This week we continue our series on Essential HR Policies with a look at time off and paid leave. As a small business or non-profit, you might be worried that giving your employees paid time off is simply too expensive. On the other hand, you fear that you won’t be able to compete for the best talent if you don’t offer the kind of time off and paid leave policies that are offered by much larger corporations. And these fears are compounded by not knowing what the law actually requires versus simply wanting to be a great place to work. 

Just like you shouldn’t do business on a handshake, you shouldn’t operate your business on a handshake either. But too many entrepreneurs regularly go into business without any formal documentation. If you have business partners, so-called “silent” investors, or took money from friends and family, I cannot stress enough how important it is to have the terms of these partnerships documented in a formal written agreement. Otherwise, it’s just a dispute waiting to happen.

If I had a dollar for every time a client or prospective client told me that their business partner/best friend/family member would never sue them, I’d be writing this article from a beach in the Caribbean right now.

​There are a few critical questions that every company operating agreement* should answer.

Previously, we looked at the difference between issue advocacy (which is permissible for non-profit organizations) and lobbying (which becomes problematic for a 501(c)(3) if it is “substantial”). So what is your non-profit organization to do if it decides that the best way to advance the mission is to influence legislation? This is where other types of tax-exempt status come into play.

This week, we continue our series on Essential HR Policies by taking a closer look at what should be in your employment files.

Most of our clients run their business or non-profit because they are pursuing a passion, not because they enjoy record-keeping. But failing to keep thorough and accurate payroll records makes it impossible for you to complete timely and accurate tax filings (including issuing W-9s or 1099s at the beginning of the year) which can expose you to penalties and late fees. And the lack of records means you can’t defend your organization from claims of unpaid wages, salary, or overtime.

​A licensing agreement is a contract in which you, the licensor, gives someone else, the licensee, permission to do something that they otherwise would not have the right to do. There are many situations in which a small business might use a licensing agreement:

• If your business is only reaching customers in a particular region, you might enter into a licensing agreement with another business to sell your products or services in a different region. 
• If your business develops software, you are typically giving end users permission to use the software in a particular way, but you are not selling the underlying code that makes up the software. (This is also true of businesses that operate under a software as a service or SaaS business model.)
• If you create content for others, you have to decide whether you are giving up all of your rights in that content, or simply giving your client permission to use that content (in which case, you retain the right to re-use that content with another client).
• If your business has a proprietary process or patent rights in a particular technology, you might monetize that confidential information by giving another business the right to use that confidential information.
• If you franchise your business or offer a business opportunity, you are licensing your brand for someone else to use.

​While licensing agreements need to be customized to fit your particular business situation, there are some common terms that most licensing agreements should address.

​You’ve been diligently pursuing your marketing plan, and your dream client is finally interested in working with your business. You take some time to hammer out the details, maybe trading multiple emails and phone calls, sometimes even text messages. At some point, the haggling concludes and you get to work providing your service. At this point, one of two things often happen:

​If you’ve ever found your business in one of these situations, you’re definitely not alone. These situations illustrate exactly why you need to use written contracts in your business and not just rely on a handshake and a few emails. 

​As a non-profit organization, you may have heard that you are not allowed to engage in lobbying. However, this generalization greatly oversimplifies the matter. And because of that oversimplification, some non-profits wrongly assume that they cannot even take a stand on issues, whether current social issues or simply issues that are relevant to the organization’s mission and purpose.

When it comes to running a functional and productive workplace, drugs and alcohol can cause any number of problems: lost productivity, excessive time off, workplace accidents, employees behaving badly while under the influence, etc. As we keep reiterating in this series, as an employer, you can be held vicariously liable for everything that your employees do when they are acting in the course and scope of their job duties. And if you think this is just a problem for someone else’s small business or non-profit, think again. Statistically, substance abuse is more of a problem at smaller businesses than larger ones precisely because small businesses are less likely to have drug-free workplace policies in place.[1] 

Add in the trend towards legalizing marijuana and small businesses can find themselves caught in a tough place. There’s a tension between being a “friendly” small business employer and making sure your employees can do their best work. After all, you’re not trying to be traditional, “stuffy” corporate America, but you don’t want to face a lawsuit caused by an employee’s bad behavior (especially one caused by an employee being under the influence while on the job). 

Over the lifespan of a small business, you may find yourself needing to sell or transfer intellectual property rights. There are a variety of situations where this might come up:
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• The trademark or copyright was registered in the name of an individual owner instead of the business. (Because this can be an incredibly valuable business asset, most of the time, the intellectual property should belong to the company and be registered in the company’s name.)
• The intellectual property rights are being sold in connection with the sale of all or part of the business.
• The trademark or copyright is being used as collateral to secure a debt.
• The company is merging with another business, and the intellectual property rights need to be transferred to the other business (or sometimes a new entity created out of the merger).
• The business entity (or sometimes individual) that owns the trademark or copyright undergoes a name change, and the registration simply needs to be updated.

​Even though intellectual property rights are intangible, they can still be sold or transferred much like any other business asset. This week, we look at how to transfer ownership of these assets.  Except for name changes, we first need an agreement between the parties describing the terms of the sale or transfer. Then, we need to record the assignment of the intellectual property rights in the appropriate office.

(Note: Licensing intellectual property is not the same as transferring ownership. Licensing deals with a temporary right to use intellectual property, not a change in the underlying ownership.)

In Part 1, we covered how to set up your non-profit organization as a legal entity, and in Part 2, we looked at applying for tax-exempt status with IRS Form 1023-EZ. But chances are that if your organization qualifies for the EZ application for tax-exempt status, then you might want to consider fiscal sponsorship. 

Just what is fiscal sponsorship, and how can it help your new non-profit organization or project?