msb

As tax season approaches for business owners, staying informed about potential tax changes and taking proactive steps can make all the difference in protecting your financial future. Whether you’re a growing business owner juggling multiple ventures, or a long-time entrepreneur focused on transitioning your companyto the next generation, preparing early can help you navigate shifting tax laws with confidence. What Tax Changes Could Be on the Horizon? While 2025 tax laws aren’t set in stone, discussions are underway regarding potential changes that could impact individuals and businesses alike. These changes may involve adjustments to income tax brackets, available deductions, and business tax credits — all of which can significantly affect your business and financial plans. Proactive planning is essential to avoid unexpected tax burdens. DJ Kim, one of our trusted business and tax attorneys, emphasizes the importance of staying ahead: “Tax laws are always evolving. The best way to protect your assets is to regularly review your business and tax plans, and adjust for any anticipated changes before they go into effect.” Tailored Tax Strategies for Every Values-Driven Business Owner No two business owners are alike, and tax planning should reflect that. For the hands-on business owner — the one who thrives on getting involved in every aspect of their business — tax season presents an opportunity to dive into the details. This type of entrepreneur benefits from regular tax strategy sessions and exploring every deduction or credit available. Partnering with an experienced tax advisor can help maximize savings without overlooking critical details.  That’s one reason we provide free referrals to trusted CPAs, and to other financial professionals, for all our values-driven business owner clients. On the other hand, the legacy business owner — someone focused on succession planning, and seeking to pay their company forward while reaping thebenefits of their hard work — may prioritize minimizing estate taxes and ensuring a seamless and cost-effective transition for the next generation. Trusts, gifting strategies, and long-term tax planning can protect wealth while honoring the future vision for the business. How to Stay Ahead in 2025 Start Early: Gather your financial documents and schedule time to review them with your tax advisor. Plan for the Long Term: Work with trusted professional advisors (business lawyer, CPA, CFP, CFO, or others) to create a comprehensive tax strategy that aligns with your business and personal goals. Embrace Flexibility: Tax laws can change quickly, so regular check-ins with your trusted advisors can help you plan ahead, and then pivot when necessary. Explore All Options: Research available credits and deductions specific to your industry or your unique business model. By taking a proactive approach, both hands-on business owners and legacy-focused entrepreneurs can navigate tax season with greater confidence and efficiency. Partner with MSB Law for Proactive Business and Tax Planning At MSB Law, we understand that every business owner has unique goals and challenges. Our team is here to provide values-driven business owners with the knowledge and insights needed to prepare for the future, no matter what tax changes may come. Schedule a consultation today to discuss your business and tax strategies, and ensure you’re ready to take on tax season 2025 with confidence.

The CTA requirements for Beneficial Ownership Information (BOI) reporting have been in flux due to ongoing litigation. Business owners are understandably concerned about compliance, but recent developments have clarified the immediate obligations—or lack thereof—for now. The Timeline of the Litigation The BOI reporting requirements stem from the Corporate Transparency Act (CTA), a law designed to combat illicit financial activity by requiring certain companies to report details about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). In recent months, the enforcement of these requirements has faced legal challenges. Initially, a preliminary injunction was issued to halt the enforcement of the BOI reporting requirements. This stay was subsequently lifted, only to be reinstated again. Now, the federal government is actively appealing the latest stay, leaving business owners in a state of uncertainty about their obligations. FinCEN’s Current Guidance Amid this legal back-and-forth, FinCEN has addressed the concerns of business owners. According to FinCEN’s official statement, companies are not required to comply with the BOI reporting requirements while litigation is pending. The agency has assured stakeholders that additional guidance will be provided in the future, once the legal matters are resolved. For the most up-to-date information, FinCEN recommends monitoring their official BOI page. What Should Businesses Do Now? While no immediate action is required, business owners should stay informed and be prepared to act when the legal uncertainties are resolved. Here are some practical steps to take: Monitor Updates: Keep a close eye on announcements from FinCEN and legal updates regarding the appeal. Understand BOI Requirements: Familiarize yourself with the reporting requirements outlined in the Corporate Transparency Act, to ensure your company is ready to comply if enforcement resumes. Consult Legal Counsel: If your business may be affected by these regulations, seek advice from a legal professional to ensure you’re prepared for any future developments. Moving Forward The shifting landscape around BOI reporting highlights the importance of staying informed and proactive. At MSB Law, we are closely monitoring this situation and are here to help business owners navigate the complexities of compliance. If you have any questions about how these developments might impact your business, contact us for expert legal advice.

When planning for the future of your business, one of the most significant decisions you face is defining what exactly you’re passing on. The “what” of succession planning sets the foundation for everything that follows—determining how the transition unfolds, who benefits from it, and what role you will have once the transition is complete. It’s not just about handing over control; it’s about ensuring the process reflects your values and goals while protecting your legacy for years to come. So, what are you actually transitioning? Here are some key factors to consider when defining WHAT you’re passing on: Company Ownership vs. Specific AssetsFirst, decide if you’re transitioning ownership of the company as a whole or just certain assets owned by it. Are you transferring full ownership of the entire corporate entity for someone else to run and lead? Or do you want to pass along just specific assets such as property, key equipment, or even customer lists and intellectual property? For some owners, it makes sense to transfer ownership of the entire company to maintain continuity and provide a clean break. Other owners might prefer to separate certain assets from the overall business for the transition, which can offer more flexibility and allow you to determine the best path forward based on the circumstances of both your business and your potential successors. Total Sale vs. Gradual TransitionOnce you’ve determined what you’re passing on, the next question is whether you want to do it all at once or over time. A total sale all at one time offers a clean break—allowing you to walk away and fully focus on the next chapter of your life without any ongoing responsibilities. This might be ideal if you’re ready to retire or want to avoid being tied to the business. However, a gradual transition, such as selling ownership over time or handing over control piece by piece, can help provide stability and continuity. It allows successors time to adjust to their new responsibilities and helps ensure that the business remains stable during the transition. A hybrid option could be to sell/transfer the full business or all assets at the same time, but stay on in an advisory capacity to support your successor as they navigate the early stages of leadership. Key Employee Buy-In? ESOP? Family Trust?How you structure the transition also matters greatly. Would selling to a key employee or a group of key employees make the most sense? This option is often attractive because it keeps the business in the hands of those most invested in its success. Alternatively, establishing an Employee Stock Ownership Plan (ESOP) allows all employees to gradually take ownership of the business, building a sense of shared responsibility and loyalty. A family trust, on the other hand, can help preserve the business for future generations, ensuring that family members maintain control and benefit from the business’s success. Each option comes with unique benefits and challenges, and it’s important to think about which aligns best with your vision for the future. Retaining an Advisory RoleFor many business owners, stepping away completely all at once can feel overwhelming or “too soon.” You’ve poured your heart and soul into this business, and the thought of cutting all ties can be difficult to face. If this sounds like you, consider whether retaining an advisory role might be the right option. Remaining involved as an advisor can offer you the best of both worlds—you get to step back from the daily responsibilities while still contributing to the company’s success. This role can be invaluable during a gradual transition, as it provides stability for the new leadership and peace of mind for you. The Importance of Business ValuationNo matter what path you choose, having an accurate valuation of your business is essential. A thorough valuation helps you understand the true worth of what you’re passing on, allowing you to make informed decisions and ensure fair value for yourself and any successors. This valuation process can also highlight areas where your business could be improved before the transition, helping you maximize its worth and set your successor up for success. The more clarity you have about the value of your business, the easier it will be to create a succession plan that aligns with your goals. Aligning with Your Goals and ValuesThe decisions you make about what you’re passing on should align with your personal goals and values. Are you singularly focused on maximizing the financial return from your business? Or is preserving your family’s legacy the most important factor? Do you want to give back to your employees who have helped the business grow over the years? Or do you want to make sure your family members are provided for above all else? There’s no one-size-fits-all approach, and every decision should reflect what you value most. Defining what you’re passing on is about more than just finances; it’s about shaping the future in a way that is meaningful to you. Creating a Customized Succession PlanUltimately, defining what you’re passing on is one of the key factors in crafting a succession plan that’s customized to fit your unique circumstances. Whether you’re selling the business outright, transitioning assets over time, establishing an ESOP, creating a family trust, or some combination of these options, the structure of your succession plan should reflect your vision for the future. A thoughtful, well-designed plan can help ensure that your business continues to thrive long after you’ve stepped away, benefiting your successors, employees, and community for years to come. At MSB Law, we understand the complexity of these decisions. Our values-driven approach ensures that your succession plan is crafted with care, aligning with your priorities and goals. Whether you’re ready to step away completely or prefer to remain involved in some capacity, our team can provide the guidance and support you need to make the best choices for your future. Contact us today to learn more about how we can help you define what you’re passing on and create a succession

Choosing your successor is often the most emotional and challenging aspect of successful succession planning. It’s not just about finding someone who has enough money or can run your business effectively—it’s also about identifying a person who understands the heart of what you’ve built, who can honor your values, and who has the capability to take your legacy to new heights. This decision is a big key to the future of everything you’ve worked so hard to create, making it critical to approach this step with thoughtfulness and intention. Our previous blog post covered five questions you should consider as you are making plans for your business’s succession. Now, let’s take a close look at question 1: “Who? – Choosing Your Successor.” 1. Passion and Alignment with Values   A successful succession plan begins with a successor who not only has the necessary business skills, but is also someone who has a genuine passion for the work. Passion fuels dedication and commitment, two traits that are non-negotiable when it comes to preserving and growing your legacy. Beyond that, does this person align with your values? A successor who shares your philosophy on leadership, ethics, company culture, and positive community impact will be more likely to sustain the vision you have set for your business. Take time to reflect on the core principles that matter most to you, and ensure your successor resonates with those ideals. 2. Capability and Skillset  While passion and alignment with values are essential, so too is the capacity to lead effectively. Ask yourself if your successor has the technical skills, business acumen, and strategic mindset to guide the company forward. Capability doesn’t just mean experience—it also involves adaptability, teachability, and the potential for growth. If your preferred candidate isn’t quite ready yet, but shows promise, consider mentorship opportunities that can bridge the gap. Think about the timeline for your transition and whether there’s room to develop their skillset in preparation for taking the reins. 3. Willingness to Take on the Responsibility   One of the often-overlooked parts of successful succession planning is making sure the person you’re considering genuinely wants the role. Stepping into leadership can be overwhelming, especially if they understand the full weight of responsibility. It’s crucial to have open, honest conversations with your potential successor(s) to ensure they are excited and ready to take on the responsibility. This is not just about capability but also about willingness—if they feel pressured into the role, it could lead to significant challenges down the road. 4. Relationship with Stakeholders   A successful transition is not just about the successor’s relationship with you; it’s also about their relationship with all your stakeholders including your employees, clients or customers, and the broader community. How well does your successor get along with key stakeholders? Are they respected in the community? Are they trusted by the people who matter most in the day-to-day running of your business? These relationships are the foundation upon which a successful future is built, so it’s important to choose someone who can foster strong and supportive connections. 5. Emotional Intelligence and Leadership Style   The way your successor leads matters. A great leader makes sound business decisions, while also inspiring others and navigating the human complexities of running an organization. Emotional intelligence (EQ)—the ability to empathize, communicate effectively, and respond with sensitivity—is a trait that can set a successor apart. Observe how they handle challenges, interact with others, and respond to conflict. The right successor should be able to carry your vision forward while also carving their own path, bringing both empathy and resilience to their role. 6. External vs. Internal Succession   Sometimes the best candidate is within your company—a family member, a long-standing employee, or even a co-founder. Other times, it might make more sense to look externally. Both approaches have their pros and cons. An internal candidate already knows the ins and outs of the company culture and operations, while an external candidate can bring fresh ideas and a new perspective. It’s essential to weigh these factors and decide which type of candidate will best serve your business’s long-term goals. Consider who will be most effective in guiding the company toward your vision, while maintaining the core of what you hold most dear. 7. Communicating Your Choice   Once you’ve chosen your successor, the next step is to communicate that decision effectively to all relevant parties. The way you announce this choice can have a significant impact on how it is received by employees, clients, and partners. Make sure your communication is transparent, respectful, and celebrates both your legacy and the future leadership. Introducing the successor gradually can also help ease anxieties and build trust, allowing everyone to adjust to the upcoming change. Choosing a successor is a deeply personal journey. You’re deciding who will carry forward your life’s work, and that requires both your head and your heart. By prioritizing factors like passion, capability, alignment with values, and the ability to build relationships, you can make a choice that ensures your business’s future is in good hands, and allows both your business and the community to experience the benefits.  Remember, it’s not about finding someone who will simply replicate what you’ve done—it’s about finding someone who will honor your legacy and take it to the next level. At MSB Law, we understand how important it is to make the right choice for your business’s future. Our values-driven approach to successful succession planning ensures you have the support and guidance you need every step of the way. Let us help you create a plan that respects your vision and sets your successor up for success. Contact MSB Law today to begin securing your legacy.

As the year winds down and you gather with family or your dedicated employees, there’s a unique opportunity to start an important conversation about what’s next for your business. At MSB Law, we’ve been privileged to guide countless leaders—just like you—through the transition from “today’s business owner” to “tomorrow’s legacy maker.” Whether it’s over a cup of coffee with your kids or a heartfelt toast at the holiday party, now is the time to think about the future of your business and the legacy you want to leave behind. You’ve spent decades building your business and now you may be feeling ready to step away from the day-to-day demands, and embrace the next chapter of your life. Succession planning isn’t just about paperwork; it’s about deciding what matters most to you and ensuring your values and goals continue, even after you move on. Here are five essential things to help start the discussion with your family or employees as you consider your business’s future: 1. WHO: Choosing Your Successor Who is the right person to carry your legacy forward? This is often the most emotional part of the conversation—deciding who will take over the business you’ve put so much into. Is there someone within your family, or a trusted employee on your team, who is passionate about the business? Are they capable of leading it into the future, or do they need more mentorship before they’re ready?  Alternatively, would it make more sense to look for an external partner or even consider a merger or third-party sale? This decision requires a careful evaluation of both skillsets and desires. Choosing the “who” is about making sure that your values, your work, and your relationships can continue with someone who will honor and grow them. It’s also important to openly communicate with the potential successor(s) to ensure they are willing and prepared for the role. 2. WHAT: Defining What You’re Passing On What are you transitioning—is it ownership of the company as a whole, or perhaps specific assets? Do you want to pass along the entire business at once, or do it gradually? Would selling to a key employee, an employee stock ownership plan (ESOP), or a family trust make more sense for you?  The “what” helps begin defining the structure of your succession plan. Think about whether you want to retain any involvement in the business, such as an advisory role, or whether you’d prefer a clean break. It’s important to align these decisions with what’s best for you, your family, and your business. It’s also critical to have a valuation of the business performed, so you can be sure you are receiving fair value and making informed decisions about what exactly you are transitioning. 3. WHEN: Establishing the Right Timeline Timing is crucial in succession planning. When is the right time to begin planning this transition? When is it time to execute the transition? Are you looking to step away completely in the next year? Or do you see yourself transitioning out over a few years’ time, and  remaining involved in some capacity during the transition to ensure a smooth handover?  Establishing a timeline not only gives you peace of mind but also helps those around you prepare for their own futures. Setting clear expectations for “when” helps everyone plan accordingly, and reduces uncertainty for your family, your employees, and your clients. Consider the financial aspects as well—tax planning and structuring, and options for things like tax-advantaged charitable giving, can vary greatly depending on when the transition takes place.  It’s imperative to have a team of professional advisors (business lawyer, financial planner, CPA, tax strategist, etc) helping you determine the best strategy for timing.. 4. WHERE: Envisioning Your Next Chapter Where do you want to be after you’ve passed the torch? Visualizing your next chapter is key to planning your transition. Whether it’s spending winters in a warmer climate, moving closer to family, or even starting a new venture entirely, understanding where you see yourself—both physically and emotionally—will shape the steps you take today. Where you plan to live, what lifestyle you envision, and what kind of personal fulfillment you seek are all questions to reflect on.  Also consider how “where” impacts the future of the business itself. Do you want to relocate the business, keep it local, or expand into new regions? Having a clear vision of your own future helps ensure the plans you make today align with the life you want to lead tomorrow. 5. WHY: Clarifying Your Purpose Why are you considering making this transition? Why is it important to you to make the transition a success? Understanding your motivations is essential. Are you transitioning for health reasons, to finally enjoy your retirement, or to spend more time with loved ones? What drives you? For some, it’s about maximizing financial returns. For others, it’s about preserving family and customer relationships or continuing a positive community presence and impact.  You might be driven by the desire to see your family continue in the same industry. Or perhaps you have a charitable intent that allows your business to make a greater community impact. Clearly identifying your “why” helps guide the decisions and conversations you have along the way. It also ensures that those taking over understand your purpose, so they can continue to act in a way that honors your original goals. Succession planning is so much more than a task to cross off your to-do list. It’s about creating a bridge from where you are now to where you want to be, and helping those around you come along for the journey. As you gather together during this holiday season and spend time with those you hold most dear, both personally and professionally, we encourage you to take a moment to reflect, share, and plan. At MSB Law, we’re here to help you navigate these complex, deeply personal choices. We bring our experience, our understanding, and our values to every conversation because we know how much

Over the past 40 years, we’ve seen the impact of a business and corporate world driven by shareholders, and specifically the goal of maximizing shareholder wealth. The overly-aggressive pursuit of profits often harms those who make up the core of a company, its true “stakeholders” – all the employees, customers, and members of its community it touches.  Many business owners, especially those driven by values, have felt the strain of operating in an environment that seems at odds with their most closely held beliefs.  We can relate. For business owners motivated by their principles and values, the purpose of business extends beyond profit. It’s about building something that aligns with their deeper motivations, pursues a higher calling, and contributes to the greater good. The debate between “shareholder capitalism” and “stakeholder capitalism” has often centered on governance, ethics, and long-term impact. Yet, those who run values-driven businesses already know what matters: integrity, respect, and a commitment to lifting up not just the shareholders who primarily seek to maximize their ROI, but all the real stakeholders, i.e. all the participants who are critical to the business’s health, success, and impact.  This perspective is not a fleeting trend, but a deeply held belief by many about how business should be conducted. It’s about creating workplaces where employees are valued, fostering thriving communities through responsible practices, and seeing success as more than just the bottom line. A Shared Vision for Businesses and Society At its heart, values-driven business is about putting people’s whole wellbeing at the center of every decision. This idea echoes the sentiments expressed in discussions about stakeholder capitalism: the notion that a business’s true owners are not merely its shareholders who earn a return on profits, but rather everyone who contributes to its success. This is not a new concept. In fact, companies used to operate this way—investing in their employees, supporting their local communities, and focusing on long-term health rather than only quarterly returns. And those who embrace values-driven business leadership have already seen the impacts on their bottom line. Teams with a shared sense of purpose and values perform 17% better than teams without a strong sense of purpose and values. And some of the world’s most ethical companies are also some of the most popular and profitable (Chick-Fil-A, anyone?) Many business owners today find themselves drawn to this values-driven model, not as a reaction against the status quo but as a return to what business was always meant to be: a force for good in society. They understand that focusing on stakeholder well-being is good for society, but also leads to a more resilient, thriving company. What they are often lacking are like-minded advisors who understand their values and can help them navigate the complexities, legal and financial and otherwise, of running such a business. Supporting the Unique Needs of Values-Driven Businesses Values-driven businesses often face complex challenges in aligning their operations with ethical principles, while striving for profitability and long-term success. Balancing  financial goals with fair treatment of employees, community engagement, and sustainable practices requires careful navigation. Each decision must reflect core beliefs and consider the impact on all stakeholders. To support this journey, businesses need trusted partners who understand the weight of these choices. Thoughtful legal counsel plays a vital role here, helping to implement governance structures that reflect values, craft equitable contracts, and develop policies that support the well-being of employees, customers, and the community. This kind of support is essential for pursuing growth that benefits not just the company, but everyone it touches. Finding the Right Legal Partner to Support Your Vision Businesses that lead with values know that their mission requires more than passion; it requires practical support from trusted guides who understand the complexities of their journey.  A law firm that aligns with their values can be an invaluable advisor, helping them integrate their valued principles into every aspect of business. It’s about finding legal counsel that doesn’t just focus on risk mitigation or compliance, but instead empowers business owners to lead with integrity and purpose. The right legal partner will assist in: shaping governance structure to reflect ethical commitments; crafting contracts that honor fair relationships; and developing and implementing growth strategies that echo a dedication to employee well-being. They will walk with clients through the legal intricacies, allowing the business’s values to shine through in every business decision. Moving Forward Together You don’t need to be convinced that values-driven business works. You’ve experienced it firsthand. What you need is a legal partner who sees the world as you do, who understands that the path to success is not paved solely by profits but by the positive impact you create along the way. At MSB Law, our approach to legal support is grounded in the same principles that guide your business. We help you integrate your values into your business practices in ways that are legally sound and reflective of who you are. Our services are not just about risk mitigation or compliance; they are about empowering you to lead with integrity and purpose. We live in a time when the call for values-driven business owners to stand up and lead is stronger than ever. As you continue on this journey, remember that you are not alone. The complexities you face, the choices you make, and the impact you create are all part of a broader movement toward a more equitable and sustainable future. At MSB Law, we are honored to support businesses like yours. We do more than just offer legal advice—we strive to serve as a trusted guide that respects your mission and helps you realize your values-driven vision. Together, we can build not only successful companies but also a legacy of positive impact on people and our communities that extends far beyond the confines of business. In the end, running a values-driven business is about staying true to what matters most. It’s about leading in a way that lifts others up and leaves a lasting and positive impact

The Department of Labor’s (DOL) recent overhaul of overtime regulations, effective July 1, 2024, has sent ripples through the business world. The increased salary threshold to qualify for the white-collar exemptions has expanded the pool of employees eligible for overtime pay, necessitating a comprehensive re-evaluation of workforce classifications for many employers. As the DOL states, “The final rule updates and revises the regulations issued under section 13(a)(1) of the Fair Labor Standards Act implementing the exemption from minimum wage and overtime pay for executive, administrative, professional, and outside sales employees.” This adjustment is a significant departure from previous standards and may have far-reaching implications for you as a business owner.    The Impact of the New Overtime Regulations on Businesses The elevated salary threshold means that millions of workers who were previously classified as exempt from overtime rules may now be eligible to receive overtime pay. While this change aims to provide additional financial security for workers, it presents substantial challenges for employers. Increased labor costs due to overtime payments are a direct consequence. Furthermore, the risk of misclassification claims has escalated, with potential penalties and damages significantly impacting a company’s bottom line. To mitigate these risks, business owners should: Review each employee’s role: Revisit each member of your team’s classification and determine if they are exempt or non-exempt. Review job duties, responsibilities, and the exercise of discretion and independent judgment. Update employee handbooks and policies: Ensure that these documents accurately reflect the new overtime regulations. Clear and up-to-date policies can help prevent misunderstandings and disputes. Implement robust timekeeping systems: Accurate timekeeping is paramount for calculating overtime pay correctly. Reliable timekeeping systems are essential for complying with the new regulations. Train managers and supervisors: Provide appropriate training to managers and supervisors on the new overtime rules to ensure consistent application and avoid costly errors. Stay informed about developments: Labor laws are subject to change, so businesses must stay informed about any modifications or interpretations of the overtime regulations. The Importance of Legal Counsel The new overtime regulations present a significant challenge for businesses of all sizes. Failure to comply can result in substantial financial penalties and reputational damage. It’s essential to recognize that these changes are not merely administrative adjustments; they represent a fundamental shift in labor law that impacts the core operations of many businesses.  We encourage you to find trusted legal counsel to help guide you. Why does this change matter to businesses? It’s important for business owners to stay up to date with the latest legal developments for both protecting their businesses and also ensuring they are keeping their employees’ best interests in mind. Failure to comply with updated regulations could result in: Increased Labor Costs: The expansion of overtime eligibility can lead to significant increases in payroll expenses. Compliance Risks: Misclassification of employees can result in costly lawsuits, penalties, and back wages. Operational Disruptions: Implementing new timekeeping systems and adjusting payroll processes can be time-consuming and disruptive. Competitive Disadvantages: Businesses that fail to comply with the new rules may face unfair competitive pressures. Given the complexities of the new overtime regulations, seeking experienced legal counsel well-versed in the nuances of business law in Kansas and Missouri is highly recommended. Business law attorneys can provide informed and grounded guidance on: Assessing your current classification practices Developing strategies for compliance Implementing new policies and procedures Mitigating the risk of litigation Understanding the potential impact of the new rules on your business By partnering with trusted business lawyers, business owners can navigate these changes with confidence and minimize the potential negative consequences. Remember, prevention is key. Proactive steps taken now can save your business time, money, and headaches in the long run. How MSB Law Can Support Your Business At MSB Law, we understand how overwhelming the new overtime regulations can be for business owners like you. You’re not just running a business; you’re supporting employees, families, and a community. We’re here to walk with you through these changes, providing the guidance and care you need to protect what you’ve worked so hard to build.  Let us help you navigate this transition with confidence, ensuring your business stays compliant and your team stays secure. Contact us to request a free consultation.

On April 23, 2024, the US Federal Trade Commission issued a final rule banning many noncompete agreements nationally, with some exceptions. This came months after California led the charge with Senate Bill 699 and Assembly Bill 1076, which went into effect on the first of this year. The FTC estimates that by freeing employees from the clutches of noncompete clauses, more than 8,500 new startups will be created per year, as well as an average annual pay increase of $524. The FTC’s change is expected to have the biggest impact in the tech sector, which some people claim unfairly binds employees to what they call an “exploitative” practice in order to protect intellectual property. But despite some people’s fear that banning noncompetes will let businesses’ hard-earned trade secrets leak out to their competitors, some recent scholarship concludes that banning these agreements may not lead to an increase in trade litigation. So, noncompetes are DOA, business will be booming, and everyone’s trade secrets are safe. Right? Well, it’s not that simple. Who is exempt from the ban on noncompete agreements? Not every employee is free from the limitations of a noncompete agreement just yet. As one example, under the FTC’s new rule, existing noncompetes for senior executives, defined as those earning more than $151,164, can remain in effect. However, employers may be prevented from enforcing any new noncompetes, even for senior execs. While the FTC says this number represents less than .75% of the working population, this still opens the door to litigation for those who are uninformed. When does the noncompete ban take effect? Despite news headlines everywhere announcing the end of noncompete agreements, they are not truly over…just yet. The FTC’s final rule was not scheduled to take effect until 120 days after it was published in the Federal Register. That means the earliest possible date we could have seen the ban take effect would have been August 22, 2024. However, a court decision on August 20, 2024 (Ryan LLC v. Federal Trade Commission), ruled that the FTC’s noncompete rule is unlawful and ordered that the FTC’s noncompete rule shall not take effect against any company nationwide. Are there any alternatives to a noncompete agreement if the ban is upheld? If the ban on noncompetes is eventually upheld, there are still many other ways businesses can protect themselves from having their hard-earned trade secrets leaked to their competition or otherwise out of their hands or from other actions that could harm their competitive advantage. Trade secret laws, non-disclosure agreements (NDAs), other confidentiality agreements, and non-solicitation agreements are all ways to protect well-meaning employers. According to the FTC, research estimates that over 95% of workers who signed a noncompete agreement additionally signed an NDA. What will the noncompete ban mean for employers if enforced? The FTC’s final rule would require employers to provide clear notice to employees (“workers”) that their noncompete clause cannot and will not be legally enforced before the effective date. Long-term, the ban could encourage employers to distinguish themselves from competitors through comprehensive benefits packages and a positive, productive working environment. For workers, the ban is freeing. For employers, it will be imperative to adopt updated policies to continue protecting important confidential information and competitive advantage without violating the law. What should employers do next? Employers should stay apprised of any updates related to this FTC ruling. We expect this issue to be tied up in litigation for some time, but the situation can quickly change. Business owners who want to stay out of the courts will want to stay informed and be ready to pivot during any time of transition. The FTC believes their proposed rule is largely promising, freeing workers from restrictive clauses that pin them to an unhappy job and giving them, in the words of the FTC Chair Lina M. Khan, “the freedom to pursue a new job, start a new business, or bring a new idea to market.” By eliminating noncompetes, the FTC hopes to foster healthy competition that fosters innovation from new voices. However, as with any form of change, there can be confusion and unintended consequences. Employers and employees alike who have questions about how the latest FTC ruling affects them should always feel comfortable reaching out to an attorney who specializes in business and corporate law. Have questions about the status of the FTC’s final rule banning noncompete agreements nationwide? The team at MSB Law has been in your shoes. We’re business owners ourselves, and we know how challenging changing federal regulations can be, especially for business owners to understand and navigate. Contact us or give us a call at 913-839-2808. We would welcome the opportunity to serve as your trusted legal counsel for all your business law needs.