SMME EP 415: Legal Considerations in the New Year with Keren de Zwart of Not Your Father’s Lawyer

7:51AM Apr 21, 2025

Speakers:

Daniela Woerner

Keywords:

Legal considerations

business structure

compliance

employee handbook

non-compete agreements

S corp election

tax savings

business licenses

BOI report

labor laws

paid sick leave

proprietary information

confidentiality

financial advisor

CPA.

Welcome to Spa Marketing Made Easy, a podcast for spa owners who want to step up their leadership and business skills and step into the role as Spa CEO. I'm your host. Daniela Woerner, CEO of Addo Aesthetics and Founder of the Growth Factor Framework Program, where we teach, coach and guide spa owners in scaling their spas to the next level of growth and unlocking freedom in their life and their business. I'm so glad you're here now. Let's dive into the show. Happy 2025 My dears, and thank you so much for tuning in for the very first episode of the year. I hope that you had an incredible holiday season, and you're still filled with that energy and excitement that only the New Year can bring, just like a brand new planner and a set of gel colored pens. Now, I don't know about you, but for me, some of the heaviest parts of business are the legal and administrative aspects, and sometimes those are the most important so things like changing your business structure that can save you 1000s in taxes, but there is only a certain window that you can make those elections. So I wanted to make sure to kick off 2025 with an episode with a good friend of mine, Keren. She's been hosting the legal calls inside of our growth factor program for the past few years. Now, I am not an attorney, and I'm very comfortable stepping aside when things are not in my scope, so I brought Keren on to fill those gaps, and today, she is going to go over the big things that we need to know from a legal perspective at the beginning of the year. Now also make sure that you save the date mark your calendars for January 28 just a couple weeks from now, at noon, Eastern Time, we are hosting an educational, no pitch webinar with Keren, where she's going to present the differences between employees and contractors and what you need to know as a spa owner to ensure that you are compliant with the laws of your state. Now, while this webinar is absolutely free to attend live for anyone in our adult community, the recording will be housed inside of the adult professional association. So if you're not an APA member and you want to hear the content in this webinar. You've got to attend live. If you're already an APA member, attend live, and you'll also have access to the recording in the APA members area. You can, of course, learn more about being an APA member in the show notes section of this episode. All right, so let me do a quick read of Keren's bio, and then we will jump right in. Not your father's lawyer was born from a desire to fill the legal gap for entrepreneurs and small businesses by replacing the outdated billable hour model with flat fee pricing. With 15 years of experience in corporate transactions, Keren has worked with every type of business, from side hustlers to raising millions of dollars and taking companies public. Today, she helps small business owners get the legal aspects of their businesses in check through her law form, not your father's lawyer, and offers legal contract templates tailored specifically to small niches. She resides in Orange County, California with her husband and two children. All right, Keren's incredible. She obviously from being a growth factor. Knows a ton about our industry, and I hope that you enjoy this interview. All right, Keren, welcome to the Spa Marketing Made Easy Podcast. I'm so excited to have you on here and get into really, what is one of the most important foundational topics in operating a business, maybe not the most fun, but oh my gosh, so so important. So thanks for being here. Thank you so much for having me. So I think we should start with, you're an attorney. We have to put all the disclaimers you are not providing legal advice, but it's it is an important topic to have someone that is an expert in this kind of subject matter of what are the things that we should be looking at in the new year for our business? So often, these little administrative tasks that are not actually little. They're very, very important in your business. They I know for me, they just like, drain me. It is the it is the thing that I procrastinate on. It is the last thing that I want to do. But if you don't do them, there can be major consequences. So we're going to get into those things today. So where do you want to start? What do you think is like the first thing people need to look at as they're kind of reviewing their businesses from a legal standpoint this year?

Yeah, it's a great question. I think that there are a lot of different elements that we can kind of talk i. Level about all of them, but the first thing I always tell people is, don't freak out. Don't feel like I don't know. I don't know what I don't know. I don't know where to start. I don't know what to do. It's just take one step at a time. And kind of where you're operating often leads to the right question. So a lot of people come to me with those examples, like, I'm, you know, I have an LLC. Somebody told me I should have it taxed as an S corp. When you know, what do I do? Or how do I know? Or, you know, do the have the laws changed, and do they impact my operations? And so those types of questions that you often will come up with in your own day to day. Operations are a great jumping off point, but in the new year, it's a great time to kind of take stock of everything legally speaking and where you're at, and not just Legally speaking, but you know operationally, and make those changes, or at least confirm that everything you're doing, you know, today is still legal. And that's especially important at the New Year, because a lot of laws change and are effective January 1. So that's a great time to kind of say, is everything working out. So you know, on that point, one of the most common changes that impact small business owners is, you know, labor laws. So wage and hour laws, a lot of minimum wage laws go up in

the minimum wage. We're also seeing a lot of required sick pay or required vacation pay or different and these are all dependent on your state.

So they're not just dependent on your state, but dependent on, really, where the worker lives. So most people, if you have a spa, for example, you're, you know, and it's in Indiana. You're probably operating in Indiana, and all your employees are in Indiana. But if you have a, you know, multiple locations across state lines, it doesn't matter if your business is in Indiana business. If you have a you know, business in Kentucky, the Kentucky laws are going to impact where those workers are. So that's maybe not as impactful for these types of businesses, but if you do have, you know, maybe you have a social media manager, and they live in California, then all of those the state where the worker is, well, yes, the California laws here in California were very specific, but the state Where the worker is is what governs the Wage and Hour and labor laws. So that will include, like we're talking about minimum wage, meal and rest breaks, overtime laws, paid sick leave. This is very, very big, and lot of states are moving to either requiring or increasing paid sick leave, California, for example, was three days of paid, you know, minimum of three days of paid sick leave for all workers, and they increased it last year to five days. A lot of other states are moving to those models of requiring paid sick leave. And these are important to check, because a lot of people are like, Well, I'm a small business. Is it still impact me. I only have three employees. All my employees are part time. So it's really important that you look at the state rules, because a lot of them do differentiate small businesses versus larger businesses, but they usually have requirements in both. Part time employees are usually still covered. So people are trying to understand, is it three days of my workers four hour shift, or is it three, eight hour days, like a total of 24 hours, which really gives them, you know, whatever, six days of paid sick leave if they work four hour shifts. And understanding what your state says about that is really important. Yeah, and

I've got a list of topics, but I want to stay on on this one right now, because I think this is an important piece also, as we're doing our budgeting and projections and setting goals and everything, which, you know, realistically, we like to do those in October, November, to have an understanding. But hey, if it's January and you haven't done that yet, and it's okay, you can still you can do it at any point. But I know we have a spa that we work with that is in Michigan, and Michigan just recently had a lot of changes, and it was going to impact her payroll percentage by several $1,000 and so it when we're trying to budget and operate our businesses using Profit First and staying within a certain percentage, when all of a sudden your payroll gets bumped up significantly, you have to, you know. Are you going to deal with that? You know, and small business owners right now, we're dealing with compliance. We're dealing with a lot of kind of in the economic and political climate. There's going to be a lot of shifts and changes that business owners need to be aware of, whether it's with supply chain, additional taxes, you know, there's, there's a lot of things to look into as you're doing, your budgeting and your forecasting, to make sure that you are prepared and and don't just get like, Oh my gosh. I had no idea that, you know this was going to happen or that was going to happen. So for you as far as next steps, I know something that we've done with you specifically is, how do you review our employee handbook? We are employers in multiple states. I know the example that you said with the spa. Yes, most spas are operating within one state. But if you are, like, I live in the DC area, there's, you know, you can be in three different, you know, two states in one district, in like, a very short period of time, you might be employers in all three of those places, and the laws are different in all three of those places, right? Exactly, having an attorney review and make sure that your wages and and all laws to be in compliance. Are, you know, accurate,

yeah, and I think that these are, you know, every business owner can start with the you know, going to the Employment Department website of your state and trying to get resources. They do. Most states do a really good job of trying to provide, like, easy to understand information for business owners. But if you get there and it's not clear, and you're like, you know, I'm not totally sure, the DCA is a great example. If you say, Well, my worker lives in Maryland, but they drive into the DC area to work, or to Virginia or whatever. You know which laws apply to me, and that's a good time to say exactly what we talked about the beginning, right? That's a great question to ask, and sometimes the information is available to you through the State's website or through industry organization, and sometimes you say this is important enough to inquire with an attorney in my area that's going to know the answer and be able to provide me guidance about whatever I need to do, because the fallout is potential. You know, liability, financial and otherwise to to put that on your business is not typically far outweighed. You know, whatever cost you pay up front to know correctly is typically, is a better investment than finding out on the back end that you did it incorrectly, and going through the and not just the financial costs that it can cost to, you know, find an attorney and hire them and pay them to deal with it and any potential monetary liability that you have. But what I see even more in in small business owners, is like the stress that dealing with any sort of legal issue causes and you have enough on your plate, and listen, no matter what you do, I was telling people like, there's no silver bullet. There's no guarantee, even if you work with a lawyer at every step of your business, there's no guarantee that you will never have a legal issue, but being you know, prepared and doing the due diligence up front and having the information is usually going to be less costly, and it's going to provide you with better protections going into a conflict then if you kind of go in blind and hope for the best.

So let's kind of keep stay on this topic around non compete. So in the past year, there's been a lot was it the Federal Reserve that put the ruling out? But it's supposed to be like a state issue. You know, I'm obviously not an attorney, but I know there was, like, some people said, No, you can't have non competes. And then the states were fighting it and going back and forth. So where they stand right now

with non compete? So it was the FTC, the commission, okay, that did this kind of blanket federal ban on non competes. The concept is the it's public policy, right? It's worker movement, allowing, allowing employees to kind of move in the economy, to do what's best for them. California has had an effective ban on almost, almost near ban on non competes for many years. So I'm agree. I I'm based in. California, and so I'm like, I've seen this in many local clients, and we've seen this play out. Where we are at right now is that, then it was ruled unconstitutional, you know, it's going through, it's it's going through the court systems. It's going to take time, like you said, with there's political changes coming up with an administration that is probably less likely to enforce or want to enforce, a ban on non competes, and so it's very much in flux, and this is a tricky part about running a business, especially in the 21st century, where you know the business changes very quickly in technology changes and laws are notoriously slow to catch up, so it's often the laws are trying to play catch up, and like business is way out in front. And so part of it is just trying to stay on top of it. But I always tell people, regardless of where, whether you're in a state that allows non competes or not, whether the there's a federal ban on non compete or not, one important thing for a business owner to know is there are still ways to protect your business, your intellectual property, your proprietary information, your trade secrets. None of that has gone away. It's just the concept of being able to restrict a worker from quitting and going to the spa down the street and taking all their clients there. So a few things that are important for a business owner to make sure they have, this is in your employee handbook. This is in your, you know, offer letter or your your agreement with your employees to, first of all, you know, have, like, a confidentiality, non disclosure and proprietary information assignment agreement. So basically, everything that they have access to at the business that's proprietary is owned by the business. Anything that they create as a worker in the business, so maybe they help create a system or methodology or whatever, something that is owned by the business, it's assigned to the business and that they can't take it or compete with it or use it when they go somewhere else. They can't sell it. They can't, you know, whatever. So if, even if you can't stop your employee from going to the spa down the street, and you can't, almost, almost never, you almost never, can stop an employee. You know, if I leave your spa and my 12 clients call me and they're like, Oh, where are you? I'm like, I'm not there anymore. I'm over here. And they say, Oh, can I want to come book over there? You can't stop because the customer can go wherever they want to go, and as long as I'm not soliciting, soliciting them.

So it's a kind of you own the IP, having that in there, and then also having a non solicitation. So

if I take your email list and I blast all of your email list saying, Hey, I'm at this new spa. Come see me. You know, 50% off special, I am violating more that that's not a non compete issue, that's a violation of all these other things, the confidentiality, the proprietary, the trade secrets, the non solicitation, and those still exist. And

our medical spa, it can even be HIPAA, right? Sure.

Yeah, it can be a HIPAA violation if, because they've

texting them and doing, you know exactly.

So I think that that's the first thing I always tell people, because they freak out and say, I mean, California, like I said, it's been like this for years, but people came and they said, What do I do? How do I protect my business? And that's only one way to protect your business. And so can you pursue action against a former employee who not just leaves and goes and compete, whether they're starting their own spot or working for somebody else? Maybe not. That's in legal flux right now. On a national level, it's all the states have always had their take on it. Can you still pursue action against somebody who takes proprietary information and uses it absolutely so if they're taking all your, like intake forms or, you know, your standing orders, or anything like that, that's all proprietary to the company, and they can't take it or use it or disclose it or anything like that. Can people always find out? You know, know if they're being discreet about it, nobody knows, and maybe they'll never find out. But the way that these play out often, at least with people who come to me, is like, you know, my employee left and they started their own business, and then they, you know, emailed all of our clients and said that they're, they'll offer a 20% discount, you know, to come over to me. What can I do? And so having all those policies written in your handbook, in your offer letter, having a, you know, and then they're signing it all. So exactly they sign. So with the employee handbook, everybody should get a copy, but there should be, like, an acknowledgement page that basically, when you onboard a custom, I'm sorry, an employee, they sign it that they received it, they read it. Everybody knows they probably didn't, but they're signing that they did, and that's legally binding. And then they get a copy, and you get the original right? So they get a copy. Here you go. I have proof that you said that you signed this and you read it. I keep the original in your file here. And so you have proof that they did that same thing with if you sign a lot of when I do like an offer letter for employees, we do like a, what I said, a confidentiality, non disclosure and proprietary, you know, inventions, assignment agreement, and they sign the offer letter, but they also signed that separately. And of course, they get a copy of it, eat themselves. And so that's important. One thing that is rare, but California is like this, that California has really strict laws where, if you put something into an agreement with an employee that is no, no, you can actually invalidate the whole agreement. So in most states, it's like, well, if there's a non compete and you know, you know that that's not allowed in, that piece might be invalidated. But you can actually invalidate an entire agreement in some states by putting in something that is not the case. Now I don't want people to freak out and say, Oh my gosh. Well, what if these non compete are not valid, and I had a non compete that is not the case. But when this law first came into effect, when they did this ban before it got stopped in the courts, one of the requirements was an affirmative requirement for an employer to notify present and former employees that were bound by a non compete to let them know that they're not bound anymore. Because the idea, from a public policy standpoint was, well, even if it's not legal anymore, lots of people are going to know that. Yeah, so you as the employer have to go out there and tell all your former employees that that non, yeah, so that's again, that's all on hold as of now. It's going through the court system. We'll see where it lands. I think that with the next administration that this is going to be left to the states and not be a blanket ban, that's what I believe, but that's just an opinion, not a legal that's not a legal, no legal advice.

So let's, let's kind of transition. We've talked a lot about compliance. You know, we talked about compliance as far as what we need to have according to states in the handbook. There's also a separate compliance issue, I think if you're in medical spas and understanding scope of practice, that's kind of a whole other conversation and thing. But it's also good to review if any of your scope of practice, laws have changed, which in esthetics, there's, I mean, it changes all of the time of what you're able to do, who's able to do what, and so it's a great time as you're going through compliance on am I in accordance with all of the laws, the employment laws, also, am I in accordance with the laws of the state? For you know what scope of practice is so good time to do both of those things? Let's transition into kind of your entity elections, because this was something for me that actually saved me a ton of money, tax wise, and that is making an S corp election. So I am a single member LLC, my CPA, let me know that, hey, between January 1 and February 15, if you fill out this for I don't know what I had to do. It was several years ago, but I had to do something that created an S corp election. Can you talk about kind of what that actually means and when and why someone would do that?

Yes, it's a great question. So I will start with the thing that I have so many people that are confused on, which is an S corp, and S corporation is not a legal entity itself. Just like you said, you have an LLC is your legal entity, and it's taxed as an S corp. So an LLC or a corporation as a legal entity can choose to be taxed as an S corp, which is just a tax election under IRS sub chapter s. That's why it's called that. And it's effectively this small business election that allows you to be treated differently for tax purposes, which can be tax advantageous. So a few things, one is that any entity can choose. Choose the S election within the first 75 days of formation. So you can do it when you form or in the first 75 days of any tax year. So for most people who are a December 31 tax year, that's March 15. So March 15 is your deadline, and that would be for electing it for that year and going forward. So for somebody in January of 2025 saying, oh, you know, my taxes were more than I expected. Now my accountants suggesting this, if you elect it here, you know, January through March 15, it will be for the 2525 tax year. And going forward, some accountants will back. They'll kind of elected backwards. It's an accountant specific thing. I personally have worked with accountants who do that and are able to kind of absorb some of the benefits going backwards. But it's not the you know. All I can give you is the official legal rules, which is that the first 17 deadline, but if you're like a June 30, for whatever reason. If you're like a June 30 fiscal year, it would be the first 75 days. So whatever that is, from July 1 to September 15 or whatever. So the easiest way to explain the S election is that you would, instead of, if you're a single member LLC, then by default, your taxation is as a disregarded entity, which means all the income from your entity just flows through to your personal tax return on a schedule C, and you just pay taxes on it regularly, and you pay self employment tax on all that money up to whatever. Let's

give an easy example, and say, at the end of the year, you have 100,000 left over as your net profit. Exactly then that net profit is going to go over onto your personal tax return in addition to anything else that you had paid yourself throughout the year. So if you were, am I correct in that, if you're an LLC, yeah,

so if you were paying yourself, you know of some like a consulting fee or whatever management fee, or anything like that. So it all of it goes together. The difference is, if you take that $100,000 and instead you hire yourself as a w2 employee of your business. So now let's say and, and this is where it's really important to work with an accountant, because, of course, the IRS doesn't give us clear rules. You have to, it's whatever's considered reasonable. So what's considered reasonable for like a graphic designer versus a physician versus a lawyer versus a spot owner, everything's different. But let's say you and your accountant say, Okay, we're going to pay you $3,000 a month as your w2 pay so that you're now you're getting a paycheck. You're a w2 employee of your business. So it takes out payroll taxes, and let's say whatever your net pay is like 2472 and 32 cents, and that goes in to your personal, you know, checking account, just like if you are working for somebody else. Now that other $64,000 of profit is not subject to payroll taxes, and it's not subject to self employment taxes. It's taken as a distribution, as an ownership distribution. Of course, it's still subject to income tax, but you can save yourself a considerable amount, because if you're saving that effectively 15% or whatever of of the payroll you know, the employer and employee side payroll taxes, that it can be a significant tax savings. So the additional cost is associated with running payroll. Now, technically speaking, you can run payroll like manually and old school, and cost very little, like you write yourself a check and you deduct, do all the deductions, or whatever. I don't really recommend that. I don't know any accountant that would most people will use a platform like Augusto or another ADP, some platform. Yeah,

so, and I want to just make sure this is crystal, crystal clear, because I think we were on the same page. But I want to this took me a little bit myself to grasp. So if I am a single member LLC, I have not made an S corp election, and throughout the year, I've paid myself $50,000 and at the end of the year, I have a net profit of 100 that means 150,000 is going to go on to my personal income taxes, correct? If you're in partnership, then it's your it's your household income. So if you're filing your taxes with a spouse or partner, then and they make 150,000 then you're in whatever tax bracket is the 300,000

tax bracket.

If instead I say, Hey, I'm going to be an S corp and I'm going to pay myself a reasonable salary of 44,000 a year. And my CPA has always told me what a reasonable salary that they expect is, and also as the business. Grown. They've said, I think that you should increase your salary to this amount, and so that becomes, you know, we're not paying any of the whatever taxes, and then everything else is considered distribution. So, yes, exactly. I think that part is super clear, but I just wanted to really show the difference between the two of how it gets over, and I think this is also the reason why people get confused of if they're paying their quarterlies through their business account or if they're paying their quarterlies through their personal account. So always make sure that you're talking to your CPA and make sure that you understand how and where you're paying taxes from as well.

And I will say a little plug for CPAs all over the world, is that I say, if you had to pick, I feel I am a lawyer. I'm a business lawyer. And if you had to only pick a lawyer or an accountant as a small business owner at the beginning, start with the accountant, because that. I mean, I don't think you should start with only one, but I always say, if you're backed into a corner and you have to pick because that the tax code is complicated small businesses, and a lot of it is that it's going to save you a lot of money. It's very rare that you're going to spend more on your accountant than they're going to save you from, you know, all of the little nuances, and that's a perfect example, is that you can operate for years, and then one day, your accountants, like, you know what it's going to make sense to make an S election. And I will say I have worked with in my 15 years of practice. I've worked with literally hundreds of accountants, and everybody has a different opinion. So some accountants, every single LLC, they set up or that get set up, you know, for their client, they say, elect that s, take the S election, no matter why. It doesn't matter if you make $12,000 a year. Some of them are like 100 200 300,000 if I had to aggregate all the opinions of the accountants that I've spoken to, around a $50,000 in net profit is where it for sure, for sure, like the costs are outweighed by the benefits and but again, I really always recommend people speak to their own accountant, because, you know what is if you have a spouse or partner, what are their what is their income look like? So what does it look like altogether? You know, do you have other sources of income that impact it? And so it's never, you know, there's never an ability to give people just a blanket advice, like, if you make this much money, this is you should do this. It's all very dependent on your personal financial picture and the financial picture of your own business. But if I had to give like a general aggregated number, that would kind of be it.

And I love that you focused on profit, because that's such an important piece. You can have a million dollar business with 50,000 profit, and you can have a $200,000 business with 50,000 profit. And so those are two very different businesses, but profit is the same. And so when we're looking and this is why I love having kind of an internal advisory team, I look at your attorney, your financial advisor, your CPA, you want to have these people that understand your entire financial health, because the recommendations that they're going to make for you are it's very personalized based how old you are. If you have children, when do you want to retire? Are you going to be exiting? I know you know certain people. We don't see this very much in spas, but I have a lot of friends that are doing startups and and they're saying, Well, you automatically would go for a C Corp because of the capital gains when you sell, right? So that's, you know, not really a small business like spa thing that we're dealing with. But it could be, as private equity is coming into our industry so much more, and we're going to

do that. One thing about the S election is an S corp has to meet certain criteria, which most small businesses easily meet. They can't have more than 100 shareholders, which obviously none of these do. But it also, the end the owners have to be us individuals. So it can't be entities. So this happens a lot where, you know, maybe two people are in business together, and for, you know, convenience or whatever, they decided it's like their LLCs each become members of the LLC the spa. And you cannot select at the spa level if you have LLCs or corporations as members. So, you know, you can elect LLC that for each individuals, LLCs, the S corp, and it all flows through, and it still works. But those are things, same thing. If you are like, Well, I have this plan to scale and franchise or grow or whatever, and I'm going to be bringing investors, well, venture capitals, never, well, not never, say never. But. Almost never going to invest in an LLC and nor an S corp, obviously, because it wouldn't qualify. But it needs to be a C Corp. And so this is again where I tell people, don't freak out, because you can convert entities from one thing to another, or you can form a new C Corp and merge it in. There's lots of opportunity, if and when you get to that bridge. But it's important to understand these things. Because if you were like, oh, you know, I got a message received, you know, s select, but then you're also talking to, like, a group of angel investors to invest in the business this year, when you have to understand these various kind of moving parts and how they impact your business. And this is exactly what you're saying. Is having a kind of a lawyer on speed dial, an accountant on speed dial, a financial advisor on speed dial, those are fantastic to have, because if we're and I love when people are like, can we get on a call with my CPA? I'm like, yes, let's do it. Like I

tell every I ask them every year, like when we're doing our planning, is, can we all be on the call together? Because then I'm not having to. And yes, it's expensive, but it's so worth it. It's so and

playing telephone between everybody. Sometimes the message gets warped and it's not the correct information one way or the other. And typically, it's probably not going to be something so wild that, like so wildly wrong that it fundamentally changes, you know, the the advice that's given from one professional to another. But I do think that it is a worthwhile thing. And when people say, you know, like, I don't have legal or county in my budget, and it was like, well, redo your budget, because if you want to run a small business and grow it's important that you that you invest in those pieces so that you're not again, spending exponentially more trying to unwind a mistake down The road.

So true. Okay, so we talked about compliance. We talked about the, you know, your tax entity elections. Let's talk about some of the other, like, little things when your business licenses do. That's also kind of like a state thing. I always, you know, like, Do you have a Registered Agent, or is is your attorney, someone that's handling that for you? Is that something that you know put these things on your calendar, right, that when you have to have them do? And if you're listening to this in January, you likely, I mean, there's some time in the past year just do a an audit. Mine's always due in December. So I, you know, feel like, oh, it's, you know, fresh in my mind, but I realized that maybe other people's probably is not due in December. It can be anytime throughout the year. What are some of these additional things? And then I want to talk a little bit about boi compliance and kind of what that means, because that's been a big thing that my attorneys have been emailing me about this year and making sure that we're all on track and all of that. So

yes, so this is my favorite. I talk about this a lot at the end of the year, and a lot again, at the beginning of the year, which is when you're taking time to make plans or make a budget or kind of regroup. It's a great time to put these things on your calendar. As an attorney, this is some of the things they see the most. So every state has different rules, but many of them have either an annual report of some sort or annual franchise tax. States like Nevada have an annual business license and report. And if you don't, you know, file them when they're due. Your entity can become suspended or even terminated by the state. Usually take some time, but the reason you don't want that is because it can invalidate contracts that you know were signed during when a business wasn't in compliance, like was inactive or suspended. It can, you know, create, most importantly, it can open the door to personal liability, which obviously we don't want. And so taking a time to say when you know what is due for my business and when is it due, and then putting it on your calendar. Because I do have a lot of people that come and they go, Oh, I thought my accountant filed my annual report. You're like, wow, did you have a conversation with them? Because, you know, maybe they didn't. So most states have some sort of annual report and or franchise tax. And it's funny that they call, I don't know where the term comes from, because when we think like franchise, but it's just usually a fee. It's either a flat fee or it's a fee based on, you know, profits, or whatever. It's different in every state. Some states have a state level business license. I gave the example of Nevada, but a lot of business license are actually local to your county, or if you're in a big city, even into in the city. So for example, the city of Los Angeles, which. Is obviously a huge city, has its own, you know, business license and permit requirements, but then all the things in Los Angeles County, but outside of the city of Los Angeles, answer to the county and so a lot of and it's similar even in like, I'm based in Orange County, California, which is kind of more spaced out than Los Angeles, and then each city so Irvine has certain license requirements. And I think there's a few important things. Most people who have a spa are fairly familiar with them, because you need these in order to open and get your, you know, certificate of occupancy. So most people, at least did it once, and they know what they needed. Sometimes it kind of flies out the other ear, and then we're we don't remember, and most of those are renewed annually. So make sure you're getting those renewals on the off chance that, yep, go ahead. I was just saying

I know, for me, being a military spouse and moving so many times if you're in if that's a part of your lifestyle, that you know you're moving and then you're setting up shop again. And you know, figuring that out every single at one point, I lived in Fairfax County, when I was living in Virginia, and Fairfax County has, like specific county, and now I'm in montgomery county. Montgomery county has specific laws that are different than the state, that are different than federal so like everywhere you go, and also, like being an employer in multiple states, the workman's comp is different. Not called workman's comp in certain states. It's called something different, you know. So really having an understanding of these little their little laws that can cause big problems if you don't know what they are, and that's why, you know, I've used you as an attorney several times. I also have attorneys that are based in the DMV area that know specifically all the laws in this area you know. So think about that as well. If you're someone who lives, you know, where close to state borders, or close to where you can have kind of moving from counties and states and all that,

yeah, and not to throw like, another wrench in it, but another big issue. A lot of spa owners. They might have one or maybe a few, but they're all in one state, and it's easier to kind of think about compliance. But then they have E commerce, and they sell across state lines, and do sales tax in those other states. And how do you collect it? How do you do it? So there are a lot of complications, and again, it's not to scare people are to overwhelm people. There's a lot of information out there, and again, having professionals on, you know, speed dial to be able to have that answer, or to get that answer for you, and just to not freak everybody out. Most states, if you like, live in one state and you sell to people in other states, there are Nexus laws, which are basically, and of course, they're different in every state, but it's basically like, what is the trigger that is considered, you know, now you are operating in that state, and so usually they're fairly high thresholds, like, many 10s of 1000s of dollars of revenue into that, like, directly from that state. But a lot of people are like, Oh, I have a niche in California. You know, I work in New York, but I sell $100,000 a product in California. Or if you end up with us, you know, a most people are, it's more like drop shipped, or shipped directly from, you know, manufacture, whatever. But if you have a warehouse space of some sort in another state, you have to foreign register your entity in that state, stuff. So there's a lot of moving parts. And this is just why it goes back to kind of asking yourself, like, how am I operating what states Am I operating in? What counties or cities Am I operating in? And then trying to go reverse engineer that way. So you know, what do I need to know, where my employees located? Where's my business located, what are the rules here? And so the business license, the Franchise Tax workers copy, talked about those insurance coverage. You know, those are all really good things to look at at the beginning of the year and make sure that you have the coverage you need. That's another thing that you kind of touched on the beginning that I was thinking about is with med spas and and licensure coverage is your insurance coverage, and also that it's your as the business owner, it's your obligation to make sure that those licensed professionals that you are maintaining, but you have a copy of their license, you know that they're maintaining their licensure, their continuing education, any additional training that is required of them that you are on top of making sure that they are getting that proper training, because the liability ultimately can be on the business owner if they are, you know, in default on any of that.

So let's wrap this up. With boi compliance, yes. What is it? How do we ever Yes.

So the boi stands for beneficial ownership information report, and it's the it's under the corporate Transparency Act, which was a law that was passed last year, that was passed actually the year before, but it went into effect, and it basically is to prevent money laundering and and kind of illicit business in these company, US based companies. But the impact is that basically all the small businesses in the United States have to file this report. Now it is free, and it's actually quite simple. So you go on, it's, it's run by FinCEN, which is the Financial Crimes Enforcement Network, and it's a piece of the US Treasury. So if you go to fincen.gov, F, I n, C E n.gov, you can find the boi report. You can file it online. Basically what it's requiring is information about your company, so you know, what state is it in, what's the name of the company, where was it filed? What's your EIN number, and then beneficial owner information about the beneficial owners and and there's a little bit of legal nuance, but for these, for small businesses, it's pretty clear which is anybody that owns 25% or more of the business or has a substantial control over the business. So you could be the sole owner of your business, then you're a beneficial owner. But if you have like a COO or a CEO that you've hired, or President CFO whatever, they are probably a beneficial owner too, because they have substantial control over the business, and then you basically have to put in that personal information, so that person's name, their home address, their driver's license or passport number, and a photo ID and the and that's it. It's actually quite simple and easy to file online. You technically file it one time, and then you would only have to update it if the beneficial owners change or if the company information changes. So if your company moves, or the corporate address moves, you're supposed to file an update so anybody that owned that the end it for any entity that existed before January 1, 2024, they technically are supposed to have complied by December 31 2024 except that a court in December or late November of 2024 said that it's unconstitutional and unnecessarily burdensome and whatever. So there was a stay on it. So as this plays out in the courts, is it technically do, I think as of today, when we're having this conversation, the US Treasury had not commented on whether they needed, you know what, what their opinion was about, whether it was going to be enforced or whatever. But the the penalties are big. It's like $500 a day. Who's to say how they're going to enforce it, and against whom they're going to enforce it. But I always tell people like, it's a pretty easy thing to comply with, and the potential, you know, penalties are, are certainly burdensome on small business owners. So some people have concerns about the, you know, privacy, that's where, that's why this is in court, that it's unnecessarily burdensome, that it's an invasion of privacy. You know, it's a, it's a government owned database. Now, of all these people and their things, I personally, I own quite a few entities, and I filed my boi for all of them. I don't, I don't feel like my personal information is very personal anyway, so I don't care, but that's what you need to know, is that basically, it's in legal flux. We don't know, we don't know whether it's going to be enforced and how it's going to be enforced. If you rule, just CYA, yes. So, so I'm still advising my client, especially because I'm like, my clients are not like, it's Monday morning. Like, let me check on the status of this, the boi report. You know, like, out of sight, out of mind. Get it done. You know, if you want to stay up on it, you're welcome to, like, follow us. Treasury there. You know, they'll send you updates, I guess. But it is important to understand that it is for for basically any small business owner that's listening, it is absolutely required. There are certain limited The only limitations that could impact some of these listeners are, if your business does like 5 million in revenue or more, and has 20 full time us employees, and you might be exempt. So if you're doing that, and you can, you know, and you're like, I might qualify as an exemption that doesn't have to report your public company, you don't have to report. There's other things that most of your listeners probably don't don't meet those exemptions.

But just to it's. Take you about five minutes to complete it. Just do it. Have that done. Don't have something come up and surprise you. So this was so much information, and I know, like legal stuff makes me just like, but I think it's really, really important for business owners to know it's kind of expanding our knowledge. We kind of jump into a business and like, Yes, I'm going to do this thing that I love and I'm passionate about it. I'm going to have freedom and all of these things. But the deeper you get into it, there are a lot of complexities. But just make sure that you you don't have to be an expert in all those things. That's why it's like, have your people that can advise you, that can help you, that can give you guidance and make sure that you are protected Absolutely. Where can people find you? Follow you, get in touch with you.

Yeah. So you can find me at my website, not your father's lawyer.com, or on Instagram at not your father's lawyer. Those are the easiest places you to hold me. It's got my contact information there. So

perfect. And we'll link everything up under the show. Thank you so so much. This was so incredibly helpful. I want all of you listening to go take action via this is, this is how you build a company, not just create a hard job for yourself. Do these things. All right, we will catch you on the next episode. As always, if you want to keep the conversation going, I want you to head on over to the spa. Marketing Made Easy. Facebook group, the number one free resource out there for estheticians, focused on business building. We've got weekly marketing tips, a monthly goal setting and planning session, monthly esthetician business book club, plus a community of 1000s of estheticians committed to business building in the spa industry. I'll see you there.