Tuesday, May 26, 2009

Business Legal Issues: Handling The Legal Aspects of Business

Certain legal issues may be specific to the type of business you have. However, many issues are common for all types of small businesses. Some of these are being discussed here.

Health and Safety

Every business owner has to ensure the health and safety of their employees at the workplace. This is one of the major concerns of business owners of all businesses, whether big or small. Such responsibilities are both ethical and legal.

If your business has a physical location, then you will need to register your business with OSHA (Occupational Safety Health Administration. This goes double if your employees face on the job hazards, such as building things or handling hazardous materials.

Not following the law when it comes to health and safety is a sure-fire way to get into legal trouble.

Employment and Age

It is necessary for every business owner to ensure compliance of age and employment-related laws along with the health and safety laws applicable to their particular business. In a case where a business is sold to another owner, the new owner needs to follow and maintain the correct policies and procedures together with appropriate practices that accompany the purchase of the business.

It would be advisable to seek information from the EEOC (Equal Employment Opportunity Commission) to ensure legal compliance and help you stay within the age limitations imposed by the law.

Buildings and Property

As a small business owner, you need to know the building codes in the district where your business will be operating. This will ensure that there are no building code violations and that there are no structural issues or other problems that may invite fines.

Fair Trading Practices

Fair trading practices help to avoid deceptive conduct and prevent economic injury to consumers and other businesses. Fair Trade includes unfair competition, false advertising, copyright infringement, etc. As a small business owner, you should make sure to acquaint yourself with Better Business Bureau guidelines and register your business with them. Registering with the BBB shows that your business has an open-door policy and will be fair and equitable when dealing with complaints or other issues.

In general, when selling products, either wholesale or retail, all sales should be on equal terms and prices must be non-discriminatory.

For example, a box of cards should not be sold to one or more stores for $10 and to others for $13 unless there is an economic justification. This justification may be that some pay in cash so they get the product cheaper, or they buy in bulk so they get a discount. Other stores may want to retain the right to return unsold goods, so they may pay a higher price.

Licensing and Insurance

It is important that all relevant and necessary licenses pertinent to the business be obtained. The proper way to proceed in applying for any licenses you need is through your state’s Business License division. Your business should also be insured (in fact, this is often required), preferably with a reputable insurance company. To get more information on government regulations related to licenses, permits, registrations etc. for a specific line of business, check with related trade associations, business colleagues and experienced consultants.

It is best to hire an attorney to go through all documentation, plans and papers related to the legal aspects of your business. This will help you to comply with any legal requirements and ensure that your business is protected from lawsuits and other legal complications. The Legal Audit Checklist is a checklist of twelve key areas of inquiry that a qualified business lawyer will audit. Analogous to a medical physical exam, the purpose of the legal audit is to understand your current condition, identify any problems, and enable you to take appropriate actions to correct or arrest the worsening of current problems and to avoid/prevent future problems. It is more cost effective to catch these issues earlier than later to avoid costly litigation. For more information about a legal audit check out the following link: https://www.box.net/shared/bxg70z9bxg

Sunday, May 24, 2009

Keep Lawsuits off your Back

This article is courtesy of Cliff Ennico ([email protected]). Cliff is a syndicated columnist and author of several books on small business, including Small Business Survival Guide and The eBay Business Answer Book.

A lawsuit can crush your business, and there’s no fool proof way tot prevent someone from suing you if he thinks you’ve made a mistake, breached a contract or caused him to have an accident while on your premises. The good news is lawsuits are costly and time consuming, so most sane people won’t waste the time and money to sue you if the claim is not substantial and you do everything you can to make yourself an unattractive target. Here are five ways to reduce your liability risk:

1. Use your company as a shield. If you’re doing business as a corporation or LLC, people have to know that they’re dealing with your company, not you. Make sure your corporation or LLC name appears on your business cards, stationery, website homepage, company vehicles, office doors and all other places that are visible to your customers, suppliers and others. Make sure customers write checks to your corporation or LLC, not to you individually. Make sure you sign all business documents, checks and correspondence as a representative or your corporation or LLC (e.g., XYZ Enterprises, Inc. signed by “Your Name, President”).

2. Update your insurance. You should have commercial liability (“slip and fall”) and malpractice (“errors and omissions”) coverage with limits of at least $1 million per occurrence and $3 million total liability.

3. Disclaim legal liability in your contracts. Look at your form contracts with customers and suppliers. These should specifically disclaim any liability for: ”consequential, incidental and punitive damages,” express and implied warranties, “including but not limited to merchantability and fitness for a particular purpose;” and, any liability whatsoever in an amount greater than the amount paid by the customer or $100, “whichever is greater.” These disclaimers need to be in bold type or all caps so that they’re clearly visible. If you website has a “Terms and Conditions” section or a “User’s Agreement,” make sure these disclaimers appear there as well, and that people have to click on a box saying “I Agree” to your terms before they can buy goods or services from you online.

4. Transfer assets. Consider transferring personal assets into the hands of family members who are not involved in your business. To be effective, this must be done before something happens that results in a lawsuit.

5. Get rid of “high risk” customers. If you sense that a customer or client is a lawsuit waiting to happen, especially if he generates little sales for your business, now is the time to stop doing business with him. Let him down gently and refer him to another local business—preferably your biggest competitor or worst enemy.

One thing Cliff didn’t mention in his article which I think is very important when trying to avoid lawsuits is including an Alternative Dispute Resolution (ADR”) Provision in your contracts. Every year, millions of business contracts are written which provide for arbitration as a means of resolving disputes. Most provide for administration by the American Arbitration Association (“AAA”), a public-service, not-for-profit organization offering a broad range of dispute resolution procedures. ADR includes arbitration and mediation, you can also include in the ADR provision, that the parties try to work out the problem before the matter is submitted to ADR. Either way, every contract should have an ADR provision to allow the business to get its disputes resolved as quickly and cost effectively as possible.

Sunday, May 17, 2009

Legal Issues Associated With Starting or Buying a Small Business

There are numerous legal issues to think about when it comes to starting or buying a small business. There are important legal requirements associated with registrations, permits and licenses, and you will need to meet all the laws for operating your particular business in your community. Regulations vary by industry, state and locality. It is important to make sure you have satisfied all the legal requirements associated with your business before you start operating.

Regulatory Considerations

Certain businesses are subject to restrictions on the legal form the enterprise must take. Some businesses, particularly those that require a “professional” license, may not be practiced in the form of a regular corporation, but are restricted to the modified ''professional corporation'' format. By contrast, some businesses may be operated only as corporations.

In addition to general and specific regulations of a business's activity, there may be legal obstacles to certain individuals engaging in a particular business. An example is state permit or license requirements that restrict who may engage in a particular activity based on certain educational or other background requirements.

Some licensing requirements are aimed at preventing those with criminal or otherwise ''undesirable'' histories from participating in some activities. Often, even if a licensing statute does not specifically call for good character in an applicant, a licensing official may have implied discretion to investigate an applicant's character and to deny the license on that basis.

Federal Requirements

With the exception of sole proprietors, most business types must apply for an Employer Identification Number (EIN) regardless of whether they have employees. Additionally, if you provide health insurance for your employees, you may need a National Standard Employer Identifier (NSEI) for your electronic health transactions.

Most businesses do not require a federal license or permit. However, if you are engaged in one of the following activities, you should contact the responsible federal agency to determine the requirements for doing business:

  • Investment advising
  • Drug manufacturing
  • Preparation of meat products
  • Broadcasting
  • Ground transportation
  • Selling Alcohol, tobacco or firearms

Federal registration of intellectual property, including patents, trademarks, trade names and copyright, provide business owners with exclusive use of intellectual property in the United States as well as in a large number of foreign countries.

State Requirements

Many types of businesses need to obtain some type of business or professional license or permit from a state government. While business licensing requirements vary from state to state, some of the more common types are listed below:

  • Business licenses. A state business license is the main document required for tax purposes and conducting other basic business functions. Many states have established small business assistance agencies to help small businesses comply with state requirements.
  • Occupations and professions. State licenses are frequently required for occupations as varied as building contractors, physicians, appraisers, accountants, real estate agents, private investigators, funeral directors, hairdressers and auto mechanics. Prior to opening a business, be sure that you know what the licensing requirements are for your particular occupation and that you have complied with all of them. Contact the state board governing your particular occupation for information as to licensing requirements. Certain occupations also require that you provide regular proof of "continuing education," to ensure that you keep up with changes in your occupational field.
  • Licenses based on products sold. Some state licensing requirements are based on the product sold. For example, most states require special licenses to sell liquor, lottery tickets, gasoline or firearms.
  • Tax registration. If the state in which you operate has a state income tax, you'll have to register and obtain an employer identification number from your state Department of Revenue or Treasury Department. If you're engaging in retail sales, you will need to obtain a sales tax license.
  • Trade name registration. If your business will only be operated in your local community, registering your company name with the state may be sufficient.
  • Employer registrations. If you have any employees, you'll probably be required to make unemployment insurance contributions.

Local Requirements

Nearly all businesses need a county or city license. This is a general license that grants you, as the business owner, the privilege of legally operating a business within a certain city or county jurisdiction. Fees are typically low and these kinds of licenses are easy to obtain, though application procedures may vary. Contact your city hall or county government offices to determine the kind of license you need and obtain necessary application paperwork.

Local permit requirements vary as well. Failure to have the proper permits may prevent your business from opening, force it to shut down and you may have to pay fines.

For specific requirements for your business you should contact a local business attorney to make sure you comply with all the necessary requirements. If you plan on starting a business in California, I can handle these issues for you and make sure you stay compliant throughout the life of your business.

Friday, May 8, 2009

JD Scoop Lawyers to Follow on Twitter

JD Supra is a site dedicated to showcasing the work of lawyers across the country. In September 2008, it published a list of lawyers to follow on Twitter. It continues to monitor legal "tweets" and adds lawyers to the list periodically. I recently made the list and am at no. 645. You can see the list at http://scoop.jdsupra.com/2008/09/articles/law-firm-marketing/145-lawyers-and-legal-professionals-to-follow-on-twitter/

To follow me on Twitter you can hit the button on the right column of this blog or go directly to http://twitter.com/dja2law


Tuesday, May 5, 2009

Employment Eligibility Verification

I would like to thank my Employment Law colleague, Karen Pointer for bringing this requirement to my attention. Ms. Pointer is a founding partner at the Los Angeles Employment Law Firm of Lerman & Pointer LLP and can be reached at (310) 229-9800.

Purpose of Form I-9 :

All U.S. employers must complete and retain a Form I-9 for each individual they hire for employment in the United States. This includes citizens and non citizens. On the form, the employer must examine the employment eligibility and identity document(s) an employee presents to determine whether the document(s) reasonably appear to be genuine and relate to the individual and record the document information on the Form I-9. The list of acceptable documents can be found on the last page of the form.

Number of Pages :

Edition Date :

Rev. 02/02/09. The revision date can be found on the lower right hand corner of the form. No previous editions accepted.

Where to File :

Do not file Form I-9 with U.S. Immigrations and Customs Enforcement (ICE) or USCIS. Form I-9 must be kept by the employer either for three years after the date of hire or for one year after employment is terminated, whichever is later. The form must be available for inspection by authorized U.S. Government officials (e.g., Department of Homeland Security, Department of Labor, Office of Special Counsel).

Filing Fee :

Special Instructions :

You should have the latest version of the free Adobe Reader to download and use Form I-9.

Note: The Spanish version of Form I-9, available below on this page, may be filled out by employers and employees in Puerto Rico ONLY. Spanish-speaking employers and employees in the 50 states and other U.S. territories may print this for their reference, but may only complete the form in English to meet employment eligibility verification requirements.



Below is a "how to fill out" article in English


If you have any questions regarding this requirement, please do not hesitate to contact me at (714) 730-4040. You can also contact Ms. Pointer at the phone number listed above.

Sunday, May 3, 2009

How Respond to an EEOC Complaint

Although I am not an employment lawyer, as general counsel for numerous companies, I have responded to and represented them in administrative hearings involving employment issues. These hearings usually begin as administrative charges or complaints against the employer.

The EEOC and state and local agencies have been filing more administrative charges in recent years and that trend is likely to continue. Because administrative charges can be precursors to discrimination lawsuits, it is critical for you to handle them properly. These tips will help you prepare to respond:

  1. Tell the whole story - Often, an EEOC charge contains just one or two paragraphs, containing little more than conclusory allegations of discrimination. Resist the temptation to put minimal effort into your response. It is usually advisable to provide a comprehensive response, detailing the circumstances surrounding the employment relationship and the reasons for adverse employment actions. Try to nip the claim in the bud by giving the agency all the facts. Demonstrate that there were legitimate business/legal reasons for your actions.
  2. Use documentation - If you have documents supporting your version of events, consider including them in your response. Documentation dating from the time of the adverse employment action can be the best way of discrediting the allegations. Attendance records, sales reports and e-mail messages can all help prove that events happened as you say they did, and that the company's concerns were bona fide.
  3. Verify the response's accuracy - Attorneys love catching an employer in a lie. Since the information you submit could be used in later legal proceedings, make sure everyone involved reviews the response and verifies the accuracy of every statement.
  4. Highlight consistent past decisions - One of the best ways to demonstrate that a decision was not motivated by unlawful discrimination is to point to the same actions being taken against similarly situated employees who are not members of the charging party's protected class. For example, if the charging party alleges that her termination was motivated by discrimination against women, tell the agency of instances when you terminated men for the same misconduct.
  5. Remember, the agency doesn't know your business - In telling your version of the events, share details about your business that will help the agency understand your actions. Think about why the charging party's performance concerned you. Would that be readily apparent to an outsider? For example, if you are legally required to have a certain number of staff on hand at all times, explaining this will emphasize why poor attendance would be a significant problem in your workplace.
  6. Maintain confidentiality - Information about the charge should be on a need-to-know basis, especially if the charging party is still employed. If you know investigators will contact employees, couch your message in terms like this: "While we do not feel there is any merit to the allegations, we respect Employee X's right to bring this charge. If you are contacted by the agency, you should cooperate and be completely honest with the investigator."
  7. Be prompt and cooperative - Don't put off preparing your response. Anti-discrimination agencies are less inclined to provide extensions than they once were. Failure to respond to a charge in a timely manner can result in an adverse determination.
  8. WORK WITH LEGAL COUNSEL - Because a discrimination charge can be the first step in a chain of legal actions, you must protect your company's interests. Many employers ask their attorneys to investigate and prepare the response. I generally perform this action for my clients. If I see a red flag, I will suggest that we retain an employment law specialist to handle the matter. At the very least, have an attorney review a draft of the response before you submit it.
  9. Contact your insurer - Insurance policies require insured parties to provide prompt notice of claims. Many employment-practices liability policies define claims to include discrimination charges. Failing to apprise the insurer of a charge could result in denial of coverage, not only for the charge but all subsequent legal claims.
  10. Preserve all documents - Courts are increasingly imposing harsh sanctions on companies that fail to adequately preserve relevant evidence. When you receive an administrative charge, collect and preserve all documents that could be relevant. You may also want to suspend any routine practices that might result in the destruction of relevant records, particularly electronic information like e-mails, voice mails and Internet usage records.

Taking the charge process seriously, and defending against the allegations at this stage can increase the likelihood of a favorable determination and help prevent further legal actions. If you ever get served with an EEOC charge, please take it seriously and follow these guidelines for your response.

Saturday, May 2, 2009

The Official Business Link To the U.S. Government