Articles Tagged with limited liability companies

Previously on this blog, we discussed two important matters relating to the formation of the Terms of Use on your business’s website: avoiding using boilerplate language in favor of terms tailored to your specific business and having a privacy policy regarding the collection of customer information. The following are two more important things to consider during the process of drafting and posting your website’s Terms of Use.

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Have Clear Sale Conditions

Many companies use their website to conduct online sales. No matter what your product is or the size of your operation, failing to have clear conditions of sales on your Terms of Use can result in disputes and even legal claims. The terms of a sale should be in clear language that the customer can read and agree to prior to making a purchase. Some terms to address in this part of your Terms of Use include the following:

Every time a contract is signed, the potential exists that one party fails to perform the obligations specified under the contract. In such cases, the aggrieved party may elect to file a lawsuit to try to seek performance under the contract or, more typically, for losses incurred as a result of the other party’s non-performance. However, in some cases, there may be a defense to the enforcement of the contract.  One such defense is undue influence.

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Undue influence is the unfair or improper persuasion of one person by another or excessive persuasion that causes another person to act or refrain from acting by overcoming that person’s free will resulting in inequity. A party’s apparent consent to a contract (or transaction) is not free or real when it is obtained through undue influence. In other words, a contract obtained though undue influence is voidable.  Consent is deemed to have been obtained through undue influence when the purported consent would have been refused if the acts constituting undue influence had not existed.

In California, there are four circumstances, prescribed by the civil code, in which undue influence occurs:

As a business owner, you should take every possible precaution to ensure that the information of your clients, customers, and employees are safe. However, as many corporate owners will tell you, even the most well-prepared companies – large or small – can be the victims of data breaches. One precaution to protect your company from these data security breaches is to seek counsel from an experienced California e-commerce attorney from the start.  The following are only a few steps you may want to consider taking if a data breach happens to your business:

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Take Immediate Action

The minute you learn of any type of breach, you should start working to repair the leak.  You can do a lot of damage control by immediately addressing security flaws and securing the rest of your data. You should identify which servers have been affected and the nature of the data on those servers.

Types of Crowdfunding for Investors

Like other types of investments, all crowdfunding campaigns are not created equal and one campaign can vary significantly from the next. There are two main types of crowdfunding investments on which we will focus here: reward-based crowdfunding and equity crowdfunding. However, it is important to realize that these are not the only types of crowdfunding available for investors in today’s market.  In addition, there are many guidelines, requirements and regulations differing for each type of crowdfunding.

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Reward-based Crowdfunding

Last year, the Department of Labor (DOL) set forth a new “Final Rule” on overtime requirements that gave millions of Americans the right to time-and-a-half overtime pay. The law in place for years gave automatic overtime rights to non-exempt individuals who earned $455 per week ($23,660 annually). The new rule approximately doubled this threshold to $913 per week and was set to go into effect December 1, 2016.

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On November 22, 2016, a judge in a Texas federal district court issued a preliminary injunction on the overtime rule, which halted it from taking effect. The DOL initially sought an expedited appeal of the matter and all of the briefs in the appeal of the injunction were to have been filed by January 31st. However, the litigation is on-going so what will happen to the law is still very much uncertain.

The change of administration only complicates the matter further, as the Trump administration opposes the rule. In reality, the new leadership of the DOL could drop the appeal and simply let the injunction remain permanently.  Having an experienced employment lawyer who is up-to-date with these laws can help you understand the rules and mold your business accordingly.

The Terms of Use for a website is critical to maintaining control of how users access and use the information on the website, and in limiting liability for unapproved uses. Regardless of whether users actually read the Terms of Use – many don’t because it typically contains complex legal jargon – the Terms of Use binds users to its terms by virtue of their use of the website. The Terms of Use constitutes a contract between the business and the customer. That legal jargon protects from liability from users and allows control over the information contained on the website.

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Businesses with an online presence — whether it be social media, e-commerce, mobile, static or interactive site — should always craft a carefully written Terms of Use. These terms are written to include a variety of different subjects relating to the business, the customer, information that is exchanged, information received and how that same information may be used.

Avoid Using Boilerplate or “One Size Fits All”

What is Crowdfunding?

Crowdfunding refers to entrepreneurs seeking relatively insignificant financial contributions from a large number of people, often via social media or other internet networks, to fund the start or growth of a business venture. According to one report, more than 600 crowdfunding sites exist and raised billions of dollars for various types of businesses in 2015 alone, worldwide.

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Types of Crowdfunding

In the early stages of a merger and acquisition (M&A) transaction, owners may be willing to overlook certain differences in favor of focusing on the benefits of the deal. However, as the M&A transaction is completed, the rose-colored glasses may come off and sudden concerns may develop into serious legal disputes between owners. If these disputes are not handled correctly, it can result in long-term consequences, both financially and regarding the relations of the parties. The following are some information regarding common post-closing M&A disputes.

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Deferred Payment of Purchase Price

Many M&A agreements are structured such that part of the purchase price is paid at closing and the rest is paid at some point in future.  This is done with “earn-out” clauses and purchase price adjustment clauses, among others.  An earn-out clause is where the amount of future money paid depends on selling company’s performance after the acquisition, i.e. the money has to be earned after the closing before it is paid out.  These types of clauses are sometimes interpreted differently by buyers and sellers after the closing.  For example, if the selling company’s product is upgraded after the closing, the buyer and seller may view the revenues from those sales differently under an earn-out clause.  As another example, if the buyer and seller have different accounting practices that could certainly affect their interpretation of purchase price adjustment clauses.  Resolving these disputes can involve complex accounting and negotiations by both parties.

Many people will say that your business is only as good as your best employees. In fact, you may have one or more top employees who are absolutely integral in building and maintaining the success of your company. While having talented employees is a benefit to any business owner, it also tends to draw the attention of your competitors.

Identify the most important employees.Fotolia_121891165_Subscription_Monthly_M-300x221

Your company may have some employees who could leave with only minimal interruptions to your business operations. On the other hand, there may be a select few whose absence may substantially harm your bottom line. Identify the top performers in your company through performance reviews and other tools and focus on keeping them satisfied. After all, your competitors will not be actively seeking your “benchwarmer” employees – they will be looking to take your Stephen Curry.

What happens to an LLC member’s membership interest in the LLC if the member files bankruptcy? How does the member’s (the debtor) bankruptcy filing impact the LLC and its other members? Does the bankruptcy trustee (or the debtor in possession in a chapter 11) step into the debtor’s shoes contrary to an express provision in the LLC’s operating agreement restricting transfers by members and prohibiting a transferee or assignee of a member from becoming an LLC member without the other members’ consent? Is the bankruptcy trustee bound by the terms of the LLC’s operating agreement, or does the trustee acquire the debtor’s membership interest free and clear of any transfer or other restrictions imposed by the LLC’s operating agreement? To answer these questions, the Bankruptcy Court in the debtor’s bankruptcy must first determine whether the LLC’s operating agreement is an “executory” contract under Section 365 of the Bankruptcy Code.

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What is an Executory Contract?


The Bankruptcy Code does not define “executory contract.” However, many circuits, including the Ninth, have adopted the “Countryman Test,” which provides that a contract is executory if ‘the obligations of both parties are so far unperformed that the failure of either party to complete performance would constitute a material breach and thus excuse the performance of the other.’ Determining whether a contract, including an operating agreement, is executory therefore requires a case-specific examination of the contract in question.