Tuesday, August 07, 2012

Net Operating Loss Carry back/ Liability from theft of your Bank Account/ IT Vendor

I have written previously about AB 2408 which would repeal the Net Operating Loss carry back. This is an awful bill and will hurt small businesses as they will be prohibited from carrying back losses for two years. As an example say in 2010 and 2011 you made a profit and in 2012 you suffer a loss. The repeal of the carry back provision would not allow you to carry back the losses into the two profitable years You may however carry these losses forward.

This runs counter to federal tax law and will have a negative impact on small businesses investing in their business and will be bad for the economy of California.

Small Business California has put together a letter of opposition and we have about 15 associations around the state signatory to the letter. We will be putting together a letter for individual business and if you have not already agreed to sign onto the letter p[lease let me know if you would sign. I will send a copy of the letter to you when we have all the company names/.

For more information on this bill go to www.leginfo.ca.gov

Businesses can be held responsible for theft from their bank account if their password is obtained by a third party. This may occur because of malware and a Trojan horse that gets into their computer or if their computer is breached. I suggest you contact your bank to see what protections you have. Ask them what happens if you computer is breeched by malware or if your computer is breached.

Do you outsource your IT functions to vendors and entrust sensitive data to these third parties? If so take a look at your contract with them. There are usually four types of contracts.

1.The contract has a full indemnity clause protecting you from a loss. This is the ideal contract

2.The contract has a cap on losses. Take a look at the cap and determine if this is enough to cover a loss

3. The contract has a limitation of liability. Usually this will be amount you have paid the vendor for services. This most likely will not cover your loss.

4.A disclaimer of consequential damages like business interruption. This should be rejected.

I think you will be surprised when you look at your contract. If any of you have a full indemnity provision please let me know.

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116

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