Spa Marketing Made Easy Podcast - Episode SMME #415: Legal Considerations in the New Year with Keren de Zwart of Not Your Father’s Lawyer

Release Date: January 6, 2025

In the episode titled "Legal Considerations in the New Year," host Daniela Warner welcomes Keren de Zwart, founder of Not Your Father’s Lawyer, to discuss essential legal aspects that spa owners need to address as they embark on a new business year. This comprehensive conversation delves into compliance with labor laws, entity elections, non-compete agreements, business licenses, and the newly introduced Beneficial Ownership Information (BOI) compliance. Through expert insights and practical advice, Daniela and Keren equip spa professionals with the knowledge to navigate the complex legal landscape, ensuring their businesses are both compliant and protected.

1. Navigating Labor and Employment Laws

Key Discussion Points:

• State-Specific Labor Laws: Keren emphasizes the importance of understanding and complying with labor laws that vary not only by state but also by the location of the employee.
• Minimum Wage and Paid Leave: Changes in minimum wage and requirements for paid sick and vacation leave are critical for spa owners to incorporate into their budgeting and payroll systems.
• Impact on Small Businesses: Even small businesses with a few part-time employees must adhere to these laws, with specific state variations providing different thresholds and requirements.

Notable Quotes:

• Keren de Zwart at [07:07]: “A lot of states are moving to either requiring or increasing Paid Sick Leave. California, for example, was three days of paid minimum for three days of paid sick leave for all workers.”
• Daniela Warner at [09:27]: “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, how are you going to deal with that?”

2. Understanding Non-Compete Agreements and Business Protection

Key Discussion Points:

• Federal and State Stances: The Federal Trade Commission (FTC) has attempted to implement a federal ban on non-compete agreements, but this is currently in flux due to court rulings and varying state laws.
• Alternatives to Non-Competes: Keren advises focusing on confidentiality, non-disclosure, and proprietary information agreements to protect business assets without relying solely on non-compete clauses.
• Practical Implications: Even in states where non-competes are restricted, businesses can still safeguard their intellectual property and client relationships through other legal mechanisms.

Notable Quotes:

• Keren de Zwart at [15:00]: “Regardless of where, whether you’re in a state that allows non competes or not... there are still ways to protect your business. Your intellectual property, your proprietary information, your trade secrets.”
• Daniela Warner at [18:17]: “Having a... you own the IP, having that in there and then also having a non-solicitation.”

3. Entity Elections: S Corp vs. LLC

Key Discussion Points:

• Tax Implications: Keren explains the differences between LLCs and S Corporations in terms of taxation, highlighting how an S Corp election can lead to significant tax savings by allowing owners to classify income as distributions rather than wages, thereby reducing self-employment taxes.
• Election Process: The timing and criteria for electing S Corp status are crucial, with elections typically needing to be made within the first 75 days of entity formation or the start of the tax year.
• Professional Guidance: The importance of consulting with a CPA is stressed to determine the most advantageous structure based on individual and business financial situations.

Notable Quotes:

• Keren de Zwart at [24:51]: “An 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.”
• Daniela Warner at [29:53]: “If you are 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 $100,000. That means $150,000 is going to go onto my personal income taxes.”

4. Maintaining Business Compliance and Licenses

Key Discussion Points:

• Annual Reports and Franchise Taxes: Different states require businesses to file annual reports and pay franchise taxes or business licenses, with deadlines varying by jurisdiction.
• Registered Agents: Ensuring that registered agents are in place to handle filings and legal notices is essential to maintain good standing.
• Local Requirements: Beyond state-level compliance, local ordinances may impose additional licensing requirements, especially for businesses like spas that require specific permits for operations.

Notable Quotes:

• Keren de Zwart at [38:39]: “Every state has different rules, but many of them have either an annual report of some sort or annual franchise tax.”
• Daniela Warner at [41:22]: “If you’re a military spouse and moving so many times... figuring that out every single... every time you move, you’re setting up shop again and figuring that out.”

5. Beneficial Ownership Information (BOI) Compliance

Key Discussion Points:

• Overview of BOI: Under the Corporate Transparency Act, businesses are required to file a Beneficial Ownership Information Report with FinCEN to prevent money laundering and illicit activities.
• Filing Requirements: The report includes details about the company and its beneficial owners, such as names, addresses, and identification numbers.
• Legal Status and Penalties: Although currently under legal challenge, non-compliance carries severe penalties, including fines of $500 per day. Keren advises proactive compliance despite the ongoing court rulings.

Notable Quotes:

• Keren de Zwart at [45:33]: “The BOI stands for Beneficial Ownership Information Report... it is absolutely required.”
• Daniela Warner at [50:27]: “But just to, it should take you about five minutes to complete it. Just do it, have that done.”

6. Recommendations: Partnering with Professionals

Key Discussion Points:

• Importance of Legal and Financial Advisors: Both Daniela and Keren stress the necessity of having a dedicated team of professionals, including attorneys and accountants, to navigate complex legal and financial decisions.
• Collaborative Approach: Holding joint meetings with advisors ensures that all aspects of the business are aligned and that advice is consistent across different areas of expertise.
• Budgeting for Professional Services: Investing in professional services is portrayed as a cost-effective strategy to avoid more significant expenses and legal troubles in the future.

Notable Quotes:

• Keren de Zwart at [36:29]: “If you’re backed into a corner and you have to pick because the tax code is complicated... small businesses... it’s going to save you a lot of money.”
• Daniela Warner at [36:42]: “Where can people find you, follow you, get in touch with you?... It’s expensive, but it’s so worth it.”

7. Final Thoughts and Action Steps

Key Discussion Points:

• Proactive Planning: Spa owners are encouraged to review their legal and financial standings at the start of the year to identify and address any compliance gaps.
• Ongoing Education: Staying informed about evolving laws and regulations is crucial for maintaining compliance and protecting business interests.
• Community Support: Daniela invites listeners to join the Spa Marketing Made Easy Facebook group for continued support and resources.

Notable Quotes:

• Daniela Warner at [51:19]: “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.”
• Keren de Zwart at [51:56]: “Head on over to the Spa Marketing Made Easy Facebook group... we’re going to do that.”

Conclusion

Episode SMME #415 provides spa owners with a critical overview of the legal considerations essential for a successful and compliant business year. From understanding labor laws and entity elections to navigating non-compete agreements and BOI compliance, Daniela Warner and Keren de Zwart offer invaluable guidance tailored to the unique challenges faced by the spa industry. By emphasizing the importance of professional partnerships and proactive planning, this episode empowers spa professionals to build resilient businesses that thrive in a complex regulatory environment.

For further assistance or to connect with Keren de Zwart, visit NotYourFathersLawyer.com or follow her on Instagram @notyourfatherslawyer.