News, Events, & Insights

Many small business owners incorporate their businesses not only for legal protection, but also to reduce owners’ payroll taxes through S-Corp tax election with the IRS. One advantage of an S-Corp is that it gives business owners the ability to reduce their self-employment taxes. Any small business owner who has not made an S-Corp election and uses Schedule C for their personal tax return for 2010 is subject to both employer and employee FICA and Medicare payroll taxes at 15.3% up to $106,800, 2.9% Medicare for Schedule C net income greater than $106,800, and California SDI for 1.1% up to 93,316. If a business owner pays himself/herself a “reasonable salary”, the rest of the net income is not subject to these payroll taxes.

Posted on The Internet Law Advisor Blog November 16, 2009 – By William Galkin, Esq.

Summary: The Federal Trade Commission (FTC) has issued revised Guides Concerning the Use of Endorsements and Testimonials in Advertising(Guides) which will take effect on December 1, 2009. The main purposes of the revisions are (1) to update the application of the Guides to new media and (2) to rescind a safe harbor that previously allowed ads stating positive results experienced by consumers, even though such results could not necessarily be expected by the average consumer, provided the statement “Results not typical” was included in the ad. Now the actual typical results need to be stated in the ad.

Dow Jones VentureSource is one of the most popular nationwide venture capital date reports in the United States. VentureSources published its latest data on the development of venture capital investments in the third quarter of 2009. Below are some overviews observed by VentureSource.

• With 616 venture deals and $5.1 billion invested, Q3 is a 6% drop over Q2;
• IT investment barely outpaces health care;
• Web2.0 investments surpassed the software sector for first time on record;
• Medical device investments nearly match biopharmaceuticals;
• Corporations investing instead of acquiring, commitments to VC-backed firms surpasses 2008 total;
• $5 million median deal size on par with Q1&Q2, but still lowest since 1999.

It is undeniable that the investments and fundraising by venture capitalists remained at low levels in 3Q’2009, but there is room for optimism as the economy is picking up slowly and Nasdaq continued to improve. In addition, with regard to the largest U.S. deals overall in 3Q’2009, eight deals are conducted in California, such as Facebook, Tesla Motors, and Pacific Biosciences of California, etc.

On September 1, 2009, the Government of the United Kingdom implemented the New Offshore Disclosure Opportunity (“NDO”).

The NDO allows those individuals with unpaid UK taxes relating to previously undisclosed income and/or capital gains linked to offshore accounts and/or assets to settle related tax liabilities at a favorable 10% penalty rate.  Ordinarily, penalties are charged at up to 100% of the tax due.

The NDO provisions apply to all UK residents and certain non-UK domiciled individuals (who themselves may be or once were subject to tax in the UK) who have an interest in any Offshore Accounts, Trusts or Corporate entities that would otherwise be subject to UK tax. 

The United States Court of Appeals for the Second Circuit, in a September 10, 2009 ruling, held that an employer can be held liable for discriminatory hiring decisions made by its independent contractors. The case involved an independent contractor acting on behalf of the employer, telling the plaintiff that “they were looking for someone younger”.

The Second Circuit ruled that, even if the hiring decision is made by the authorized independent contractor, the employer was still responsible for the discriminatory hiring decision by the independent contractors. In a worse scenario, even if the independent contractor does not have the actual authority but the applicant thought that it did (“apparent authority” in legal terms), the employer is still liable.

Considering the harsh economy and fewer job opportunities these days, employers should be more cautious since the job applicant is more inclined to sue if he/she cannot get the job. Employers should avoid asking job applicant questions such as race, religion, national origin, gender and age, etc during the interview process; when entering into the independent contractor contract, it is a good idea to add an indemnification clause asking the independent contractor to indemnify the employer for any liability arising from the hiring process conducted by the independent contractor.

If you are a company with operations in both the United States and Israel, you should be aware of several very important U.S. and Israeli Tax issues when you engage in cross border operations. I have set forth below several of the main issues. This list is not exhaustive and only reflects briefly the main tax issues. Other issues such as employment, banking, intellectual property rights, custom duties etc. will be addressed in other communications.

Oracle’s takeover of Sun Microsystems is facing the European Union’s competition regulator’s investigation, and the prospect of Google’s ambition of building a digital library is still unclear because some publishers and writers reckon the accessibility of large volume of online books will damage their economic interests. While small tech companies and start-ups are worrying about their sources of capital and the outlet of their products, the big tech companies are also undergoing tough scrutiny from both the governments and their competitors.

Oracle’s deal is a typical M&A deal among two tech companies in order to complement each other and expand their market shares, and it is not uncommon to trigger the anti-trust examination. Google’s “monopoly” is sort of untraditional, since the platforms of the competition are not overlapping: one from the physical word, i.e., the physical books, and the other is from the virtual word, i.e., the books on the internet.

I do like Google’s fantastic idea of making millions of books digitally available to the general public, and do admire its ability of making it true. While creation is the life of a tech company; having a good idea and making it good is the key to the success of a tech company, no matter it is only a startup or a giant.