Question 1

What is FMLA?

Accepted Answer

FMLA stands for the Family and Medical Leave Act. It is a federal labor law, generally applicable to employers with 50 or more employees, that allows eligible employees to take up to 12 weeks of unpaid leave a year for qualified family or medical related reasons.

Question 2

What is a buy-sell agreement?

Accepted Answer

Buy-sell agreements are contracts between business owners to address various situations under which one or more owners have the option or the obligation to sell their ownership interest, and other owners (or the company) have the option or obligation to purchase that interest. Common triggers of these buy and sell rights include an owner’s death, disability, termination of employment, and receipt of a third party offer to purchase the interest. These are put in place to protect a company’s stability and longevity should a triggering event occur, and to limit disputes that can arise in those circumstances. The agreement would usually address price determination, payment terms, and timing, along with other matters. If one of the business partners dies and there is a buy-sell agreement in place, oftentimes life insurance policies are used to fund the buyout. Buy-sell agreements safeguard the company, stakeholders in the company, employees, and even clients and customers.

Question 3

What is a Sole Proprietorship business structure?

Accepted Answer

This is the most common and straight forward business structure where one person is the owner. This business is not incorporated, which means less government involvement but also less government protection. Generally speaking, the owner pays personal income tax and self-employment tax on the business profits earned. The owner is solely financially liable for the business. Which also means that if the business needs to settle a debt or a legal claim, your personal assets may be at risk. This type of business structure offers simplicity and more control for the individual owner.

Question 4

What is a Limited Liability Company (LLC) business structure?

Accepted Answer

An LLC is structured in a way that offers owners the chance to limit their personal liability which protects their personal assets. It offers flexibility like a partnership does, but it provides protection of assets like a corporation does. LLCs are common in Michigan. They are inexpensive to start and easy to set up. You are required to file original articles of organization which should contain all the information required to form your LLC. They offer flexible management structures and do not put a limit on the number of members or owners the business may have. Typically, LLCs pay lower taxes than corporations. The profits that an LLC makes are treated as the business owners’ personal income, they are not subject to corporate taxation.

Question 5

What is a B Corporation?

Accepted Answer

This business structure is also called a benefit corporation. They are a for-profit corporation, but they are also mission driven. They must receive a certification that shows they are socially and environmentally responsible and transparent. This type of corporation is taxed in the same way as a C Corporation, so they do not receive any tax breaks. Companies that focus on the planet and people as well as making a profit should be structured as B Corporations. B Lab (the company that performs the certification assessment) says that “Certified B Corporations are businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose. B Corps are accelerating a global culture shift to redefine success in business and build a more inclusive and sustainable economy.” Examples of B Corporations would be TOMS, Ben and Jerry’s, Thrive Market, and Seventh Generation, among many others. B Corporations build trust with their consumers and have the advantage of attracting investors because of their business mission.

Question 6

What is a C Corporation Business Structure?

Accepted Answer

Businesses structured as C Corporations are independent of their shareholders. They are the most prevalent type of corporation as they provide defined tax and ownership structures.They are for profit companies that pay tax on the profits.Funds distributed out to the shareholders as dividends can also be taxed.They can be expensive to start and require extensive record keeping.They have strong personal liability protection for their shareholders.They have no limit on the number of shareholders they can have and can also offer stock options.

Question 7

What is an S Corporation Business Structure

Accepted Answer

Generally speaking, an S Corporation business structure passes taxable income, credits and deductions, and losses to its shareholders. They have a special tax status with the IRS which provides them with some tax advantages.A business must meet certain IRS requirements to become and remain an S Corporation.An S Corporation does not pay corporate taxes, because the profits and losses are passed through the business and reported to the shareholders personal tax returns.Like all corporations, they must file articles of incorporation.Typically, S Corporations are smaller businesses since they cannot exceed 100 shareholders and they must hold shareholder and director meetings.

Question 8

What specific information should a Non-Disclosure Agreement contain to ensure it is legally valid?

Accepted Answer

The names of all parties involved in the contract.A description of the confidential information that the employer wants the employee to keep private. It is important to be as specific as possible.The owner of the confidential information.The reason the information is confidential so the employee understands why they are required to sign the contract.The length of time that the information should be kept confidential.The remedies in the event the NDA were breached or suspected of being breached.

Question 9

What is a Non-Disclosure Agreement?

Accepted Answer

Non-disclosure agreements (NDAs), also referred to as Confidentiality Agreements, are legally binding contracts in which one or more parties enter into a confidential relationship because of sensitive information.NDAs are used to help keep valuable business information secret.NDAs are not just for large businesses.NDAs can protect a company from an employee leaving and using the information they were taught to start their own competing business.If NDAs are breached, the parties involved could be subject to lawsuits.The confidential information protected by a non-disclosure agreement is typically the information that makes a business successful and unique.

Question 10

What is a Partnership Business Structure?

Accepted Answer

This type of business structure may be ideal for businesses owned by multiple people. It is also the simplest way for more than one person to own and operate a business where all the owners share in the profits and share in the liabilities. A partnership business structure:Does not pay taxes on income.It passes profits and losses to the partners.Has two different types: general and limited partnerships.

Question 11

What information must a non-disclosure agreement contain to ensure it is legally valid?

Accepted Answer

The names of all parties involved in the contract.A description of the confidential information that the employer wants the employee to keep private. It is important to be as specific as possible.The owner of the confidential information.The reason the information is confidential so the employee understands why they are required to sign the contract.The length of time that the information should be kept confidential.The remedies in the event the NDA were breached or suspected of being breached.

Question 12

What is a nonprofit business structure?

Accepted Answer

Nonprofit business structures are mission driven. The type of mission typically benefits education, art, charitable causes, or religious purposes.Nonprofits may or may not be tax-exempt. To form a nonprofit organization that is tax-exempt, you would need to apply for and receive a federal 501(c)(3) tax exemption. With this tax exemption, nonprofits are not required to pay taxes on the profits, but most of the profits are used to fund the nonprofit’s mission.

Question 13

What is the PWFA?

Accepted Answer

The Pregnant Workers Fairness Act is a law that mandates federal requirements for employers to provide “reasonable accommodations” in the workplace to an employee with limitations due to pregnancy and childbirth, or other related medical conditions, unless the implementation imposes “undue hardship” for the employer.

Question 14

What are valid family or medical related reasons an employer must allow an employee to take FMLA leave?

Accepted Answer

*The birth of a child and to care for the child within the first year.*The placement of an adopted child or fostered child with the employee to care for them within the first year.*If the employee has a “serious medical condition” and is unable to perform their essential job duties because of it.*To care for an immediate family member that has a “serious health condition.” Immediate family member means spouse, child, or parent of the employee. It does not include the employees in laws or grandparents. Child can include someone in an “in loco parentis” relationship with the employee.* For qualifying needs due to the employee’s spouse, child, or parent being on active duty as a Member of the National Guard, the Reserves, or the regular Armed Forces.

Question 15

What is the FLSA?

Accepted Answer

The Fair Labor Standards Act is a United States Federal Labor Law enacted in 1938 that protects employees’ rights by establishing:Minimum WageOvertime Pay EligibilityRecord KeepingChild Labor Rules
This affects full-time and part-time employees in the private sector and in the federal, state, and local governments.

Question 16

Who is the Beneficial Owner of your Business?

Accepted Answer

A company can have multiple beneficial owners. A Beneficial Owner, according to FinCEN, “includes any individual who, directly or indirectly, either:exercises substantial control over a reporting company, orowns or controls at least 25 percent of the ownership interests of a reporting company.”
An individual has substantial control over a reporting company if they meet any of the following criteria:The individual is a senior officer.The individual has authority to appoint or remove officers.The individual is a decision maker of important matters.The individual has some other substantial control over the business.

Question 17

What types of confidential information could be included in an NDA?

Accepted Answer

A Non-Disclosure Agreement may contain the following confidential information:Trade Secrets such as test data, customer lists, new products or new developments, and expansion plans, among others;Business plans, processes, and procedures;Intellectual Property such as copyright, trademarks, patents, etc.;Research and Development;Client information;Sales and marketing plans; andCompany financials and passwords.

Question 18

What are some benefits to having an NDA for your business?

Accepted Answer

*Keep sensitive and confidential information about your business a secret.*Inexpensive way to help keep business information secret.*Builds trust between the parties signing the NDA.*Limits the likelihood of information being leaked or information being stolen by competitors.*Helps attract investors which in turn would help businesses gain the capital they need.Non-Disclosure agreements are not only used by businesses with their employees, but they can also be used with independent contractors, potential investors, vendors, and other business associates.

Question 19

What are the six essential elements of a contract?

Accepted Answer

Contracts are a part of most commercial transactions so it is important that they are constructed with all the necessary information to make sure they are legally valid. While they very in terms and complexity, the formation of a valid contract must include specific essential elements. These specific elements are:OfferAcceptanceMeeting of the MindsConsiderationCapacityLegality

Question 20

What are the different types of Partnership business structures?

Accepted Answer

General Partnership: In a general partnership, the owners all share full operational control of the business as well as unlimited liability.Limited Partnership: In a limited partnership, the owners are not always involved in the day-to-day operations. They are more like silent partners in a business. An industry example for limited partnerships would be film making or real estate.

Question 21

What is the Youth Employment Standards Act?

Accepted Answer

The Youth Employment Standards Act (YESA) is a Michigan law that regulates the employment of minors. YESA establishes rules issuing required work permits, what types of jobs minors can have, the number of hours they are allowed to work, and the times in which they are allowed to work.

Question 22

What are the essential elements of a contract?

Accepted Answer

Contracts are legally binding agreements between two or more parties that consist of a mutual exchange of promises with terms and conditions that are understood by both parties.While contracts very in terms and complexity, the formation of a valid contract must include specific essential elements. These specific elements are:OfferAcceptanceMeeting of the MindsConsiderationCapacityLegality

Question 23

What type of business would benefit from a buy-sell agreement?

Accepted Answer

Having a buy-sell agreement should be a fundamental business practice. Any business with more than one owner, structured as a:CorporationLLCPartnership
...should consider having a buy-sell agreement, including family-owned businesses.

Question 24

What is typically included in a buy-sell agreement?

Accepted Answer

Buy-sell agreements are typically constructed in a way that best suits the individual business needs. They must also be constructed to adhere to specific state statutes.Generally, a buy-sell agreement will include:*A list of owners/partners of the business and percentages of ownership.*A methodology for determining the value of the departing owners share of the business, and the date the valuation is determined.*A list of events that could trigger the buyout.*The determination of which parties will purchase the interest, terms of purchase, security for payment, etc.*Addressing certain tax and estate planning considerations for each of the owners and the business.

Question 25

What is a Contract?

Accepted Answer

Contracts are legally binding agreements between two or more parties that consist of a mutual exchange of promises with terms and conditions that are understood by both parties. It is important that contracts are constructed with all the necessary information to make sure they are legally valid. While contracts very in terms and complexity, the formation of a valid contract must include specific essential elements:OfferAcceptanceMeeting of the MindsConsiderationCapacityLegality

Question 26

What is a Cross Purchase Agreement?

Accepted Answer

This is the simplest form of a buy-sell agreement and is best suited for businesses with just a few owners. In this type of agreement, upon the occurrence of a triggering event, the other partners/owners of the business purchase the interest of the departing owner at an agreed upon price. This is sometimes funded by life insurance.

Question 27

What is the FLSA?

Accepted Answer

The Fair Labor Standards Act is a United States Federal Labor Law enacted in 1938 that protects employees' rights by establishing minimum wage, overtime pay eligibility, record keeping, and child labor rules. This affects full-time and part-time employees in the private sector and in the federal, state, and local governments.

Question 28

How is business value determined in a buy-sell agreement?

Accepted Answer

Valuation methods are an important part of buy-sell agreements as they determine the price at which business interests are valued. This important component helps avoid potential conflicts should the parties fail to agree on value. Some of the most common types of valuation methods are:Asset Based Approach: This type of method focuses on the net asset value of the company's assets.Income Based Approach: This is a valuation approach that uses the income generated by the business to determine value.Market-Based Approach: This type of method compares financial metrics of similar assets to determine value.Stipulated Value: Where the owners agree in advance of the value of an interest for buy-out purposes.

Question 29

What is a Brief?

Accepted Answer

A legal brief is a structured, written document used to present arguments, facts, and legal reasoning about a case. It's commonly prepared by lawyers and submitted to a court to persuade a judge to rule in their client's favor.

Question 30

When should business owners create a Buy-Sell Agreement?

Accepted Answer

Ideally, it should be created when the business is formed, but can also be implemented at any stage.A buy-sell agreement outlines what happens if an owner retires, becomes disabled, passes away, or wants to sell their interest.Having a plan in place can:Prevent conflictProtect the businessProvide peace of mind for everyone involvedBuild your business with your future in mind!

Frequently Asked Questions

What is FMLA?

What is a buy-sell agreement?

What is a Sole Proprietorship business structure?

What is a Limited Liability Company (LLC) business structure?

What is a B Corporation?

What is a C Corporation Business Structure?

What is an S Corporation Business Structure

What specific information should a Non-Disclosure Agreement contain to ensure it is legally valid?

What is a Non-Disclosure Agreement?

What is a Partnership Business Structure?

What information must a non-disclosure agreement contain to ensure it is legally valid?

What is a nonprofit business structure?

What is the PWFA?

What are valid family or medical related reasons an employer must allow an employee to take FMLA leave?

What is the FLSA?

Who is the Beneficial Owner of your Business?

What types of confidential information could be included in an NDA?

What are some benefits to having an NDA for your business?

What are the six essential elements of a contract?

What are the different types of Partnership business structures?

What is the Youth Employment Standards Act?

What are the essential elements of a contract?

What type of business would benefit from a buy-sell agreement?

What is typically included in a buy-sell agreement?

What is a Contract?

What is a Cross Purchase Agreement?

What is the FLSA?

How is business value determined in a buy-sell agreement?

What is a Brief?

When should business owners create a Buy-Sell Agreement?