Does Your Compass Work? Practical Legal Guide for Florida Businesses

By Yasmin Tirado-Chiodini

The United States offers the freedom and opportunity to find success through business ownership. This is an opportunity that millions of people around the world strive for but cannot attain. If you could enjoy this privilege, why not do it well from the beginning?

Value: This book is a tool to calibrate your business compass. It highlights important legal and ethical norms as key components of a successful business strategy in the United States. The well-structured content is relevant to start-ups, as well as established businesses. The reading is a valuable resource for entrepreneurs new to the United States, who must adapt not only to a new culture, but also to new laws and a different business environment. The information provided is geared to help identify and eliminate business vulnerabilities and mitigate risks.

Topics: The book topics include business entity formation, permits and licenses, business planning, marketing, business and information protection (non-compete, confidentiality agreements, etc.), contracts, franchising, intellectual property (copyrights, trademarks, patents, etc.), business financing, exit strategies, among others subjects.

Scope of Laws and Regulations: In addition to Federal laws that apply across the United States, the book discusses laws and regulations applicable to Florida businesses. The author also provides references with links to additional information and organizations that offer business assistance.

One of the wisest strategic decisions that business owners could undertake is to calibrate their business compass by following legal and ethical norms. This responsibility lies in the hands of the business owner. Does your compass work?

• Language: English
• Publisher: Yasmin Tirado-Chiodini
• Release date: Oct 8, 2014
• ISBN: 9780981730738

Yasmin Tirado-Chiodini

Yasmin Tirado-Chiodini is an attorney, biomedical engineer and family historian. She is a former Space Shuttle engineer and adjunct professor of legal ethics and negotiations for the Executive M.B.A. program at Rollins College, Crummer Graduate School of Business in Winter Park, Florida. She is also a start-up founder and entrepreneur. In addition to authoring “Does Your Compass Work? A Legal Guide for Florida Businesses,” she is also the author of “Antonio’s Will,” exposing the story of injustice of the first Hispanic executed on the electric chair in the United States, and is working on her second novel with onset on 15h Century medieval Spain. She frequently publishes in various media. Recognized for her community leadership and contributions, she has a solo business and intellectual property law practice and lives in Florida with her husband, daughter and their four Labradors. For more information, visit www.tirado-chiodini.com.

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Does Your Compass Work?

Practical Legal Guide for Florida Businesses

3rd Edition (E-Book)

Yasmin Tirado-Chiodini

Black Hammock Books

Black Hammock Enterprises, LLC

Oviedo, Florida, U.S.A.

Copyright © 2014 by Yasmin Tirado-Chiodini. All Rights Reserved.

All rights are reserved, including the right to reproduce this book, or portions thereof, in any form or medium, except for critical review and certain other noncommercial uses permitted by copyright law.

Licensing:

This e-book is licensed for your personal enjoyment only. This e-book may not be re-sold or shared. Thank you for respecting the hard work of this author.

For permission requests, please address:

Black Hammock Enterprises, LLC

P.O. Box 622249

Oviedo, FL 32762

E-mail: [e-mail]

Book Website: http://www.doesyourcompasswork.com

Cover Copyright © 2008-2014 Black Hammock Enterprises, LLC

Published 2014 by Black Hammock Enterprises, LLC

ISBN: 978-0-9817307-3-8

Table of Contents

Foreword

Dedication

Epigraph

Chapter 1. The Entrepreneur’s Profile

Chapter 2. First Steps to Start a Business

Chapter 3. Selection and Formation of the Appropriate Legal Entity

Chapter 4. Licenses and Permits

Chapter 5. Taxes and Accounting

Chapter 6. Business Insurance

Chapter 7. Business Plan and Marketing Plan

Chapter 8. Financing the Business

Chapter 9. Credit History

Chapter 10. Labor Laws and Employee Management

Chapter 11. The Lease Agreement

Chapter 12. Considerations Prior to Purchasing a Business

Chapter 13. Franchises

Chapter 14. Intellectual Property

Chapter 15. Information Protection: Competitive Intelligence, Information Security and Privacy

Chapter 16. Marketing and the Law

Chapter 17. Small Business and Minority Certifications in Government Contracts

Chapter 18. White Collar Crime

Chapter 19. Product Liability

Chapter 20. Exit Strategies

Chapter 21. Dispute Resolution

Chapter 22. Conclusion: Social Responsibility and Business

Appendix: Useful References

End Notes

Back Cover and About the Author

Would you tell me, please, which way I ought to go from here? said Alice to the Cat.

That depends a good deal on where you want to get to, said the Cat.

I don't much care where– said Alice.

Then it doesn't matter which way you go, said the Cat.

–so long as I get somewhere, Alice added.

Oh, you're sure to do that, said the Cat, if you only walk long enough.

- Lewis Carroll, Alice in Wonderland

Foreword

This book is written for all entrepreneurs, those who want to start their own businesses and those who already have an ongoing concern in the United States, particularly in Florida. Its contents are a practical summary of the legal, ethical and strategic business norms affecting companies today.

As the title alludes, to enhance the opportunity for business success, it is necessary to have a business compass calibrated with the correct information regarding the legal and ethical standards that must be followed along the growth path of the business. To this end, this guide is a handy reference for the entrepreneur filled with practical information about a selection of important topics relevant to businesses, regardless of their level of development.

The business owner should read this book in its entirety and not wait until information on a particular chapter topic becomes necessary, because the book will connect the dots and will present a strategic perspective of what the business owner may encounter in the course of their business development in the United States, particularly in Florida.

It is important that the reader does not use this book as a replacement for legal counsel. This is not the book’s objective. To obtain legal counsel, business owners must consult with an attorney of their preference experienced in business law and other legal fields in which they may need assistance.

The Small Business Engine

Before moving into the main text of the book, I would like to make reference to some statistics that highlight the strength of the small business spirit in the United States:

• According to the Small Business Administration (SBA), in 2010 there were 27.9 million small businesses, and as of September 2012, small businesses comprise about 99.7 percent of United States employer firms and generate 42.9 percent of private sector jobs in the United States.¹ This figure demonstrates the power of small businesses in this country and presents the existence of a real opportunity for entrepreneurship in the United States.

• Entrepreneurship in the United States is an opportunity available to all, regardless of origin. The SBA reported that in 2007 minorities (including women) owned approximately 18 percent of the 23 million United States firms. Receipts of minority-owned businesses rose 55.6 percent to $1.0 trillion between 2002 and 2007.²

As of 2007, Hispanic-American-owned businesses numbered 2.3 million with average receipts of $120,000. African-American-owned businesses numbered 1.9 million with average receipts of $50,000. Asian-owned businesses numbered 1.6 million with average receipts of $290,000. Native American/Islander-owned businesses numbered 0.3 million with average receipts of $120,000. Veteran-owned businesses numbered 3.7 million, with average receipts of $450,000 and the 7.8 million women-owned firms in the United States averaged $130,000 in receipts.³

There is a heightened focus on the strong emerging Hispanic markets and industry. Hispanics are the fastest growing minority segment in the United States, growing 86 percent between 2000 and 2010.⁴ One of every ten businesses in the United States is Hispanic.⁵ As of 2010, there were approximately 3.1 million Hispanic businesses in the United States, generating almost $387.8 billion⁶ in annual sales. It is projected that by 2018 there will be 4.3 million Hispanic businesses generating $539 billion and 16 percent of small businesses in the United States will be Hispanic.

Women-Owned Businesses

In 2007, women owned 28.8 percent of United States businesses. Of these, the breakdown by race/ethnicity (within their own population) is as follows: 47.4 percent African-American, 40.8 percent American Indian and Alaska Native, 39.7 percent Hawaiian or Pacific Islander, 33.7 percent Asian, 34.9 percent Hispanic, 28.1 percent White, and 35.8 percent some other race.⁷

Again, within this segment, Hispanic women own more than one third (34.9 percent) of Hispanic businesses in the United States,⁸ and they own one out of ten women-owned businesses in this country.⁹ Since1996, the number of Hispanic women-owned businesses grew 133.7 percent, compared with 37 percent growth for other businesses in general.¹⁰ Florida ranks as the second state with more women-owned Hispanic businesses in the country; California is the first, and Texas the second.¹¹

The Other Side of the Coin

Unfortunately, 50 percent of small businesses fail within five years of being started.¹² Many fail due to lack of knowledge in business management. This also includes their lack of familiarity with legal, ethical and key business principles. Minority businesses demonstrate a higher level of failure than other non-minority businesses. Therefore, it is key that the entrepreneur prepares, and obtains as much information as possible, before starting a business. This is especially true if the entrepreneur is a minority group and/or has come to the United States recently from another country.

Regardless of whether the entrepreneur is native to the United States, has lived in the United States for some time, or even if the entrepreneur has simply already begun a business, it is not too late to learn the applicable federal, state and local legal norms regulating a business. The business owner must manage the business to minimize all vulnerabilities that may arise in the course of its life.

As shown by the above statistics and as the last chapter of this book, "The Social Responsibility of Business," discusses, many business owners in the United States have failed because they have not taken the law and business formalities seriously. Consequently, business owners must understand that they can maximize the opportunity for success if they follow legal, ethical and social responsibility guidelines and incorporate these as key strategic business elements in their business model.

If you are reading this book, you have already made the first step to improve the business success statistics in the United States.

Proceed to calibrate your compass!

Back to Table of Contents

Dedication

To Tom and Isabella

~

Chapter 1. The Entrepreneur’s Profile

Prior to deciding whether to start a business, the potential entrepreneur must undergo a self-evaluation to help determine whether being a business owner is the right decision. A person may have a strong desire to become his or her own boss, but this is not reason enough to enable them to be a successful business owner. The first decision to be made is, in all honesty, whether the entrepreneur has the personality and the resources to not only be a business owner, but also be a successful entrepreneur.

Take the following test: If you answer Yes to at least seven of the following questions, then you possess some of the characteristics of having an entrepreneurial spirit. Although this will not guarantee your success as a business owner, this exercise is without a doubt, an excellent start.

Considering all the time and resources that you will likely invest in your business, do you have the support of your family?

Are you able to obtain the financial resources to start and maintain your business, until it produces profit on its own? (Could you obtain these resources from your friends, family and/or associates? Could you obtain financing from a bank or other financial institution?

• Do you have a product or service that can provide benefit to the community?

• Do you know who your competition is or will be?

• Does your idea or business have a competitive advantage?

• Are you willing to invest 50, 60 or 70 hours a week (or more!) to dedicate them to your business?

• Are you experienced in business administration?

• Are you a leader?

• Are you willing to risk all your savings in your business?

• Do you have a contingency plan in case your business fails?

• Are you willing to learn and follow the laws and regulations applicable to your business?

• Are you willing to engage professional and legal counsel to assist you with your business?

If you replied Yes to seven or more of the above questions, then you are a serious entrepreneur. In addition, if you answered the last two questions in the affirmative, you have the correct perspective to begin operating your business properly.

Back to Table of Contents

Chapter 2. First Steps to Start a Business

To operate a business in the United States, a person must form a business legally, obtain the necessary permits and licenses, establish a system to pay taxes correctly, and follow other required business formalities. The next steps are essential to start a business in Florida:

First Steps to Start a Business in Florida

1. Select the best legal entity to form your business, and determine if you must register your business with the Florida Department of State, (or in the state where the business will operate.)

2. Develop the organizational documents and company formalities required under state law.

3. Obtain a Federal Employer’s Identification Number or EIN" for the business with the United States Internal Revenue Service.

4. Evaluate the tax liability for the business at federal, state and local levels.

5. Determine if you must obtain a professional license with the applicable licensing agency or agencies.

6. Obtain a Business Tax Receipt (also known as Occupational License in some jurisdictions) with the county and/or city where the business resides.

7. Register the business employees at a state level with the Department of Revenue (required in Florida).

8. Determine if your business must pay Sales Tax.

9. Register your business to pay Tangible Property Tax.

10. Determine if your business must pay Impact Fees.

11. Secure the Zoning Permit to operate your business in the selected business location.

12. Obtain the proper insurance for the business.

13. Write a Business Plan and a Marketing Plan.

14. Develop written contracts with key employees, subcontractors and suppliers, as needed.

15. Write a Company Policy or Employee Handbook for your business.

16. Implement a Performance Measures system to ensure your business objectives are being met. Address this periodically.

17. Protect your Intellectual Property (e.g., trademarks, patents, copyrights).

18. Before starting business, finalize your due diligence research to ensure that you are informed of all legal requirements in the state, county and locality where your business resides. (e.g., Non-profit businesses require additional filings.)

The next chapters will discuss the above recommendations and will provide information to assist in their proper implementation. They will also discuss additional topics of interest.

Back to Table of Contents

Chapter 3. Selection and Formation of the Appropriate Legal Entity

One of the most important aspects to consider prior to starting a business is the decision of selecting, along with legal counsel, the proper legal entity to operate the business. There are various forms of legal entities that can be formed in the United States. Each state applies its own laws of entity formation. Therefore, the entrepreneur must decide with his attorney which one of these entities is more favorable to the business and the entrepreneur’s objectives. The laws of the state in which the business will reside will influence this decision.

Specifically, the businessperson will have to determine whether to operate the business under one of the following options:

• Sole Proprietor – Individual who operates on his own, without a legal entity separate from the person. The earnings of the business will be attributed to its owner, and therefore, the owner will pay taxes for all the net income of the business.

• C Corporation – Entity in which stockholders exchange money, goods or both for a stock in the entity. The entity’s earnings will be attributed to the entity itself and later to the stockholders, upon distribution. The stockholders can be employees and/or investors of the corporation. Tax is paid at two levels, at the entity level and at the owner level.

• S Corporation – A corporation, which after meeting certain requirements, chooses to elect S treatment under the United States Internal Revenue Service Code. In general, an S Corporation is exempt from federal corporate tax. The stockholders declare the income, deductions, loses and creditors of the corporation in their personal income tax returns.

• Partnership (there are various types) – Relationship between two or more people who associate to develop a commercial activity or a joint venture. Each person contributes money, goods, work or skill, and in return they expect to share in the profits and losses of the business. Taxes are paid at each individual associate’s level.

• Limited Liability Company or LLC – An entity authorized under state law in some states in the United States, where the legal responsibility for the debts of the company is limited, like in the corporation, the management is in the hands of partners or the managers hired by the partners, and taxes are paid as in the partnership entity. In Florida, an LLC can elect to pay federal taxes as a C Corporation, as an S Corporation, or as a Partnership, and it may still keep its LLC status for the purposes of legal liability.

The selection of the most appropriate entity for a business will depend on various factors that affect, among other things, the legal responsibility of the entity’s owner(s) and the tax liability of the business and its owner(s). These factors include:

• The number of owners of the entity

• The citizenship of the owners of the entity

• The eventual size of the business (number of employees and earnings potential)

• If the entity will eventually become a franchise

• If the entity is set to Go Public (it will sell stock in the Stock Exchange)

• If the entity will provide fringe benefits to its employees

• If the entity will be a closely-held family business

• If the entity will purchase real estate

• If the entity will focus on being solely a service provider (e.g., a sales or consulting entity, a medical practice, etc.)

• If the entity plans to become a non-profit organization

Important Observation

The decision to choose the right legal entity should not be made in a vacuum, and it should not be