$1.5 Million For Texting? That Is Awesome, Dude

               If your life is anything like mine, you were forced into text messaging kicking and screaming.

               Dexterity in my thumb and fingers was never honed by endless hours on a couch with an X-Box controller playing Madden or Mortal Combat. I would look at my phone’s key board and then at my fat thumbs and simply shake my head in surrender.

               But I quickly learned that if I wanted to communicate with my three kids (none of whom are kids anymore…) easily or, in reality, at all, I had better get with the program. Predictive text still haunts me but I’ve learned to thumb my way through “how was ur day?” as clumsily as the next old guy. I’m not quite at the point of texting my daughter across the dinner table (she’s tried), but I do communicate primarily by email with my paralegal Kate a few steps from my office door and keep up with friends and colleagues on social media messaging. Perhaps the clearest sign of my submission to the inevitable is that I have come to dislike the drudgery of checking voice mail. Remember voice mail?

               Yes, between email and texting and IM and social media messaging in its varied forms, the number of ways to communicate without ever actually speaking is astonishing.

               And it can lead to big problems when combined with continuing contract discussions.

               Just ask the parties in CX Digital Media, Inc. v. Smoking Everywhere, Inc. a recent Florida case in which a few seemingly off-the-cuff and quite informally short instant messages were deemed contract modifications. The instant messages…err… contract “modifications” cost Smoking Everywhere, Inc. $1.5 million buckaroos, enough dough to take this texting, IMing, emailing and messaging stuff seriously in your business dealings.

               Essentially, much of the dispute focused on what had been negotiated as a cap on sales commissions contained in the initial contract. However, during an otherwise benign instant message exchange between representatives of the parties, the CX rep mentioned, “We can do 2000 orders/day by Friday if I have your blessing.” This was ten times the 200 per day order cap on which Smoking had agreed to pay commissions. But when the Smoking rep replied saying, “NO LIMIT,” CX was obviously jazzed and responded with “Awesome!”

               And like that the contract was modified.

               There were additional and complex legal issues playing a part in the Court’s ultimate determination but the message (pun intended) is this: any communications between contracting parties may potentially be considered modifications to the original agreed terms. Just because you are not sitting around a massive cherry wood table in some glass tower conference room, lawyers in tow, does not mean your text or email won’t be considered a contract offer or counteroffer or an acceptance of either.

               So text until your thumbs get blisters but be careful. Words matter.

               All the best.

               Bill Yanger

Sure, LLC’s Grab the Hype, Sub S’s Are the Small Biz Tax Stars, but C’mon, C-Corps Need Love Too…

               The phone calls are predictable by now:

               “Hey Yanger, me and my buddy wanna start a little widget business. LLC or one of those Sub-S thingies?”

               Or “My brother’s wife’s cousin’s neighbor’s plumber said I’d be stupid not to make my company a subchapter S. I say LLC. What’s the deal?”

                I can’t remember the last time someone came in or called and said, “Set me up in a good ol’ C-Corp please!”

                So what gives? Are plain-jane run of the mill corporations now passe’? Does anyone even operate a straight C-corp anymore?

                Well, of course they do. While flexibility and lack of rigid structure have made LLC’s the sexy business model of late and the smooth tax perks of a Sub-S make it an easy sell, there are darn good reasons to consider the tried and true C-Corp for small business entity structure.

                First, LLCs get taxed like partnerships and the partners, or “members,” have to wait until the partnership files its tax return before receiving a K-1. Depending on the size and complexity (and the efficiency of your CPA…) of the LLC, you may wait a significant period before being able to file your own taxes. With a C-Corp you can classify yourself as an employee and get a W-2 lickety split and file pronto. Plus, banks like to see W-2’s when you apply for financing. They kind of look sideways at K-1s.

                Second, if you are fortunate (and successful) enough to offer yourself and your employees benefits like medical coverage, childcare, life insurance and retirement, LLCs and Sub-S entities have significant limitations on the deductions allowed for these perks. C-Corps? Not so much.

                Third, the whole tax thing actually isn’t the lurking monster some make it out to be. Since C-Corps have progressive tax brackets, you (and your accountant*) can be creative and figure out the best plan in any given year to vary how much you pay yourself and perhaps avoid higher tax brackets for both you and the company. And if your company derives its revenues from the direct efforts of its employees like consultants and, yes, attorneys, it is reasonable then to dole out all of that revenue as income to the employees so the company’s income is negligible.

                Finally, if you simply hate corporate protocols like minutes and meetings and get all tingly over the loosey goosey management style an LLC affords, then what the heck, go for it. You can file an IRS Form 8832 and tell the IRS to tax your LLC as a C-Corp. Awesome or what?

                So LLCs are nifty things and Sub-S’s have their groupies. But don’t kick C-Corps to the curb. If you see one on the way home tonight, give it a hug. They need love too.

               All the best.

               Bill Yanger

 

               *I am not an accountant and don’t want to be an accountant. Talk to yours about your particular circumstance.

Splat! Agreements To Agree Are Stinky Business. Just Ask Congress.

               We are trying so hard not to say it. Really, we’re trying, promise.

               But there is just no way around it. The reality is too stark and the lesson is too valuable.  So…

               We told you so.

               There, said it.

               Back in August, Congress pulled its epic fail on the debt ceiling crisis and then, with fingers pointing every direction but at themselves, dove head first into an orgy of self-congratulation after tossing the hot mess into the hands of the pompously named Super Committee and proclaiming to the world that they had “a deal.” In our post back then “Not In My World” (yes, by all means, read it again…) we said:

              “They have done nothing more than agree to agree…This is less governance than it is sanctioned procrastination. And in my world, the real everyday world, the world of business contract language that necessarily binds the parties to specific action and defines the consequences of failure or breach or inaction, slippery procrastination just don’t cut it, Brother. If you and your company are able to pawn off your tough and gritty decisions to some hazy “commission” and still turn a profit, more power to you. I suspect that is not the case.”

               As has become clear today, that slick dodge and toss in August has boomeranged back to Capitol Hill with a sickening splat. And it stinks. Badly.

               But told you so.

               An agreement to agree is not an agreement. It’s a negotiation, a delay, a punt. It is simply an invitation to be lazy now and then tangle later.

               Don’t do it.

               All the best.

               Bill Yanger