What Law Governs Contracts With Foreign Entities?

A Business FAQ with Mark A. Williams.

The law that governs every contract is usually the law that the contract says. In  most agreements, there will be a provision in it that says if we get into a dispute, here is the law that is going to apply. If the contract does not say that, then there is a little bit of a problem. Every state has some laws and there are federal treaties with other countries, and those laws and treaties are supposed to work out whether it is the law of your state or whether it is the law of the foreign jurisdiction that is going to apply.

The important thing to think about is if you are going to do business with a company in another country, you really need to  make sure that in your contract, you specify what law is going to apply and what jurisdiction lawsuits are going to happen in so that if there is a dispute, you know how it can get resolved.

© 2014 Parsonage Vandenack Williams LLC

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Posted in Business Transactions, Franchising, Intellectual Property, Limited Liability Companies, Starting a New Business

What is the UCC?

A Business FAQ with Joshua A. Diveley.

The UCC is a set of uniform laws that have been developed as kind of a recommendation for the states to apply and adopt for their states. It stands for Uniform Commercial Code and it covers different commercial matters like sales of goods, secure transactions and negotiable instruments. It is not the law but it is a recommendation of what the law should be. Some form of the UCC has been adopted in all 50 states.

© 2014 Parsonage Vandenack Williams LLC

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Posted in Business Transactions

What Are Business Broker Agreements?

A Business FAQ with Mark A. Williams.

A business broker agreement usually means that you have hired someone to sell your business for you. So you sign an agreement with them that will say, “I want to sell it for this amount of money and I’m going to give you a period of time to go try to sell it, and if you do sell it, then I have to pay you a commission.” You would hire a business broker just like you would hire someone to sell your house; it is very similar, but in those agreements, you really have to be careful to specify exactly what you are selling and exactly what are you paying a commission on.

© 2014 Parsonage Vandenack Williams LLC

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Posted in Business Transactions

Are Handshake Agreements Binding?

A Business Law FAQ with Mark A. Williams.

Handshake agreements are another way of saying a verbal contract or an oral agreement and, generally the answer is yes, they are binding. If you and another person agree to something and exchange some kind of consideration, somebody pays money or somebody does something, then generally that is enforceable and you can make them continue. Now there are a lot of exceptions to this depending on the size of the agreement and what it’s for, but generally when you agree with somebody that you are going to do something, you have to do it.

© 2014 Parsonage Vandenack Williams LLC

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Posted in Business Transactions

How Are Businesses Valued In Relation to Mergers or Acquisitions?

A Business FAQ with Ronald K. Parsonage.

Usually business valuation is a 2-stage proposition. In the first stage is to develop a general value for the business based upon formulas that are readily accepted. If the formula amount that you think you are willing to offer exists, you enter into a standstill agreement. At this time the real due diligence starts where you ask for copies of all material contracts and that you are involved in receiving at least 5 years of financial statements and tax returns, and following that either with an accountant or a business appraiser, you establish what you think the true value of the business is. It usually entails using formulas such as Rev. Rul. 59-60, which deals with the issues of the book value adjusted plus a return on earnings or goodwill.

© 2014 Parsonage Vandenack Williams LLC

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Posted in Business Transactions

Is My Business Subject to Income Tax in Other States?

A Video FAQ with Joshua A. Diveley.

Whether the business is going to be subject to tax in a state is going to be dependent on the state’s laws and, most importantly, how they define nexus for income tax purposes. Nexus will generally be determined based on a couple of factors such as whether you have income derived from a source within that state and whether you have personnel, capital equipment or physical property in the state. The more factors you have against you, the more likely it is that you are going to have nexus in that state and that you are going to be subject to income tax.

© 2014 Parsonage Vandenack Williams LLC

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Posted in Business Taxation, Starting a New Business

If My Business Is Located in One State and I Have Employees in Another State, What Are the Employment Tax Issues

A Tax FAQ with Mary E. Vandenack.

When you have employees in another state, you have to determine whether you have to pay and withhold income taxes on your employees in the other state. Many of the states have gotten very aggressive about charging for payroll taxes and claiming that if you have an employee in the state for even one day, that that employee is subject to employment taxes in that state. So it’s really important to get to know those rules so you can stay in compliance. Some states also have some specialized employment tax rules if you are sending an employee into another state for even a day. You are going to want to take a look at those rules.

© 2014 Parsonage Vandenack Williams LLC

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Posted in Employment Tax

Do I Have to Collect Taxes for Sales Made Over the Internet?

A Tax FAQ with Mark A. Williams

If you make a sale over the Internet, generally, if sales tax apply you do have to collect the sales tax. The complication is you might be a business in the state of Nebraska and you might make one sale in the state of Louisiana. If you’re not advertising in that state and you don’t have a business location in that state, generally you wouldn’t be required to collect sales tax there. There is a legal concept called “nexus.” If you don’t have sufficient nexus, you usually don’t have to pay sales tax; however, some states are adopting laws that just require on every sale in that state you do have to pay sales tax. So it’s a very complex set of rules right now that are changing every day because of the growth of the Internet and you need to make sure you have good tax advisers to help you through that process.

© 2014 Parsonage Vandenack Williams LLC

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Posted in Sales and Use Tax, Starting a New Business

Does an Out-of-State Retailer Have to Collect Sales Tax?

A Tax FAQ with Mary E. Vandenack.

As a generality, an out-of-state retailer is subject to collecting tax in another state if they have nexus with the state in which they are making a sale. The definition of nexus varies state to state so it’s really important that a business look at what nexus means in a particular state.

In addition, different states tax different types of things so you have to really understand the nature of the business to determine whether you’re going to be subject to sales tax in another state.

© 2014 Parsonage Vandenack Williams LLC

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Posted in Sales and Use Tax

What Is Nexus?

A Tax FAQ with Mary E. Vandenack.

Nexus is simply the connection, usually considered in the business context, to another state. So what that is looked at for is that a business might be formed and do its primary operations in the state of Delaware, but it also engages in business in Colorado or sends employees into Colorado. We begin to look at what is called nexus to say how much connection that business has with the state of Colorado for purposes of being subject to Colorado laws and Colorado taxes.

Another nexus issue in the employment tax arena is when you send employees into another state, you look at their connection to that state to determine whether they are subject to that state’s payroll tax laws.

© 2014 Parsonage Vandenack Williams LLC

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Posted in Business Taxation, Employment Tax, Sales and Use Tax, Starting a New Business
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