As a business and corporate law attorney I find it interesting that many business owners do not understand there are significant advantages to forming a separate legal entity, such as an LLC or a corporation, to run a business, but fail to realize the full benefit these entities can provide.
As a way to relate why it is important to get advice from a corporate attorney here is a story told of a poor farmer whose friends all told him he should buy a horse to help on the farm. With a horse, his friends said, the farmer could grow more crops and relieve himself of some of the hard labor required on the farm. So the farmer saved up his money for many years to purchase a prize horse. After he purchased the horse, however, the farmer realized that he did not know how to use the horse to help with the farm work. He was too embarrassed to ask someone, and so he continued to do all of the farm work alone. The farmer failed to realize the full benefit of the powerful animal he had worked so hard to acquire.
One significant advantage to using a corporate form is that it can keep a person from being personally liable for a business obligation. For example, if an LLC is sued for a breach of contract, the business owners often cannot be sued so long as they properly used the LLC in running the business. Simply having a corporation, however, does not provide sufficient protection. The people owning the business must also properly disclose the existence of the corporate entity, usually by using the proper designation such as “LLC,” “Inc.” or “Corporation.” It must be clear to other people that a person is operating on behalf of a corporate entity.
By way of illustration, suppose that John Doe forms the entity Acme, LLC for operating his farm. If Mr. Doe signs a contract for the sale of crops on behalf of Acme but only uses the name “Acme” instead of “Acme, LLC,” then Mr. Doe risks being personally liable for the farm crops and, in the event the farm breaches the contract, Mr. Doe can be sued.
Many potential problems can be avoided by simply using the proper corporate designation on contracts and other documents. Of course, there are other things business owners should be careful about to protect themselves, such as not commingling business assets with personal assets and being honest in business transactions. If you are starting a new business or have questions about an existing business, we have experienced business and corporate law attorneys that would be glad to meet with you to discuss ways to help yourself and your company.
Attorney Profile: Nathaniel Wadsworth, Business and Corporate Law Attorney
Being a business law attorney it came to my attention, as I walked down the snack food aisle at the grocery store, and noticed a product that looked similar to a “Twinkie” that product copying can clearly be a problem for a business owner. The snack cake I saw was clearly not a “Twinkie”, however, and had a completely different name. Since the return of the true “Twinkie” in 2013, certainly there are loyal customers everywhere who will want the real thing and not an imposter.
If not for certain legal protections, any person could copy the product of another to make a competing product, even using the same name as the competing product, like “Twinkie.” Fortunately, federal and state laws related to copyrights, patents, and trademarks provide protections for intellectual property, such as names and designs. For example, an Arizona statute, Arizona Revised Statute § 44-1460.05, sets forth some of the rights a person may receive by registering a trade name in this state:
The registration of a trade name if prior in time to the filing of articles of incorporation or the reservation of a corporate name shall give to the holder of the registered trade name exclusive right to the use of such name.
This does not necessarily mean that no one can use the same name for any purpose, but the law in many cases does provide protection specific to the type of product or business associated with the name. Moreover, even the continual use of a name without registering it may be sufficient to establish some trade name rights. Other laws provide protections for such things as trade dress (the way a product or service is packaged–think the shape of a bottle of Coca Cola for example), designs, and written works.
Of course the existence of these laws does not mean that no one will ever attempt to copy the work of another to gain an unfair advantage. Also, if the owner of a name or design does not take the proper steps to protect his intellectual property, he might limit his ability to legally protect it. To better protect an idea and/or to stop others who may be infringing on one’s intellectual property rights, a person should contact a qualified business law attorney to determine what legal steps to take. If we cannot provide the help you need, we can refer you to others who can.
Attorney Profile: Nathaniel Wadsworth, Business Law Attorney
When people come together to begin a business, they may not think the time will come when they will not get along. But if, after many years, you and your business partner no longer see eye-to-eye when it comes to how to operate your business, what is to be done? The late Mickey Rooney once quipped: “A lot of people have asked me how short I am. Since my last divorce, I think I’m about $100,000 short.” There are many who could say the same thing about a business divorce, and you are going to need an experienced business attorney to help you.
If you planned ahead, then you may have a detailed agreement to direct you on how to move forward. Such direction may involve one partner buying out another, for example. However, if you failed to plan ahead, you may be facing the possibility of leaving the fate of your business up to a court.
Under Arizona’s statutory scheme, a shareholder of a corporation or a member of a limited liability company can petition a court for the dissolution of a company if there is a deadlock in the management of the company which adversely affects the business. See, A.R.S. §§ 10-1430, 29-785 To Read Click Here. And even though the court might allow one shareholder to buy out another in order for the business to continue on (see A.R.S. § 10-1434) To Read Click Here, there is no guarantee that the business will survive one owner’s efforts at dissolution. Such an action may even involve the appointment of a receiver to take over the operations of the business while the court case plays out. Whether or not the business survives such a court action, the financial cost to the business and its owners may be enormous. This is especially true if the action involves claims of wrongdoing.
At Rowley Chapman & Barney, we have experienced business law attorneys and we can help you prepare for disagreements that may arise between business partners by use of such things as a shareholder agreement, operating agreement or buy/sell agreement. If you are past that point, we are also experienced in litigating business divorces and will aggressively fight to protect your interests. Please give us a call today if you are facing these or other legal issues.
Attorney Profile: Nathaniel Wadsworth, Business & Litigation Attorney
With the start of a new year, many people begin thinking of resolutions related to personal fitness and weight control. “This year I will lose X number of pounds,” is a common goal. However, many may testify that it is easier to never to gain extra weight in the first place.
In legal matters, it is also easier to avoid legal difficulties than to have to fight a lawsuit after the fact. One example of this is in a company’s employment practices. Many companies have out-of-date non-compete agreements with their employees which may not be enforceable in court. An employer may discover only when it is too late that its non-compete agreement does not provide the protection intended. Non-compete agreements must be narrowly-tailored and limited in time and geographic scope, or a court will not enforce them. If you have not had your employment policies and non-compete agreements reviewed recently, you may save your business a lot of risk and trouble by having them reviewed and revised by an experienced employment and business law attorney. Call me today at (480) 833-1113 to make an appointment to have your non-compete agreements reviewed before you need to enforce them.
Pope Benedict XVI announced recently that he will be resigning his position as the leader of the Catholic Church. While a Pope’s resignation is not common, it is common for leaders of businesses to resign their positions, either because of age, a sale of the business, a forced resignation by others with an interest in the business, or any number of other reasons. When these situations arise, it is imperative that the business follow the legal and corporate requirements for the changes to be effective and enforceable. If you need help in these or other corporate matters, you will be well-served by seeking the assistance of an experienced business law attorney. Call us at (480) 833-1113 and one of our experienced business lawyers will help you with whatever transition you are facing.
Are you an entrepreneur struggling to decide how to form your business? You may be wondering whether you should:
- start the business without assistance;
- use an online platform to assist in filing; or
- hire an attorney.
Which option to choose depends on the complexity of your business and its structure.
1. STARTING A BUSINESS WITHOUT ASSISTANCE
There is a wealth of information on the internet that can provide you general concepts on how to form a business. Articles, websites, and blogs are readily available that outline the fundamental differences, advantages, and disadvantages of various types of legal entities. They often provide free sample forms, checklists, explanations, and state or federal filing fee schedules.
The greatest disadvantage with this approach, however, is that such sources do not offer legal advice, and cannot explain how to adapt or apply the complex legalities to your entity. Thus, while the internet is a wonderful resource to gain the initial understanding of what legal entities are available, you may be left with unanswered questions as to how your particular entity should be structured.
2. USING AN ONLINE PLATFORM
If the prospect of forming or restructuring a business alone seems too daunting, or questions remain after an online search, you may think about looking to various online platforms. These platforms charge hundreds, sometimes thousands, of dollars to “assist” in starting or restructuring a business. They provide research materials, forms, and fee schedules. They are required by law, however, to disclose that they can neither offer legal advice nor provide specific, detailed guidance to help in determining what entity you should form.This option is remarkably similar to the first, starting a business without any assistance, with one major difference: it costs money. It seems that the role of an online platform is to provide a form-filling template that expedites the process. Ultimately, along with significant costs, you are left to decide how to structure your business.
3. USING AN ATTORNEY
If researching online articles, blogs, and websites, or attempting to use an online platform leaves questions unanswered as to how the confusing concepts apply to your business, the assistance of a qualified attorney is the solution. Only an attorney, unlike the two options above, can offer detailed advice as to how to best structure your business to reach your unique business goals.
If you are an entrepreneur and have questions about the structure or complexity of your entity, contact us at (480) 833-1113.
Shakespeare reminds us that a rose by any other name would smell as sweet. However, this metaphor only goes so far. A contract signed in any other name is not necessarily enforceable in the same way.
Some business owners, for example, have made the mistake of signing their personal name to a contract without making any indication in the document that they are signing on behalf of their company. If a problem arises, the other party to the contract then may attempt to hold the individual owner liable on the contract instead of or in addition to the business. Much litigation can be spared if people are careful in the way they sign their contracts.
Call us at 480-833-1113 and our experienced contract and litigation attorneys will make sure your name is protected!
Attorney Profile: Nathaniel Wadsworth, Contract & Litigation Attorney