Best Practices for Managing Employee Departures

manage employee departures

As the job market improves, job options for workers are increasing and so is employee turnover. According to the Bureau of Labor Statistics, the average tenure of the American worker is 4.6 years. For a Millennial worker born between 1977 and 1992, the wanderlust comes even sooner. Millennials move on an average of every 3.2 years.

Employee turnover is a trend that shows no sign of stopping, making it increasingly important for employers to offer competitive pay and benefits to their staff. For those that do jump ship, it’s critical for employers to ensure they’re taking the correct steps manage employee departures.

Changing jobs is a lengthy process for both employees and employers, which is why it’s crucial for companies to have a formal process in place. Whether employees leave involuntarily or of their own volition, HR managers should carefully follow exit procedures with employee departures. There are five steps you should consider when you and your employees split ways.

1. Exit Interviews

As an employer, the benefit to exit interviews for you is hearing a realistic take on what workers think about your company, management and the host of other items that come with a job.

Since departing employees are more likely to be open and honest about any problems they might have with the organization, you can take their feedback and apply it as necessary moving forward.

Use exit interviews to gather important information about whether salaries and benefits are up to par with competitors, as well as to improve culture, processes, management and development programs.

2. Timing of Final Paychecks

Most states have a timeline for when employers need to issue final paychecks to departing employees. Violating these regulations could lead to fines, penalties and interest payments.

Make sure you’re aware of the law in your state. FindLaw is a website for small business owners with a list of final paycheck requirements by state.

3. What’s Included in Final Paychecks

Each state has its own law regarding what has to be included in final paychecks. While you may be aware of requirements for hours worked and potential severance pay, make sure you know your state’s policy about compensating for unused sick or vacation time.

4. Health Insurance Benefits

When an employee covered under a company’s health plan leaves to take another job, he or she is protected by the Health Insurance Portability and Accountability Act. If new group health insurance coverage is available, either at the worker’s new job or through his or her spouse’s employer-sponsored plan, the departing worker must request enrollment in the new plan within 30 days.

To ensure that pre-existing conditions are covered under the new plan, the worker’s former employer is required to provide a certificate documenting previous continuous coverage.

COBRA

Workers who are laid off, quit or retire from companies with 20 or more employees, and who participated in their employers’ group health plans, may qualify to continue coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA). Employers must provide these departing workers with written notice explaining their rights under COBRA, and the workers have 60 days from the date of notice or the date coverage ended, whichever comes later, to sign up for COBRA coverage. COBRA coverage remains in effect for 18 months, or longer in some cases.

Voluntary Benefits

Some employers offer workers the opportunity to enroll in voluntary health care benefits in addition to major medical insurance plans. These voluntary benefits vary from company to company and may include disability insurance, long-term care insurance, accident and hospitalization insurance, cancer or specified-disease insurance and more. When meeting with exiting workers, employers should discuss their enrollment in these plans. In some cases, coverage terminates when employment ends. In other cases, coverage may be portable and remain in place as long as the worker continues to pay the policy premiums.

5. Retirement Benefits

Although you might offer all of your employees some type of retirement benefits, everyone will need different information upon departure. A Millennial will need different details than say, a Boomer, who is a few years away from retirement.

You should provide departing workers with copies of their retirement plan summary descriptions, as well as individual benefit statements. Explain if, when and how benefits can be collected, either at retirement age or in a lump-sum payment, as well as whether benefits can be rolled over to an IRA or to a new employers’ plan.

According to the 2013 Aflac WorkForces Report, 48 percent of workers are likely to look for a new job in the next 12 months. While retention should remain a top priority for all employers, businesses should always have a plan in place for professionally handling employee departures and prepare to discuss these topics with them.

It is in the best interests of both your company and your workers to avoid loose ends and ensure that everyone is on the same page.

Employee Leaving Photo via Shutterstock




Tech Thursday (10/31): Tech News and Updates from GoDaddy, Nitro, CakeMail and Brother

It’s Tech Thursday from Smallbiztechnology.com. Each week we take a quick look at recent small business and tech news and updates for the small business community and share them with you in a quick and simple round-up.

GoDaddy Acquires Ronin - Integrates Invoicing Into Online Bookkeeping

5th Acquisition in 15 Months Fuels GoDaddy’s Mission to Help Small Businesses

GoDaddy, the Web’s top platform for small businesses,has announced the acquisition of Ronin â€" an online invoicing company. The acquisition, made quietly in April, has been fully integrated into GoDaddy Online Bookkeeping â€" providing a full-service solution for any small business looking to simplify and organize their finances and get back to business.

“I am a new online business entrepreneur with very little business experience,” said Kelly’s Gourmet Doggie Owner Kelly Krieger. “GoDaddy Online Bookkeeping has made managing my revenue as well as costs so simple. It’s like Business Management for Dummies! As a one-person operation, there is very little time left in my day to manage my books, but thankfully GoDaddy Online Bookkeeping does it for me. I would recommend GoDaddy Online Bookkeeping to any business large or small, they have saved me!”

Online Bookkeeping combines GoDaddy’s 2012 acquisition of Outright.com with Ronin. Outright helped small businesses track their income, expenses and taxes. Ronin, founded by Lu Wang, was recently listed on Mashable.com’s “27 Free Invoicing Tools for Small Businesses,” and was described as an “ideal solution for both small businesses and freelancers.” Ronin created a user-friendly invoicing product â€" taking the complexities out of the process for small businesses trying to get paid by their clients.

For more on this acquisition, click here.

Nitro Debuts Latest Version of Award-Winning Document Solution With New Cloud Integration

Nitro Pro 9 Offers the Most Robust Feature Set to Date With Addition of Cloud Offering


Nitro, a leading provider of document productivity and workflow solutions, today announced the release of Nitro Pro 9. This latest version of Nitro’s desktop offering provides integration with Nitro Cloud, a new service that gives powerful flexibility to businesses when sharing, signing, and collaborating with documents.

Nitro Pro 9 expands on the award-winning set of features that have helped the company become the trusted provider of PDF tools for over 50% of the Fortune 500, and the standard PDF software preload for PC giant Lenovo. The pairing of Nitro Pro 9 with the new Nitro Cloud offering demonstrates the company’s commitment to the paperless office, document productivity, and workflow efficiency.

“The latest release of Nitro Pro delivers on our promise to make the document lifecycle as painless as possible,” said Nitro’s Founder and CEO, Sam Chandler. “Pro 9 is an evolutionary leap forward for anyone who works with documents. For the first time, we connect the desktop to the cloud, enabling sharing, signing and collaboration online. Send documents to anyone for review, markup, or e-signing, all in the browser.”

In addition to the integration with Nitro Cloud, Pro 9 contains several new desktop features and enhancements, and an all-new look and feel. Highlights in the latest version include:

  • Nitro Cloud Integration. Nitro Cloud enables document sharing, signing and collaboration in the browser, with no desktop software required. Send documents for review, contracts for signing, and invite people to collaborate using Nitro Cloud’s online markup tools. Track everything, including document views, document versions and collaboration history.
  • All-new Look and Feel. Updated to the Windows 8/Office 2013 application style, Nitro Pro’s user interface is familiar to anyone who uses Microsoft Office, which means virtually no learning curve.
  • Compare PDFs - Visually & by Content. Nitro Pro’s PDF compare tool allows you to easily spot the differences when comparing two versions of a document. Quickly analyze inconsistencies in your documents, accelerating review processes and improving collaboration.
  • Enhanced Text Editing. New and enhanced intuitive text editing tools allow changes to text in paragraphs or line-by-line as well as easy switching between the two editing modes.

Nitro Pro 9 is priced at USD 139.99 per single user license. A free, fully functional 14-day trial is available for download.

For more on this story and the features offered, click here.

CakeMail Launches CakeMail 4

Helping Small Businesses Engage Customers by Providing Simple, Cost-Effective Email Marketing Application

CakeMail Inc. has announced the launch of CakeMail 4, an email marketing application that simplifies the way small businesses engage with customers. The new product is an
affordable, easy-to-use solution, created to help small businesses begin their email marketing efforts - regardless of the marketing resources, design background or technical expertise they have.
CakeMail 4 allows businesses to manage contacts, create personalized email campaigns from templates and simply send. It’s targeted at small businesses looking to build relationships with existing and potential customers, increase customer loyalty and retention, create brand awareness and drive revenue. 

“We want to be part of the success and growth of small businesses,” said CakeMail CEO Francois Lane. “Our goal was to put a simple yet powerful tool in the hands of small businesses; if they can email, they can CakeMail. We’ve removed the barriers of cost, complexity and time required to create email campaigns, so that millions of small businesses could begin reaping the benefits. CakeMail 4 was created with a ‘less is more’ philosophy - less time to send an email campaign, more time to focus on the core of your business.”

For more on this launch, click here.

Brotherâ„¢ Introduces New Line of Compact, Multi-Page Scanners that Bridge the Gap Between Workgroup and Portable Scanners

The Flagship ImageCenter™ ADS-1500W Helps Users Maximize Productivity and Organization 

Brother International Corporation, a leader in business technology, today announced the launch of the ImageCenter™ ADS-1500W, the flagship model in their new series of compact scanners for small office/home office (SOHO) and small business users. With the introduction of this series of compact desktop scanners, Brother now offers a complete lineup of scanners including newly redesigned mobile scanner models and an award-winning1series of workgroup scanners.
Brother created the ADS-1500W to be a tremendous value for business customers, combining the economical price point and size of mobile scanners with a variety of advanced functions typically reserved for more costly desktop workgroup scanners. The ADS-1500W has a compact footprint of only 11.2” wide and 4.1” deep, but is packed
with advanced scanning features including simplex/duplex color scan speeds of up to 18 ppm2, a 20-sheet capacity uto document feeder, and web connectivity3. Plus, the ADS-1500W is compatible with Windows®, Mac® and Linux®operating systems, so it can be used in almost any small business, workgroup or home office environment.

The ADS-1500W can connect to a wireless network and the 2.7” color TouchScreen display lets users scan directly to popular cloud services including FACEBOOK™, ICASA
WEB ALBUMS™, FLICKR™, GOOGLE DRIVE™, EVERNOTE®, BOX and SKYDRIVE.3 Users can access a variety of scan-to destinations such FTP, network, e-mail server, USB flash drive4 as well as scan directly to compatible mobile devices using the Brother iPrint&Scan app.5.

For more on this from Brother, click here.



Tech Thursday (10/31): Tech News and Updates from GoDaddy, Nitro, CakeMail and Brother

It’s Tech Thursday from Smallbiztechnology.com. Each week we take a quick look at recent small business and tech news and updates for the small business community and share them with you in a quick and simple round-up.

GoDaddy Acquires Ronin - Integrates Invoicing Into Online Bookkeeping

5th Acquisition in 15 Months Fuels GoDaddy’s Mission to Help Small Businesses

GoDaddy, the Web’s top platform for small businesses,has announced the acquisition of Ronin â€" an online invoicing company. The acquisition, made quietly in April, has been fully integrated into GoDaddy Online Bookkeeping â€" providing a full-service solution for any small business looking to simplify and organize their finances and get back to business.

“I am a new online business entrepreneur with very little business experience,” said Kelly’s Gourmet Doggie Owner Kelly Krieger. “GoDaddy Online Bookkeeping has made managing my revenue as well as costs so simple. It’s like Business Management for Dummies! As a one-person operation, there is very little time left in my day to manage my books, but thankfully GoDaddy Online Bookkeeping does it for me. I would recommend GoDaddy Online Bookkeeping to any business large or small, they have saved me!”

Online Bookkeeping combines GoDaddy’s 2012 acquisition of Outright.com with Ronin. Outright helped small businesses track their income, expenses and taxes. Ronin, founded by Lu Wang, was recently listed on Mashable.com’s “27 Free Invoicing Tools for Small Businesses,” and was described as an “ideal solution for both small businesses and freelancers.” Ronin created a user-friendly invoicing product â€" taking the complexities out of the process for small businesses trying to get paid by their clients.

For more on this acquisition, click here.

Nitro Debuts Latest Version of Award-Winning Document Solution With New Cloud Integration

Nitro Pro 9 Offers the Most Robust Feature Set to Date With Addition of Cloud Offering


Nitro, a leading provider of document productivity and workflow solutions, today announced the release of Nitro Pro 9. This latest version of Nitro’s desktop offering provides integration with Nitro Cloud, a new service that gives powerful flexibility to businesses when sharing, signing, and collaborating with documents.

Nitro Pro 9 expands on the award-winning set of features that have helped the company become the trusted provider of PDF tools for over 50% of the Fortune 500, and the standard PDF software preload for PC giant Lenovo. The pairing of Nitro Pro 9 with the new Nitro Cloud offering demonstrates the company’s commitment to the paperless office, document productivity, and workflow efficiency.

“The latest release of Nitro Pro delivers on our promise to make the document lifecycle as painless as possible,” said Nitro’s Founder and CEO, Sam Chandler. “Pro 9 is an evolutionary leap forward for anyone who works with documents. For the first time, we connect the desktop to the cloud, enabling sharing, signing and collaboration online. Send documents to anyone for review, markup, or e-signing, all in the browser.”

In addition to the integration with Nitro Cloud, Pro 9 contains several new desktop features and enhancements, and an all-new look and feel. Highlights in the latest version include:

  • Nitro Cloud Integration. Nitro Cloud enables document sharing, signing and collaboration in the browser, with no desktop software required. Send documents for review, contracts for signing, and invite people to collaborate using Nitro Cloud’s online markup tools. Track everything, including document views, document versions and collaboration history.
  • All-new Look and Feel. Updated to the Windows 8/Office 2013 application style, Nitro Pro’s user interface is familiar to anyone who uses Microsoft Office, which means virtually no learning curve.
  • Compare PDFs - Visually & by Content. Nitro Pro’s PDF compare tool allows you to easily spot the differences when comparing two versions of a document. Quickly analyze inconsistencies in your documents, accelerating review processes and improving collaboration.
  • Enhanced Text Editing. New and enhanced intuitive text editing tools allow changes to text in paragraphs or line-by-line as well as easy switching between the two editing modes.

Nitro Pro 9 is priced at USD 139.99 per single user license. A free, fully functional 14-day trial is available for download.

For more on this story and the features offered, click here.

CakeMail Launches CakeMail 4

Helping Small Businesses Engage Customers by Providing Simple, Cost-Effective Email Marketing Application

CakeMail Inc. has announced the launch of CakeMail 4, an email marketing application that simplifies the way small businesses engage with customers. The new product is an
affordable, easy-to-use solution, created to help small businesses begin their email marketing efforts - regardless of the marketing resources, design background or technical expertise they have.
CakeMail 4 allows businesses to manage contacts, create personalized email campaigns from templates and simply send. It’s targeted at small businesses looking to build relationships with existing and potential customers, increase customer loyalty and retention, create brand awareness and drive revenue. 

“We want to be part of the success and growth of small businesses,” said CakeMail CEO Francois Lane. “Our goal was to put a simple yet powerful tool in the hands of small businesses; if they can email, they can CakeMail. We’ve removed the barriers of cost, complexity and time required to create email campaigns, so that millions of small businesses could begin reaping the benefits. CakeMail 4 was created with a ‘less is more’ philosophy - less time to send an email campaign, more time to focus on the core of your business.”

For more on this launch, click here.

Brotherâ„¢ Introduces New Line of Compact, Multi-Page Scanners that Bridge the Gap Between Workgroup and Portable Scanners

The Flagship ImageCenter™ ADS-1500W Helps Users Maximize Productivity and Organization 

Brother International Corporation, a leader in business technology, today announced the launch of the ImageCenter™ ADS-1500W, the flagship model in their new series of compact scanners for small office/home office (SOHO) and small business users. With the introduction of this series of compact desktop scanners, Brother now offers a complete lineup of scanners including newly redesigned mobile scanner models and an award-winning1series of workgroup scanners.
Brother created the ADS-1500W to be a tremendous value for business customers, combining the economical price point and size of mobile scanners with a variety of advanced functions typically reserved for more costly desktop workgroup scanners. The ADS-1500W has a compact footprint of only 11.2” wide and 4.1” deep, but is packed
with advanced scanning features including simplex/duplex color scan speeds of up to 18 ppm2, a 20-sheet capacity uto document feeder, and web connectivity3. Plus, the ADS-1500W is compatible with Windows®, Mac® and Linux®operating systems, so it can be used in almost any small business, workgroup or home office environment.

The ADS-1500W can connect to a wireless network and the 2.7” color TouchScreen display lets users scan directly to popular cloud services including FACEBOOK™, ICASA
WEB ALBUMS™, FLICKR™, GOOGLE DRIVE™, EVERNOTE®, BOX and SKYDRIVE.3 Users can access a variety of scan-to destinations such FTP, network, e-mail server, USB flash drive4 as well as scan directly to compatible mobile devices using the Brother iPrint&Scan app.5.

For more on this from Brother, click here.



Employment Litigation: Who is Your Enemy?

employment litigation

When a company is sued by an employee, the company naturally views the employee as the problem.  But in many cases, another equally dangerous enemy exists in employment litigation - disguised as the company defense lawyer.  The legal fees paid to defense firms can easily eclipse the amount paid to resolve the case.

The legal profession as a whole has come under attack for being too expensive and inefficient.  Law school applications are declining and compensation paid to lawyers is falling as clients demand better value.

Many sectors have adjusted to the new climate, but the major employment defense firms remain largely unchanged. Let’s explore.

Your Legal Bill May Exceed the Cost of Settlement

Most employment defense firms today are made up of hundreds of lawyers and support staff in offices located throughout the country at prestigious addresses.  The lawyers are well compensated and enjoy large private offices.

Who pays for this massive overhead?

You do when you hire one of them to defend you. These giant legacy operations thrive on inefficiency.  They have a financial incentive to protract disputes to generate fees. This is why these firms send two lawyers to take the plaintiff’s deposition.  And it is why these depositions last an entire day or more.

That deposition, however, could easily be handled by a single lawyer in one or two hours.

Multiple Seven Hour Depositions of Employees

A recent wage and hour case brought by security guards serves as an example of billing abuse.  In that case, the security gaurds sued to recover overtime pay.  The issues were simple.  The job of a security guard is no secret.

Yet the defense firm deposed each guard for an entire day.  Two lawyers for the defense were present at each deposition.  The settlement obtained by the guards mostly likely was less than the fee earned by the defense lawyers.

The business owner would have been better off paying the guards early in the case.

Slim Odds and Big Bills

Summary judgment is another billing bonanza for defense firms.  In almost every case, these firms file motions and generate sizable bills.  The motions, however, are rarely effective and can easily be defeated simply by showing a material factual dispute.

Material fact disputes exist in most employment cases.

Affordable Alternatives and Better Service

The large traditional defense firms are safe choices for large enterprises with deep pockets or insurance.  The problem with these firms is that they are not cost effective.

Why pay $80,000 to solve a $40,000 problem?

Here is a simple road map:

Assess Legal Costs in Advance

Conduct an early realstic assessment and try to resolve the matter before legal costs mount.  The employee and their firm are equally motivated to resolve the matter early and will do so at a discount.

Minimalistic Defense

If early resolution is not possible, take an aggressive, focused and minimalistic defense of the claim.  Do only what is abosultely necessary to win the case.  Most all cases are winnable.

Seek Project Pricing

Use a law firm that offers project pricing with upfront, agreed upon prices for each task. For example, the deposition of the plaintiff should take no more than two hours and cost $2000 or less.  Consider hiring a firm the also represents employees as they may have a more balanced approach.

Mediate a Resolution

Mediate a resolution if possible. Know that 95% of employment cases settle and your case will also. So keep your costs down but be prepared to win at trial if necessary.

Court Photo via Shutterstock




Salesforce’s Task App Do Is Done

salesforce do app

Salesforce.com will shutter its task app Do on January 31. The app is one of many that enables teams including small businesses to coordinate a wide variety of tasks via mobile device.

Do allows teams to share task lists, organize projects, track contacts and attach files to task lists or other project information.

In an announcement to its community recently, the Do Team explained:

“Here at Do, our customers have been the driving force behind our mission to change the way people work together. While the last two years have been an incredible journey, we’ve made the tough decision to discontinue the Do service on January 31, 2014.”

Do was the reincarnation of Manymoon, a project management application.  Salesforce.com has had a strategy of renaming products with common one-word domains.  Other Salesforce products include Desk.com, Work.com, Data.com and even Force.com.  Somehow, though, the name Do.com never caught on.

Part of the problem Do faced is the sheer number of these tools already on the market.   There are literally dozens of task apps, collaboration tools and project management apps â€" with lots of crossover of functionality and purpose.  A few include Microsoft’s Yammer, Salesforce’s other management tool Chatter, and tools like Campfire and Asana.  We noted 20 project management tools back in 2010 and the list was by no means complete even then.

In a field test of Do earlier this year, a CITE World author opined the app just wasn’t as intuitive as some other apps on the market.

Members of the community have been told an exporting tool will be ready by November 15 for anyone interested in exporting their data out of their Do account.

Current members can continue using the app until the end of January if they wish and may even add new members and to existing groups, projects and tasks. However, registration for new users has been closed.

All data remaining on the Do servers will be deleted shortly after shutdown January 31, 2014.  In other words, get your project data from Do.com before January 31, 2014 or it may be lost forever.

Image: Salesforce




Why Postal Mail Marketing Is Not Dead! (Video)

In this day and age of small business marketing everyone seems to be focused on digital and social marketing techniques in order to reach a larger number of people for a much lower cost. While this can be an effective way to extend your brands reach, mail marketing, if done correctly, can be a much more effective way of reaching potential customers. Here’s why postal mail marketing is not dead!

I recently received, in the mail, a small package from DIY website builder, Jimdo. In this package was a hand written note, a small Jimdo screen cleaner and a mini pack of gummi bears. Check out my video about this here, or watch below to see why this package had successful effects on me and why I’ll remember them much differently than the other providers in their category.

I’ve recently heard a lot of stories about other companies who’ve achieved great success with mail marketing campaigns. The guys at Iron Tribe Fitness shared the success they had with a mail marketing campaign to potential customers at a recent event we held on NYC. As Forrest Walden, CEO and Founder, noted to the group, “you have to find a creative way to get past all the ‘junk mail’ so they open your package”. Iron Tribe did this by sending a small mailer that included a spy glass with it’s marketing information. The fact that the recipient knew the package contained something moved it immediately to the ‘must open - I’m intrigued’ pile and the response they received was huge.

As Seth Godin said at another recent event in NYC, “Be Weird!”. Effective business marketing is sometimes about being weird and thinking outside of the box to come up with something creative that ‘sticks’ with whomever you are marketing to. Ultimately what you are trying to achieve is being that one company that they think about when they are ready to make a purchase. Mail marketing can have that effect - so don’t bury it just yet!



Why Postal Mail Marketing Is Not Dead! (Video)

In this day and age of small business marketing everyone seems to be focused on digital and social marketing techniques in order to reach a larger number of people for a much lower cost. While this can be an effective way to extend your brands reach, mail marketing, if done correctly, can be a much more effective way of reaching potential customers. Here’s why postal mail marketing is not dead!

I recently received, in the mail, a small package from DIY website builder, Jimdo. In this package was a hand written note, a small Jimdo screen cleaner and a mini pack of gummi bears. Check out my video about this here, or watch below to see why this package had successful effects on me and why I’ll remember them much differently than the other providers in their category.

I’ve recently heard a lot of stories about other companies who’ve achieved great success with mail marketing campaigns. The guys at Iron Tribe Fitness shared the success they had with a mail marketing campaign to potential customers at a recent event we held on NYC. As Forrest Walden, CEO and Founder, noted to the group, “you have to find a creative way to get past all the ‘junk mail’ so they open your package”. Iron Tribe did this by sending a small mailer that included a spy glass with it’s marketing information. The fact that the recipient knew the package contained something moved it immediately to the ‘must open - I’m intrigued’ pile and the response they received was huge.

As Seth Godin said at another recent event in NYC, “Be Weird!”. Effective business marketing is sometimes about being weird and thinking outside of the box to come up with something creative that ‘sticks’ with whomever you are marketing to. Ultimately what you are trying to achieve is being that one company that they think about when they are ready to make a purchase. Mail marketing can have that effect - so don’t bury it just yet!



What the Strike Down of the Amazon Tax Law Means for Illinois Affiliates

illinois amazon tax

How states should tax Internet sales is one of the hottest issues in state legislatures today, as cash-strapped states look to close perceived loopholes and put more money in their coffers.

Over the past few years, several states such as California, New York, North Carolina, and Illinois, have passed laws requiring out-of-state retailers to collect sales taxes on purchases made by customers in the state, regardless of whether the merchant has a physical presence in the state or not.

The laws particularly affect large online merchants like Amazon.com and Overstock.com, who previously had not charged sales taxes.

On September 18, Illinois’ Amazon tax law that required online businesses to collect state sales tax on purchases made by Illinois residents was invalidated in a 6-1 ruling by the Illinois Supreme Court.

According to the Performance Marketing Association (PMA), the plaintiff who filed the lawsuit, there were approximately 9,000 Illinois-based affiliates in 2010, generating more than $744 million in advertising revenue. After the law took effect in 2011, out-of-state retailers, such as Amazon.com and Overstock.com, terminated their relationships with Illinois affiliates in order to avoid the new sales tax obligations.

According to PMA, one-third of affiliates left Illinois because of the ruling, and the other two-thirds either downsized or went out of business altogether.

Now, out-of-state merchants can reinstate their advertising agreements with Illinois-based affiliates. Once large merchants like Amazon and Overstock reinstate their relationships with Illinois companies, it will be time for any displaced affiliates to move back to Illinois.

If you’re thinking about starting an affiliate business in Illinois, below are the steps needed to make your business legit:

1. Incorporate Your Business

Over the past two years, an Illinois-based company would need to incorporate in another state (such as Delaware, Nevada, and Wyoming). However, now it’s recommended for a small business affiliate (“small” is defined as under five shareholders) physically based in Illinois to incorporate or form an LLC in Illinois.

That way, you don’t have to deal with the added fees and paperwork associated with operating “out of state” (i.e. when you incorporate in Delaware, but have a physical presence in Illinois).

2. Establish a Federal Employer Identification Number (EIN)

You’ll need to obtain a tax ID number from the IRS for your new company. You can apply for your EIN online through the IRS site.

3. Open a Business Bank Account in Illinois

Once you have your corporation/LLC established and have an EIN, you can set up a business bank account for your affiliate business, and begin to receive payments under your business name.

4. Get Any Necessary Local Business Licenses

Don’t forget to apply for any local business licenses from the city or county where you have established your new business.  

If you’re an existing Illinois-based affiliate who may have moved out of state after the 2011 law went into effect, you may want to think about moving your business back to Illinois. In this case, you will want to dissolve the corporation/LLC in the other state and then establish a new business in Illinois.

Please consult with your CPA to figure out the best timing for this action in terms of tax implications. Fortunately, it can be relatively quick and painless to incorporate your new company online once you’re ready to do so.

If you aren’t located in a state currently affected by the Amazon sales tax law, you should still keep a close eye on your state’s legislative activity.

Court Photo via Shutterstock




What the Strike Down of the Amazon Tax Law Means for Illinois Affiliates

illinois amazon tax

How states should tax Internet sales is one of the hottest issues in state legislatures today, as cash-strapped states look to close perceived loopholes and put more money in their coffers.

Over the past few years, several states such as California, New York, North Carolina, and Illinois, have passed laws requiring out-of-state retailers to collect sales taxes on purchases made by customers in the state, regardless of whether the merchant has a physical presence in the state or not.

The laws particularly affect large online merchants like Amazon.com and Overstock.com, who previously had not charged sales taxes.

On September 18, Illinois’ Amazon tax law that required online businesses to collect state sales tax on purchases made by Illinois residents was invalidated in a 6-1 ruling by the Illinois Supreme Court.

According to the Performance Marketing Association (PMA), the plaintiff who filed the lawsuit, there were approximately 9,000 Illinois-based affiliates in 2010, generating more than $744 million in advertising revenue. After the law took effect in 2011, out-of-state retailers, such as Amazon.com and Overstock.com, terminated their relationships with Illinois affiliates in order to avoid the new sales tax obligations.

According to PMA, one-third of affiliates left Illinois because of the ruling, and the other two-thirds either downsized or went out of business altogether.

Now, out-of-state merchants can reinstate their advertising agreements with Illinois-based affiliates. Once large merchants like Amazon and Overstock reinstate their relationships with Illinois companies, it will be time for any displaced affiliates to move back to Illinois.

If you’re thinking about starting an affiliate business in Illinois, below are the steps needed to make your business legit:

1. Incorporate Your Business

Over the past two years, an Illinois-based company would need to incorporate in another state (such as Delaware, Nevada, and Wyoming). However, now it’s recommended for a small business affiliate (“small” is defined as under five shareholders) physically based in Illinois to incorporate or form an LLC in Illinois.

That way, you don’t have to deal with the added fees and paperwork associated with operating “out of state” (i.e. when you incorporate in Delaware, but have a physical presence in Illinois).

2. Establish a Federal Employer Identification Number (EIN)

You’ll need to obtain a tax ID number from the IRS for your new company. You can apply for your EIN online through the IRS site.

3. Open a Business Bank Account in Illinois

Once you have your corporation/LLC established and have an EIN, you can set up a business bank account for your affiliate business, and begin to receive payments under your business name.

4. Get Any Necessary Local Business Licenses

Don’t forget to apply for any local business licenses from the city or county where you have established your new business.  

If you’re an existing Illinois-based affiliate who may have moved out of state after the 2011 law went into effect, you may want to think about moving your business back to Illinois. In this case, you will want to dissolve the corporation/LLC in the other state and then establish a new business in Illinois.

Please consult with your CPA to figure out the best timing for this action in terms of tax implications. Fortunately, it can be relatively quick and painless to incorporate your new company online once you’re ready to do so.

If you aren’t located in a state currently affected by the Amazon sales tax law, you should still keep a close eye on your state’s legislative activity.

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