10 legal issues that consultants should know about !

As a consultant, you face more than technical challenges. You face legal ones as well. For this reason, the more you know about these legal matters, the less chance you have of getting into trouble. Although this article is not meant as legal advice, it can help you be aware of some issues that concern you. At the very least, it will alert you to questions and issues you might need to raise with your own attorney.

1: Status — consultant or employee?

Make sure of your legal relationship to your client. Are you really an independent contractor, so you should receive a form 1099 at the end of the year reflecting your billings? Or could you actually be considered an employee, who should receive a form W-2?

The company using your services most likely prefers the former, and you might also. The Internal Revenue Service in the past used a series of 20 questions to determine whether a person was a contractor or an employee. However, the IRS recently streamlined those questions into a three general categories:

Behavioral control (i.e., how much direction and control the business has over the individual, in terms of working hours, sequence of actions, and tools and equipment to be used)
Financial control (i.e., how the individual is paid, e.g., weekly or hourly vs. a flat fee)
Type of relationship (i.e., how permanent it is and how the parties view the relationship)
Generally speaking, the greater the behavioral control, and the greater the financial control, and the more permanent the relationship is, the greater the chance that the IRS will view you as an employee rather than as an independent contractor.

2: Income and self employment taxes

The distinction between employee and independent contractor will affect the way you handle your taxes. As an employee, your employer is responsible for withholding income taxes from your paycheck. In addition, you and your employer each contributes half to Social Security payments.

If, however, you are an independent contractor, you are responsible for your own taxes because the organization that pays you generally will not withhold anything. You’re also responsible, depending on how you’re organized legally, for completing appropriate business tax returns, such as a Schedule C , if you’re a sole proprietor.

3: Sales tax on your fees?

Check with your state’s department of revenue to see whether the fees you charge clients are subject to tax. If they are, and you are not collecting and remitting such taxes, you could have a problem.

4: Intellectual property / “work made for hire”

In the course of your consulting work, you may create intellectual property for use by your clients. Such work might be entitled to copyright protection. In this case, be clear with your client about such copyright ownership. You do not want your work to be considered a “work made for hire.” The copyright for such a work would reside with your client, even though you were the one to create the work.

The client has high hurdles to overcome to claim work made for hire status — but be safe and avoid misunderstanding. In your statement of work or in your contract, consider including a clause that expressly excludes your work product from being classified as a work made for hire.

5: Nonexclusive vs. exclusive license

If you are the copyright holder of intellectual property, you can permit others to use that property via a license. In return, of course, you probably would charge the other party a fee, or royalty, for the privilege of holding this license.

When you grant licensing rights, you can do so exclusively (to only one license holder) or nonexclusively (to more than one license holder). You would do an exclusive license, in most cases, because your client asked or demanded it. In such a situation, obviously, you would probably want to charge a higher royalty for an exclusive license than a nonexclusive license.

6: Professional liability vs. general liability insurance

You should consider at least two types of insurance: professional liability and general liability insurance. While both protect you from things you do or fail to do, the specific focus of each is different. Professional liability insurance (also known as errors and omissions insurance) protects you from the consequences of bad decisions and actions with respect to your consulting. For example, if your improper systems implementation caused the client’s business to shut down, resulting in loss of revenue, your professional liability policy might protect you from a client lawsuit.

General liability insurance protects you from other liability. For example, such a policy might protect you in the event that your client falls within your office or you accidentally spill hot coffee over an audience member at one of your presentations.

7: “Claims made” vs. “occurrence” insurance coverage

Liability insurance usually differs from other insurance, such as automobile, in one important respect: Policies of the former are generally based on “claims made,” while those of the latter are based on “occurrence.”

Suppose you are involved in an incident on June 1, while you hold an insurance policy with company A. On July 1, you change from insurance company A to insurance company B. Then, on August 1, the other person files a claim regarding the incident. If both policies were “occurrence” policies, company A would be responsible for this claim, even though it no longer carries your insurance. However, if both policies were “claims made” policies, company B would be responsible, even though the incident occurred prior to your becoming their policyholder.

8: Business organization option — the sole proprietorship

The way you organize your business determines the amount of reporting you do as well as the amount of legal protection you have. If you are in business by yourself, the simplest form of organization is the sole proprietorship. In Pennsylvania, in fact, if you include your name as part of your business name (e.g., you are John Smith and your business is John Smith Consulting), you don’t even need to register with the state. But if the sole proprietorship business name does not include your name, you would need to file a “fictitious name registration.” Such a filing is designed to protect the public so that they know who is involved with a particular business.

While a sole proprietor provides for ease of tax reporting, it involves legal risk. If you are sued because of your business, you have no legal way to shield your personal assets — they can be used to satisfy a judgment against you. Consider this fact carefully if you choose a sole proprietorship.

9: Business organization option — the corporation

A corporation offers significantly more legal protection. If you are sued over acts of your corporation, generally only the assets of that corporation can be used in a judgment. Your own personal assets, if separate from the corporation, usually can’t be used. However, a corporation requires its own set of tax returns and typically requires formal meetings and documentation of those meetings.

To form a corporation, you’ll probably need to file articles of incorporation with your state and you’ll likely need officers, a board of directors, and bylaws. For further information, check with your state’s Department of State (not to be confused with the U.S. Department of State).

10: Business organization option — the limited liability company (LLC)

A third form of organization, available in many states, is that of a limited liability company (LLC). Think of an LLC as combining the best features of a sole proprietorship and a corporation. On the one hand, the LLC does not file its own returns — you include income on your own Schedule C, just as for a sole proprietorship. On the other hand, if you’re sued, only the assets of the LLC are generally at risk — not your own personal assets. For this reason, many consultants use an LLC form of organizat

Edited from : Tech Republic
Poosted By : Grace Paul Regan

Top 10 excuses why techies don't give projects on time

When engineering projects are not delivered on time, whom do we blame for that? Clients are known to be the most stubborn people on earth to get their job done. All they understand is that they pay for the service and find no reason for not being demanding. Some engineers do face genuine issues but some try to take advantage of the genuine situations and it would be hard to believe that such a situation might not have been faced by the engineers.

No matter, whatever changes are incorporated in the IT sector to make it more lean and adaptive, the delivery of projects would be delayed at some point of time and the techies know how to get away with it. With India being one of the fastest growing markets in IT and ITeS space, SiliconIndia conducted a small survey to see what are the excuses which techies in India normally bet upon. And here are the top 10 reasons that make them hunt for more time to get their projects done.

1) Requirement Slippage: "What can I do, if the client does not stick to his requirements?" Any techie you come across must have either made this excuse or must have come across it. Many times, when the team members in a particular project are about to complete the project keeping the client requirements in mind, they are insisted to either make certain changes in the project or bring in some addition to it. Requirement slippage is a genuine problem faced by team members in a project but many times it becomes the easiest excuse for any techie if the project is delayed. This excuse is often validated by the organization and the team members can easily prove themselves impeccable.

2) Wrong Project estimation: Project estimation is usually given by a module leader who is not deeply associated with the project. He or she is the one who builds relationship between the client and the project team and integrates the module's findings into the broader project work. Usually when the project demands some more time to be delivered, the team members crib about the project not being estimated in an appropriate manner. At times, the requirement is underestimated, the time frame is not fixed in sync with the project and the entire project is not compatible with the engineers working on the project. This excuse has a broader dimension as any one part of the project estimation could become a reason for extending the time for project delivery.

3) Work Overload: Attrition is no big news in the IT industry. The software professionals deal with immense pressure in coding their programmes correctly. In such a case, when one team member resigns, the existing team members are overloaded with the pending work of the ex-employee. And in such a case, the priorities of the project team members change and this becomes another excuse for team members.

4) Infrastructural issues: Well if nothing works out, then this is the excuse which everyone resorts to. Blame it on the company's infrastructure. Indian IT infrastructure usually lacks with effective resources like availability of power and high bandwidth. So probably one could understand the frustration caused due to a technical snag. Each time there is an infrastructural slowdown, the efficiency of employees comes down.

5) Information does not get passed on, lack of understanding of processes: Communication of the project details seems to be another area for making an excuse. If the project is not delivered on time, the problem could be directed to the organizational processes. The discrepancy in understanding of a project requirement is one point which the techies pick on to make an excuse.

6) Health issues: This is the most common excuse which prevails in every sector. This is one area, where the employees can't be questioned further. It has been widely seen that many IT professionals take sick leaves on Mondays because they are reluctant to work on Mondays after a relaxed weekend.

7) Unplanned Holidays: Take the recent verdict on Ayodhya. The fear of the consequences of the judgement led all the IT companies work for only half a day. Most of the holidays are granted to the IT professionals due to bandhs at both national and state level. The major development to the project comes to a halt when an organisation remains closed for a day or half. And this is often a valid reason for the failure of delivery of project on time.

8) Lack of proper skill set in a team: The experienced team members often accountable to higher authorities blame it on the unavailability of skilled engineers in the project. The hiring of additional developers late in the software development cycle, after not meeting some deadline, is often the factor in delayed contributions from the newcomers as they take time to familiarise themselves with the project. This contributes to a great deal of time lost in coordinating their joining the group.

9) Poor planning or management: the role of project manager is not only to give the final word to the team members and to arrive at a particular timeline for the project. If the person taking on the role of project manager has poor planning and managerial skills, the team members could point this as a reason for the project fall over.

10) Quality control and documentation: The major problem of a late running project. Many engineers try to find an excuse for the sake of quality assurance. It is easy to get away with this excuse as the client is also willing to compromise with the deadline for the sake of quality.

Edited from Siliconindia

Posted by
S.Grace Paul Regan