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Law Talk

Business Bartering

Business BarteringSmall business owners network with other small business owners and find out they both need each other’s services or products but neither have the capital.  Seems natural that they would barter or trade services as bartering has been a part of our lives since the beginning of time.

Although this seems like a great opportunity there are risks which must be considered.  Carefully think about the exchange of services of products.  Investigate the other company, ask for references.  Find out if they are reliable, trustworthy, provide a good product or service and take care of their clients or customers.  If the deal does not feel right, then pass on it.

Bartering is a contract between two entities.  Get the deal in writing (email or contract).  Document the details of the exchange including services or products to be rendered, time frame, confidentiality clauses and other pertinent information.  Always advise the other side of changes to the original contract.  A good rule of thumb is consistency with communication.  For example, if the terms of the deal were agreed upon in an email then continue to use email for updates.  Keep all correspondence for future reference.

Notify the other party if you are unable to move forward with the arrangement.  Explain the reasons.  If work has not begun then it should be no harm no foul.   If it has, you may have to provide compensation for time and/or materials already used.

Always be honest, ethical and use integrity in business deals whether payment is made or an exchange has been agreed upon.  Negative actions have a tendency to come back against us in the future.  Remember the reference discussed above?

Review the IRS guidelines for reporting taxes on the services/products exchanged.  An audit is the last thing any small business owner needs.

If you are entering into a contract, barter  or any written agreement or have questions about IRS reporting contact an experienced business law and transaction attorney.  As a former accountant and attorney with the Treasury Department, Ronald A. Luzim is a proven and well experienced business law attorney.  He brings an integrative and holistic approach to his law practice. Please contact his Coral Springs office at 954-755-1500 for all your business related needs.