Drafting a Personnel Policy for Your Sacramento Business

November 14, 2012,

Most large corporations, non-profits, and public sector organizations employ an army of human resources professionals to handle all types of personnel matters. These matters can range from training to payroll to employee relations. The common denominator among these large organizations is that the managing officers delegate these responsibilities to a human resources department so that they can focus on the broader goals of the organization. The owners of small businesses in Sacramento do not have this luxury. The business owner (or perhaps one trusted employee) is the human resources department for a small business.personnel-handbook.jpg

Be that as it may, there is no reason that a small business cannot have many of the same human resources features that a larger organization has. One of the most important of these features is a solid and robust personnel policy. And make no mistake: the best personnel policies are written by Sacramento business attorneys.

Think of a personnel policy as your employees' handbook. It serves as a guide for what is expected of all employees. It outlines the rights and responsibilities of both the employee and the business itself. It provides clarity on what to do if certain circumstances should arise. Finally, it supplements the labor and employment laws of the jurisdiction in which the business operates.

Imagine the following situation. You hire a new employee, and you explain to that employee that "business hours are from 8:30 a.m. to 5:00 p.m with a half hour lunch break." This has been your policy for the life of your business. Its source is not any particular law or regulation, but simply your interpretation of a normal work day. Now suppose your new employee is making a habit of being late in the mornings. She shows up closer to 9:00 than 8:30 about once or twice a week. Do you have a mechanism in place for handling this situation, besides a verbal expression of your displeasure?

This is a perfect example of where a comprehensive written personnel policy would bring immediate guidance and clarity to the situation. Suppose you have asked your attorney to draft your personnel policy in such a way that employees get two warnings about lateness, and then a forfeiture of pay upon their "third strike." You can present the applicable policy section to your employee, putting her on notice of her entitlement to two warnings and her danger of forfeiting pay upon the third lateness. That way, neither party can claim that they were unaware of the company lateness policy.

Now apply some different facts to the same example. Suppose your employee wants to call out sick. Suppose she is spending too much time surfing the internet or accessing personal email. Suppose any number of typical small business situations occur. Do you have policies on the books for these situations?

Having a personnel policy drafted by a Sacramento small business lawyer can help reduce the likelihood of workplace disputes, employment lawsuits, and even general impediments to productivity. It is a simple, one-time investment in your sanity and your bottom line, and it gets everyone on the same page. Can you afford not to have one?

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Choosing a Resident Agent for Your Business

November 7, 2012,

California business owners who decide to incorporate their business routinely overlook a very important decision amidst all of the registration paperwork. When organizing as a business entity in California, as in most states, the business entity is required to designate a Resident Agent for Service of Process. Business owners commonly list themselves or a trusted employee as their Resident Agent. But is this a wise decision? Most California business attorneys would say no.process_servers_south_wales.jpg

If we are to explore why this Resident Agent designation is so crucial, it is important to begin with some terminology. A Resident Agent is a person (or sometimes a corporate entity) who is entrusted with the receipt of "process" arising from litigation in which the business entity is involved. "Process" is merely the term for the documents that initiate the litigation, such as a complaint for a law suit. "Service of process," therefore, refers to the manner in which the litigation documents are delivered to the attention of the business entity. If one is designated as a Resident Agent for a business entity, he or she is, in essence, the one who can certify to the court that the business entity is aware of the suit brought against it.

While technically there is nothing wrong with a business owner or an employee being designated as a Resident Agent, there are some considerations that may make the prudent business owner inclined to appoint a California business lawyer as the Resident Agent for the business. First and foremost, business owners and their employees, as a general rule, are not as well-versed in the legal process. They may be unaware of the existence of strict deadlines or of an obligation to respond to or to deny allegations in a complaint. Failure to recognize these deadlines and obligations could jeopardize the business's ability to prevail in the law suit.

Secondly, law suits against a business entity may contain sensitive or even sensational allegations whose disclosure could negatively impact the reputation of the business or its owners or employees. California business attorneys are accustomed to protecting the confidentiality of such materials, and understand that dissemination of the allegations can be harmful.

Finally, appointing an attorney as a Resident Agent establishes an existing relationship with the attorney, and can streamline the process in the event that the attorney might be consulted to litigate the case. If not, the attorney is far more likely to know of a reputable colleague who would be better suited to handle the case. This existing dialogue between the business and the attorney could very well save time and lessen the likelihood that the business would fail to meet one if its aforementioned legal deadlines or obligations.

California business lawyers routinely offer Resident Agent services for a modest annual price, and most businesses would say it's well worth it. When incorporating your business, consider designating a lawyer as your Resident Agent. A licensed professional should handle your most sensitive legal documents, especially when your bottom line is at stake.

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Are My Workers Employees or Independent Contractors?

October 31, 2012,

The question is simple enough. You have people whom you "employ" to perform work for your business. Are they technically your employees, or do they fall into a similar category as independent contractors? It may seem like a matter of semantics, but any Sacramento business attorney would caution you that the technical classification of those who perform work for you can have a tremendous impact on your business's legal exposure.6a01053697c8b6970b014e5f679488970c-800wi.jpg

Unfortunately, there is no settled definition of what makes an independent contractor different from a typical employee. Their classification depends on a number of different factors, some of which can vary by jurisdiction. Moreover, there is no single factor that trumps all others in making the determination.

Generally speaking, independent contractors engage in a business that is distinct from your own, even if you both perform substantially similar work functions. An independent contractor likely operates under a different name than your own, likely has multiple clients, and advertises his or her business services independently from your own. He or she typically works his or her own hours, is not subject to your direct supervision, and utilizes his or her own tools or workspace. An independent contractor would likely provide you with an invoice for the value of the services performed. Some common examples of independent contractors include: attorneys, doctors, engineers, architects, construction contractors, and accountants. However, the classification is not limited to these listed service providers.

By contrast, a formal employee of your business is internally supervised, uses tools and workspaces owned and provided by the business itself, and is paid as part of the payroll for the business. The employee does not perform work for another company unless it is the nature of the business to take on other businesses as clients. In these situations, the work is considered to be performed for the parent business rather than for the client business. A formal employee works the hours prescribed by the business, and is not paid on a per-project basis.

Why is this distinction important? Because state and federal laws impose tighter restrictions on the interactions between a business and an employee as opposed to a business and an independent contractor. For example, businesses are required to provide formal employees with regular meal and rest breaks, as well as workers compensation benefits. Additionally, businesses must pay certain payroll taxes on every formal employee they hire. The same regulations do not apply to independent contractors performing work for the business. Understanding the difference not only could potentially save the business some money, but could mitigate the business's exposure to costly fees, penalties, taxes, and potential litigation.

For these reasons, a thorough examination of your business's employment structure may be a worthwhile endeavor. Sacramento business lawyers are adept at evaluating whether a court would be likely to classify a particular worker as an employee or an independent contractor, and can help explain the legal consequences of such a classification. Don't leave your business's legal and financial future to chance. Don't venture your best guess. Do contact an attorney for guidance.

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Help with Writing Terms of Service

October 24, 2012,

Everyone who has ever used the internet to download a program or gain access to a service has had to read and agree to Terms of Service (TOS). In certain circumstances, they might be called an End User License Agreement (EULA). Both types of agreements accomplish roughly the same things: they outline the terms and conditions upon which a customer is permitted to utilize a good or service. Though often overlooked, they are integral cogs in the operation of a business and the delivery of products and services.terms-and-conditions.jpg

These types of agreements are binding contracts, just like any other. Specifically, they are called "adhesion contracts". The difference between a regular contract and an adhesion contract is that in a regular contract, the customer is free to negotiate terms with the business entity. In an adhesion contract, the customer must agree to the terms outlined by the business entity, or else the customer will not have the privilege of utilizing the good or service at all. Another way to look at it is that typical contracts differ based on the interests of the parties negotiating their terms. An adhesion contract looks the same no matter whom the customer is.

Terms of Service are important tools for the successful business entity in that they make the customer operate by a defined set of rules that the business can dictate. Terms of Service also typically contain protections that the business entity doesn't even know it needs: the so-called "fine print." Fortunately, an experienced California business lawyer is an expert in drafting the fine print.

A business attorney may recommend a multitude of fine print provisions for your Terms of Service. For example, it may be advantageous for your company to dictate the choice of venue for the resolution of business disputes. This is an important provision because it forces a litigious customer to bring a lawsuit on your home turf, subject to the local laws under which you operate and subject to a more sympathetic local jury pool. Similarly, your attorney may recommend some provisions regarding any disclaimers or warranties your company may want to make in regard to your products or services. Overzealous warranties may expose your company to litigation in the future, while certain disclaimers may violate the laws of your jurisdiction. Other typical provisions include privacy policies, intellectual property rights, licensing, and accepted and prohibited uses of the product or service.

Even if your business merely uses a web site to help promote itself, it is a very good idea to draft Terms of Use solely for the website. These Terms of Use help web site visitors understand what kind of use and behavior is acceptable and unacceptable while accessing your web site, and give you authority to bring civil or criminal charges against web site visitors who are needlessly destructive, lewd, obscene, or otherwise disruptive of your customers' use - and your maintenance - of your web site.

A California business attorney can craft Terms of Service, Terms of Use, or End User License Agreements uniquely tailored to the legal protection of your business.

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Leasing Commercial Equipment in Sacramento

October 17, 2012,

Just because your business could be categorized as a "small business" doesn't mean that it can't handle big tasks. Small businesses routinely use heavy equipment and machinery to increase output, to aid in construction, or to otherwise make their operations more efficient. In the modern world, software can even sometimes be the heavy lifter in an operation. There is only one problem with these types of tools. They can be expensive; perhaps more expensive than a small business can afford.2005_mustang_mtl_m20_track_loader_480x360.jpg

Nonetheless, small businesses all over California march on with the aid of these specialized pieces of equipment. How do they do it? They lease them.

Equipment leasing is an industry unto itself. Leasing companies will use their considerable capital to invest in pieces of heavy equipment to be used in construction. Manufacturers of special machinery or software will also set aside some of their units to be used in future leases. Those with more modest capital, the small business owners, will contact these sources and inquire about an equipment lease.

A large percentage of these lease transactions are designed for the short term. For instance, a small construction company may need to lease a jackhammer and mobile air compressor for a day to demolish a concrete porch. The company may use a jackhammer and air compressor too infrequently for it to make sense to purchase their own. These types of leases are typically done with form contracts prepared by the lessor, the equipment leasing company. Lessees in this type of short term transaction ordinarily would not have the leverage or the need to negotiate special terms in the contract.

However, equipment leases are not limited to these short-term transactions. Companies routinely lease equipment, machinery, or software for a period of months or years. In some cases, the lease may be designed to endure for the working life of the piece of equipment. This is especially true in the case of software, where it would not make sense to purchase the software outright when it could be obsolete in a matter of years. For these cases, small business are highly encouraged to consult a California small business lawyer for their expertise in negotiating and drafting long term lease contracts.

Small business lawyers know that the contract should contain things that the ordinary person would not think to include. For instance, which party is to pay taxes and fees on the item? Who is responsible for obtaining any applicable licenses? Whose insurance will cover damage to the item or personal injuries related to the operation of the item? What is the duration of the lease term, and who has the right to terminate, and why? Are there any restrictions on the lessee's use of the item? Who pays for delivery or installation? Who maintains the equipment, and are there any warranties associated with it?

These are questions best left to someone who is skilled in contract negotiation and drafting. After all, the equipment lessor is likely to contact an attorney to negotiate for them. Shouldn't you?

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California's New LLC Law

October 10, 2012,

On September 21, 2012, Senate Bill 323 was signed into law by Governor Jerry Brown. Sponsored by Senator Juan Vargas, the bill will be designated as the California Revised Uniform Limited Liability Company Act (RULLCA). On January 1, 2014, it is slated to replace the Beverly-Killea Limited Liability Company Act, which was signed into law in 1994. California joins a growing minority of states that have rewritten their limited liability company laws in recent years, and now California business lawyers are left to decipher how the new laws will affect small business owners and entrepreneurs who wish to incorporate their small businesses as limited liability companies.Law-books.jpg

Some people that have studied the new law worry that it may open the door to a number of constitutional challenges. Portions of the law are written so as to be made retroactive to limited liability companies that were organized under the existing laws. The United States Constitution states at Article 1, Section 10, Clause 1:

"No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility."

This "Contract Clause" is at odds with RULLCA because RULLCA appears to be establishing an ex post facto law - one that changes the legal consequences of an action once the action has already been taken. In other words, the argument is that the owners of a limited liability company could not have predicted this change in the law, and may not have chosen to organize in quite the same manner if they knew that a new set of laws would govern the way their business was treated. There is also a compelling argument that the new RULLCA could constitute a "law impairing the obligation of contracts." California businesses routinely enter into contracts with customers and other business entities with the understanding that their contract will be honored under a certain set of laws. If the law were to suddenly change, it may have a dramatic effect on how existing contracts might be enforced.

Another troubling feature of the new RULLCA is some uncertainty regarding the law of LLC operating agreements. If the RULLCA is slated to become the law of the land on January 1, 2014, and if a particular LLC was incorporated prior to that date, which set of laws govern any amendments that are made to the operating agreement? Even worse, might the original parts of the operating agreement be governed by Beverely-Killea while the amendments are governed by RULLCA? Might a business owner refrain from making a beneficial amendment to their operating agreement based on the fear and uncertainty of the new law?

These questions, and others, will be hashed out in the next couple of years. Rest assured that you can rely on your California small business attorney to keep abreast of any developments and new interpretations in the new RULLCA so that you can run your business entity in the way you intended.

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Google Creates New Tools for Startups

October 2, 2012,

Google, Inc. is always on the cutting edge of enhancing and simplifying the internet experiences of the average computer user. Sometimes, however, Google comes up with unique ways to help a certain segment of the population. One such segment, comprised of brand new small business owners, is set to benefit tremendously from a new Google tool: "Google for Entrepreneurs."Search_Engine_Optimization.jpg

Google realizes that starting and growing a new business venture is not as simple as hiring a small business attorney to prepare the entity formation paperwork. In addition to all the legal issues associated with startup, new business owners will eventually have to tackle marketing, product delivery, and intellectual property rights to transform what may be a solid concept into a viable and profitable business.

Google for Entrepreneurs features a toolbox full of resources. On the marketing front, Google provides a service through which small business owners can launch their very own professional website to market and promote their goods and services. Google+ for Business helps ensure that your particular goods or services are reaching the types of Google users who are most likely to be interested in them. Google AdWords provides a way for your business to promote itself in the side margins of a Google search when the potential customer searches for certain keywords that are similar to or related to the product or service you are trying to sell.

On the product delivery front, Google Apps has a vast array of productivity applications to help streamline your business operations. With a simple download, you and your employees can be armed with the right apps on all hardwired and mobile devices used in day-to-day business. Google also helps entrepreneurs connect with other similarly-situated entrepreneurs through a local Google Business Group and provides entrepreneurship conferences nationwide to help startups share ideas and experiences.

In much the same way, your local Sacramento small business attorney can provide a "toolbox" of legal services to ensure that your business is properly formed, maintained, and in compliance with all applicable laws and local regulations. At the start, a small business lawyer can help prepare all of the entity formation paperwork for filing with the appropriate state agencies. Even before that, your lawyer can arm you with the right information as to which entity type is best for your business model, including any state and federal tax consequences that may arise from using each type.

After startup, the same attorney can help make sure your business is in compliance with all recordkeeping requirements prescribed by the state and federal government. If your business is one that regularly utilizes sales or service contracts, your attorney can make sure the contracts are worded in such a way as to protect the rights of the business and its proprietors. If your business contracts are the subject of a subsequent dispute, the same attorney can help litigate the matter. Finally, your attorney can be a valuable asset in the realms of business licenses, commercial leases, and employment matters. In short, Google isn't the only "toolbox" at your disposal.

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Sacramento Small Business Debt Collection

September 25, 2012,

There are many small businesses in the Sacramento area that offer consumer financing for larger purchases or installment contracts so that the consumer does not have to pay in one large lump sum. One major benefit of financing is that the small businesses can collect interest on the payments in exchange for the convenience of smaller payments on the part of the consumer. Similarly, small businesses benefit from installment contracts in that the business does not have to deliver a finished product or service before receiving partial payment. debt-collection.jpg

In some cases though, consumers break their promises to pay the remaining balances. When this happens, businesses and their agents are free to engage in actions to collect the debt. However, there is one major caveat: the debt collection practices must comply with a federal law called the Fair Debt Collection Practices Act (FDCPA). This is where an experienced Sacramento small business attorney can be a valuable asset to the small business, acting as a consultant on FDCPA compliance.

In general, the Act is designed to protect debtors from fraud and harassment in the collections process. For example, before the Act, it was commonplace for debt collectors to insinuate that the debtor was committing a crime and that the debtor could go to jail if the debt was not paid by a certain date. Debt collectors would call the debtor's residence up to dozens of times a day, or find the debtor's place of business and call there as well. In extreme cases, intimidation and threats of violence were used to induce prompt payment of debts. It is not surprising that these types of debt collection practices do not fly in the modern business world.

Under the Act, debt collections are reduced to a set of heavily-enforced rules. Collectors may not call a debtor before 8 a.m. or after 9 p.m. They also may not contact the debtor's place of business if the place of business objects to those types of calls (most do!). Anyone collecting a business debt may not hold themselves out to be an attorney or insinuate that some sort of legal process has begun unless the legal process has in fact begun. Debtors are entitled to write a letter to a debt collector demanding that the collector cease and desist all calls, letters, faxes, and other communication about the debt. Once this right has been invoked, the debt collector must not send any additional communication unless it is a receipt of the debtor's demand or a letter informing the debtor of the commencement of a legal proceeding.

Sacramento business lawyers recognize the right of a small business to collect any debts owed to it. However, a business can get in a lot of trouble with the federal government if its debt collection processes do not comply with the Fair Debt Collection Practices Act. Therefore, it is in every small business owner's best interest to consult an attorney for advice as to the proper way to engage in debt collection practices.

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How to Avoid Business Contract Disputes with Customers

September 18, 2012,

A large portion of Sacramento small businesses are able to sell goods and offer services without the need of a contractual agreement with their customers. After all, a contract is a set of mutual promises between the customer and the business - usually that the customer will promise to pay a defined amount in exchange for the business's promise that it will deliver a product or provide a service. In most small business models, a contract is impractical for the type of transaction to be conducted. For instance, you would not ask your customer to sign a contract in order to purchase lunch, nor would they sign a contract before a haircut.Contract2.jpg

In other business models, however, properly structured business contracts are essential. For example, a home remodeling company would want to have a work contract explaining exactly what work would be performed, what materials are to be used, and what the company can expect in compensation for its services. Similarly, a small business that manufactures large-quantity orders or small quantity orders of a specialty product would want to have a document that outlines exactly what is expected of all parties involved in the transaction. This is where a Sacramento business attorney can be a valuable asset. Only an attorney can evaluate your business model and tailor a sales or services contract that protects the interests of all parties involved.

When drafting your sales or service contract, your Sacramento business lawyer will ask a host of questions of you. Your lawyer will want to know every conceivable detail about the typical transaction for which the form contract will be used. The most common details included in these types of contracts are the task to be performed or the product to be delivered, the specific timeframe for completion or delivery, an itemization of all costs to be involved in the completion of the service or production of the good, and any guarantees or warranties that will govern the transaction. Where appropriate, the contract should leave blank lines for any portion of the agreement that is negotiable, or where there is room for customization.

Although specificity is the number one priority in a goods or services contract, a good Sacramento business contract attorney will make sure the document is both readable and economical with words. Unreasonably complicated contracts tend to confuse both parties as to their rights and responsibilities, while unreasonably wordy contracts tend to burden the business process. After all, if your customer has to hire his or her own attorney to interpret your business contract, you aren't likely to win many customers.

Sometimes, all the care and preparation in the world cannot prevent a business contract dispute. If this is the case, the same Sacramento attorney may be your best bet for winning the litigation battle. After all, your attorney should already be familiar with your business's model and goals, and the specifics of the contract at issue. In short, your attorney's number should be close at hand during all contract stages.

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New Bill to Help Green Industries in California

September 11, 2012,

California prides itself on being at the forefront of green and sustainable industry practices. Its residents also pride themselves on being at the forefront of new and revolutionary business practices. If some members of the State Assembly have their hopes come to fruition, a new bill would bring these two realities into a single lucrative and green concept that would pave the way for thousands of new jobs and tremendous economic growth in California's Imperial Valley. Sacramento business attorneys suspect that it will also create tremendous demand for regulatory compliance advice as new companies get involved in the industry.green-earth.png

According to a recent article in the Sacramento Bee, California Governor Jerry Brown signed Assembly Bill 2205 into law on Friday. Assembly Member V. Manuel PĂ©rez (D-Coachella) and Senate Majority Leader Ellen Corbett (D-San Leandro), who co-authored the bill, say that the bill brings several state regulatory schemes into the 21st Century, allowing for a new technology to be applied to the extraction of precious minerals from the geothermal brines in California's Imperial Valley.

Some of the byproducts of geothermal energy production in this area are actually quite valuable and applicable in a number of green industries. The production of geothermal energy produces high concentrations of lithium, manganese, and several other precious minerals. Among the most prevalent uses of these materials is in the production of electric vehicle batteries.

Californians are purchasing electric cars at a higher rate than in any other state in the union. It seems only fitting that the raw materials used in the production of electric car batteries could come primarily from local and sustainable sources. One estimate suggests that the byproduct materials from a single geothermal plant could be used to produce in excess of one and a half million electric car batteries. Such production could also inject as much as $25 billion into the state economy and provide countless high paying jobs. Lawmakers say that this industry will "accelerate the green economy in California" and will be "vital to...other clean energy technologies needed to meet the state's climate targets."

By all accounts, this new technology and the regulatory scheme to go with it should make California the world's largest producer of lithium, a raw material that could gain in importance into the next several decades as electric cars begin to replace gas cars. Newcomers to this industry, however, should be wary of the strict regulatory measures that have been signed into law. Assembly Bill 2205 requires compliance with a number of notice and reporting standards as well as several pollution and emissions controls.

Those who wish to profit from this new and exciting opportunity should be mindful that they will need the aid of a California business lawyer to help interpret the new law and identify how to meet the rigorous compliance standards. Failing to meet the requirements of these regulatory measures can mean the suspension of your license to operate or could result in crippling fines. Be sure that your operation is meeting these requirements.

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Buying a Business in Sacramento

September 4, 2012,

Earlier this year, I posted a blog entry about the legal issues faced by Sacramento small business lawyers and their clients when the client wants to sell their business. It seems only natural to write a companion piece explaining the legal issues faced by a client who wants to purchase a business. Although some of the issues are somewhat similar, buyers and sellers in a business sale can have vastly different goals and perspectives in the process. As such, the best business lawyers are able to wear both hats based on their client's end of the transaction.

When a Sacramento small business attorney wears the business purchaser hat for her client, there are some particular pieces of advice to impart. The first and most important thing to consider is the particular structure of the purchase deal. There are two main types of purchase structures: an entity purchase and an asset purchase. iStock_severance.jpg

An entity purchase is the more complex and extensive of the two purchase structures. In order to understand the mechanics of an entity purchase, a client must be able to distinguish the difference between a business itself and the legal entity that operates the business. Both of those must also be distinguished from the existing business owner. The business owner owns and operates the business entity, and the business entity operates the business. By way of example, a business owner named Mario may own a legal entity known as Mario's Pizza, LLC. His limited liability company may operate two pizza joints that do business as Mario's Pizza Parlor and Mario's Pizza Palace.

In an entity purchase agreement in this situation, the purchaser acquires the rights and interests in more than may be readily apparent. Not only does the purchaser acquire the rights to the Pizza Parlor and the Pizza Palace (and everything related to business operations therein), but also the rights to Mario's Pizza, LLC as a legal entity. The purchaser is now required to pay taxes and obtain licenses in the entity's name, as well as submit the proper state filings.

By contrast, the purchaser has the option to enter into an asset purchase agreement. This type of purchase offers less extensive rights to the purchaser, but may be cheaper and easier on a number of levels. In purchasing only the assets of a business entity, the purchaser essentially purchases only the right to conduct business operations for a profit. The ownership interests remain with the legal entity, whether it be with the shareholders of a corporation or the managing members of a limited liability company. Assets purchases are popular with purchasers who do not want to absorb the liabilities of the owner company.

Only a Sacramento business lawyer can evaluate your purchase proposal and determine which type of purchase structure will accomplish your business goals in your particular market. Your attorney knows the proper legal language, negotiation tactics, and tricks of the trade to turn your proposal into a functional business purchase agreement so that you can spend less time worrying and more time profiting.

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Managing Immigrant Workers in Sacramento

August 28, 2012,

It is no secret that California is a primary destination for aliens of both the documented and undocumented varieties. Each year, hundreds of thousands of immigrants, primarily Mexicans, flock to California's major cities for work opportunities. Sacramento is no exception to this trend.

In 1986, Congress passed what is commonly known as the Immigration Reform and Control Act. Through this legislation, the federal government sets regulations as to the manner in which aliens may immigrate legally. The same legislation sets out penalties for non-compliance, including penalties for the illegal employment of undocumented workers. Given the rate of immigration and the federal guidelines in place, California business owners must be extra vigilant in making sure their employees are legally able to work. Consequently, California business lawyers must be just as vigilant in ensuring compliance by their client businesses.Trabajo.jpg

Penalties for non-compliance can be quite harsh, especially if a business exhibits a wanton disregard for maintaining a fully documented labor force. According to the Code of Federal Regulations, the civil penalties for employing undocumented workers can range from $275 to $16,000 per undocumented worker. Those business owners who engage in a pattern of illegal hiring behavior may also be subject to criminal fines up to $3,000 per violation and/or the possibility of six months imprisonment. Suffice to say that any Sacramento business law firm will advise a business owner that it does not pay to gamble against the federal government for the prospect of cheap labor.

However, the same law firm will also advise you that compliance with these regulations is not as simple as asking your employees to fill out a questionnaire. As a small business owner, you must maintain an I-9 form for each and every employee you retain, unless the employee is an independent contractor or a "casual worker." Be aware that "casual worker" does not equate to part time laborer. A casual worker is someone like a babysitter, who is not affiliated with any business enterprise.

The purpose of the I-9 form is to help verify the worker's identity. It contains information like the worker's social security number, driver's license, and other sensitive information. Although you are required by law to keep these documents, there are very stringent rules as to the record-keeping procedures. The information contained in these documents is susceptible to identity theft, so you must be judicious as to whom you entrust with access to the documents. These persons must have a genuine business need to review such documents, and must also be authorized to provide copies if a regulatory body requests them.

If you are a California small business owner and you are concerned about the immigration status of your employees, consider contacting a Sacramento business attorney for an evaluation of your employment compliance procedures. Businesses circumvent these rules all the time, and most of them are eventually caught. Most likely, your business's profit margin cannot withstand a hefty fine or the potential imprisonment of you, the owner. Be sure you are in compliance before the wrong agency discovers that you are not.

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Naming Your California Business

August 21, 2012,

Entrepreneurs who consult a California small business attorney for business formation advice sometimes neglect to ask about what may seem to be the most elementary consideration for a fledgling business: what to name it. In today's modern age, and in the incredibly complex business environment of California, naming your start-up business may not be as easy as tacking on "Inc." or "LLC" to your word or phrase of choice.sticker,375x360.png

According to the United States Census Bureau, there are more unique business entities in existence in California than in any other state in the union. In fact, more than 12 percent of all unique business entities across the country call California home. The lesson in these statistics is that an entrepreneur in California is far more likely than anyone else in the country to share an idea for a business name with another existing business. Sharing a business name with another business entity is not only illegal, but also detrimental to your efforts to distinguish your business's products or services from those of other businesses in your market.

With this in mind, experts suggest that the owner of a California start-up business should come up with several different words or phrases and view them merely as candidates for the business's name. Once the business owner is convinced that he or she would be satisfied with any of those several names, he or she should contact a California business lawyer for a consultation. A business lawyer will know the proper State databases to search in order to determine whether your prospective business names have been taken. Your lawyer can also help apply specific State rules about what constitutes a substantially similar business name. For instance, you may not be permitted to incorporate at "Haircuts, LLC" if "Haircuts, Inc." or "Haircuts Co." already exists. In a similar vein, something like "Haircutz" may be viewed as too similar to an existing name.

In deciding on a business name, the modern California business owner should also be mindful of whether the prospective business name is available as a domain name on the internet. Sometimes, a business owner may choose to incorporate under a perfectly valid and unique name in the eyes of California, but may fail to realize that the same business name is being utilized in another state, and that the internet domain name is already taken.

An additional consideration in choosing a business entity name is the likelihood that your business name will conflict with existing trademarks. For example, you may wish to start a company that sells accessories for Apple, Inc. products. Before you set your heart on a business entity name that features the word "Apple" or its products like "iPod" or "iPad," you may want your attorney to investigate whether such use would infringe on another company's trademarks, or whether you may be able to purchase a license for such use.

Suffice to say, it is prudent for your California business law firm to have just as much input in the naming of your business as you do.

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What to Include in a Sacramento Employment Contract

August 14, 2012,

When clients come into a Sacramento business law office for advice on how to start and maintain a new business venture, a significant portion of the conversation often turns to how to manage employees. In most cases, small businesses tend to hire employees "at-will." At-will employment is the most flexible form of employment for both the employer and employee, as either party can terminate the employment relationship at any time. Further, the employee can terminate the relationship for any reason, while the employer can terminate the relationship for almost any reason, as long as the reason is not discriminatory or otherwise illegal.

In some limited cases, however, small businesses may benefit from creating more formal employment relationships with their employees. This type of employment is called "contract employment," and it can help both the employer and employee understand precisely what each other's rights are when it comes to the employment. An employment contract can include whatever provisions the employer and employee want to include, but below are some provisions typically found in most employment contracts.

contract.jpgFirst and foremost, employment contracts must include the start date and duration of the employment. The duration may be unknown to either party at the time the contract is made, which is fine. In place of a known end date, the parties may agree to such language as "indefinitely" or something similar. Some other mandatory things to include are salary and benefits. The salary clause must specify whether the employee's compensation is hourly, weekly, monthly, or yearly. The agreement may also need to include alternate forms of earnings, such as profit sharing or stock options. The benefits portion should include the methods of calculating how benefits are to be paid, including future adjustments to account for inflation or cost of living.

Many employers prefer to list specific duties of the employee in the employment contract. While in most cases, employees are tasked with whatever duties arise in the course of business, some businesses prefer to have one employee's duties segregated from another's duties. This may be for reasons of business efficiency, accounting, or other internal controls. Whatever the reason, if the employee's authorities or duties should be limited, it should be spelled out in the contract.

Employment contracts often contain more complex terms. These include confidentiality agreements and non-competition clauses. Confidentiality agreements are designed so that the employee does not leak business secrets to competitors or the public. Non-compete clauses are designed to prevent the employee from seeking employment at a competing company, or from starting a substantially similar company. A Sacramento small business lawyer can be an invaluable ally in drafting these clauses.

Federal and state laws sometimes prohibit confidentiality agreements and non-compete clauses that are excessive in scope or duration. Your lawyer can help interpret these laws so that you can craft an employment agreement that fully advances your business model without unreasonably burdening the rights of your employees. If you think your business would benefit from creating employment contracts with your employees, consider contacting a Sacramento business attorney for a consultation.

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Incorporating as a Non-Profit in Sacramento

August 7, 2012,

When clients come to a Sacramento small business lawyer for advice in business entity formation, there is an implied presumption that the business's creator wishes to organize the business as a for-profit entity. For-profit entities are the classic business model: the business offers products or services and tries to realize as much profit as possible. In the for-profit model, any surplus revenue that is not reinvested in the business or use to cover overhead costs such as wages or rent is retained by the business owner. The goal of a for-profit entity is simple: to generate as much profit as possible and enrich the owner.nonprofit.jpg

But what if someone is trying to start an organization in which profit is not the primary motivation? Suppose the business model is to deliver meals to elderly residents as opposed to selling coffee and pastries at a corner shop. If the business model you envision is primarily concerned with philanthropy or compassion, or your motivation is drawn from a strong belief in a particular cause other than profit, you may want to consider incorporating your entity as a non-profit corporation.

Non-profit corporations enjoy many of the same benefits of their for-profit cousins. For one, incorporating as a non-profit confers legal personhood on the entity, meaning that the non-profit can sue and be sued in a court of law. As we have discussed in previous posts, the entity's legal personhood tends to absolve the personal liability of any individuals who serve the entity as long as their actions were performed in the scope of their work for the entity.

Another tremendous advantage of incorporating as a non-profit entity is that non-profit entities are almost always exempt from paying federal income taxes. However, in order to achieve this tax exemption, non-profit entities must petition the IRS for tax exemption under 26 U.S.C. 501(c)(3). This must be done in addition to any California state charter documents, sometimes called articles of organization. Due to this complexity, a Sacramento business attorney is your best bet at understanding what filings are required of your organization, what must be included in the filings, and how best to organize the paperwork so that the state and federal governments are more likely to grant non-profit entity status.

A word of caution when starting a non-profit entity: any surplus funds generated by the entity must be recycled into the community and must not find their way into the pockets of the entity's officers. Officers of a non-profit entity are entitled to compensation at the fair market value for their professional services in their geographic area, but may not receive bonuses when revenues exceed expenditures.

If you are considering starting a business model in which profit is not the main goal, you should consider contacting a Sacramento small business attorney, who can bring you up to speed on your options when it comes to entity formation and the incorporation process. Non-profit corporations are wonderful ways to advance a particular cause or to bring a valuable service to the community without the tax burdens of typical corporations.

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