Two Years in Review

The abi would like to thank all of the experts who have lent their time and expertise to the abi.  Over the last two years the experts have covered everything from Insurance to Social Media.

Thank you to the NH Union Leader for partnering with the abi to bring this informative series to the general public through the web and in print, thereby allowing people to ask the various business experts questions and receive answers.

Please feel free to revisit any of the past experts that the abi has had over the last two years.  A list of all past experts and the companies they represent can be found below along with links to their articles and Q & A.

Thank you again to everyone for their time and expertise and please be sure to check out the site monthly to find a new expert and start asking away!

September 2008

Expert:   Daniel Bourque, Bourque and Associates, P.A.
Article:   "Patents, Provisional Applications, Trademarks & Copyrights"
Summary:  Overviews the various legal ways that businesses can protect ideas and property.

About the Expert:  Dan Bourque founded the firm in 1992 after having practiced intellectual property law in Boston, Massachusetts since 1987.  Prior to attending law school, Dan was a computer hardware and software design engineer with an international computer company.  Dan therefore is experienced in preparing and prosecuting patent applications in electronic and electrical technologies including computer hardware and software, as well as a wide variety of other technologies including telecommunications, radar and acoustics.  Dan also advises the firm's clients with their trademark, copyright and technology licensing needs and  assists the firm's clients, as well as other attorneys both in the U.S., and around the world, with litigation support in intellectual property disputes.

QUESTION: We were wondering if a provisional patent can in any way be extended due to the death of the applicant? My father had a provisional patent that is up in April and we were trying to figure out how, and if, we could have it extended. Thank you for your time.

ANSWER: there is really no way to "extend" a provisional patent filing.  By statute, the provisional patent application becomes dead or abandoned 12 months after its filing date.  You either have to file a full patent application before the twelve-month deadline, or allow the application to become abandoned, or if the invention has not been publicly disclosed in any manner, you could file another provisional patent application which would get you 12 more months to file a full patent application.  You mention your father's application is due to expire in April.  Do you mean it expired in April 2009 or is scheduled to expire in April of 2010?  I hope this helps.  Please feel free to contact me if you need additional information. 

February 2009

Expert:   Peter C. Lachance, CPA, Tax Manager, William Steele & Associates, P.C.
Article:   "Decide How Your Small Business Will Be Taxed"
Summary:  Looks at understanding and choosing how a small business is taxed, an important decision for business owners.  By making the proper choice, a business owner can minimize taxes paid to Uncle Sam and put more cash in their pockets.
About the Expert:  Pete is a Tax Manager with William Steele & Associates, P.C., a firm of certified public accountants serving businesses and individuals throughout New England.  He advises the firm's clients on federal and state income tax planning, tax return preparation, estate planning and trusts.  His clients include technology, manufacturing, real estate, trust administration and professional service companies and non-profit organizations. 

QUESTION: This is a tax question for either Peter Lachance or Fred Kline.  What is your take on Health Reimbursement Arrangements in a sole proprietorship?  I own the business.  My husband works for the company part-time and pays for health insurance.  Also, need to know a little about tax planning and how to minimize our business taxes so we can keep more.  Thank you!!!

ANSWER: Thanks for your question.  You have touched upon a significant tax savings opportunity for self employed individuals who employ their spouse.
Health Reimbursement Arrangements (HRA) under IRC Section 105(b) allow an employer to reimburse employees for qualified medical expenses (such as insurance premiums and other healthcare expenses) up to a maximum stated dollar amount. The reimbursement is not taxable to the employee. Although HRA's are not available to self-employed individuals like yourself, they are generally available to employees and their spouse and dependents.  Since your spouse is an employee of the sole proprietorship, the IRS allows an HRA to cover your spouse and his family (which includes you!).  The tax savings result from converting medical related deductions that would normally be deducted on Page 1 and/or Schedule A of your individual income tax return to business deductions deducted on your sole proprietorship's Schedule C.

The reimbursement of qualified medical expenses through an HRA is a business deduction which reduces self employment tax (up to 15.3%) and income tax (up to 35%).  In contrast, if you did not employ your spouse, you could still deduct medical expenses however they would be individual deductions and thus only reduce your income tax and not self employment tax.  But there are limitations which may reduce the benefit of the individual deductions. Health insurance premiums are deductible but only to the extent your self employed business produces a net profit.  Also medical expenses other than health insurance premiums (such as deductibles, dentist, co-pays, prescriptions, etc.) are deducted on Schedule A but only the portion that is more than 7.5% of your adjusted gross income (AGI).  Most people don't incur more than 7.5% of their AGI so often times these types of expenses don't provide any tax benefit.

Let me use an example to demonstrate how an HRA could generate $3,500 in tax savings.  Let's say your spouse incurred $10,000 of health insurance premiums and $5,000 of other medical expenses and let's say you are in the 25% income tax bracket and your adjusted gross income is $100,000:

• Without an HRA - The $10,000 of health insurance premiums would generate $2,500 of tax savings. The $5,000 of other medical expenses would appear on Schedule A however no tax deduction is generated because of the 7.5% of AGI limitation (7.5% of $100,000 = $7,500 which is less than $5,000 ). Total Tax Savings = $2,500.
• With an HRA - The $10,000 of premiums would generate $4,000 in tax savings and the $5,000 of other medical expenses would generate $2,000 in tax savings. Total Tax Savings = $6,000 which is $3,500 more than without an HRA!
  

There are certain requirements that must be met with an HRA, such as they must cover all employees and must meet certain nondiscrimination requirements.  Your spouse also must be a bona fide employee performing services for the business.  I highly recommend consulting with a specialist to ensure you qualify and properly setup and maintain an HRA.

May 2009

Expert:    David Wood, Writer/Publisher Construction Break

Article:    "Ethical Business Practices Lead to Long Term Success"

Summary:  Woody shares his insights about the importance of putting forth the highest ethical standards, and the positive impact it will have on your business.

About the Expert:  David W. "Woody" Wood of Deering, N.H., is a writer and newsletter publisher specializing in the construction industry. Since 1994, he has operated Construction Break, producing marketing newsletters for more than one hundred construction firms in the U.S. and Canada. His own quarterly newsletter, Words from Woody, has received 26 national awards.

QUESTION:  What do you suggest as a few practices or questions one can utilize during an interview to help determine an applicant's attitude toward ethics and their likelihood to stick to honest choices once hired? 

ANSWER: While obviously people are on their best behavior during a job interview and will generally try to provide the answers they believe the person hiring wants to hear, my best advice would be to pose a couple of hypothetical scenarios (ideally related to situations one might encounter in your own business) in which there is no real right or wrong answer. Take a look here for an example:

http://www.smallbusinessnotes.com/operating/leadership/ethics.html.

Judging an individuals responses to two or three similar questions should give you a hint of whether the applicants thinking leans toward the ethical side.

April 2009

Expert:    Debra LeClair, Psy.D., Platinum Principle Training & Development
Article:    "Rallying Your Employees: Focusing Your Internal Communications Effectively in the 2009 Work Environment"
Summary:  Explores communication breakdowns and conflicts in the workplace, and the importance of engaging employees so that they work together and in the best interest of the business.

About the Expert:  Debra holds masters' degrees in both clinical and applied psychology and earned her doctorate in applied psychology from Rutgers University in 1998. She is a licensed psychologist in New Hampshire as well as a certified life coach and Peoplemap^TM trainer. Based on her commitment to human potential, Debra co-founded Full Spectrum Wellness LLC, a holistic health and learning center that has thrived since opening in 2002 by offering services and classes to the public along with workplace wellness programming to local organizations.

QUESTION: I'm interested in your thoughts concerning passive efforts to inspire appreciation and commitment amongst employees. By passive, I mean practices such as: hanging art, installing more plants, playing quiet music, placing herbal tea packets in employee mailboxes, etc. How important a practice is this and how can it be best used in relation to more direct efforts, such as the type you describe in your article?
 

ANSWER: Good question--- I believe the efforts you describe communicate to all the employees that they are valued in that their comfort as well as stress management are important to the company.  Since what you listed are environmental changes, they also create an atmosphere that is conducive to just "feeling good" about the place where you work---an objective that should never be overlooked when we are talking about anything from employee retention to productivity enhancement.
 
In regard to looking at the passive and direct efforts to recognize employees, I would have to say that implementing both would give you the best results.  The passive efforts simply recognizes and honors the needs employees have as human beings while the direct efforts, reward and thus reinforce specific behaviors that the company wants to see continue.   So if Sam feels good just coming into work, is able to be more productive and focused in a supportive environment and then receives recognition for his performance---how engaged and committed do you think he will feel working for this company?