Articles Tagged with business attorney

AdobeStock_170886507-300x200Corporate bylaws are an important tool for ensuring the efficient operation of any business and helping to avoid internal conflicts, such as those relating to founder, director, officer and shareholder conflicts. Not all businesses are required to have corporate bylaws, but it is always a good idea to commit your business plans to writing and take advantage of California corporate law. Bylaws can reduce the opportunities for disputes between owners, shareholders, and corporate officers, which can cost time and money that most startup businesses do not have to spare.

Corporate Officers

Most corporate bylaws establish corporate officer positions. These are usually “c-suite” titles, such as Chief Executive Officer, Chief Operating Officer, Chief Technology Officer, Chief Financial Officer, and similar roles. Your corporate bylaws should clearly state what roles will be created, how they will be filled, and what the scope of responsibility is for each officer. You should also provide a process for arbitrating disputes between officers and replacing officers as needed.

AdobeStock_314925095-300x200For businesses in financial distress, the right path forward may mean choosing between a reorganization or a liquidation.  Businesses have a number of options available to them, each of which include their own benefits and drawbacks.  You should speak with a bankruptcy attorney before deciding which approach makes the most sense for your business.

If a reorganization is not feasible, one of the available options is an Assignment for the Benefit of Creditors — commonly referred to as an “ABC.”

In an ABC, the business assigns all of its assets and debts to an assignee.  The assignee — which is generally a company that specializes in such transactions — then liquidates the assets and distributes the proceeds to the business’s creditors.  The assignee has a fiduciary duty to the creditors to maximize the value of the business’s assets, and often may seek to sell the entire business as a going concern, or even continue to operate the business after the ABC has commenced.

AdobeStock_330926552-300x203We are beginning to see hopeful signs about the ongoing COVID-19 crisis, and the conversation about when and how to reopen the U.S. economy is beginning in earnest.  In the meantime, however, the restrictions remain in effect.  What can businesses do to try to increase their odds of surviving the crisis?

  • Assess all costs and expenses to determine if any costs can be eliminated or delayed. Cut back or cut out expenses that are entirely within your control to adjust.  Where you don’t have the right to cut back, speak with vendors to see if they will agree to temporarily modify terms, perhaps in return for longer terms or other compromises.  Evaluate force majeure provisions to see if the coronavirus pandemic might provide grounds to terminate or renegotiate unfavorable agreements.  Determine if any counterparties are failing to perform under your agreements, and if such nonperformance might allow you to terminate or renegotiate those agreements. Weigh the potential long term costs and potential short term benefits of breaching agreements.  Note renewal and expiration dates of all agreements.  Discuss all of these potential actions with an attorney to make sure that you fully understand the potential risk of taking any of these measures.
  • Review existing lines of credit and other sources of cash, and consider drawing down on those lines in full to increase cash reserves. Speak with existing creditors about potentially delaying payments or other forbearance.

AdobeStock_330935716-300x169Due to the COVID-19 pandemic, many non-essential businesses have been shut down, resulting in an unprecedented economic downfall for many employers.  In efforts to provide relief for employers, the government has passed the CARES Act, which will allow employers to save costs by deferring their Social Security payroll tax (6.2%) payments.  This deferral period applies to employee wages accrued between March 27, 2020 and December 31, 2020.  Once the deferral period has passed, the employer will be obligated to pay the “deferred amounts” to the U.S. Treasury in two installments.  The first half of the deferred amount of payroll taxes will be due on December 31, 2021, while the remaining half will be due on December 31, 2022.  The CARES Act also applies to all employers regardless of their sizes, including individuals who are self-employed.  The only exception is employers who have already received Small Business Act loans that are forgiven under the Cares Act.  These employers do not qualify for the payroll tax deferral.

Call Us Today to Schedule a Consultation with a Silicon Valley Business Attorney

Contact Structure Law Group at (408) 441-7500. Our experienced Silicon Valley business lawyers know how to prevent business disputes and proactively address other business issues.

AdobeStock_292580187-e1576014509781-300x183A partnership is like a marriage. It takes effective communication to meet mutual goals. You can avoid many partnership disputes by creating a clear operating agreement before the partnership starts doing business. The experienced San Jose business attorneys at Structure Law Group can help you avoid unnecessary partnership disputes. By executing a clear, binding, and specific partnership agreement, you can save time and expense that ultimately hurts your business. Call (408) 441-7500 to schedule a consultation with one of our skilled San Jose business lawyers. We have helped many Northern California businesses create effective operating agreements.

How to Create an Effective Operating Agreement

There are several important steps to follow in order to create an agreement that will effectively resolve disputes in future business transactions:

AdobeStock_252648156-300x200Drafting contracts that properly protect your legal interests requires training, a unique skillset, and years of experience as a business attorney.  Contracts that are not drafted by experienced counsel often fail to provide adequate protections to the parties involved.  For example, contracts prepared by business people that are not attorneys often contain key terms that are vague or are missing key legal provisions and fail to offer business owners sufficient legal protection. A well drafted contract can provide a business owner predictability and will save significant time and money by avoiding pitfalls that can be a significant burden on a company.

4 Reasons Why You Shouldn’t Draft Your Own Business Contracts

  1. The Agreement May Not Reflect Your Intentions. Although a form contract purchased online might look enticing, it may very well fail to meet your specific needs.  You might not properly understand its provisions, legalese, or legal terms of art. Lengthy terms in a form contract can be confusing to the untrained reader and can contain terms that are dangerous to include in your specific situation. They can address complex legal theories that are best understood by an experienced attorney.  Ultimately, using a form contract without individualized legal advice can lead to your business being bound to legal provisions that you never intended.

AdobeStock_119342156-300x200Selling your business can be an exciting time. An acquisition can represent a new stage of growth for a company. However, a poorly drafted acquisition agreement can also jeopardize the legal and financial interests of business owners who do not adequately prepare for such an event.

What Issues Should Be Studied During the Due Diligence Process?

Each business is different, and every merger or acquisition requires a host of critical issues to be examined by both buyers and sellers.  Here are some – but of course not all – of the issues that must be addressed:

AdobeStock_279822215-1024x683LLCs are a popular business entity that can provide comprehensive legal protection. Unfortunately, business owners who do not properly form or operate their LLCs can still be personally liable for the debts and liabilities of the business. Call Structure Law Group at 408-441-7500 to schedule a consultation with one of our experienced lawyers. We have helped many business owners throughout California protect their assets and rights through solution-oriented counsel and representation.

What is an LLC?

A limited liability company (LLC) is a type of business entity. When formed and operated properly, an LLC can protect business owners from liability, and shield their assets from being used to satisfy the debts of the business. This is because the LLC is a separate legal being from the individuals who own it. As a result, creditors can only access assets in the LLC’s name to satisfy the debts of the LLC. The owner’s personal assets are not available to business creditors.

AdobeStock_125549643-300x200Employee benefits can be goods, services, or deferred compensation provided to employees in addition to wages. Federal law governs certain mandatory employee benefits, such as sick leave under the Family and Medical Leave Act (“FMLA”), while other benefits are voluntary perks of employment. In addition to the minimum requirements required by federal law, many states, including California require additional benefits.

For example, California requires employers to pay into or carry short-term disability insurance. Understanding mandatory employee benefits and the laws governing the same are crucial to starting a business in California. Business of all sizes that fail to adhere to federal and state employee benefits regulations may face costly litigation and/or tax penalties.

Types of Employee Benefits  

It’s no secret that years of corporate research indicate that strategic debt can be beneficial for a business. Taking on corporate debt may confer certain tax benefits, and debt can be used to grow earnings and increase the value of the company. Companies may also be able to create higher returns on the borrowed money than the interest rate they are paying on the debt. However, too much debt or a poorly structured or executed financial strategy also negligently impact the marketability and value of a company, including Silicon Valley startups. In addition, both California startups and creditors alike must be mindful of the federal and state laws that apply to debtor/creditor relations.

Commercial Debt and The Fair Debt Collection Practices Act (“FDCPA”) 

The primary federal legislation governing debtor and creditor rights is the FDCPA; however, this legislation typically does not apply to business debts. It may apply to certain late payments of commercial debts. California’s version of the FDCPA, the California Fair Debt Collection Practices Act (“CFDCPA”), while broader than the FDCPA, also typically does not apply to business debts. As such, business debtors aren’t afforded the same protections as consumers but business and their creditors also have more latitude to negotiate and structure the financial arrangement they deem most appropriate. There are few, if any, state and federal laws that regulate business-to-business debt, but the FDCPA can provide some guidance for creditors. For example, creditors should generally not:

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