Businesses can easily break the law without realizing it. A failure to follow the rules can leave them facing criminal sanctions and crippling fines. Here are five ways Texas businesses can unknowingly break the law.
1 Improperly Using Investor Funds
If you are a struggling start-up business and you suddenly receive a sizeable sum of money from an investor, there may be a temptation to spend it on yourself. Even if you only use a small amount you may land up in trouble.
Investment funds are held in trust. As a business owner, you have a fiduciary duty to investors to be ethical and report how the money is being used. You may think buying a new car helps your image as a business. It could leave you facing fraud charges.
2 Misclassifying Employees as Contractors
You can fall foul of a wide range of employment laws as a small business owner. It may be tempting for Texas businesses to designate workers as independent contractors. You can cut costs by not paying them overtime or other benefits and increase your profit margins.
In reality, small business owners do not always have the freedom to choose whether a worker is an employee or a contractor. There are certain tests set out by the federal government. This IRS sets out the characteristics of a worker and an employee here.
If you misclassify a worker you can face penalties, back wages and back taxes that can hit your bottom line.
If you are unsure about the status of worker, Texas businesses can request an IRS determination by filling out Form SS-8.
3 Accidentally Hiring Undocumented Immigrants
It’s very easy to fall foul of immigration laws, which is why we recommend you hire an experienced Travis County, Texas immigration lawyer.
When you hire a worker you have to fill in form I-9 by law. This documents the eligibility of the worker for employment in the United States. Although it’s a single piece of paper there are many common mistakes that can be made while completing and maintaining I-9 records. Failure to do the paperwork correctly can lead you to employ an undocumented immigrant and to face heavy fines from U.S. Citizenship and Immigration Services (USCIS).
Texas Businesses Can Improperly Bill for Services
4 Improperly Billing for Services Like Medicare
Healthcare related businesses face very strict regulations about how they can charge for expenses related to Medicare. It can be easy to break the rules without realizing it. Health care fraud has been the subject of crackdowns by the federal authorities in recent years. We have noted some major health care fraud prosecutions in Texas.
In 2016, federal investigation uncovered a $900 million health care fraud in Texas and other U.S. states.
5 Making False Claims when Bidding for Government Contracts
It’s not a crime to promote your business, but you should not make false claims. This is particularly the case if you are submitting an RFP (request for proposal) for a government contact. False claims can include your experience, previous projects and the time you will take to do the work,
You should be as honest as possible when dealing with the government to avoid potential sanctions.
At Peek & Toland we work with many business owners to make sure they are complying with the complex legal requirements of running a company. Call us for a consultation at (512) 399-2311.