Articles Posted in Partnerships

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Starting a business partnership can be very exciting. You are ready to hit the ground running with your new venture. However, you will want to pause and make sure you have your legal interests well documented and in order before you jump into starting the business. The corporate attorneys at Structure Law Group understand the intricacies of forming a partnership and putting safeguards in place should a problem later arise.

California Partnership Legal Classifications

General Partnership

Fotolia_194134312_Subscription_Monthly_M-300x200It may seem simple to try and put together a shareholder agreement on your own. However, a carefully drafted shareholder agreement is imperative to how your business functions in the present, but more importantly how you might need to handle things in the future. You will want your shareholder agreement to be carefully drafted to match your business’ specific needs. Even though every shareholder agreement will be different, there are some common components that most shareholder agreements include.

Governance Procedures

The shareholder agreement can outline how often meetings should be held. It can also describe the process for general or special meetings, quorum needed for specific types of matters, and how notices for the meetings should be sent. The addition of theses details not only spells out the procedural process, but also notifies members of their duties and rights as a shareholder.

When multiple individuals begin conducting business together, they may have effectively created a partnership, even if they didn’t intend to do so.  Thus, even though partnerships can be formed without the partners actually signing a partnership agreement, the partnership and its partners become subject to state laws governing partnerships.  The California business attorneys at Structure Law Group, LLP understand the laws and mechanics required to build a strong foundation for a partnership.  Being careful and meticulous about the partnership formation process can also help to prevent litigation if and when a dispute arises between and among business partners.

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Partnership Agreements

 Although not required under California law, as discussed above, entering into a partnership agreement when forming a partnership is highly recommended.  A partnership agreement is a legally binding contract that, among other things, dictates the roles of the partners and establishes guidelines for management of the partnership.  In addition, partnership agreements set out how potential legal disputes will be resolved.

Many partnerships begin among friends or individuals with similar interests who have a business idea together. However, having a good business idea and being able to cooperate to actually run a successful partnership are two very different things. In many cases, you may realize that your partner is not pulling his or her own weight or is even bringing the business down through his or her actions, or lack thereof. In such situations, you may naturally wonder what you have to do to remove that partner from the partnership and continue running the company without them.

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Unfortunately, simply removing a partner and continuing with business as usual is often much harder than it seems. Your options should be closely evaluated depending on your specific circumstances.  Having the assistance from a San Jose partnership attorney will help your business establish a binding partnership agreement that will allow the business to run smoothly and efficiently even if a situation arises between partners.

Do You have a Partnership Agreement?

The exchange of cash for payment for a goods or services is rare these days. We have certainly become a digital society. Business make advances daily to make transactions more efficient and convenient. However, businesses engaging in e-commerce must not compromise security for expediency. Additionally, businesses store infinite amounts of personal data about their customers. These businesses, such as health care providers and health insurance companies, not only must safeguard their electronic transactions but must also secure sensitive information and proactively combat data breaches. Failure to do so can lead to a huge economic loss for the customers and the company. The savvy business attorneys at Structure Law Group, LLP advise businesses on the best practices to prevent data breaches and counsel them on the necessary steps to take if such an unfortunate event occurs.

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In California, people have a constitutional right to the safety and integrity of their personal information. California’s information security act defines personal information as any information that could identify or describe a person. Personal information is also an individual’s name, address, social security number, license number, medical information, and the like. A business in possession of such information must take reasonable steps to prevent disclosure of private information. California law obligates businesses to implement security measures reasonably designed to protect the integrity of the private information. Every business entity, from a sole proprietorship to a multi-national corporation is subject to the information security act.

California law broadly defines “data breach.” Data breach includes any “unauthorized acquisition of computerized data that compromises the security, confidentiality, or integrity of personal information maintained by the person or business.” The information may be used in good faith for the benefit of the person whose information is disclosed, provided that such disclosure is authorized.

A “fraudulent,” or more accurately “voidable” transfer, is a transfer by a party (the “debtor”) of some interest in property with the goal or effect of preventing a creditor or creditors from reaching the transferred interest to satisfy their claim or claims.

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What Law Governs “Fraudulent” or “Voidable” Conveyances/Transfers?

Fraudulent conveyances are governed primarily by the Uniform Voidable Transactions Act (UVTA), which replaced the Uniform Fraudulent Transfer Act (UFTA) in California as of January 1, 2016.  The UVTA applies to transfers made or obligations incurred after January 1, 2016.  The UFTA will continue to apply to transfers made or obligations incurred prior to January 1, 2016.  One of the most noticeable changes made in the UVTA is the removal of the word “fraudulent” from the title and body of the act. This change emphasizes that a transfer may be, and often is, voidable even in the absence of any sort of improper intent by the debtor or the transferees.

Businesses must endeavor to guard their trade secrets jealously. Failure to do so can wreak havoc upon development and growth. It will also give competitors a leg-up in the marketplace. Knowing and understanding California’s trade secret law is therefore critically important. Implementing multiple safeguards to prevent trade secret disclosure is necessary. If a business fails to implement reasonable safeguards to prevent trade secret misappropriation, then the business may be without recourse in court. Working closely with experienced business attorneys to develop the appropriate security measures to prevent trade secret theft could prevent disaster from striking. The San Jose San Jose business attorneys at Structure Law Group, LLP (in San Jose and Oakland) have extensive experience counseling businesses on how to best protect their trade secrets and defending businesses against trade secret misappropriation in court.

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California’s Uniform Trade Secrets Act (“UTSA”), which follows the Uniform Trade Secrets Act adopted in 48 states, defines a “trade secret” as “information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” (Ca. Civil Code §3426.1.)

In order to assert a claim for misappropriation of trade secret information, the owner of the trade secret information must identify its trade secret with sufficient specificity so that the information is separate from areas of general knowledge. For example, customer lists, marketing plans or pricing concessions are examples of broad categories of trade secret information. Or, the trade secret can be highly specific, such as a newly designed manufacturing process or the recipe for some sugary carbonated beverage, such as the recipe for Coca-Cola.

A partnership is created whenever two or more people agree to do business together for a profit. Additionally, partnerships should ensure that they follow sound business practices once they begin their new venture.

Steps in Forming a Partnership

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The first step to forming a partnership is choosing its name.  In California, a partnership may use the last names of the individual partners or any fictitious names. If a fictitious name is used, it must be distinguishable from the name of any business name that is currently on record.  Before choosing the name, a search should be run in the following databases such as California Secretary of State or The United States Patent & Trademark Office.   If a fictitious name is used, the state of California requires that a fictitious business name statement is filed in the office of the county clerk where the partnership intends to do business.  The fictitious business name must also be published in the county newspaper for four weeks.

California law requires employers to take reasonable steps to prevent and address alleged discriminatory and harassing conduct, to provide a government-issued brochure on sexual harassment to all employees, and to conduct sexual harassment prevention trainings if the employer has 50 or more employees.  As of April 1, 2016, the California Department of Fair Employment and Housing (DFEH) has enacted regulations that will require employers to develop written anti-discrimination and harassment policies with certain content requirements.

Under the new regulations, the anti-discrimination/harassment policy must be in writing, and must at a minimum:

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  1. List all of the protected categories under California’s Fair Employment and Housing Act, which currently include race, creed, color, national origin, age, ancestry, physical and/or mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, sexual orientation, and military and/or veteran status,

If your business employs at least one person, you should be thoroughly familiar with both the California and federal wage and hour laws. These laws regulate many aspects of employment from minimum wage to guaranteed rest and meal breaks. One important part of compensation that is regulated by wage and hour laws is overtime payments for individuals who work more than 40 hours per week.

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Overtime laws entitle certain employees to time-and-a-half payments for additional hours worked. However, not everyone is entitled to overtime and the laws that regulate overtime exemptions can be complex. One important rule under the Fair Labor Standards Act (FLSA) is that anyone who earns less than $455 per week for full-time work ($23,660 annually) is automatically entitled to earn overtime. If employees earn more, a closer examination into their job duties must be made. In addition, once an employee earns $100,000 annually, they are considered to be “highly compensated” and no longer have the right to overtime provided his or her job duties meet certain minimum requirements.

The Department of Labor updated the overtime rules with regard to the income threshold and the new rules will take effect on December 1, 2016. The new threshold for automatic entitlement to overtime will be $913 per week for full-time work ($47,476 annually) and the new highly compensated threshold will be increased to $134,004. It is estimated that over four million people will receive a new entitlement to overtime.