TEXAS MEMBER-MANAGED LLC
By: Allen T May, C.E.O. of Westwood Associates, LLC.
If you don't specify how you want your LLC managed in your formation documents, Texas will treat your company by default as member-managed. As the owner and sole member of the LLC, this means you are also the manager - in the full legal sense of the word. As sole owner/member/manager of the LLC, you do have the option to delegate certain managerial authority to other people, such as authorizing someone else to write checks for the business or handle the company's accounting. This can be done in your operating agreement or by some other means such as a consent resolution or power of attorney.
Delegating certain management responsibilities to another person will not make the other person a manager. That person will only have the specified delegated authority and you - the sole owner - will remain the manager with the general overall authority under Texas state law to run the business. In addition, because you are also the owner, you will not be subject to the limitations on authority that otherwise apply to managers under Texas state law.
With a member-managed LLC, options for transfer of full management authority upon the death or incapacitation of the owner/manager include putting a section in the operating agreement, using a separate written resolution, or using other legal documents to transfer control. You may want to consider looking into those options to help ensure your business keeps operating in case something happens to you.
As with manager-managed LLCs, there also may be options under trust or estate planning laws. Keep in mind that because a member-managed LLC does not have a role of manager separate from the owner defined by statute, it may be more complicated or take more time to transfer management authority to another person.
Regarding this matter, we strongly suggest that you contact your licensed Texas attorney for guidance on what works best for your individual situation. For additional management consulting matters regarding your Texas LLC, please feel free to reach out to me via email at: allentmay@gmail.com

NONPROFITS CAN LOSE TAX-EXEMPT STATUS

NONPROFITS CAN LOSE TAX-EXEMPT STATUS
By: Allen T. May, C.E.O. of Westwood Associates, LLC
Nonprofits can lose federal tax-exempt status by not filing IRS Form 990 or IRS Form 990-EZ for a three year period. Small tax-exempt nonprofit organizations whose annual gross receipts are normally $25,000 or less ($50,000 for tax years ending on or after December 31, 2012) may be required to electronically submit IRS Form 990-N, also known as the e-Postcard, unless they choose to file a complete IRS Form 990 or IRS Form 990-EZ.
If you do not file your e-Postcard on time, the IRS will send you a reminder notice. However, an organization that fails to file required e-Postcards (or information returns 0 IRS Forms 990 or 990-EZ) for three consecutive years will automatically lose its tax-exempt status.
The revocation of the nonprofit organization's tax-exempt status will not take place until the filing due date of the third year. The e-Postcard is due every year by the 15th of the 5th month after the close of your tax year. For example, if your tax year ended on December 31st, the e-Postcard is due on May 15th of the following year. If the due date falls on a Saturday, Sunday or federal holiday, the due date is the next business day. You cannot file the e-Postcard until after your tax year ends.
Protecting your organization's tax-exempt status should be one of your highest priorities.
If you feel your tax-exempt status may be in jeopardy, we urge you to contact your tax professional for assistance.

BENEFITS OF AN EMPLOYMENT AGREEMENT

BENEFITS OF AN EMPLOYMENT AGREEMENT
By: Allen T. May, C.E.O. Westwood Associates, LLC.
Every business needs legally binding employment agreements. They need contracts for different types of employees including full-time, part-time, and casual. Contracts are also necessary for any independent contractors. A good employment contract will spell out what exactly you expect the employee to do - the parameters of the job duties. In addition, the contract will spell out what your employee can expect from you. However, there are other terms that you can include in an employment contract, such as: reasons and grounds for termination, covenants not to compete, non-disclosure agreements, methods for resolving disputes, and anything else you deem important.
A good employment agreement should also define the kind of behavior you expect employees and even contractors to engage in. If employees violate this and engage in behaviors that damage the business then you'll be within your legal rights to terminate their employment. It's a safeguard every small business needs. A good employment agreement will also serve to protect your business if any lawsuits arise. If an employee or independent contractor signs a contract then a business owner can limit a lot of responsibility and damage he or she could face in a lawsuit.
Please feel free to contact us for additional information on employment agreements.

STAKEHOLDERS OF THE COMPENSATION SYSTEM
By: Allen T. May, C.E.O. of Westwood Associates, LLC
Regardless of which company you recruit for, regardless if you're working as an in-house recruiter, contractual recruiter, or with an outside recruiting firm on a contingency basis, the HR dept. for which you are recruiting for provides services to stakeholders within and outside the organization. Stakeholders include employees, line managers, executives, and the U.S. government. Unfortunately, not everyone in the loop recognizes the other, nor appreciates there are other stakeholders at the table of the compensation  system. As an executive recruiter, its tantamount that you understand who all the players are. In doing so, you will have a clearer understanding when you are negotiating a compensation package for your candidate. The success of HR departments depends on how well they serve various stakeholders. Your 25% or 30% placement fee depends on how well you serve the HR dept as well as the stakeholders.
> EMPLOYEES: Successful pay-for-knowledge programs depend on a company's ability to develop and implement a systematic training programs. Compensation professionals must educate employees about their training options and how successful training will lead to increased pay and advancement opportunities with the company. These professionals should not assume that employees will necessarily  recognize these opportunities unless they are clearly communicated. Written memos and informational meetings conducted by compensation professionals and HR representatives are effective communication media. As the recruiter representing both the client and the candidate, it is vital that you have a clear understanding of these and other training options that will be made available to your candidate. This is information that you will share with your candidate. As a future employee with the company, your candidate is a stakeholder in the compensation system.
Discretionary benefits provide protection programs, paid time off, and services. As compensation professionals plan and manage employee benefit programs, they should keep these functions in mind. There is probably no single company that expects its employee benefits program to meet all these objectives. As the recruiter, it is your job to know what they are so you can communicate this information to your candidate far in advance of the initial interview. Compensation professionals as representatives of company management, along with you the recruiter, must therefore determine which objectives are the most important for their particular workforce. You play a role in this process so its important that you have a very clear understanding of what your client is offering.
> LINE MANAGERS: Compensation professionals use their expert knowledge of the laws that influence pay and benefits practices to help line managers make sound compensation judgments. For example, the Equal Pay Act of 1963 prohibits sex discrimination in pay for employees performing equal work, so compensation professionals should advise line managers to pay the same hourly pay rate or annual salary for men and women hired to perform the same job. As the recruiter, this is an area of compensation that you must be familiar with, otherwise you could yourself in an embarrassing situation with your candidate as well as your client. I have been in various situations where the line manager was clueless to the Equal Pay Act of 1963. Sometimes, the HR dept was not effective in communicating this information to the line managers. And, sometimes, the line managers disregarded this information. As the recruiter, it is critical that you ensure your candidate is receiving an offer equal to what a candidate of a different gender would be offered. It is good policy for line managers to turn to compensation professionals for advise about appropriate pay rates for jobs. Compensation professionals oversee the use of job evaluation to establish pay differentials among jobs within a company. In addition, they train line managers how to evaluate jobs properly. As the recruiter, you need to understand this function between HR and line managers.
> EXECUTIVES: Compensation professionals serve company executives by developing and managing sound compensation systems. Executives look to them to ensure that the design and implementation of pay and benefits practices comply with pertinent legislation. Violation of these laws can lead to substantial monetary penalties to companies. Executives also depend on compensation professionals' expertise to design pay and benefits systems that will attract and retain the best qualified employees. As a recruiter, it serves you well to maintain an open channel of communication with the compensation professionals at your clients' offices. In doing so, will better enable you to assist in the negotiation stage of the hire.
> U.S. Government: The U.S. government requires that companies comply with all employment legislation. Compensation professionals apply their expertise regarding pertinent legislation to design  legally sound pay and benefits practices. In addition, since the Civil Rights Act of 1991, compensation professionals have applied their expertise to demonstrate that alleged discriminatory pay practices are a business necessity. Worth noting, the burden of proof to demonstrate that alleged discriminatory pay practices are not discriminatory rests with the compensation professionals.
Having a solid understanding of the compensation system will better allow you to communicate to your candidate the total benefits package being offered by your clients. Its never good to be in the dark on these matters so I encourage all fellow Headhunters to get their head around this area of compensation.

DEVELOPING BUSINESS CREDIT
By: Allen T.. May, C.E.O. of Westwood Associates, LLC
A business credit card is associated with a business, and not fundamentally with the business owner personally. For that reason, some credit card issuers will not report the card as a liability on the business owner's credit report, nor will any future balances and payments get reported there. A hard credit inquiry will take place with the initial application, but the account won't appear on the credit report at all. Its important to note that a delinquency from a business credit card will usually show up a a black mark on your personal credit report. The business card is tied to the business owner, and it's his responsibility to ensure those payments are made and the balances are paid.
Aside from the personal credit report of each individual, every business has a credit report that records the credit accounts connected with it. When applying for a business credit card, the business report is often referenced in the card approval process to augment information on the business. Things like size and age of the business can be gleaned from the report. The business credit report is not typically used in the decision for approval since the data there is fuzzy and lacking. Even someone who doesn't  have any reporting on the business (e.g. a new business that's applying for its first credit card) can get approved for a business credit card based on their personal credit worthiness. After getting a business card, most banks will report the new business and associated account to the business credit bureaus, and a business credit report is thus established. While most banks will report a business credit card on your business credit report, many will not report it on the all-important personal credit reports.
When you think of "business credit" you should first think of "personal credit". Basically, the same rules apply to both your personal credit as it will to your business credit. Keeping in mind that a corporation or LLC are separate entities from yourself, they too, must develop and maintain a good credit standing in order to access capital. Like most people, when you were in college, your first credit card was probably a lousy $500 credit line from Citibank. They bombarded university campuses around the country. They set up booths on campuses to sign up unemployed, irresponsible 19 year olds. Crazy times they were. If you were enrolled in college and had a pulse, they would gladly send you a credit card. Some of us used it responsibility while others, like myself, took the new credit card to the mall just to make sure it worked. (It did and...thanks Dad for paying that off for me.) But that's another story for another post. Like, when American Express foolishly sent me, an unemployed college fraternity brother, a Gold Card. What were they THINKING? They said I had "excellent credit history" with Citibank! Ha! Ha!
Anyway, now that I've grown up and became responsible with my personal credit, and cherish my high FICO score, I turn to the mysteries of business credit. They're really not that scary once you dive into it. Just keep in mind that the process for building credit in your new company is the same process for building credit in your business name. The edge you have here is quite simple. You've already done it for your personal credit so you already will have a clear understanding of the layout.
Business credit is credit that is obtained in a company name. With business credit, the company builds its own credit profile and credit score. With an established business credit profile and score, the business will then qualify for credit. This credit in the company name and based on the company's ability to pay, (not the business owner's ability to pay) since the company qualifies for the credit, in some cases there is no personal credit check required from the business owner.
With business credit, the company can use its credit to qualify for revolving store credit cards likes Staples, Sam's Club, Costco, ExxonMobil, Lowe's, Wal-Mart,  as well as privately issued Visa and MasterCard's.. Moreover, American Express offers numerous corporate credit and corporate charge cards in the company names. In addition, the company can also qualify for lines of credit and loans, all of which are in the company name.
There are three primary business credit bureaus:
1.) Dun & Bradstreet
2.) Experian Business Credit
3.) Equifax Business
To check to see if you have a business credit file already with Experian, go to this link and run a search for your company name: http://www.experian.com/small-business/establish-business-credit.jsp
For a Dunns number, simple go to http://www.d&b.com Getting a number from Dun & Bradstreet is free and all you have to do is complete an online application and the number will be generated for you. I'll be blogging more about Dun & Bradstreet during this month. Its important that you have a clear understanding on how this process works.
Here are some other companies that will extend business credit that report to the above referenced business credit bureaus:
1.) National Pen
2.) NEBS
3.) Uline
4.) Grainger
5.) Quill
6.) Staples
When applying for a new business credit card, the financial institution will check your credit report to determine credit worthiness. Even when applying for a business credit card using your EIN, your personal credit report is almost always used in making decisions, and this does result in a hard inquiry on your personal credit report. So keep this in mind. Its also good policy to ask the creditor you are applying for which, if any, of the business credit bureaus do they report to. This is important because you want your trade history reported to the business credit bureaus on a regular basis.
To learn more about developing business credit, please feel free to reach out to me via email at: allentmay@gmail.com

ESTABLISHING A BUSINESS BANKING RELATIONSHIP
By: Allen T. May, C.E.O. of Westwood Associates, LLC
Now that you've taken your business venture to the next level, its time to handle some much needed tasks to ensure your new LLC is in fact a separate entity from you personally. I cannot stress enough just how vital this task is. Yes, its more for you to keep up with and yes, its more for you to manage, but its part of doing business. This is an area of your new business venture that should not be overlooked.
You need to establish a business checking account. One of the most important reasons for opening a separate bank account for your business is to help ensure you have limited liability for your newly formed LLC. Your LLC by default is considered a legally separate entity from you. The legal separation goes hand in hand with the protection from personal liability that the LLC provides. You could merely create an LLC on paper by filing articles of organization with the State of Texas and leave it at that. However, that likely won't be enough to definitively prove you and your LLC are separate and, by extension, ensure liability protection in case of a lawsuit filed against your business.
On the contrary, Texas courts have consistently held that an LLC must take additional steps to demonstrate the distinction between the company and you, its owner. One of the most important steps is separating an LLC's money from an owner's money. This is easily accomplished by setting up business banking accounts. As a rule, that means setting up a separate bank account for the business and handling it accordingly. I recommend to all of my clients to set up a business bank account straight away to ensure this process is executed from the beginning.
There are also other reasons why it makes sense to have at least one business checking account. However, I recommend to my clients that they set up the following accounts with the financial institution you choose:
1.) business checking account
2.) business savings account
3.) business money market account
4.) business certificate of deposit account
There are many banks to choose from and while you may have your preferences I highly recommend that which ever bank you eventually go with, make sure that you have selected one with the absolute LOWEST monthly fees. I prefer "NO FEES" and they do exist. You just have to do some research on the matter. From time to time, banks will have specials listed on there website so look for those. When you talk with a banker, make sure that you leave your ego at home. Stress to the banker that you are a SMALL business and want a NO FRILLS checking account. You should be able to find something with no monthly fees. Credit unions would love your business banking relationship and from my experience, offer free monthly business checking accounts if you maintain a minimum balance with them. The bigger banks wont negotiate with you on this matter so look for smaller banks to do business with if this is a concern for you.
Financial institutions like to have a working relationship with its customers. This is why I recommend that you also open a savings, money market and certificate of deposit with the bank you choose. You can open a business savings account a deposit the minimum to establish the account. Ditto on the money market accounts but I have seen some that require a minimum account balance of $2,500. Generally, with such an account, the bank will waive monthly service fees.
I like the certificate of deposit for many ways. For starters, it is a tool you can utilize to get started on some "business credit" you will want and need down the road. For example, you can open a FIVE YEAR certificate of deposit at your bank of choice for say, $10,000.00. Then, you can ask your new banker to take that CD and secure a $10,000.00 loan with it over the course of a 5-year note. The bank will have no problem with this because they have your money. The good news is that this "trade line" will be reported under the name of your new LLC. Hence, you now have a $10,000.00 (high) trade line being reported to D&B and Experian Business Credit. When you apply for business credit, you will be able to provide them with this "loan" which is held in the business name. You do not need to disclose to the new vendor you are seeking credit from that this is a secured loan with a CD. That information is inconsequential. Especially in light of the fact that most business loans are "secured" with some type of business asset, be it equipment, a copier, or hard cash you've placed in a CD.
Here are some important reasons why you should have a separate business checking account:
> Makes it easier to compute and pay taxes for your business
> Is required to establish commercial lines of credit
> Is required to open corporate credit cards, such as an American Express corporate card
> Makes you look more like a real, professional business as opposed to a small and potentially unreliable operation
> Is required for accepting credit card payments; and
> Makes you look like a real company when paying bills and making payroll.
You'll usually just need a few documents to establish a business banking account. These will include:
1.) The businesses EIN
2.) A copy of the articles of organization/certificate of formation
3.) Your valid drivers license
4.) Your social security number
5.) Opening deposits
6.) A copy of your Operating Agreement
The bottom line is, you'll need basic documents that substantiate the name and general nature of your business. Regarding the last item listed, if the bank requires an additional document that shows you, specifically, are authorized to sign on behalf of the LLC, you can prepare a written resolution, which we will be happy to prepare for you.
It has been by experience, both personally and professionally, that banks will not open a business banking account for a person who IS NOT a managing member of the LLC. Hence, why the banks will request to the see signature page of your Operating Agreement. I have even seen situations where the managing member delegated this task, via a resolution, to the "Treasurer" of the LLC only to be told that "one of the managing members needs to be on the account." Electing a personal as an additional managing member only takes a few minutes to draft a one-page amendment to your Operating Agreement. SO fear not.
Once you set up your business banking accounts, use them ONLY for business purposes. The rule of thumb is simple. Use your business accounts for business purposes and use your personal accounts for personal purposes. If you don't keep the uses separate, and instead commingle business and personal funds, you'll make it more likely you won't have limited liability in the event of a lawsuit.
For additional information, please feel free to reach out to me via email at: allentmay@gmail.com

BUILDING BUSINESS CREDIT FOR YOUR NEW BUSINESS

BUILDING BUSINESS CREDIT FOR YOUR NEW BUSINESS
By: Allen T. May, C.E.O. of Westwood Associates, LLC

A business credit card gives you the convenience of a credit card for business expenses. This can keep your business transactions separate from your personal expenditures. Most business credit cards require a personal guarantee or personal credit check. This may happen even when you use your businesses EIN on the application instead of your social security number. Your business needs to build its own credit so it stands alone from you personally. If you have fair or bad personal credit, you may not be able to get approval for an unsecured business credit card. With bad credit, a secured business credit card might be your only option. However, if you have good credit, you will most likely get approved for an unsecured business credit card.
One of the most challenging tasks most small business owners experience is developing business credit for their new venture. My grandmother used to tell me, "Getting credit is easy. Keeping credit is what's difficult." There remains a lot of truth in that logic. I probably have more credit cards than I need and their interest rates are shameful. Regardless, if you pay your balances off promptly, its inconsequential what the annual interest rates are on your credit and charge cards. For instance, many credit cards will offer free interest for 12 to 18 months if your purchase is over $1,000. Its good policy to take advantage of those offers when available.
If a bank denies your business credit card application, a secured business credit card is another option. Most people are familiar with "secured" credit cards. These credit cards are offered by many banks and credit unions. The process for obtaining one is simple. Monies you deposited into savings account or certificate of deposit are held by the bank or credit union as "security" for the line of credit they issue to you on a credit card. I recommend to clients seeking such a credit card to check with their bank first. In the alternative, these banks offer secured credit cards and as of today, March 20, 2018, they are allowing the following limits for securing a line of credit on their credit cards:
Baptist Credit Union
www.bcu.org
Secured MasterCard
Deposit equals 100% of credit limit
Interest is earned in a savings account of 0.20% annually
$500 minimum deposit
$100,000 maximum deposit
BBVA Compass Bank
www.bbvacompass.com
Business Secured Visa Credit Card
Deposit equals 90% of credit limit
Interest is earned on your money
Annual Fee is $40
Interest rate on card: 16.24%
$500 minimum deposit
$10,000 maximum deposit
Business Edition Secured Visa Card
www.businesseditionvisa.com
Deposit equals 100% of credit limit
Annual Fee: $39
Interest Rate on card: 18.24%
$2,000 minimum deposit
$100,000 maximum deposit
Capital One Bank
www.capitalone.com
Secured MasterCard
Deposits equals 100% of credit limit
No interest earned on your money
$200 minimum deposit
$3,000 maximum deposit
Citibank
www.citibank.com
Secured MasterCard
Deposit equals 100% of credit limit
No interest earned on your money
$300 minimum deposit
$25,000 maximum deposit
Discover Card
www.discovercard.com
Secured Discover card
Deposit equals 100% of credit limit
No interest earned on your money
$500 minimum deposit
$5,000 maximum deposit
First Premier Bank
www.firstpremiercard.com
Secured MasterCard
Deposits equal 100% of credit limit
No interest earned on your money
$200 minimum deposit
$3,000 maximum deposit
OpenSky Visa
www.openskyvisa.com
Secured Visa
Deposit equals 100% of your credit limit
No interest earned on your money
$200 minimum deposit
$3,000 maximum deposit
Wells Fargo
www.wellsfargo.com
Secured MasterCard
Deposit equals 100% of your credit limit
Interest is earned on your savings and/or CD account
Annual fee: $25 per card
Interest rate on card: 18.99%
$300 minimum deposit
$100,000 maximum deposit
Worth mentioning, during my research on secured credit cards, these banks and financial intuitions DO NOT offer a secured credit card, either personally or for your business.
American Express
www.americanexpress.com
Regions Bank
www.regionsbank.com
Secured credit cards are a unique product offered by banks and financial institutions for consumers but what most people DON'T know is that they are also available for businesses. This is an excellent tool to develop credit for your business. The process is rather simple as well. You place cash in a savings account or Certificate of Deposit with a bank and they provide you a credit card, loan, or line of credit equal to that amount. Its a good thing for the bank because they have your money up front so no matter what you charge on the credit card they issued you, they will never suffer a loss. For example, you go into a bank and open a savings account - IN YOUR BUSINESS NAME - with $5,000. Then, you ask the loan department to issue you one of their credit cards - IN YOUR BUSINESS NAME - for $5,000. The savings account is "frozen" meaning you cannot make withdrawals from it because it "secures" the line of credit the bank has extended you, which you will access via the Visa or MasterCard. Again, its a simple and easy process and allows you the opportunity to start building credit in your new business name.
If you have the cash, I strongly recommend that get with your bank and set up a "line of credit" in your business name. Make clear to your banker EXACTLY what your objectives are so you are both on the same page. Here's how this works. You can use as little as $5,000.00 but if you have the cash, I recommend starting with a minimum of $25,000.00 to $100,000.00. You open a certificate of deposit with your bank, and I recommend for a 5-year term. Only because the 5-year CD's are paying the highest interest rates on your money. Then, you tell your banker that you want to "secure" an equal amount ($25,000 to $100,000) as a "line of credit" under your business name. ALERT!!!! If they do not report to Experian Business Credit and/or Dunn & Bradstreet, then you are NOT interested in doing this with them. Remember, the sole purchase for doing this is to build credit in your business name.
The way business credit cards report to credit bureaus can be tricky. Reporting varies, depending on the bank and/or card issuer. Personal credit reports are different from business credit reports. If you have a business card, your business may have a credit report at one or more business credit bureaus. But, not all business credit cards report to business credit bureaus. To find out if a business credit card reports to a business credit bureau, ask the issuer BEFORE you apply. Capital One and American Express reports a business credit card to business credit bureaus.
Unfortunately, there aren't many issuers that offer secured business credit cards. This is why I always recommend to my clients to reach out to their bankers for assistance on this. They should be able to help you. If not, find a banker who will.
DISCLAIMER: Westwood Associates, LLC does not receive compensation from any of the card issuers or banks discussed in this post. Reasonable efforts are made to maintain accurate information, though all credit card information is presented without warranty. All information posted on this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Westwood Associates, LLC does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, please visit each bank, credit union, or card issuer.
For additional information, please feel to reach out to me at allentmay@gmail.com or via mobile phone: (214) 893-2623.