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| Having a writing that spells out the rights of business owners and buying insurance are the two key steps for any new business. Often it is not necessary to incorporate a start up As a business attorney in Los Angeles I am routinely contacted by individuals who are starting new businesses. Almost invariably their questions relate to what type of business entity they should form – should they create a corporation or an LLC or a partnership? My response usually surprises them.
The legal entity under which you do business is a distant third place in the considerations of a start-up company. Often business owners are better off waiting to incorporate or creat a limited liability company until later. For more information on the pros and cons of incorporating a start up read this post. The first thing a startup has to have is a written agreement between the owners of the business about how they will relate to each other – how they will share the profits, the losses, the work on the business and most importantly, what will happen if one or more business owners wants to leave the business or if one of the owners gets a divorce. For more information on the agreements between business owners read this post.
Second,only to an agreement between business owners is the importance of having sufficient insurance coverage for the business. When prospective clients call me about whether to form a corporation or LLC (limited liability company), they are usually surprised when I ask why they need a corporation or a LLC. They always say the something like this;“I want to create a corporation to limit my personal exposure”. The truth is that the way to limit one’s exposure is through insurance. A general liability policy will go a long way to covering any problems a new business might face. Startups need insurance. And the individuals who are starting the company need to find a good insurance broker with whom to discuss the nature of their business, their possible exposure issues and the appropriate insurance coverage. If the business will have employees then it must also buy worker’s compensation insurance. It’s cheap and it is required by law. You do not need to be a corporation to have an Employer Identification Number (EIN). The I.R.S. will issue you one if you simply ask for it (either online or by using a simple mail in form). Please do not misunderstand me. I am not saying that it is never appropriate to incorporate your business or form a limited liability company as you start up your business. The more sophisticated the business plan is the more likely it will make sense to incorporate straight away. For example if you’ll be seeking investors you should have a corporation or limited liability company as you will have to follow certain strict laws when you make your investment offerings in order to avoid having to register with the Securities and Exchange Commission. But in my twenty-one years of experience as a business lawyer, the vast majority of individuals who want to start a business put the cart before the horse. The legal entity is less important than the agreement between the owners and appropriate insurance for possible liability exposure. A common misconception people have is that if they incorporate they can incur obligations which they won’t have to repay if the business fails. Wrong. No bank will give a brand new small business company a loan unless the owners personally guarantee the loan. So the idea that the corporation will insulate the owners from debts is a myth. Further, if there is an injury caused by a product the business sells or an accident on the premises a corporation might insulate the personal assets of the owners, but you can count on the plaintiff’s lawyer to try to “pierce the corporate veil” which is to say that he or she will argue that for this or that legal reason the personal assets of the owners should be subject to the complaint (the specifics of the argument are too boring to spell out here, just trust me this is what the lawyer will do). All of this drama can be minimized by insuring your new business has appropriate liability insurance coverage. Whether you intend to create a construction business,a business devoted to entertainment, hospitality, real estate, a restaurant, technology,telecommunications or transportation,if there will be more than one owner,there must be a written agreement concerning:1) the capitalization of the business;2) the division of the profits and losses;3) what happens in the event an owner leaves the business or divorces. And as I said above appropriate insurance coverage must be purchased. A business agreement and insurance are more important than the nature of the business entity in 95 percent of the start up businesses created in California every year and yet few people consider either the business owner agreement or business liability insurance coverage. Don’t make that mistake! Beverly Hills Business Attorney Galen Gentry can help you protect your business. Whether yours is a start up or a going concern we can help minimize lawsuit exposure, draft employee contracts, buy-sell agreements,and incorporate your business. With 21 years of experience and the highest rating for legal skills and ethical conduct from avvo.com and martindale.com, Galen can work with you to avoid costly legal problems through proper planning. Call 800 486 6814 for a free, no obligation consultation. Serving clients in Southern California including Los Angeles, Beverly Hills, Santa Monica,Hollywood, The San Fernando Valley, Glendale, Pasadena, Ventura County,Orange County and Long Beach Businesses Should Ensure That Their Clients Know What The Payment Policies Are Before Work Begins Collecting accounts can be a hassle in good times, but in difficult financial times (like now) when every dollar counts it can be tougher. Businesses that provide services such as accountants, financial planners, architects, and interior designers just to name a few often have a tougher time getting paid than businesses that sell products. 1. The first step to avoiding late payments is to set a standard payment policy with clear terms. 2. Then, make sure your customers are aware of the policy before the work is started. 3. Print the policy clearly on all paperwork (estimates and invoices) and be sure to include any fees associated with late payments. 4. If you use service contracts (and you should) consider adding an attorney’s fees clause to your agreements which compels the court to award you attorney’s fees and reasonable court costs if you have to sue to collect.
Want to write your own contracts with customers? Read this article on 10 things every business agreement must contain. Beverly Hills Business Attorney Galen Gentry can help you protect your business. Whether yours is a start up or a going concern we can help minimize lawsuit exposure, draft employee contracts, buy-sell agreements, and incorporate your business. With 21 years of experience and the highest rating for legal skills and ethical conduct from avvo.com and martindale.com, Galen can work with you to avoid costly legal problems through proper planning. Call 800 486 6814 for a free, no obligation consultation. Serving clients in Southern California including Los Angeles, Beverly Hills, Santa Monica, Hollywood, The San Fernando Valley, Glendale, Pasadena, Ventura County, Orange County and Long BeachEntreprenuers Are Often Sued For Fraud Because Their Investment Offerings Are Not Written By Lawyers
Unscrupulous individuals have always been willing to use deceptive tactics to improve their bottom line. Bernard Madoff wasn’t the first or the last big time crook. We have successfully prosecuted and defended indviduals, businesses and government entities in cases arising out of investment schemes,art forgeries,contract fraud and criminal conduct in state and federal court for 21 years. On July 7,2011 Mr. Gentry won $438,000.00 in a fraud case stemming from a contract dispute. ( Case No.NC 054938 DNI-Allegre Foods,Inc. v. Allegre Foods,Inc. ) In August of 2011 Mr. Gentry successfully settled a fraud case in which he represented the defendant arising out of a contract dispute for low six figures even though the claimant alleged millions in damages. On October 6,2010 Mr. Gentry won a jury verdict of over three million dollars on behalf of the City of Compton. Read about the case here. Read the LA Times article about the case here. When business deals go bad claims of fraud and deceit are sometimes included in breach of contract actions. This is often the case in disputes between partners or business co-owners. If your business has been the victim of fraud or if you have been falsely accused of committing civil or criminal fraud,we can help. Call 800486 6814 for a free consultation. Many entreprenuers inadvertently find themselves to be defendants in fraud actions brought by disgruntled investors. Invariably these fraud lawsuits could have been avoided had the business entreprenuer consulted with a lawyer in preparing his investment offerings. By being too cheap to pay for a proper contract,the entreprenuers face potentially disasterous fraud lawsuits that usually allege the entreprenuer mislead the other party as to the facts upon which the investor based his decision to invest. ( “But,I am not too cheap, I am too poor. I can’t afford a lawyer to write my deals.” Okay,read on and see what you need to put in your offerings.) Often the entreprenuer will use partnership language indicating that he or she and the potential investor will each invest X amount of dollars, when what the entreprenuer means is that he has already invested what he considers X amount of dollars (or a different amount plus his efforts or sweat equity) and the entreprenuer is willing to sell an interest in the venture for X amount of dollars. The key to avoiding fraud lawsuits is to be transparent and honest about what you are offering. It’s perfectly fine to say,“Look I have worked my butt off to get this restaurant going. I designed it and caused it to be built. I have equipped it and I am running it. And I think a 25% stake in it is worth X dollars and that’s what I am willing to sell.” The language of the agreement has to be geniune and clear, or the results can be catastrophic for the entreprenuer. Taking the example above let’s suppose the entreprenuer writes his own partnership agreement (or buys one on the internet–same thing–they both stink) stating he will invest X and the investor will invest X. The investor gives his money to the entreprenuer and sometime later a dispute arises. Instead of a straight forward contract action or an accounting action* the investor can claim he was duped into the investment and that he wouldn’t have invested had he known the entreprenuer did not simultaneously invest the same amount. A fraud action exposes the entreprenuer to potential punitive damages which could result in the investor getting all his money back plus more,maybe A LOT more. The moral is it’s better to consult with an attorney before you offer an investment opportunity to potential investors and it’s critical that your communications and your agreement are honest and clear. *(An accounting action refers to an action,usually brought in equity ,to secure a formal statement of account from one partner to others in order to obtain a judicial determination of the rights of the parties in a shared asset. If one partner feels another has been diverting funds or otherwise cheating him or her,he or she may bring an action for an accounting and ask for the appointment of a temporary receiver. 1 Am. Jur. 2d,Accounting §44. ) Beverly Hills Business Attorney Galen Gentry can help you with lawsuits and create protection for your assets and your business. Whether yours is a start up or a going concern we can help minimize lawsuit exposure,draft employee contracts,buy-sell agreements,and incorporate your business. With 21 years of experience and the highest rating for legal skills and ethical conduct from avvo.com and martindale.com. Galen can work with you to avoid costly legal problems through proper planning. Call 800 486 6814 for a free,no obligation consultation. Serving clients in Southern California including Los Angeles,Beverly Hills,Santa Monica,Hollywood,The San Fernando Valley,Ventura County,Orange County and Long Beach Attorney Galen Gentry Inducted Into The Multi-Million Dollar Advocates Forum To:Mr. Galen Gentry
From:Don Costello Your application for membership in the Multi- Million Dollar Advocates Forum and the Million Dollar Advocates Forum has been reviewed and approved. Membership certificates have been ordered and will be sent,together with a letter of acceptance and press release,within the next several weeks. At that time your name will also be added to the online member list. The website address is www.MillionDollarAdvocates.com You are presently a member and may hold yourself out as such. Established in 1993,the Million Dollar Advocates Forum (which includes the Multi-Million Dollar Advocates Forum) is one of the most prestigious groups of trial lawyers in the United States. Membership is limited to attorneys who have won million and multi-million dollar verdicts and settlements. There are over 4000 members throughout the country. Fewer than 1% of U.S. lawyers are members. Very truly yours,
Don Costello
Donald F. Costello,President
Million Dollar Advocates Forum,LLC DelMar,California
www.MillionDollarAdvocates.com
t:858.792.6100 | f:858.792.6101 | e:members@MillionDollarAdvocates.com Conrad Murray Ordered To Pay $100 Million Restitution For Michael Jackson’s Death Conrad Murray,the doctor convicted of involuntary manslaughter in the death of Michael Jackson,was sentenced to four years imprisonment,the maximum punishment the judge could deliver.
“Some may feel that this was a medical malpractice case. It wasn’t. And this jury found that Conrad Murray,with criminal negligence,caused the death of Michael Jackson,”Judge Michael Pastor said before revealing the sentence. “The fact is,Michael Jackson died because of the actions of,and the failures to perform legal duties on the part of,Conrad Murray.” In addition to the jail time the Court ordered Murray to pay an astonishing $100 Million in resitution–an amount Murray will never be able to pay. The doctor will inevitably have his medical license universally revoked,ensuring that he never treats another patient again and also crippling his financial means. Beverly Hills Business Attorney Galen Gentry can help you create protection for your assets and your business. Whether yours is a start up or a going concern we can help minimize lawsuit exposure,draft employee contracts,buy-sell agreements,and incorporate your business. With 21 years of experience and the highest rating for legal skills and ethical conduct from avvo.com and martindale.com Galen can work with you to avoid costly legal problems through proper planning. Call 800 486 6814 for a free,no obligation consultation. Serving clients in Southern California including Los Angeles,Beverly Hills,Santa Monica,Hollywood,The San Fernando Valley,Ventura County,Orange County and Long Beach Many new businesses should not incorporate or form an LLC until they become profitable because the troubles outweigh the benefits
For many new businesses the best initial ownership structure is either a sole proprietorship or if more then one owner is involved a partnership. A sole proprietorship is a one person business that is not registered with the State. You don’t have to do anything special or file any papers to set up a sole proprietorship. You create one just by going into business for yourself. You will need a business license from the City in which you operate. And you should file a fictitious business name statement with your county recorder (also known as a “dba’) if your business will have an name other than that of the owners. You should speak with an accountant and an insurance broker. Make sure you set up an appropriate book keeping system with a separate business account. Make sure you obtain insurance if necessary. For example you might need errors and omissions insurance. A potential draw back of the sole proprietorship is that it is inseparable from its owner. This means that the owner of the business reports business income and losses on his or her personal tax return and is personally liable for any business related obligations such as debts or court judgments. A key purpose of corporations,LLCs and other business entities is to provide protection from personal liability for business debts and to memorialize the rights and the obligations of the individuals who are shareholders or members. But remember for you to obtain credit for your business you will have to personally guarantee the obligation–whether a credit card or bank loan–no lender will be willing to look only to a newly formed LLC for payment. So,unless the business has an unsually high risk for lawsuits insurance should suffice instead of corporation or LLC. If you don’t have employees,don’t plan on seeking investments or funding,don’t have a business that creates great legal exposure,and don’t have a lot of income you may not need to form a corporation or LLC. A corporation or LLC can be expensive to maintain. Corporate books and records must be kept,minimum state taxes must be paid (presently $800) and an annual tax return must be prepared and filed,even if there is a loss. Once your becomes lucrative it may make sense to create an LLC or corporation. Whether you incorporate or not,if there is more than one owner of the business,you must plan for what happens if one of the owners desires to leave or must leave the business and you should plan for what happens if one of the owners gets a divorce. The way to accomplish this is through a buy-sell agreement. A buy-sell agreement is more important to a start up than incorporation in almost every instance,and yet most of my clients who have going concerns,that is operating businesses,have no buy-sell agreement in place. A buy-sell agreement may be thought of as a prenuptial agreement between business partners/shareholders. Beverly Hills Business Attorney Galen Gentry can help you create your business start up,draft employee contracts,buy-sell agreements,and incorporate your business. With 21 years of experience and the highest rating for legal skills and ethical conduct from avvo.com and martindale.com Galen can work with you to avoid costly legal problems through proper planning. Call 800 486 6814 for a free,no obligation consultation. Serving clients in Southern California including Los Angeles,Beverly Hills,Santa Monica,Hollywood,The San Fernando Valley,Ventura County,Orange County and Long BeachA buy-sell agreement also known as a buyout agreement,is a binding agreement between co-owners of a business that governs what happens if a co-owner dies,is forced to leave or chooses to leave the business. It may be thought of as a prenuptial agreement between business partners/shareholders. Buy–sell agreements consist of several legally binding clauses in a business partnership or operating agreement or as separate agreement; it controls the following business decisions: Who can buy a departing partner’s or shareholder’s share of the business (this may include outsiders or be limited to other partners/shareholders); What events will trigger a buyout (the most common events that trigger a buyout are an owner’s death,disability,or retirement. Less common and more problematic events include a desire of one owner to exit the company or an owner getting a divorce) and; What price will be paid for a partner’s or shareholder’s interest in the partnership. Buy-sell agreement can be in the form of a cross-purchase plan or a repurchase (entity or stock-redemption) plan if the business is a corporation. Not having a shareholder agreement which would dictate the purchase price of a departing shareholder is very common with small businesses. People often form a corporation with an online automated company or the like or by using the services of a company they found in a newspaper ad. This can be disasterous. If you have a business and you are not the sole owner,you owe it to yourself to make a plan. Without a plan any shareholder who owns at least a third of the stock in a small corporation could force an involuntary dissolution pursuant to the California Corporations Code. Under such a proceeding,the remaining shareholders would be given the option to buy out the departing owner at “fair value.” “Fair Value”is subjective and has been the source of a lot of lawsuits. It is not “fair market value”which is more easily determined, but it is a starting point for negotiation. Without a plan partners have no starting point. And that has been the source of a lot of lawsuits. If you have questions regarding business planning,formation or dissolution contact us at 800 486 6814. We have experience dealing with legal issues which confront small business start ups and going concerns. Business Lawyers for clients throughout Southern California including Los Angeles,Beverly Hills,Santa Monica,Hollywood,The San Fernando Valley,Orange County and Long Beach  Businesses Should Follow This Steps When Hiring Employees
1. Obtain an Employer Identification Number (EIN)
Before hiring employees,you need to get an employment identification number (EIN) form the U.S. Internal Revenue Service. The EIN is often referred to as an Employer Tax ID or as Form SS-4. The EIN is necessary for reporting taxes and other documents to the IRS. In addition,the EIN is necessary when reporting information about your employees to state agencies. To obtain an EIN,you can contact the IRS directly or apply online. 2. Set up Records for Withholding Taxes
The IRS states that you must keep records of employment taxes for at least four years. Also,keep good records for your business to help you monitor the progress of your business,prepare your financial statements,identify source of receipts,keep track of deductible expenses,prepare your tax returns,and support items reported on tax returns. In California a business has withholding tax obligations to both the Federal and State government tax authorities. Federal Income Tax Withholding (Form W-4)
Every employee must provide an employer with a signed withholding exemption certificate (Form W-4) on or before the date of employment. The employer must then submit Form W-4 to the IRS. For specific information on employer responsibilities regarding withholding of federal taxes,read the IRS’Employer’s Tax Guide. Federal Wage and Tax Statement (Form W-2)
On an annual basis,employers must report to the federal government wages paid and taxes withheld for each employee. This report is filed using Form W-2 Wage and Tax Statement. Employers must complete a W-2 Form for each employee to whom they pay a salary,wage or other compensation.
Employers must send Copy A of Form W-2 to the Social Security Administration (SSA) by the last day of February (or last day of March if you file electronically) to report the wages and taxes of your employees for the previous calendar year. In addition,employers should send copies of Form W-2 to their employees by Jan. 31 of the year following the reporting period.
Visit the Social Security Administration’s Employer W-2 Filing Instructions and Information for further guidance and assistance. State Taxes
Depending on the state where your employees are located,you may be required to withhold state income taxes. Here in California you are required to withhold taxes and pay to the Franchise Tax Board. You can visit the state and local tax pages in your area for more information.
3. Employee Eligibility Verification (Form I-9)
Federal law requires employers to verify an employee’s eligibility to work in the United States. Within three days of hire,employers must complete an Employment Eligibility Verification Form,commonly referred to as an I-9 form. This requires you to examine acceptable forms of documentation supplied by the employee to confirm the employee’s citizenship or eligibility to work in the U.S. Employers can only request documentation specified on the I-9 form. Employers who ask for other types of documentation not listed on the I-9 form may be subject to discrimination lawsuits. Employers do not file the I-9 with the federal government. Rather,an employer is required to keep an I-9 form on file for three years after the date of hire or one year after the date of the employee’s employment termination,whichever is later. The U.S. Immigration and Customs Enforcement (ICE) agency conducts routine workplace audits to ensure that employers are properly completing and retaining I-9 forms,and that employee information on I-9 forms matches government records. All U.S. employers are responsible for completion and retention of Form I-9 for each individual they hire for employment in the U.S.,including citizens and non-citizens.
Instructions for Completing the I-9:Handbook for Employers
Offers a comprehensive guide to completing Form I-9,Employment Eligibility Verification. Employers can use information taken from the Form I-9 to verify electronically the employment eligibility of newly hired employees through E-Verify. To get started register with E-Verify to virtually eliminate Social Security mismatch letters,improve the accuracy of wage and tax reporting,protect jobs for authorized workers and help maintain a legal workforce.
4. Register with Your State’s New Hire Reporting Program
The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 requires all employers to report newly hired and re-hired employees to a state directory within 20 days of their hire or rehire date.
Visit the New Hires Reporting Requirements page to learn how to register with your state’s New Hire Reporting System. 5. Obtain Workers’Compensation Insurance
Businesses with employees are required to carry Workers’Compensation Insurance coverage through a commercial carrier,on a self-insured basis or through the state Workers’Compensation Insurance program. 6. Unemployment Insurance Tax Registration
Businesses with employees are required to pay unemployment insurance taxes under certain conditions. If your business is required to pay these taxes,you must register your business with your state’s workforce agency. The state taxes page includes links to your state’s agency. 7. Obtain Disability Insurance
Some states require employers to provide partial wage replacement insurance coverage to their eligible employees for non-work related sickness or injury.
The California –Employment Development Department can provide free information on disability insurance requirements. 8. Post Required Notices
Employers are required by state and federal laws to prominently display certain posters in the workplace that inform employees of their rights and employer responsibilities under labor laws. These posters are available for free from federal and state labor agencies. Visit the Workplace Posters page for the specific federal and state posters you’ll need for your business. 9. File Your Taxes
If you are new employer,there are new federal and state tax filing requirements that apply to you.
Generally,each quarter,employers who pay wages subject to income tax withholding,Social Security and Medicare taxes must file IRS Form 941,Employer’s Quarterly Federal Tax Return. Small businesses with an annual income tax liability of $1,000 or less may file IRS Form 944,Employer’s Annual Federal Tax Return instead of Form 941.
You must also file IRS Form 940,Employer’s Annual Federal Unemployment (FUTA) Tax Return,if you paid wages of $1,500 or more in any calendar quarter,or you had one or more employees work for you in any 20 or more different weeks of the year. If you need expert advice on legal issues confronting your business. If you desire to expand your business,form a new or different business entity (incorporation or LLC) if you have questions about trademarks or business contracts,then contact us for a free,no obligation consultation from a top rated lawyer. Call 800 486-6814 Business Lawyer Says Giving Credit To Worthy Small Businesses Key To EconomyIn a recent article in the LA Times author Alana Semuels notes that from 2001 to 2009,California ranked either first or second in the nation in creating businesses. But last year,the state plummeted to 50th as it lost 4,600 businesses,according to a study by Economic Modeling Specialists Inc. The article and the study conclude that California’s business creation plunged because of low employment. That’s wrong. The article and study put the effect before the cause. California’s drop in business creation has resulted in lower employment. As has the inability of existing businesses to expand. The drop in business creation and the inability of existing businesses to grow is the result of something simple–no credit. During the housing bubble banks and other lending institutions stumbled all over each other not only to make house loans but to loan to business people. Lending institutions extended large “lines of credit”to businesses throughout the state. Lines of credit were essentially signature loans. Like a credit card. The interest rates were fixed or variable but the credit was available. When the housing bubble burst and the mortgage crisis occurred the banks pulled all the money they could,off the table. And the business “lines of credit”were some of the first to go. While it’s true many of the lines of credit were poor credit risks,there is no evidence that the majority were. Businesses which had never missed a payment,never used all the credit available to them,and that were good risks,still lost their loans. The banks behaved irrationally. The decision to make signature loans on mortgages was folly,but so was the decision to pull the lines of credit of most small businesses. Successful businesses need investors willing to bet their money on the success of the business (which is generally the Silicon Valley business model) or else they need credit. It’s a rare business that reaches its full potential by using its monthly receivables to pay its bills. A business may be able to limp along in that manner,but it can not expand. It can not employ more people in hopes of selling more goods or services because it doesn’t have the cash. An important consideration for businesses is unexpected contingencies. Sometimes the contingencies are opportunities–a restaurant in a strip mall is informed by the landlord that it has the opportunity to rent the adjacent space,receive the extra parking allotment and expand. Normally he would use credit to pay for the expansion (and the business attorney’s services to put the deal together). Sometimes contingencies are negative–liability exposure for a consumer lawsuit,or the need for the business to hire a lawyer to file a lawsuit for breach of contract,trademark infringement or unfair competition. Without credit businesses forgo the services of business lawyers and litigation attorneys because they can’t afford them. California has the work force,the space,and the consumers to have a strong economy–but it needs small businesses because they employ the most workers,and small businesses need money. Something must be done to make more credit available to those business people whose credit history warrants it. Only then will this great state be able to fulfill its promise. The credit situation is bad,but there is money out there for some businesses. If you own a small business or are considering starting one and are having trouble obtaining the working capital contact us for a free,no obligation consultation. Gerard Butler,Danny and Chris Masterson,Laura Prepon,and several others including Steve Aoki,whose father founded Benihana,have been sued for allegedly failing to pay two former employees overtime pay at Shin BBQ which is a popular Korean barbeque place in Hollywood the celebrities co-own. The ex-workers —a cook and a dishwasher – filed the suit today in Los Angeles County Superior Court claiming the owners cheated them out of wages,rest time,and meal breaks. The workers are asking for their back pay,waiting penalties and other damages,and attorney’s fees. | |
