Dear Mary, I own a small bookstore and can’t afford to advertise. A few months ago I searched around the Internet for the e-mail addresses of people who I know like to read. Is it OK for me to e-mail them special offers?

Politicians hate spam. In 2003, when their spam folders hit capacity, Congress responded with the CAN-SPAM Act, which created rules for commercial e-mail messages, with serious consequences for violations. An e-mail falls under CAN-SPAM if its “primary purpose” is “commercial advertisement or promotion of a commercial product or service.” Sending out a “special offer” e-mail to the addresses you find on the Internet falls under CAN-SPAM, regardless of how big or small your bookstore may be.

If you’re sending a customer an e-mail to update them about an ongoing transaction, that would likely be exempt from CAN-SPAM, although the e-mail or sender information still may not contain false or misleading information.

CAN-SPAM compliance is not that complicated. Here are some of the main requirements:

• Your “routing information” (message headers) must be accurate and identify the message source. For example, if your business is called “Bob’s Books,” the “From” address can’t say “Waldenbooks.”

• The “Subject” line must accurately describe the message content. If the subject is “Free Books,” you have to offer free books. Would a reasonable person understand the e-mail’s purpose without opening it?

• You must clearly and conspicuously identify your e-mail as an advertisement, unless the recipient(s) have previously opted-in to e-mails from you. Placing “ADV:” in the subject or “This message is an advertisement” at the bottom will suffice.

• Somewhere in the message you must include your mailing address. It can be a current street address, a post office box, or a private commercial mailbox.

• This one’s important: You must include a clear and conspicuous explanation of how the reader can “opt out” of getting

e-mail from you in the future. Read one of the commercial e-mails in your inbox now and you’ll see an “unsubscribe” link somewhere near the bottom in a tiny font. If someone asks to be removed from your list, you MUST remove them within 10 business days. You cannot ask for more information or demand money, you simply have to remove them. And you can’t sell or give away their e-mail address.

Be aware that if you hire a company to do e-mail marketing, you are both responsible for CAN-SPAM compliance.

Violating CAN-SPAM can cost you up to $16,000 per separate e-mail, and that’s assuming the e-mails aren’t considered deceptive advertising. Penalties are severe if you use someone else’s computer without permission to send spam, use false information to register e-mail accounts, or harvest e-mail addresses.

If you’re unsure whether an e-mail falls under CAN-SPAM, consider following the regulations anyway. They’re relatively easy to follow. If you receive an e-mail that violated the act and want to file a complaint, contact the Federal Trade Commission at ftc.gov.

Mary Hudson is a business law attorney with Hudson & Luros, LLP, in Napa, and can be reached at mary@hudsonluros.com or 418-5118. The information provided here is not intended as legal advice, nor does it form an attorney-client relationship with the author. The author makes no representations as to the reliability or accuracy of the above information. In a perfect world we wouldn’t need disclaimers — or attorneys.

Dear Mary, I own a small clothing boutique here in Napa. I hired a student to work here part-time, but I’m not sure if I’m supposed to treat her as an employee. My friend says that it’s better to call her an independent contractor. Is he right? What’s the difference?

The IRS loves this question. Generally speaking, an independent contractor is a person who provides goods or services to you under a contract on a “freelance” basis. An employee provides services regularly under the direction of their employer. Businesses prefer hiring independent contractors over employees for several reasons, including reduced liability, flexibility in hiring/firing, and general savings to the business.

How does one get on this gravy train with biscuit wheels? Let’s discuss what makes a worker an independent contractor or an employee.

The local student you hire to sell clothes after school is an employee. I don’t care if she only works weekends. She comes in when you tell her to and she leaves when you tell her to leave. She works at your store, not at her home or office. She wears the apron purchased for her by the company. She will continue working for the store until she quits or is terminated. All of these things indicate to me that she is an employee — even if you call her an independent contractor and you make her sign something saying she is an independent contractor. It may sound clever to just call her an independent contractor, but I promise you the IRS has heard it before.

So who is an independent contractor? Here’s a lawyer’s answer for you: it depends. The plumber you call to fix your restroom is an independent contractor, because he has his own business, he sets his own schedule, and he decides how much he will be paid for his services. Your doctor is an independent contractor, as is your accountant, the girl who cuts your hair, your dry cleaner and your personal trainer, just to name a few.

In making a determination, the IRS emphasizes the right to control and direct the individual who performs the services. There are many other factors that go into deciding, including how the worker is paid, whether their expenses are reimbursed, whether there is a contract, how long the relationship will continue, and more. It’s the IRS — they never run out of questions.

If you call an employee an independent contractor, you could be exposing your company to considerable liability for the payment of back taxes, even more so if the mischaracterization is intentional. Generally, businesses must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee, none of which are usually required for independent contractors.

If you are planning on hiring someone whom you know will be an independent contractor, document that arrangement in a written agreement. If you are paying an independent contractor more than $600 in one year, you are required to report it to the IRS and the contractor using a Form 1099-MISC.

Still not sure whether your worker is an employee or an independent contractor? The IRS will give you an official determination if you fill out a Form SS-8, which can be filed by either the business or the worker. Be warned, though, that the IRS takes its time with these things and it can take at least six months to get a determination.

Mary Hudson is a business law attorney with Hudson & Luros, LLP, in Napa, and can be reached at mary@hudsonluros.com or 877-6279. The information provided here is not intended as legal advice, nor does it form an attorney-client relationship with the author. The author makes no representations as to the reliability or accuracy of the above information. In a perfect world we wouldn’t need disclaimers — or attorneys.

Napa Valley Register

Dear Mary,

I just bought a taco truck and would someday like to turn it into a mobile catering empire. I used most of my savings to buy and fix up my taco truck, leaving me very little for legal fees. Do I really need to pay an attorney to turn me into a corporation?

Let’s ignore DBAs, business licenses, zoning laws, and all of the other legal issues that come up when you start your own company and just look at selecting a business entity. It’s an important step that many small new businesses don’t spend enough time on, for the same reason that you have already stated—they don’t think they have enough money to do it right.

There are several different kinds of business entities from which you can choose. You can run your taco truck as a one-man (or woman) show, and be a sole proprietor. You could bring a friend into the business and form a partnership. If you’re really interested in developing this truck into a bigger company, you could also choose to set up a limited liability company (an LLC) or a corporation. Those are your basic options, although there are more out there.

Nine times out of 10, I recommend a limited liability company to entrepreneurs, regardless of their size. An LLC offers you the tax advantage of a sole proprietorship or partnership, with the added benefit of limited personal liability. What’s personal liability, and why do you want to limit it? Well, say Paula Plaintiff orders a taco from your truck and the awning on the truck falls down and hits her on the head, causing serious brain damage. Let’s further assume she sues you for $2 million, a not unreasonable sum considering the

$3 million McDonald’s coffee verdict. Your taco truck is worth $50,000. If Paula can’t be made whole again by taking money from the business, she could go after you personally for the rest — including your house, your car, and if you’re married, your spouse’s assets also. Now let’s rewind a bit and assume that you have properly set up your business as an LLC. The most Paula could walk away with is what’s in the business — your taco truck.

Many people think that they don’t need an LLC because they have a good insurance policy. While insurance is important, it will cover you up only to a certain amount. Let’s assume that you have a $1 million policy in the above scenario. Paula would get your taco truck, the $1 million in insurance, and then …  your house. If you properly limit your personal liability, all Paula would get is the taco truck and the insurance policy.

An LLC is also extremely flexible. You can choose to pass your profits and losses through the company to its members, or you can choose to be taxed like a corporation. LLCs do not have stock like corporations, nor do they observe corporate formalities (like having a board of directors, holding annual shareholders’ meetings, issuing stock certificates, keeping minutes, maintaining a corporate record book, etc.).

Corporations are far more complex than the other forms of business and involve more regulations. If you think you may want to set up a corporation, please see an attorney.

Mary Hudson is a business law attorney with Hudson & Luros, LLP, in Napa, and can be reached at mary@hudsonluros.com or 877-6279. The information provided here is not intended as legal advice, nor does it form an attorney-client relationship with the author. The author makes no representations as to the reliability or accuracy of the above information. In a perfect world we wouldn’t need disclaimers — or attorneys.