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The constuction industry is subject to more than its fair share of litigation. This not because the people who you work with are bad people (even though there a few bad apples). It is because industry itself if very complex.

There are many factors of what makes a project sucessful.  A successful project may not have anything to do with the parties involved. This includes anything from material shortages to the weather.

The people and companies involved in any given construction project are independent and often have competing business interests. The owner, contractor and architect are often at odds.

The time for an owner to begin thinking about construction litigation, which includes its avoidance, alternatives and costs is at the very beginning of the construction project. Obviously, the most important goal is to limit the possibility of a lawsuit as the most basic goal.

Unforutantely, due to the unpredicable nature of construction projects and the number of people involved in any given project there are likely to be disputes.

The time to consider litigation occurs before the point of confrontation. As an owner you should try to avoid it as much as possible by being aware of its possibility. You can do this by being careful about the people who you hire, and to define the legal rights and obligations of everyone involved in the project.

As an owner, the ability to  avoid a construction lawsuit is made likelier by the following:

• A comprehensive background check of all the participants
• A strong set of contracts that is uniquely drafted to suit your needs. This means you should avoid using the same agreement for each project and should be aware of independent contractors.
• Setting out before the project each parties administrative duties and obligations. 

You should be aware that even a contract that is drafted with every considering in mind will not inherently protect you from a lawsuit.  However, with careful planning, the likelihood of your company being involved in a costly lawsuit diminished greatly.

The Law Office of Frederic R. Abramson represents both owners and contractors in drafting contracts and construction litigation. If you have any questions, call at 212-233-0666

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I know, I know, this video has nothing to do with New York Business Law. But its Friday afternoon, and its time for the Friday Funny. Check out Jon Stewart’s take on Chatroulette. He runs into Brian Williams, Keith Olbermann, Katie Couric, Diane Sawyer along with other odd people. Enjoy!

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The IRS allows owners of LLC’s to make the decision themselves about how they want the company to be taxed.  The LLC can be taxed as in two general ways:

• As a pass-though entity, like a s-corporation, sole proprietorship
• Like a c-corporation

What is a pass though entity?

Usually business owners planning on forming a LLC at the startup stage decide that the LLC should be a pass through entity. What this means is that the corporation itself does not pay any taxes.  All tax profits and losses are reported by each business member on their tax return.  Like a sole proprietor, each owner files a schedule c.

If your LCC has more than 1 member be aware that each member must file the IRS Form 1065 and must be the same one used by the LLC.

How to Change your tax treatment

What makes LLC’s unique is the ability of its members to change the way it is taxed. You can elect to be taxed as a S or a C corporation.  To make this change, you only have to check the box that you wished to be taxed in form 8832 and simply file it with the IRS.  You can make this election at any time.  You will now be required to file corporate tax returns.

If you are interested in the entity being taxed as an S, simply file IRS Form 2553.  Be aware that to file as an S corporation, you have to meet its conditions.  Unfortunately, if you wish to change the way your LLC corporate taxed back to a partnership, you will have to wait five years to do so.

If you have any questions regarding starting a business in New York and tax issues related to it, contact me at the Law Office of Frederic R. Abramson at 212-233-0666.

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Misclassifying an an employee as an independent contractor is one of the most expensive mistakes that a business owner can make. It does not matter whether you intentionally made the mistake. You can be subject to large penalties, fines and even subject the criminal liability.  I have recently reported that the IRS has been targeting employers with independent contract workers.

The problems don’t end with the employer. Misclassified workers can lose:

• Worker’s Compensation Insurance
• Unemployment benefits
• Wage protection such as minimum wage and overtime.

Employers who hire independent contractors have an unfair advantage because labor costs less and they could charge less for their goods and services. If you are in the construction industry, a competitor who improperly misclassifies their workers as independent contractors can underbid you.

The employer who gets caught with improperly classifying workers as independent contractors can be subject to liabilities for:

• Unpaid Federal, State and Local Income Tax withholdings
• Social Security and Medicare contributions
• Workers’ Compensation Premiums
• Overtime
• Unemployment compensation
• State-mandated benefit programs

Audits

The New York Department of Labor conducts two types of audits, general and specific. The general audits are conducted randomly with nothing specific as its subject. It is interesting to note that these audits are not statistically random as specific industries, such as construction are heavily targeted. Specific groups are the subject to targeted audits as well, which are based on a variety of factors, including prior issue with improper classification. The Cornell Law Institute performed an excellent report about the misclassification of independent contractors in New York and is a great resource.

Prevailing Wage Duties

On publicly funded construction projects, some companies use missclassification as a way to avoid paying prevailing wage rates.  A company that is caught can be subject to paying restitution to affected employees, fines for failing to maintain payroll and general records and submit valid and certified records.

Conclusion

Due to the increased scrutiny on the use of independent contractors, employers, especially those in the construction industry need to focus on how they classify their workers. You should conduct audits internally with legal counsel to determine if their are any issues.

If you have any questions regarding the classification of independent contractors, contact me at the Law Office of Frederic R. Abramson at 212-233-0666.

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On July 4, we celebrate the entrepreneurs who were our founding fathers who made a difference by bringing social change to America. Unlike July 4, there is nothing particularly unique about the date of March 4.  On that date back in 2006 final contact was attempted with Pioneer 10 by the Deep Space Network. Unfortunately, no response was received.

NYConvergance recently noted that the New York Tech scene has matured. One sign of its maturity is the bevy of tech events in the New York City area.

What could be better than making March 4, 2010 special by spending the evening celebrating the power of entrepreneurs to change the world.  According to the press release:

The event will feature a panel that brings together the nation’s most prominent advocates for both early stage investment and social enterprise.  Fred Wilson, founder of Union Square Ventures, is an advocate for early stage investment and the single most read blogger in the venture capital community.  Jacqueline Novogratz is the founder of the Acumen Fund, a global nonprofit venture philanthropy fund that hat uses entrepreneurial approaches to solve the problems of global poverty.  They are joined by Roger Ehrenberg, founder of IA Venture Strategies and one of the most active angel investors in New York and Jacob Gray, partner at Murex Investments. The panel will be moderated by Scott Edward Anderson, founder of the greenskeptic.com and a frequent commentator on the FOx Business Netowrk. This rare combination of finance and philanthropy leadership reflects GoodCompany Ventures’ unique mission to help social entrepreneurs develop scalable, for-profit businesses to address unmet social needs.

Here are the details:

Date:   March 4, 2010

Time:  6-8 PM

Location:

Green Spaces NY
394 Broadway
5th Floor
New York, NY 10013

Cost: $35

For more information: GoodCompany Ventures

Drop me a line and let me know if you are planning to attend.  I would love to meet up with you!

The Law Office of Frederic R. Abramson is not affiliated with the above event.  If you have any questions regarding legal issues concerning entrepreneurship, contact the Law Office of Frederic R. Abramson at 212-233-0666.

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The New York Court system does not make it easy to find judges room and phone numbers.  Check out the New York State Uniform Court  System website and you will see what I mean.  The site itself is quite byzantine.

Knowing the judges room number is especially important when you are running to court for a court appearance and you are pressed for time. The court often fails to notify you of any room and phone changes. As a service to you, I have spent some time compiling a list of the latest phone and room numbers for all of the Judges in Kings County Supreme Court.

Below is a list of all of the Kings Supreme Court Judges court part addresses and phone numbers:

The Law Office of Frederic R. Abramson provides litigation services for businesses and individuals and  handles court appearances for lawyers in New York City and Long Island. For more information, call my office at  212-233-0666.

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Senators Dick Luger and John Kerry introduced today a new piece of legislation entitled “The Startup Visa Act of 2010.” This visa would permit immigrant entrepreneurs to stay or immigrate into the  United States if they have secured “significant” funds to start a new company. The goal of the act is to bring new jobs, opportunity and investment to the US.

To make the visa available, a new EB-6 category would be created. This new visa category would draw from visas under the existing EB-5 category.

One potential sticking point for many budding entrepreneurs is the proposed legislation’s definition of “significant” funds. The bill requires investment capital available from a sponsoring US venture capital or angel investor of at least $100,000 in an equity financing of not less than $250,000. If after 2 years the immigrant entrepreneur can show that he or she has generated at least 5 full time jobs or attracted at least $1 million in additional capital or revenue, then he or she would achieve legal status.

Clearly, this bill is aimed at attracting startup immigrant all-stars. Perhaps the young entrepreneur from Russia who started Chatroulette would qualify.  It will also help young entrepreneurs with great ideas who have recently graduated from college who have  obtained venture funding.

Most immigrant entrepreneurs who contact my office have great ideas but only limited access to capital.   I field a few calls a week from potential immigrant entrepreneurs who have amazing business plans which would be inexpensive to implement, but would fall short of the capital requirements.  I am not sure Bill Gates would qualify for a visa under the Startup Visa Act of 2010 if he hailed from Bangalore when he started Microsoft.

Nevertheless, this proposed law is  a step in the right direction and I support the bill.

Full Text of Proposed Legislation of The Startup Visa Act

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One of the great problems of the information age has been the disruption of  local communities.  During the last generation, people were able to rely on their local community to help them sustain their businesses.   Accountants were able to order a pint of Guinness at their local Irish pub and pick up a new tax client before the time the beer has settled.  The local butcher could rely on his buddy’s from his softball team to pick up osso buco at his store.

Now the local accountant has been replaced by H&R Block and you buy your meat in shrink wrapped plastic on environmentally unfriendly styrofoam at Stop and Shop. Even the local watering hole has been replaced by a TGI Fridays.  In the process, our local communities are being destroyed.

You may be paying a bit less in the short term, but there is a price. Our lives are missing the interaction of oral conversations that last more than a couple of minutes.  These conversations are important not only financially, but socially. If you are a financially planner, the local accountant would naturally refer you business.  The butcher probably knows about the best poker night in town.

Now that our local communities have been upended, many of us are turning to socially networking to re-build our communities. Unfortunately, social networking sites such as Twitter do not allow for many deep meaningful interactions that lead to building communities very quickly.

A community looks to each other to grow the relationship and to interact.  According to Chris Brogan, community happens when you feel that you are among like-minded people and when you feel that your contributions matter.? Communities empower users of products or services, or people with like-minded interests to interact.

You may not realize it, but who you buy from really matters.   Spend a few moments and think about the impact of what you purchase.

Yesterday I bought a gift for a for a two year old girl at the Dolphin Bookshop, in my hometown of Port Washington, New York rather than Barnes and Noble. The purchase supports a local independent bookstore in the community. I love technology, but don’t expect Kindle stores showing up on Main Street anytime soon.

The next time you are wondering why someone from your community hasn’t bought something from you, you should think what have you done lately to build our community.

What do you think? What are you doing to help build your community? Have you been able to use social networking sites to build a community?

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According to the New York Times, the IRS is cracking down on companies that try to pass off regular employees as independent contractors. More than two dozen states are cracking down on employers that improperly claim regular employees as independent contract workers. The federal government believes that enforcement could yield $7 billion during the next decade.

Among the most often misclassified workers are truck drivers, construction workers, home health aides and high-tech engineers.

As an independent contractor, there is no employer-employee relationship with the person or company that you are doing business with.  The independent contract is a consultant who performs specific duties that the consultant is capable of performing.

At the start of the relationship, it is absolutely vital to have an independent contract agreement (also known as a consulting agreement) drafted to protect both parties.  The consequences of failing to establish a consultant as an independent contractor can have dire tax consequences.

In your independent contractor agreement, it is important to establish that the consultant performing the services  is not under the control of the employer.  In addition, the employer may not directly supervise the consultant.

When it comes time to draft an independent contractor agreement, you should focus on the fee for services rendered and provide a complete description of the services that are to be provided.

According to IRS, you should be aware of the following common law factors when it comes to providing evidence as to degree of control:

Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?

Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)

Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

If you have a legal question regarding independent contractors in New York, contact the Law Office of Frederic R. Abramson at 212-233-0666

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