCs and LLPs. This whitepaper from Merrill Lynch Global Wealth & Investment Management Chief Investment Office summarizes the many definitions, exceptions and limitations under this new statute.  ML_Tax Reform 2018_Animated Image_12-1-17.gif





Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions. Always consult your independent attorney, tax advisor, investment manager, and insurance agent for final recommendations and before changing or implementing any financial, tax, or estate planning strategy.


This material does not take into account your particular investment objectives, financial situations, or needs and is not intended as a recommendation, offer, or solicitation for the purchase or sale of any security, financial instrument, or strategy. Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances, and if necessary, seek professional advice. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of issue.

If you visit your local post office on April 15th, you’ll most likely see a long line of people waiting to file their tax returns before the deadline. Getting prepared for tax season now can ensure a painless filing experience. Tax season happens every year but small businesses (and their owners) sometimes feel ill-prepared to deal with the complexities of tax compliance. And with a new tax law in place, it is more important the ever to begin your preparation


Here are three important tips to help you prepare for a smooth tax season.


1. Find an accountant or CPA now.

If you don’t currently have a CPA, ask colleagues, your local chamber of commerce or bank, lawyer and financial advisor for a referral. Once you have a CPA, you can search for their eligibility to file your tax returns on the IRS Directory. CPAs and Enrolled Agents are qualified to file your tax returns and represent you in front of the IRS.

You can visit the IRS search site here:


2. Get your financial house in order.

Before you can start your tax returns, you will need your financial statements in order. Speak to your accountant or CPA about when to expect the preparation of your financial statements.


Contact your bank or visit your online bank account to download monthly bank statements for your accountant. Consider using Quickbooks or another bookkeeping software to organize your financial data. Using accounting software makes it easier to create reports for your business, file tax returns and provide support for bank loans.


3. Be sure to send Form 1099s and W-2s to employees and payees.

According to the IRS, if you’re a small business or self-employed and you made payments greater than $600 during the year to independent contractors, you’re may be required to send Form 1099s to those you paid and the IRS.


You are required to file Form W-2 for any employees that you paid $600 or more for the year and for those you withheld taxes for during the year.


Getting started earlier can give you the peace of mind that comes with the knowledge that your taxes have been handled. If you follow these tips, you’ll be well on your way to dealing with this important part of your business.


Related Articles:

Learn more about Online Banking in QuickBooks

Tax Reform and Small Business: The Good, The Bad and The Ugly



About Ebong EkaEbong+Eka+Headshot.png

Ebong Eka is no stranger to the world of personal finance. As a certified public accountant and former professional basketball player he offers a fresh perspective to small business planning and executing. With over fifteen years of accounting, tax & small business experience with firms like PricewaterhouseCoopers, Deloitte & Touche and CohnReznick, Ebong provides practical money solutions tailored to the everyday person, the aspiring entrepreneur or the small business owner.


Ebong is the founder of EKAnomics, a sales, pricing and leadership firm. He is also the founder of Ericorp Consulting, Inc., a tax and management consulting firm. Ebong is the author of “Start Me Up! The-No-Business-Plan, Business Plan.


Ebong is also the founder of The $250 Tax Pro, which provides tax preparation and consulting services in the Washington, DC area.


Web: or Twitter: @EbongEka.

You can read more articles from Ebong Eka by clicking here


Bank of America, N.A. engages with Ebong Eka to provide informational materials for your discussion or review purposes only. Ebong Eka is a registered trademark, used pursuant to license. The third parties within articles are used under license from Ebong Eka. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.


Bank of America, N.A. Member FDIC.  ©2017 Bank of America Corporation

It’s the time of the year where we resolve to work out more, eat better and up our game at the office. For the small business owner, you’ll be exercising the brain a lot more as you wrap your mind around the largest tax reform bill in recent memory.  In short, there is some good news, bad news and ugly news regarding the Tax Cuts and Jobs Act.


The good news: There are plenty of opportunities for small business owners to benefit from the Tax Cuts and Jobs Act and reinvest in their business. The bad and ugly news: Some of the most enjoyable and useful business tax deductions are going away.


Here are the six biggest tax changes that will affect small businesses.


1. Lower Tax Rates = Lower Taxes

Your goal should always be to grow sales and revenue but some business owners limit their sales efforts to avoid paying higher taxes. The Tax Cuts and Jobs Act dropped the highest individual tax rate from 39.6% to 37%. For example, if you had $1,000,000 of taxable income, you would have paid $396,000 of federal income taxes vs. $370,000 you would pay under the new tax reform. 47216001_s.jpg


The Good: The difference of $26,000 could be used for employee bonuses, marketing or equipment for your business.


2. Pass-through Businesses Get Some Relief

Many small businesses are pass-through entities for tax purposes. Pass-through businesses include S-corporations, limited liability companies, partnerships and sole proprietors. The Tax Cuts and Jobs Act gives pass-through businesses an additional 20% deduction from their income. There are some limitations for professional services businesses and income limit phase-outs so be sure to speak with your tax advisor for more information.


The Good: Small business owners may be eligible for an additional 20% deduction on their personal tax returns if their business is categorized as a pass-through entity.


3. Cash Basis vs. Accrual Basis of Accounting

Per Internal Revenue Code section 448, small businesses that have average gross receipts of $5 million or less were allowed to use the cash method of accounting. Tax reform changed that limit to average annual gross receipts of $25 million or less.


The Good: Cash basis of accounting allows small business owners to pay taxes on income they receive and take deductions on expenses that were paid, which is advantageous for cash management purposes.


4. Credit for Compensation Paid to Employees on Family and Medical Leave

The tax reform bill also provides a credit for employers that offer employees paid family and medical leave for 2018 and 2019 only. Businesses must have a written policy in effect which gives full-time employees not less than two weeks of annual family and medical leave under FMLA of 1993.


The Good: The general business credit is 12.5% of the compensation paid – subject to limitations.


5. No More Special Deductions for Manufacturing

Tax reform repealed Section 199. Section 199, also known as the domestic manufacturing deduction, was a tax break for businesses that perform domestic manufacturing and certain production activities like real estate construction and production of oil, electricity, natural gas, water and computer software.


The Bad: The 2017 tax return year will be the last year you can claim the manufacturing deduction if you’re eligible.  Speak with your tax advisor to discuss your unique facts and circumstances.


6. No More Deduction for Client Entertainment and Other Fringe Benefits

The tax reform bill eliminates employer tax deductions for expenses including:

  • - Membership dues for employees for clubs and groups.
  • - Transportation fringe benefits such as parking, transit passes, vanpool and bicycle commuting expenses.
  • - Business entertainment, amusement and recreation expenses.


The Ugly: The days of receiving a 50% deduction on business entertainment are over. Business meals will still receive the 50% deduction but small business owners will no longer be able to deduct the cost of taking a business prospect or client to a sporting event, concert or even golf.


More info

For a detailed analysis of the new tax legislation—and some insights on what it might mean for you—download the latest Tax Bulletin from Merrill Lynch.


Related Article: The Top Four Tax Breaks for Veteran-Owned Small Businesses



About Ebong EkaEbong+Eka+Headshot.png

Ebong Eka is no stranger to the world of personal finance. As a certified public accountant and former professional basketball player he offers a fresh perspective to small business planning and executing. With over fifteen years of accounting, tax & small business experience with firms like PricewaterhouseCoopers, Deloitte & Touche and CohnReznick, Ebong provides practical money solutions tailored to the everyday person, the aspiring entrepreneur or the small business owner.


Ebong is the founder of EKAnomics, a sales, pricing and leadership firm. He is also the founder of Ericorp Consulting, Inc., a tax and management consulting firm. Ebong is the author of “Start Me Up! The-No-Business-Plan, Business Plan.


Ebong is also the founder of The $250 Tax Pro, which provides tax preparation and consulting services in the Washington, DC area.


Web: or Twitter: @EbongEka.

You can read more articles from Ebong Eka by clicking here


Bank of America, N.A. engages with Ebong Eka to provide informational materials for your discussion or review purposes only. Ebong Eka is a registered trademark, used pursuant to license. The third parties within articles are used under license from Ebong Eka. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.


Bank of America, N.A. Member FDIC.  ©2017 Bank of America Corporation

Hurricanes Harvey and Irma decimated the Caribbean and the southern United States, creating tremendous damage to businesses and much economic uncertainty. Because of these devastating storms, the IRS is providing tax relief to victims – including small business owners.


Unfortunately, these disasters also occurred during the extended tax filing season. Taxpayers affected by the storms and located in the disaster area now have until January 31, 2017, to file tax returns and pay taxes due.


Who is eligible for tax relief?

Individuals and small business owners are eligible for tax relief in any area designated by the Federal Emergency Management Agency. Additionally, taxpayers who live or operate businesses in parts of Florida, Puerto Rico and the U.S. Virgin Islands may also be eligible.  The IRS may add other localities at a future date.


To confirm eligibility, search the current list of eligible localities on the Disaster Relief page of



Tax relief for Individual Taxpayers

Individual tax filers who have tax returns due between September 15 and October 16 (including tax extensions) have until January 31to file their tax returns and make payments.  The tax relief extension also includes individuals who are required to make quarterly estimated tax payments on September 15and January 16.


Who are considered Individual Tax Filers?

Individual tax filers include those who operate a business as a sole proprietor or single member LLC and file Form Schedule C (Profit or Loss from Business) with their personal income tax returns.


Tax relief for Small Business Owners

Calendar year small businesses who file tax returns as an LLC, Partnership, S-Corporation or C-Corporation due on September 15 or October 1 are eligible and have until January 3to file returns.


The IRS is also providing additional relief for several other business tax deadlines, including the October 31 deadline for quarterly payroll and excise tax returns.




Additional relief for Business Owners

The IRS is waiving the late-deposit penalties for federal payroll and excise tax deposits normally due during the first 15 days of the disaster period.  Check out the disaster relief page on for specific information to your circumstances.


The IRS will generally work with any individual or business owner who lives outside the FEMA designated disaster area but whose necessary records are located within the disaster area. Tax relief is automatic but if you receive an IRS notice for late filing or late payment, call the number on the notice (or contact your CPA, Enrolled Agent or tax professional) to discuss the options to get the penalties waived.


Claiming Losses from Hurricanes Harvey and Irma

Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can either claim the loss on the 2016 income tax returns or on the 2017 income tax returns. Make sure you speak with your CPA, Enrolled Agent or tax professional as everyone’s circumstances may be different.  Refer to IRS Publication 547 for more details.


Remember: You have automatic tax relief for hurricane disasters if your location is eligible so there is no need to contact the IRS for additional information unless you receive an IRS notice.


     RELATED VIDEO: Why you may be able to deduct a casualty loss on your personal tax returns



About Ebong Eka

Ebong Eka is no stranger to the world of personal finance. As a certified public accountant and former professional basketball player he offers a fresh perspective to small business planning and executing. With over fifteen years of accounting, tax & small business experience with firms like PricewaterhouseCoopers, Deloitte & Touche and CohnReznick, Ebong provides practical money solutions tailored to the everyday person, the aspiring entrepreneur or the small business owner.

Ebong Eka Headshot.png


Ebong is the founder of EKAnomics, a sales, pricing and leadership firm. He is also the founder of Ericorp Consulting, Inc., a tax and management consulting firm. Ebong is the author of “Start Me Up! The-No-Business-Plan, Business Plan."


Web: or Twitter: @EbongEka.

You can read more articles from Ebong Eka by clicking here


Bank of America, N.A. engages with Ebong Eka to provide informational materials for your discussion or review purposes only. Ebong Eka is a registered trademark, used pursuant to license. The third parties within articles are used under license from Ebong Eka. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.


Bank of America, N.A. Member FDIC.  ©2017 Bank of America Corporation

Some small business owners believe that they don’t need business fraud protection, but nothing could be further from the truth. Often, small and midsize businesses don't have the resources to invest in robust security measures, making them attractive targets for cyber criminals and leading to devastating results. Take a look at the following infographic to help you become aware of the risks and how implementing small business fraud prevention measures can be a strong first line of defense.




Click here to download a PDF of the infographic.



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Small Business Checking

Woman.jpg As an employer, you might be surprised to learn that 67 percent of workers say they’d have trouble coping with financial costs associated with a serious illness.1 After all, more Americans than ever are enrolled in major medical insurance, whether it was obtained through a company plan or the insurance marketplace.


Here’s the rub: Major medical insurance normally pays only a portion of covered individuals’ medical expenses and doesn’t stretch to include co-payments, deductibles or the price of uncovered treatments. And depending upon the severity of an illness or injury, employees may also accrue out-of-pocket costs for lost income, travel expenses and more.


The bills accumulate faster, of course, for individuals and families without major medical coverage. According to a recent survey, 53 percent of uninsured Americans have had problems paying medical expenses in the past year. But it’s not just the uninsured who’ve struggled – 1 in 5 insured individuals has experienced changes or made lifestyle adjustments due to medical debt.2


As a result, many workers are making changes in their personal lives. Some are forgoing vacations or major purchases, but you might be surprised to know they’re also taking extra jobs, borrowing from family and friends, altering their living situations and reaching out to charities for help.2


How can you, as an employer, lend a hand? One simple way is by introducing or adding voluntary insurance to your employees’ health care options. Voluntary, or supplemental, insurance policies work with major medical insurance to help provide an extra layer of financial protection for employees. And employees are interested: 64 percent of those who participated in the 2015 Aflac WorkForces Report survey said the need for voluntary insurance today is greater than in years past.1


Learn more about the sacrifices your company’s workers are making to pay medical bills and how you can use voluntary insurance to help ease their struggles by reading more.



This article is for informational purposes and is not intended as a solicitation.

1The 2015 Aflac WorkForces Report, conducted by Research Now on Aflac’s behalf.  Accessed March 4, 2016.

2 Kaiser Family Foundation/New York Times survey. “New Kaiser/New York Times survey finds one in five working-age Americans with health insurance report problems paying medical bills.” Accessed March 4, 2016.

ACA-Thumb.pngby Brian Corbey, National Head of Sales for Small Business, Aetna


Small businesses that have long struggled to provide health benefits to their employees during years of rapidly rising health care costs have just gone through the most dramatic year ever for changes to the benefits landscape.


The small employer insurance marketplace was essentially revamped as many of the ACA's most important provisions took effect as of January 1, 2014. Let's take a quick look at how things have changed and then review some strategies that small businesses may want to consider in the new benefits marketplace.


Click here to read this article provided by Aetna (PDF format).

Bank of America, N.A. engages with Aetna Inc. to provide informational materials for your discussion or review purposes only. Aetna Inc. is a registered trademark, used pursuant to license. The third parties within articles are used under license from Aetna Inc. Consult your competent financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.

Disaster_Planning_body.jpgby Matt Krumrie


Major disasters such as earthquakes, hurricanes, tornadoes, winter storms, and spring floods make headlines. Smaller disasters such as fires, burst pipes, power outages, Internet failure and hacker disruptions can destroy small businesses. That is, if there is no disaster recovery plan in place.


"Disaster planning and preparedness can be your lifeline to staying in business," says Bob Boyd, president and CEO of Agility Recovery, a Charlotte, North Carolina-based company that offers disaster recovery solutions and business continuity services for small and mid-size businesses.


Boyd said between 40 percent and 60 percent of small businesses without a disaster recovery plan never reopen their doors. And 25 percent of those without a plan eventually fail after reopening because of lost customers and a damaged reputation.


"Most disaster recovery strategies are easy and free," says Boyd. "You don't need to come out of the gates and have the Rolls Royce of recovery strategies.”


Among the top strategies Boyd suggests small businesses put in place are related to communication – who/how do employees make contact in case of emergency; backup plans – how to keep operations moving forward in case of emergency; and understanding how to handle a worst case scenario.


Says Boyd: “If you woke up and your employees couldn’t get to work, or weren’t able to do their job, what would you do? If you don’t know, you need a disaster plan.


Act quickly

Jeff Stoks is chief technology officer at Sexton Printing, a third-generation printing and marketing services company based in West Saint Paul, Minnesota that has been in business for 60 years and has 60 employees. While there haven't been many issues over the years, a leaky roof once forced the company to shut down a press, and a severed cable a few miles down the road in downtown St. Paul cut off Internet access.


"All our clients send files via email," says Stoks. "When the Internet is down, it can have a ripple effect."



As for that leaky roof, the company quickly hired a roofer, secured tarps to cover equipment, hired a cleanup crew and then made sure no other paper or machinery was damaged.


Reid Bradley, an Anytime Fitness franchisee owner in Moore, Oklahoma, went through the worst type of natural disaster in 2013 when an F-5 tornado rumbled through the town, damaging everything in its path, including his gym. No one was hurt and the club has recovered, but it was an experience he never wants to go through again.


"No one can plan for a disaster perfectly," says Bradley. "Communication is vital in making sure everyone is okay. We have group texts to make sure (employees) are safe during and after a disaster."


As the national media director for Anytime Fitness, Mark Daly oversees the company's Crisis Response team. The company has developed a crisis response guide, much of which has to do with helping franchise owners handle, deal with, and solve any crisis, no matter how small or large.


The team meets on a quarterly basis and in the monthly company newsletter Daly regularly includes safety tips and stories about infrequent crises or mini disasters at clubs throughout the franchise. The tips include best practices and information on how staff responded. "In the face of medical emergencies, we have staff that have responded in heroic fashion and lives have been saved because our staff is prepared," says Daly.


Defining a recovery plan

Any disaster plan should include key information such as bank account numbers, customer and employee lists, and an inventory of assets, to name a few, says Stoks.


At Sexton, if there is no access to the office, board members meet at the president's house to implement the disaster plan. They would also set up an impact analysis to assess the situation and determine who or what is needed to get back up and running. A workflow transition plan would also be implemented. That consists of ideas and strategies on how to work with industry peers, outsourced vendors, and client resources to keep work moving.


Once in place, experts recommend reviewing the disaster plan yearly to make sure it is accurate and still reflects the company’s needs. For instance, in the past few years Sexton has changed insurance companies, IT providers, and paper vendors and that new information is now part of the plan.


Disaster Planning: 5 tips for success

Boyd highlights cost-effective disaster plan steps any company can implement:


1. Power: Statistics show that if organizations had a power outage, 70 percent of companies wouldn't know their power requirements. Any electrician can look at a panel and tell you how much power you would need to get back up and running, says Boyd. Other questions to ask:  Where do you get the power? Do you have your landlord’s permission to bring in a generator?


2. Communication: How will you communicate with all key stakeholders, such as employees, customers, and vendors? Phone, text, social media, 1-800 emergency number are some options. Develop a communication plan.


3. Educate employees: A disaster plan isn't beneficial unless employees are educated and aware of how the plan would be implemented, says Boyd. Inform and train on procedures and operations at least once per year. Practice and conduct drills on steps employees are responsible for in the event of an emergency.


4. Cross train staff: Prioritize which staff members are crucial to get back up and running. At Agility, they train accounts payable staff on all member service functions and on how to interact with customers in case they are needed to answer phones in the event of a mass disaster.


5. Understand your insurance: Boyd says in the wake of Hurricane Sandy in 2012, there are still small businesses wrangling with their insurance companies over payment for damages from the super storm. Simply put: Know and understand your insurance coverage and adjust as needed.


"I think the big message is that small businesses have to have some kind of plan in place," says Boyd. "Business owners shouldn't think it’s something that will take a lot of time and cost a lot of money, or require a lot of staff to do. Any small business that does not have a plan is not going to cut it."

QALegalAdvisor_Body.jpgby Heather Chaet.


You are the Superman of your business. You can leap over personnel problems and make deals in a single bound. You can handle anything…except a complicated tax transaction or a complex vendor contract or a possible lawsuit or lots of other legal issues. That’s why having a general counsel who is familiar with you and your company—big or small—is as essential to the success of your business as your website and your ideas, if not more so. Jason Smolen is co-founding principal of SmolenPlevy in Vienna, Virginia. For more than 30 years, Smolen has gained recognition for his expertise with complex business transactions, trusts and estates. Smolen chatted with business writer Heather Chaet about the benefits of having a legal advisor on board at the genesis of your business and how folks like him help entrepreneurs like you with their superhero legal mojo.


HC: Can you share a little bit of your background, how—and why—you began working with small businesses and entrepreneurs?

JS: Larger, established firms always have representation, whether it is inside counsel, outside counsel, or a combination of both. They know it is a cost of doing business and a cost that is well worth it. It is much easier and less expensive to do something right then to fix it later. Smaller companies and start-ups are usually so busy creating their market share that management might overlook or not even be aware of the value of professional advice. 


From early on, I’ve focused my practice on estate planning and business law. The two go hand in hand. Just like their house and personal fortune, a small business owner has to think about the future of their business estate. Plans have to be in place in case something unexpected happens and for the long haul. I’ve had to learn almost every detail about each client’s business, because if it’s not in shape from a business and legal perspective, it won’t make it to the next generation—or to the next owner. Working on that road map together with the owner (or owners) helps get things in order and achieve that success.


HC: Why should small businesses—with maybe only one or five employees—consider having a legal advisor from Day One?

JS: Having a good attorney advising a business can help avoid those pitfalls that could crush one before it gets started. If the company is a start-up, selecting the type of company and making the proper tax elections is critical for economic and management efficiency. Any time you have more than two owners, the potential for disagreement exists, and there is no better time than in the beginning to sort out the issues. Depending on the business, there are compliance issues, employment issues, and business issues. Something as simple as negotiating and drafting a proper lease for the location of the business can be critical. A company needs employment and contractor agreements, and strong non-competes, if they’re applicable.


HC: For those that may be uncertain about the various options out there, can you briefly explain the different ways a small business owner can hire and work with a legal advisor.

JS: There are many ways to engage an attorney on behalf of a small business. Probably the most common arrangement is straight fees-for-services, in which case the client pays for the time and cost expended. Its downside for smaller businesses is that owners may have anxiety when calling their lawyer because they are getting charged each time—I can only suggest that if you are thinking of calling your lawyer, you probably should. A way around this [anxiety] is to meet with your attorney so that you can both discuss the needs of the business and agree to a retainer paid on a monthly basis for that year. It’s possible to work out a budget that might exclude certain items, for example, litigation, but generally cover everything else. That takes the anxiety out of making a phone call to your counsel any time you need advice. For certain work, flat fees can be negotiated as well.


HC: What are the top legal mistakes you find small business owners make— and how those missteps affect their business success or may affect it down the road?

JS: I would say the top non-operational mistake is not paying proper attention to tax matters. Without proper planning, the company or its owners could pay more taxes [than necessary], or force themselves into litigation or a dissolution event upon a departure of an owner.


From a human resources point of view, not having a good employee handbook and intake and outtake processes can consume a lot of resources for almost any business. For general business matters—whether it is a lease or vendor agreements you enter into—your decisions can save money and make you more profitable. Maintain compliance with regulatory issues that affect your business and the arrangements you have with your customers. If they are done right, you can spend your time on your business. If they are done wrong, you will pay for it for quite some time.



QALegalAdvisor_PQ.jpgHC: Tell us a few examples of how you work with small businesses on a long-term and day-to-day basis—from the trouble patches you may have helped them through (or helped them avoid) to stories of successful growth that came from having a legal advisor?

JS: Most people approach problems through the prism of their own experiences. Someone may be a very sophisticated businessperson but he is only familiar with the deals he has seen. A good legal advisor not only brings his or her legal talent to the table, but also adds value with the experiences he or she has had with what works and what does not. It is an invaluable practical asset.


Sometimes the best way to start a business is to buy one. I had a client that negotiated the purchase of a modestly successful service business. The parties negotiated the deal without counsel, and the purchaser was referred to me to review the deal. Neither buyer nor seller understood the tax cost of the transaction because of the structure of the [deal]. We worked to save our client millions of dollars on the transaction, which added enormous profitability to the business going forward.


An area of concern for some clients is the protection of their intellectual property. There are times where a prior employee can cause a great deal of damage to the goodwill and trade secrets of a company. I had a client who had one key employee who left my client’s company and tried to start a competing business. As a result of our prior advice to put in place the appropriate documents to protect our client’s business we were successfully able to prevent that departing employee from improperly competing with our client and [avoided] great damage to the business.     


HC: What are the trickiest issues facing your small business clients today?

JS: No business can ignore social media. It can be a tremendous boom for growth— provided the right messages get out. Significant damage to a long-developed reputation may arise when social media problems are not addressed. Navigating these issues is a complicated web of free speech, defamation laws, user agreements, and marketing. It is important for business owners to be properly guided through this from the very beginning, including internal use of social media and the web.


Another area that I’m constantly focused on for my clients is a legal due diligence check-up, examining the company as if it was being marketed for sale—you find many of the gaps that the company might have when scrutinized by potential purchaser. I always believe that it is better to live in a nice house now than simply fix it up for the next buyer to enjoy.


HC: Any advice for a small business owner looking to hire a legal advisor, on how to find the right one?

JS: Foremost is competence in the areas that the business needs.  Most good business attorneys will have a solid foundation of the state requirements for organizing and operating a business entity within that state and a more-than-adequate knowledge of the tax issues involved in choice of entity and structure. It helps if the attorney has resources available for the other issues that could come up on running a business—this saves you having to shop different firms for everything you may need, such as leases, business contracts, and tax matters. (Editor’s note: exploring personal referrals from other business professionals is a good first step to finding an attorney, or check out the American Bar Association’s Lawyer Referral Directory or Best Lawyers, which is the oldest peer-review publication in the legal profession and quite respected.)


If you get past those threshold requirements, it is really a function of what the fit is like. You can be the best attorney on earth, but if you and your client don’t see eye-to-eye or the client is not comfortable with opening up on all issues involved in running a business, it is probably better to move on and seek someone else. The most valuable relationships are the long and trusted ones. You don’t want to educate a new attorney every other year on your business needs.


This interview has been edited for length and clarity.


Disclaimer: Since the details of your situation are unique, you should always seek the services of a qualified attorney or relevant professional for advice specific to your business.

HackInsurance_Body.jpgby Erin McDermott.


You’ve firmed up firewalls, strengthened passwords, and locked up hardware—all in the name of securing company computer systems from malicious hackers. But what if you’re breached anyway? There’s protection that more small businesses are starting to choose: hacking insurance.


Cyber liability policies are being issued to cover everything from the cost of informing customers and post-attack credit-monitoring accounts to the loss of business from denial-of-service attacks. While some traditional policies include coverage for computer-related losses, the rapidly expanding methods of data breaches mean business protection plans have had to adapt to an increasingly menacing digital landscape.


Small businesses haven’t exactly been keeping up: Symantec’s 2013 Threat Report estimated 31 percent of all attacks targeted U.S. companies with fewer than 250 employees, up three-fold from the year before. Yet 83 percent of SMBs surveyed told the security software maker and the National Cyber Security Alliance they weren’t concerned about the rise in hacking, with 59 percent reporting that they had no contingency plan in place in the event that they were breached.“When we focus on hackers in the news, small businesses take that to mean it’s a problem for big conglomerates,” says Gary Sutherland, chief executive of the North American Professional Liability Insurance Agency in Framingham, Mass. “Most don’t believe they’ll be hit. They don’t think they’re big enough.” He points to a recent case where a small accounting firm’s staffers showed up on a Monday morning and found they were unable to log in to their computers. When managers investigated their locked equipment room, they discovered what may be many small business’s worst nightmare—all of their servers were gone.


The industry that aims to ease the pain from these worst-case scenarios is growing: In June, The Betterley Report, an independent guide to specialty insurance products, pegged the cyber-liability market at $1.3 billion for 2013, up from $1 billion a year earlier. (Sutherland estimates small businesses with cyber coverage still only account for 3 percent of that market.)


HackInsurance_PQ.jpgJared Kaplan, senior vice president of products at Chicago-based Insureon, says he’s seen a two- to three-fold increase in demand, particularly as doctors and other health-care firms summon technology to adapt to HIPAA privacy protections and navigate the Affordable Care Act (known by some as ObamaCare). “We’re seeing real-world examples of hacking every day now,” he says. “The whole world is digitizing and it affects everything. The key is to manage the risks appropriately.”


But if you’re still in denial about the threat to your small business, don’t think you won’t be held responsible if the unthinkable occurs. Letting customers know their private data may have been stolen isn’t just the right thing to do; it’s also the law in a majority of U.S. states. There’s no one single federal law and rules differ from state to state, with varying mandates on how to alert clients (in writing or via email) and even in the definitions of what constitutes “personal information.” (Here’s an interesting guide to the requirements.) Some states require that the state attorney general’s office be informed.


Sutherland estimates the cost of a data breach for even small companies totals around $100,000. Other industry observers put the average at as high as $250,000. Even at the lower price, it’s enough of a surprise expense that could break the bank for most small enterprises. Sutherland says he dealt with a West Coast small business that had an intruder steal a laptop from their front counter—not for the data inside but for the perceived value of the machine, police said. Still, the computer contained stored customer information, and the theft triggered a chain of costly mandatory notifications and procedures that led the firm’s owners to decide to sell the business.  


How does cyber-liability coverage work? It can be an add-on to a basic policy or a separate, custom product. Depending on how it’s written and a business’s specific needs, there’s coverage for post-attack forensics, malware and ransomware damage, crisis management services and marketing, as well as legal settlements and penalties, and even actions by rogue employees.


Policies are generally designed to cover two tiers, known in the industry as first and third parties. First party coverage applies to a business’s losses incurred by the breach and its aftermath; third party refers to expenses sought by clients, including class action lawsuits, claims from vendors or customers, or penalties.


The price of a policy varies, depending on the size of the firm and the operating that needs protection. Sutherland says annual coverage for the smallest businesses can be in the ballpark of $2,000; for enterprise firms with 100 or so employees, expect to spend around $15,000 per year. 


Where to begin? Look first at your main policy, Kaplan says. A standard BOP—or business owner’s policy—may cover general liability for items like theft or physical damage, while data breaches could require an optional add-on.


Then think about what needs protecting. Are all documents shredded? Where are paper files stored and who has access? What if an employee’s portable device, thumb drive, or smartphone with customer data went missing? What if a vendor was negligent with your private information?


“It seems exponential in the ways to cause damage now,” Kaplan says. “We’ve had to do our own effort to keep things protected. There are still lots of things people can do to mitigate the universe of computers.”

Noncompete_Body.jpgby Iris Dorbian.


It’s a story that can induce a million nightmares: the disgruntled employee who quits your small business only to take both your trade secrets and clients and start his/her own competing company—and within your own neighborhood, no less! Unfortunately, without proper legal safeguards in place, like a non-compete agreement, which prohibits an employee to work for a rival or launch a similar business within a certain timeframe and geographic radius after leaving your company, such a nightmare scenario is tough to avoid.

For small business owners whose revenue may hinge on proprietary or confidential information (e.g. a secret recipe or software application), having employees sign a non-compete contract may be a no-brainer. However, the agreement could be deemed unenforceable by the courts if the provisions are considered too draconian in scope, such as preventing an exiting employee from pursuing his/her livelihood in the same region and industry sector for five or 10 years. 


If you’re a small business owner contemplating having your employees sign a non-compete, it’s imperative you heed these important guidelines well before anyone signs on the dotted line—particularly if you want the agreement to hold up in court.


Consult an attorney

Whether it’s a non-compete or a non-disclosure agreement, unless you’re a trained lawyer (and even then, only if you’re an attorney specializing in labor and employment law), you should always consult with a legal professional first before having your employees sign any document. Not doing so could open you up to a lawsuit filed by an ex-employee.


Sharron Senter, founder of the Boston-based Senter & Associates, a marketing consulting firm, strongly echoes this best practice. Prior to striking out on her own, Senter was the co-founder of  Visiting Geeks, a small computer networking and security company that was sold in 2011. Having her employees, which at their peak numbered up to 10, sign non-competes was a necessary strategic move that protected the interests of her company, she says. It also provided her with the experience and insight to impart several lessons learned to small business owners when it comes to drawing up non-compete agreements, one of which is always use a lawyer.


[This is for] two reasons: one, what you may be asking could be illegal; and two, why upset a valuable and well-trained employee over something that isn't enforceable by law?” she says, adding that most small businesses cannot afford to take legal action on a violated non-compete.


“Generally speaking, the responsibility of proof falls on the employer,” notes Senter. “This said, what's the good of the non-compete? It helps keep some employees honest.”


A non-disclosure might suffice rather than a non-compete

Small business owners who are concerned about employees leaking a trade secret might be better served having them sign non-disclosure agreements instead of non-competes. Or they can have them sign one in conjunction with the other. It all depends on the situation and what will give the small business owner better peace of mind when it comes to safeguarding the future of his/her business.

Todd Kulkin, a White Plains, New York-based lawyer who specializes in small business cases and has drafted a number of non-compete agreements, says employers need to assess what they’re trying to protect. 

“For example, if you’re worried that someone who works in your factory, who’s kind of low in middle management is going to go off to a new employer and give away all your trade secrets, then maybe what you really want is a non-disclosure,” explains Kulkin, adding that nondisclosures are usually easier to enforce than non-competes. “If on the other hand, you’re worried that this person will learn everything they can about what you do and then go down the street and start their own firm or business doing exactly what you do using your secrets, then a non-compete makes sense.”


For most instances, Kulkin feels a combination of both types of contracts is the best solution. “The reason why you have a noncompete in conjunction with a nondisclosure if you’re a small biz owner is to protect your trade secrets,” he says. “The trade secret is a form of intellectual property, which doesn’t have a lot of tangible protection. It’s not like a trademark in which you can register or a copyright where you have certain rights.”


Noncompete_PQ.jpgOnly high-level employees should sign noncompetes

Making everyone in your business, from the vice president to the guy who works the french fries station, sign a non-compete agreement is ridiculous and contrary to the purpose of the document. Plus, according to Kulkin, it will never hold up in court due to the disparity in power between the employer and the low-level worker. (Although in that instance, again, you might be better served having these workers sign non-disclosures to eliminate your insecurities). Only those who are high up on the corporate ladder should sign noncompetes.


Be fair and reasonable

When putting together a non-compete agreement, avoid using draconian language and excessive terms. Think about if it were you signing the non-compete. Wouldn’t you want to pursue your livelihood eventually instead of being prevented from doing so for an inordinate length of time?


Kulkin offers an example of a client who had signed a prohibitive non-compete contract: “He was forced into a non-compete that kept him from using his own intellectual property in the New York area for five years,” he recalls. “It was completely unenforceable. He didn’t know what he was doing initially. It was like, “Oh [no], I signed this thing and I’m completely going to regret it!”

Joshua Weiss, CEO of TeliApp Corporation, a mobile application development firm based in Linden, New Jersey, says that small business owners have a duty to protect their survival and ought to take whatever measures necessary to ensure that—within reason, of course. Weiss, who founded his company in 2010, currently has a staff of 16 full-time employees, all of whom he had sign non-disclosures, confidentiality agreements and non-competes the day they were hired.


“I have had ideas stolen from me in the past and had to learn the hard way that as much as I'd like to think that all the people I choose to work with are trustworthy and good, some may not be,” he says. “It really shouldn't be a big deal for an employee to sign a non-compete so long as it is fair. For instance, I have software developers and if the company lays one off, or if one gets an offer from a competing firm, I have to make sure that none of the ideas in development at my company are used elsewhere. But the employee may believe that it is not fair for me to limit them to working for a competing company to one year after a termination event, since the job market in software development is difficult. So I have language that prohibits the developer from working at a competing firm that either has or intends to develop software that would be in competition with us.”


Having an employee sign a non-compete can also be a good deterrent to a rogue ex-employee who might depart with less than the best intentions. However, there are steps you need to take beforehand to ensure the legality of your non-compete. Not doing so could lay the groundwork for a costly and time-consuming lawsuit.

QAmarkmauriello_Body.jpgby Erin McDermott.

It’s a fact of life for business owners: At some point, you will likely have to confront a lawsuit. The idea of a costly foray into the courts can be the stuff of nightmares. But what to do when it actually happens? Recently, business writer Erin McDermott talked with lawyer Mark A. Mauriello, who has not only owned and operated small businesses in the New York area, but has spent time on both sides of the legal table.

EM: You’ve seen both sides of disputes. In your experience, why do small businesses get sued?

MM: Part of it is lack of knowledge—a glaring error. More often, it’s a monetary dispute. It occurs if there’s a faulty contract that was inadequate to the task. In my experience, it’s often a leverage issue, where someone wants to change the deal, or sweeten the deal, or catch you with a weak flank. And their way of punctuating the sentence is with a lawsuit—which they know ultimately is going to be negotiated out.

A businessman I met once said: ‘Why we write a contract is to remember what it was we said we were going to do when we were still friends.’ You could do business on a handshake if everybody was just honest about what you agreed to. In that regard, your contract is your battlements.

EM: From a lawyer’s perspective, what should a small business owner do when they get served with a lawsuit? What are the first steps?

MM: Get yourself a cup of coffee. Sit down. Take a very deep breath. Get yourself to a calm place and re-read the papers. Stop being angry about it and read it dispassionately and first understand what it says. What are they saying you did or you didn’t do? Don’t worry about not understanding the legalese; just try to understand why you’re getting this. Think as a businessperson: What are they trying to accomplish? Be honest about it: Did this really occur this way? Now write down for yourself in some kind of marginal notes or write a summary of what you really believe happened. Put the paper down and clear your head. Your next call is to your attorney.

If you don’t have somebody that you’ve used in the past regarding commercial litigation, then call your most trusted business colleagues. Ask them for referrals, but more importantly ask them: “What is it that you like about that lawyer? What makes them good at what they do? What was your experience going through a litigation like that?” And just listen. You’ll get a short list. And then you’re going to make contact with them and ask them to do a consult. You’re going to be very clear—and many places don’t do this and they leave it to the very end—about the money involved. You’ll get them the legal papers you were served and you’ll set up a conference. And you need to be prepared to speak the truth. However painful you think that is, that lawyer needs the absolute, dispassionate, objective facts so that a determination can be made about what your options are from there.

QAmarkmauriello_PQ.jpgEM: From that moment, what does your lawyer want from you?

MM: The first, and very important, thing is you’ve got a ticking clock. You as a businessperson will have to be aware of what is your drop-dead moment that the proper papers must end up in court. It is surprising, but many cases are lost because people actually just don’t show up in time. The timing is very important—just accept that no matter how much you want to avoid this lawsuit, it has to have your full attention. This has to go to the top of your to-do list for now.

Aside from that? We’ve all watched all those “Law & Order” episodes—every defendant I’ve ever sat with, the first thing they want to do is tell you why this isn’t fair and why they should win the case and then they argue the case. Your lawyer doesn’t want that. The lawyer wants facts, wants you to immediately start gathering the papers. You’re about to put up a defense, so the lawyer is asking you for ammunition. Go to your files. Go to that summary you wrote about why you should win the case and then go get the data, documents, and correspondence that supports those defense arguments. If you don’t know what they are, that’s OK. At least gather all documents that have to do with that underlying controversy—the contract that went bad, the you-said-this-I-said-this, the shipment that didn’t show, the contract that didn’t have the change order. In the businessperson’s files should be all of the information regarding that.

You want to keep tight reins on the legal bills—keep the communication crisp until you look at the money involved and what kind of case this is. 

And at this point—and most defendants don’t know this—it’s important that you must not damage, alter, shred, erase electronic documents or anything to do with this case. Anything you’ve said or recorded calls—don’t erase them. It’s as if you’ve froze everything in time. You may not like that information. If you think you have bad or damaging information, your knee-jerk may be to get rid of it. But that’s a very bad thing to do.

EM: Thinking ahead of time on this, how can a small business owner prepare? What are some best practices when it comes to correspondence, data, and other information?

MM: The first rule I ever learned was “paper the file.” What I’d want, as an ‘in-house’ counsel for a small business, are policies that try to prevent suits. Whether you’re preventing a suit or defending a suit doesn’t change the fact that documenting your company’s internal communications are a part of business life.

You paper everything succinctly. There is plenty of assistance out there for document management now. But for small businesses, I tell them to organize your correspondence files in a way that makes it easy to retrieve. It’s similar to what your accountant tells you about organizing for your taxes. Just assume there’s going to be an audit someday and what you would need for that audit. If you have all of this, you don’t even worry about the audit. If you can put your hands on everything that touched the controversy, it will help you build your responses. That’s the essence of what’s going to be argued about.

EM: How do you talk about expenses? What should a small business owner be prepared for?

MM: Most business owners are great at negotiating their supply chain or their cost of goods. I think many people are just intimidated in the presence of a lawyer and they don’t behave the same way they do with their vendors. So, just treat lawyers like vendors. You’re entitled to ask any question—you want to know: “What are you doing for me? How much is it costing?” You need them to respond to your calls. You’re going to vet your lawyer the way you do your vendor—and be bold. Be as upfront as you are with the other things you do because you need to be confident—you are the customer!

Even if you’re with an hourly attorney, make them tell you how many hours something might take. How much time to deal with a pre-trial motion? How much time to develop the answer? Hold their feet to the fire on budgeting time. Nine times out of 10, the guy that’s going to give you that answer is the lawyer you’re going to go with.

And get their strategy first. Hear the options: We’re going to do A, B, and C, or just B and C and possibly A, and how much that might cost and a frank opinion on if you might win. Then you’re making a more informed choice. If you’re being sued for $50,000 and it’s going to cost $45,000 for a defense, you can see the cost-benefit balance easier. You need to see the downside, and a lot of lawyers won’t analyze that for you. Without that frank discussion, how is the businessperson going to know if there are alternative options to throwing money down a bottomless pit? You need to be able to make the other side understand that there’s different solution here, where the parties’ interests intersect and diverge—and now let’s make an intelligent decision here. You have to stay in this like it’s just another business transaction.


This interview has been condensed and edited.

Disclaimer: The opinions expressed therein are solely those of the individual. Since every small business’s situation is unique, entrepreneurs should contact their own attorney before proceeding with any legal recourse.

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