Forming a Sacramento LLC

June 26, 2012,

For those who are just starting a business, one of the primary concerns should be the organizational structure of the business. We have discussed in a previous post the many benefits of incorporating a business. For many small businesses in the Sacramento area, the Limited Liability Company (LLC) has become the organizational structure of choice.

tax calculator (Dave Dugdale).jpgIn general, any Sacramento small business attorney will vouch that the LLC structure is favored by small business owners for its ease of formation, its flexibility, and its tax and liability features. Any drawbacks to the LLC structure are typically immaterial to the small business owner, as they apply only to specific business models and businesses of a certain size.

ADVANTAGES OF THE LLC

For one, the LLC can consist of as few as one member. As a result, a sole proprietor can very easily convert his or her business into an LLC without the need for a board of directors or shareholders. The LLC can also have an unlimited amount of members. In fact, its members do not have to be actual humans. Corporations and other LLCs can be "members" of an LLC.

The principal reason for forming an LLC is for the liability protection if offers its members. When a business owner forms an LLC, the LLC becomes a separate legal entity for the purposes of suing and being sued. This means that the LLC absorbs the liability of its members who are acting within the scope of the LLC's business operations. As a result, if a member of an LLC were to commit a tort upon or breach a contract with another person or business entity, the LLC's assets are the only assets that can be recovered in a court of law. The assets of the individual members are protected, absent extraordinary circumstances.

In many cases, the managing member of the LLC can choose how the LLC is to be taxed. In some jurisdictions, the LLC is treated like a sole proprietorship or a partnership, meaning that the managing member simply pays the LLC's taxes on his or her individual tax return.

DISADVANTAGES OF THE LLC

In California, a small business attorney should inform his or her prospective clients about the limitations of forming an LLC. For example, in California, banks, insurance companies, architects, and accountants are among the business models that are forbidden from forming an LLC.

Additionally, the LLC is generally not viewed as a permanent fixture in the same way a corporation may be. As a result, the members of an LLC may have more difficulty obtaining a loan or securing investors than their incorporated counterparts.

Finally, the state filing and reporting requirements are considerably more lax for an LLC than for a corporation. This may seem like an advantage on its face, but this leniency can tend to cause problems if the LLC does not draft a formal operating agreement.

If you are unsure whether your Sacramento business would benefit from its formation as a limited liability company, consult a Sacramento business lawyer to discuss your options. You may be surprised to learn how it could help your business moving forward.

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Business Licensing in Sacramento

June 20, 2012,

As we have detailed in previous posts, owning and operating a business in Sacramento is no small feat. There are a number of financial and administrative hurdles a Sacramento business owner must navigate before opening up shop. A proper business license is among the most important of these hurdles.

open for business.gifAny Sacramento small business attorney is sure to get a host of questions about the particular business licensing requirements for operating within city limits. As a threshold matter, nearly every type of Sacramento business is required to obtain a license. It is best to assume your business falls among those that need a city license than it is to assume your business will not need a license.

All license applications are made to the City Finance Department's Revenue Division. Technically speaking, the license your business will obtain does not so much function as the City of Sacramento's permission for you to conduct business, but rather as the City's acknowledgement of your legal standing as a taxable entity. The typical business license, in fact, is called a Business Operations Tax Certificate.

In exchange for your Business Operations Tax Certificate and the City's permission to operate, your business promises to pay the City's yearly Business Operations Tax, the amount of which is determined by the type, size, and nature of your business. The Business Operations Tax is a yearly filing that must be paid on time if you wish to maintain the City's permission to operate within city limits.

The initial application process is lengthy, complicated, and often requires you to provide an exceptional amount of documentation, depending on the business. A Sacramento business lawyer will be familiar with the types of documentation necessary to obtain a Business Operations Tax Certificate, and can help you estimate how much your Business Operations Tax will be each year.

Your lawyer will also explain the possible penalties of failing to pay your Business Operations Tax. A lapse in your tax payments can result in late fees, penalties, or, at worst, the revocation of your Business Operations Tax Certificate. Remember that the Business Operations Tax is a yearly expense that must be budgeted in order to ensure the smooth operation of your business, free of fees and penalties.

Some particular types of business may require special licenses in the City of Sacramento. The necessity of these special licenses is often tied to the nature of the products or services offered at these businesses, and the degree to which the products and services are regulated by the federal and local governments. Some examples of businesses that may require special licenses include adult book, video, and clothing stores; gaming parlors such as Bingo halls, pool halls, and arcades; businesses that are publicly perceived to foster illicit activities, such as massage parlors or escort services, and others.

No matter the nature of your business, proper licensing will ensure its continued operation. Consider the aid of a Sacramento business licensing lawyer to ensure that you fulfill this critical need.

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Proposed Legislation Could Make Self-Employment Easier

June 12, 2012,

In light of some pessimistic job creation statistics in recent months, legislators have begun to look outside the box to help Californians find work. If a new bill passes the state legislature, entrepreneurial training could soon become part of California's existing job creation initiatives.

According to a recent article in The Sacramento Bee, Rep. Lois Capps, a Democrat from Santa Barbara, recently introduced what she calls the Entrepreneurial Training Improvement Act of 2012. Congresswoman Capps wishes to expand the missions of California's Workforce Investment Boards so as to include funding for entrepreneurial skills training in addition to the existing placement initiatives for traditional employment.

This state subsidized entrepreneurial training, she says, will foster the creation of new small businesses. In the end, she hopes that the creation of new small businesses could in turn lead to increased job opportunities overall. In theory, as these new businesses expand, new employees will need to pick up the slack, leading to a net increase in overall jobs.

Capps also recognizes a significant side effect of fostering the entrepreneurial spirit: innovation. Whereas in previous years, California's job placement initiatives would have tried to place creative and self-motivated workers into traditional careers, the new legislation would help promote healthy competition in the marketplace of ideas by giving the self-employed the skills they need to create innovative products and services. The entire community stands to benefit. Suppose just one of these people who would have previously been placed in a traditional job was instead able to create the next big invention or a significant improvement to an existing product or service. Congresswoman Capps would say that it is a possibility worth state funding.

capitol.jpgOpponents of the bill say that California would be subsidizing dozens of pipe dreams for every success story, and doing so when the state budget can ill afford to be wasting taxpayer money. Others opponents say that the money will almost certainly be misused for illegal activities. In all likelihood, however, some form of this bill is likely to pass the state legislature.

California small business attorneys are applauding the proposed legislation, but caution entrepreneurs not to start a business without a comprehensive plan in place. Owning and operating a business creates a number of complications. If you are just starting up, you are strongly encouraged to incorporate your California business by filing the appropriate paperwork with the appropriate state agency. A California business lawyer can help you determine which type of corporate entity is right for your new business.

Additionally, starting a business can have drastic tax implications for the business owner. If you are selling goods and services, you will need to collect local sales taxes on your products and file these taxes with the appropriate authorities. Moreover, a business must file an income tax return just like an individual does.

Your business may need to rent or purchase commercial space. If so, a California small business lawyer can help negotiate and prepare a fair lease document or help with the commercial purchase process.

Starting a business can be both exciting and scary. Make sure you have a legal professional on your side to ensure that your business venture is running properly.

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Kristina Reed Appointed to Heald College Paralegal Program Advisory Board

June 7, 2012,

Kristina Reed Appointed As A Heald College Paralegal Program Advisory Board Member

Kristina Reed has been appointed to Heald College's Paralegal Program Advisory Board. Heald College only invites select legal professionals to serve as Advisory Board members. The Advisory Board assists Heald College with the development of the paralegal program curriculum by recommending additions, revisions or removal of various academic programs. The Advisory Board is instrumental in helping Heald stay abreast of current trends as the practice of law evolves.

"I am honored" says Kristina Reed. "Being a part of a successful education system that adds well qualified professionals to the legal industry is truly amazing. I am proud to offer my experience and assistance."

Heald College was founded in 1863. Heald's mission is to prepare students for business careers by providing them with career education that focuses on practical, hands-on learning. Advice and guidance from legal professionals are the building blocks that create a strong foundation for Heald College. By collaborating with select legal professionals, Heald College is able to successfully equip its students by offering a competitive curriculum that focuses on current industry demands.

Extending a Commercial Lease in California

June 6, 2012,

A common feature of a Sacramento commercial lease is the option to extend the lease beyond its initial duration. For the successful California business owner, this is a good option to have, considering the goal of a business is to be alive and profitable for many years. lease.jpg

A commercial lease, however, can differ substantially from a residential lease, especially in the length of the lease period. Owners of commercial real estate are typically more interested than their residential counterparts in lessees who will remain in a retail space for a longer period. It is not uncommon for commercial lease periods to endure for up to 5 or 10 years.

Excited entrepreneurs are quick to rejoice in the stability that a lease period of 5 or 10 years can bring. But, what many business owners fail to consider is what will happen to their lease once the 5 or 10 year period expires.

There is no wonder why an extension provision can be overlooked. After all, a business starter cannot project the state of his or her business that far into the future. However, as discussed in a recent Smart Business article, overlooking a commercial lease extension provision in the present could have disastrous consequences in the future.

Thinking Long-Term
Consider, for example, a family-owned brick oven pizzeria. The business produces quality pizzas, strombolis, calzones, and pastas that the locals have come to love over the course of its five-year existence. The pizzeria uses a host of proprietary family recipes that make it quite distinguishable from other similar businesses in the area. As a result, about three quarters of its sales on a given day are from repeat customers.

Unfortunately, Mario, the business owner, did not carefully review the lease extension provisions when he signed the lease five years ago. The commercial property owner is fine with Mario's restaurant remaining in his shopping center. However, the property owner is demanding twice as much in rent as before. He informs Mario that if Mario is unwilling to pay twice his previous rent, he is free to look elsewhere for commercial space.

The property owner has considerable leverage over Mario. For starters, the success of Mario's business is tied to its location, and the fact that most of his revenue is generated by repeat customers in the area. Additionally, Mario's business is dependent on its authentic brick oven, which would be costly to disassemble and reassemble elsewhere. Mario is left with little choice but to agree to double the original rent, all because Mario was not careful when he reviewed and signed the original lease.

Don't be Mario. A Sacramento commercial real estate attorney can help your business protect its leasing rights by negotiating a lease extension provision that is both fair and equitable. Your California commercial lawyer will ensure that the extension provision includes neutral methods for determining future rent, fair extension notice deadlines, and impartial dispute resolution procedures. Armed with these protections, you can ensure that your commercial lease does not turn into a ticking time bomb several successful years from now.

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What Should Your Commercial Lease Include?

What Should your Commercial Lease Include?

May 30, 2012,

California small business owners routinely sign their commercial leases without any legal guidance. However, any Sacramento small business attorney would strongly caution against it. The modern small business lease, depending on the space to be leased, may include a host of complicating factors you may not encounter in a typical residential lease.

SPELL IT OUT

Your leased space is your business's most important asset. It connects your products and services with your potential customers. What many business tenants fail to think about, however, is what the lease includes beyond the actual square footage to be leased.

For example, a business owner will want to be exceptionally clear about their retail space's access to things like common walkways, parking, and utility services. Additionally, a business owner may want to be clear about his or her right to post advertisements for the business in the common areas of a retail center. Whatever the circumstances, it is imperative for the lease to provide an accurate and detailed description of the property to be leased, including the condition of the structure and anything within the structure that is to be included with the space.

strip mall.jpgIn addition to the physical and artificial boundaries, you will want to be clear about your business's responsibility for utilities like phone, internet, electricity, and water. In some cases, business owners mistakenly agree to take on responsibility for certain maintenance, insurance costs, and property taxes. A California small business lawyer can make sure the language accurately reflects your understanding and expectations for the property, and can protect your rights against an over-imposing landlord.

THINK BEYOND THE SPACE

Renting business space differs from renting residential space primarily because business space is designed to invite members of the public onto the premises. As a result of this public access, a number of federal regulations can apply to your ability to use the space to conduct business. For example, the Americans With Disabilities Acts (ADA) prescribes certain standards for access to retail environments for those with impaired mobility. If the lease is not specific as to the landlord's responsibility for the cost of ADA compliance measures, your business could be on the hook for those costs. Failure to comply may restrict the free operation of your business or halt all business operations entirely until compliance is achieved.

Also, your business may want to negotiate with the landlord for additional rights and protections. For example, if your business is to open its doors in a strip mall or shopping center, you may want to negotiate a provision in which the landlord promises not to rent any other nearby space to a competitor of yours.

Finally, you will want to ensure that the zoning regulations that attach to the leased property will not interfere with your business practices. If the property is not already zoned for your brand of business, you will want the lease to include provisions about who is responsible for the cost and effort of obtaining the proper zoning licenses.

The world of commercial leasing can be difficult to navigate. A Sacramento commercial real estate attorney can help a business owner protect his or her rights by negotiating and drafting a lease that is fair to both your business and your landlord.

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Transferring Property in Sacramento

Selling your Business in Sacramento

Transferring Property in Sacramento

May 24, 2012,

Sacramento real estate attorneys know that the transfer of property in California can be a complex process. Nonetheless, many people choose to prepare much of the paperwork by themselves. Below is an overview of the process and some of the common pitfalls a do-it-yourselfer might encounter without the aid of an experienced legal professional.house and money.jpg

Most people are so preoccupied with the financial aspects of buying or selling property that the actual mechanics of the transfer get overlooked. Especially in light of the mortgage crisis, those with less-than-stellar credit often are finding banks that are much less willing to lend. If they are lending, many banks are doing so at higher interest rates if they view the borrower to be a credit risk. The first pitfall to avoid in transferring title in real estate is to think that the process is over once the capital is secured.

The actual transfer of real estate is a highly technical process which can be made even more so if the real estate has unique features or the improvements upon the real estate are substantial. The official mechanism of real estate transfer in California is a "quitclaim deed". Quitclaim deeds are, in essence, legal contracts signed in the presence of a notary in which the transferor (the "grantor") grants the property described to the transferee (the "grantee"). The most crucial - and most overlooked - portion of this document is the description of the property and its improvements.

The reason the description is so crucial to the transfer is that a quitclaim deed must be absolutely precise in what tangible and intangible things are to be transferred. Without this precision, the grantor and grantee run the risk of creating a situation in which the parties and the State are unsure of who actually holds title to the item. Title can be described as the right to use - and exclude others from - an item of property. If the description of an item of property is vague or ambiguous on a quitclaim deed, its ownership may later be disputed.

In the case of real property rather than tangible property, the grantor and grantee must be exceptionally careful that the description of the property includes the city, county, and state in which the parcel sits. Additionally, a well written description of real property will include some language to delineate the parcel from adjacent parcels, as well as the access rights to any natural resources within the property. For example, the quitclaim deed should accurately describe any water access rights or restrictions, as well as zoning prohibitions that may affect the value of the property, among other things.

The quitclaim deed also contains important tax information related to the transfer. The taxed amount is tied to the value of the property. In some cases, certain transfers may be exempt from this taxation.

If the prospect of self-preparing such an important legal document seems daunting, consider contacting a California real estate lawyer who is familiar with the complex legal language needed to secure the transfer. Property transfers happen infrequently for most people. In our area a Sacramento real estate attorney will be more familiar with the process and better equipped to anticipate any pitfalls.

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Selling Your Business in Sacramento

May 17, 2012,

for sale.jpg California business owners may have a number of different reasons they want to sell their business. Among the most common reasons are retirement, change of career, and change of life circumstances. Others make a living starting up small businesses and then selling them a short time later for a profit. Whatever the reason, a California small business attorney is often a valuable asset to guide the process.

In our area, one thing your Sacramento business lawyer will tell you is to be prepared for a lengthy process. The primary reason the process is lengthy is that businesses are living, breathing entities. The sale of a business is unlike selling a tangible object, or even something like real estate. In fact, the sale of a business can actually include tangible objects like equipment and inventory and real estate in the form of retail space.

This is not, however, what makes a business difficult to value. The particular problem with selling a business is that the value of the business is also tied to its current customers and its ability to bring in new customers. These factors determine a business's ability to generate profit. This concept is called the goodwill of a business. Not surprisingly, the goodwill of a business is an ever-changing and shapeless figure.

Your attorney can connect you with financial professionals whose expertise is examining businesses to determine their value. These professionals are skilled at compiling figures on the value of the business's inventory, equipment, property, and goodwill. When these factors are combined, a Sacramento commercial lawyer can utilize the information to prepare the sale documents.

The preparation of these documents is a matter best left to an experienced professional. One reason is that the sale of a business can create sensitivities among certain groups. Employees may feel wary about the sale of a business due to their perception that their job may be in jeopardy. Vendors and business partners may also be wary of the sale of a business due to their perception that their revenue streams and business relationships may be jeopardized. The best way to alleviate these sensitivities is to entrust the business transaction process with someone who recognizes the value of confidentiality. Legal professionals are accustomed to protecting your confidentiality, and can take proactive measures to make sure your decision to sell is private and not panic-inducing.

Your attorney can also help you decide how to structure the sale. Some business sales occur in one lump sum. Others occur once a prospective buyer secures a loan, not unlike a mortgage for a home. Other deals are done in installments over a period of time. It is in your best interest to consult an attorney with ties to the location of your business. This way, your attorney can draw on the local knowledge of business practices and the particular business transaction laws within your jurisdiction.

The sale of a business can be a daunting and stressful prospect. You worked hard to build your business. Make sure its transition to new ownership is in good hands.

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Rent or Own?

May 9, 2012,

Should my Sacramento business purchase or lease commercial property?

contract.jpg Sacramento commercial lawyers would all agree that there is no one-size-fits-all solution. Every business model has unique location considerations, seeks different types of clientele, and has varying amounts of capital with which to work. A Sacramento commercial real estate attorney may be the best resource for determining what it best for your particular business model.

For those just starting a business, leasing may be the only option since there may not be enough initial capital to post a down payment on a commercial space and to maintain a mortgage thereafter. For those with enough capital to choose between purchasing and leasing, however, many Sacramento small business attorneys will tell you that leasing may actually be the more attractive option.

WHY SHOULD I LEASE?

The primary benefit of leasing commercial property is the flexibility it affords the business owner. Leases are most often written for one-year terms, with some ranging from as little as six months to two or more years. Regardless of the lease term, leasing typically locks in the business owner to a particular commercial property site for a shorter period than ownership of the property would. The advantages of this flexibility are particularly appealing to those who are just starting their business, as a lease is far less risky than the purchase of commercial property in the event that the business does not reach its desired profit potential. Further, the flexibility of leasing keeps the business owner from becoming too invested in a property in the event the business wishes to expand. It is easier to finish a short lease term and then move on to lease a bigger space than it is to sell an existing space and purchase a newer, bigger one.

The other advantages of leasing commercial space are similar to the advantages of leasing residential space. Business owners who elect to lease are typically not responsible for the everyday maintenance of the space or its surrounding areas. If something happens beyond a commercial tenant's control, many find comfort in the notion that a property manager is responsible. From a purely financial perspective, lease rates more closely mirror the fair market value of the commercial property at a given time, whereas those who purchase commercial property do so at the fair market value that existed during the purchase. As a result, those businesses who have been renting during the recession have often benefitted from lower lease rates, while owners of commercial property have seen their property values plummet.

WHY SHOULD I OWN?

The foregoing advantages of leasing should not entirely eliminate the option of ownership. The primary advantage of owning commercial property is the freedom to use the property as the business sees fit. Commercial leases often contain "use clauses" that can limit what activities are permissible in the leased space. For some types of businesses, the inability to engage in certain activities within the leased premises can really inhibit the growth of the business.

Owning one's own commercial space also enables the business to accumulate wealth in the form of equity in the property, not unlike a homeowner accumulates equity by paying into their mortgage. Some business owners insist that it is wasteful to "throw away" lease payments without acquiring some form of permanent interest in the property.

As mentioned before, the decision to rent or own commercial property is a matter of personal preference and opportunity. Your Sacramento commercial real estate lawyer can help you determine which option is right for your Sacramento business.

New Workplace Break Regulations Take Effect

May 2, 2012,


California Supreme Court mandates employee meal and rest breaks

On April 12, 2012, the California Supreme Court handed down a decision in Brinker Restaurant Corp. v. Superior Court (Hohnbaum), No. S166350 that may affect California business law. Brinker Restaurant Corporation, a subsidiary of Brinker International, Inc. and its related entities, own and operate a number of restaurant chains, including Chili's Grill and Bar, Maggiano's Little Italy, and Romano's Macaroni Grill.

State law requires California employers to provide employees with meal breaks and rest breaks during the workday pursuant to California Labor Code 226.7 and 512, and Industrial Welfare Commission (IWC) Wage Order No. 5-2001. The case originated when a class of restaurant workers filed suit, claiming that their employer, Brinker Restaurant Corp., 1) failed to provide meal breaks or premium wages in lieu of meal breaks, 2) failed to provide rest breaks or premium wages in lieu of rest breaks, 3) required employees to perform work duties off the clock during meal and rest breaks. Additionally, the plaintiffs contended that the employers deliberately altered the employees' time sheets in order to hide and misrepresent work time and break time. Finally, the plaintiffs objected to Brinker's alleged practice of requiring employees to take an early lunch soon after their shift began and then to work 6 to 8+ hours without a meal break thereafter.

coffee mugh (DeaPeaJay).jpgWhat must employers provide now?

The Court's decision represents a dramatic shift in California commercial law and employment rules. The following is a summary of the new provisions:

MEAL BREAKS

At designated meal breaks, the employer MUST relieve the employee of their duty for at least thirty (30) minutes. The employee may use the break time for any purpose he or she desires. The employer is NOT responsible for ensuring that the employee uses the time for a meal, or that the employee does not engage in any work. The meal break must occur after no more than five hours of work. A second meal break must occur after no more than ten hours of work.

REST BREAKS

Employees are entitled to a rest break of ten minutes for every shift of 3.5 to 6 hours in length. Twenty minutes is to be allotted for any shift of 6 to 10 hours in length. For shifts of 10 hours or more, thirty minutes must be allotted for rest breaks. Rest breaks are distinct from meal breaks.

How do I make sure my business complies with these regulations?

In our area, a Sacramento business law attorney can examine your workplace policies and even redraft the policies in accordance with the new law. Your attorney can also ensure that your policies are conspicuously available to your employees. It may be prudent to have your Sacramento business lawyer prepare documents for your employees to sign that acknowledge their understanding of your new business practices.

It is important to note that the law applies to out-of-state businesses that employ workers in the State of California. Out-of-state employers should consider the expertise of local legal professionals to make sure that their California employees enjoy the benefits of this new law and that their business remains in compliance.

Continue reading "New Workplace Break Regulations Take Effect" »

JOBS Act Permits Crowdfunding for New Business Ventures

April 25, 2012,

New start-up funding option emerges for entrepreneurs

The recently-passed JOBS Act has given new life to a novel business investment model that many new age small business owners are finding much less risky or difficult. For those seeking business investment in Sacramento, it may very well be cause for celebration.

crowd (James Cridland).jpgThis business investment model is called crowdfunding, and it may be the future of securing start-up capital for business ventures. Crowdfunding works on the premise that it is easier to get many people to pitch in a little bit than it is to get comparatively few people to pitch in a lot. Through web sites like Kiva, Kickstarter, Crowdtilt, and IndieGoGo, small business entrepreneurs are finding it much easier to connect with groups of small value investors who are willing to pool their resources together in support of a business venture.

This model differs greatly from the traditional business start-up model. Traditionally, those wanting to start a business in Sacramento needed a Sacramento business lawyer and a source of start-up capital. The traditional sources of start-up capital were a) one's own savings; b) a bank funded business loan; or c) funds accumulated from a business investor.

Each source of funding had its own drawbacks. Few business entrepreneurs have enough of their own savings to launch a business, and many of those who do are unwilling to risk the entirety of their savings on launching a business. Bank loans were similarly risky in that high interest rates could eat into the profitability of the business, and if the business flopped, the business owner could be on the hook for considerable debt. Traditional business investment was a difficult source of funding because there are few people out there with enough capital to invest in the launching of a business, and fewer still who would invest large sums of money on certain business models they deem to be risky.

Crowdfunding eliminates the need for any of these three traditional funding sources. Much like it is easy to convince huge numbers of people to donate small sums of money to a political campaign, disaster relief, or to non-profit online software ventures like Wikipedia or Firefox, it is similarly easier to convince the average investor with a small amount of extra capital to risk that small sum in conjunction with their peers. Pooling the funding sources eliminates much of the risk in business investment, as the gains are proportional to the amount invested, and the losses are marginal and spread across many peer investors. In short, the low risk-modest reward model brings more investors to the market since comparatively few investors are capable of absorbing losses in the high risk-high reward model.

Are there any drawbacks to crowdfunding?

Your Sacramento small business attorney should be able to explain to you whether crowdfunding is right for your business venture. Some things to be mindful of when considering crowdfunding are the reporting provisions of the JOBS Act, which require the business owner to disclose the sources of business funding. Much like political campaigns must disclose their funding sources, your business funding information will be available to any inquiring minds, including your family, friends, competitors, business partners, or vendors. Often, business owners need to hire a Sacramento business law firm to assist with these filings.

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New Workplace Posting Requirements Under Appeal

April 18, 2012,

Federal law may soon require employers to hang additional workplace posters for employeescontract.jpg

Employers in the State of California may be familiar with Federal and California commercial law regulations requiring that they post various fliers in conspicuous places for the benefit of their employees. These postings typically explain employee rights and responsibilities; wage, leave, and disability information; emergency and workplace injury procedures; and workplace safety information, among other things.

A new federal regulation under the National Labor Relations Act, slated to take effect on April 30, 2012, requires that employers who meet certain criteria must hang an additional employee rights notice posting in a similarly conspicuous place. The purpose of the notice is to ensure that employees are properly informed about their rights to engage in collective bargaining.

The proposed posting is to be hung wherever the employer posts similar labor-related rights information (often a break room or similar space). Additionally, the employers whom this law affects will be required to post a link to the same posting in a conspicuous place on the employer's website, if applicable.

NOTE: Employers in at least two jurisdictions have filed oppositions to the proposed law. The United States District Court for the District of Columbia upheld the National Labor Relations Board's authority to enforce this provision of the National Labor Relations Act. The United States District Court for South Carolina held that the enforcement of this provision of the Act was not within the NLRB's authority. In light of the conflicting judicial opinions, The District of Columbia Circuit Court of Appeals has granted a temporary injunction, which is currently barring the NLRB's enforcement of the mandate. The NLRB is presently appealing the injunction.

How do I know if my business will be subject to the new law?

The law is in a state of flux at the moment. Groups of employers are presently challenging the constitutionality of the workplace posting requirement. Additionally, not all employers are required to comply with the new regulation in its present form, depending on the nature and size of the business. In our area consider consulting a California business attorney to help you evaluate whether your business is among those required to post the new labor relations information.

What workplace information must I post for my employees?

The California Department of Industrial Relations maintains a resource page in an effort to inform business owners of their employee rights posting obligations. The types of postings you are obligated to maintain for your employees is dependent on the nature and size of the business you operate. Many postings are required of all employers, while others are tied to the number of employees employed by your business or the degree to which your employees engage in certain activities or expose themselves to certain substances or conditions.

Additionally, there are a number of federal posting requirements like the proposed collective bargaining rights provision above. The United States Department of Labor maintains a similar resource page to inform qualified employers about their employee rights posting obligations.

The Federal and State posting requirements - as we are presently seeing - are constantly changing. With the aid of a Sacramento business lawyer, you can examine whether your California business is complying with federal and California business laws.

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Foreclosure Rate in Decline

April 10, 2012,

Sacramento foreclosures drop from a year ago

An article in the Sacramento Business Journal last month reported an encouraging trend: the foreclosure rate in the greater Sacramento area dropped 8.8 percent from last year's figure, according to the online foreclosure tracking service, RealtyTrac.

The figure accounts for three types of foreclosure indicators: 1) notices of default, 2) notices of foreclosure sales, and 3) lender repossessions. The total number of foreclosures, according to RealtyTrac was 4,145 during the one year period across the four-county Sacramento area. Stated another way, approximately 1 in every 210 properties in the greater Sacramento area was in foreclosure during that period.

money trouble.jpgBank repossessions in Sacramento remained steady during the same period. Of the 4,145 foreclosures, approximately 24.1 percent (1001 notices) were bank repossessions. A year ago, approximately 23.1 percent (997 notices) of the 4,179 foreclosures were bank repossessions.

The good news about foreclosure decline

Sacramento foreclosure attorneys have observed that the decline in Sacramento-area foreclosures has closely mirrored the national trend. During the same one year period, foreclosures nationwide declined at a rate of approximately 8 percent.

The decline in foreclosure rates, generally speaking, is a good indicator of a nationwide economic rebound taking effect. Foreclosures often coincide with unforeseen financial hardships like market-wide job loss, unexpected unemployment for individuals, higher rates of divorce or family death, demotions and promotion denials, and medical emergencies, among others. A decrease in foreclosures can sometimes mean that one or several of these unforeseen expense categories are either stabilizing or declining in a particular market.

The bad news about foreclosure decline

Statistics can often be deceiving. Sacramento real estate lawyers would caution the casual reader from concluding that Sacramento's real estate market is outperforming the national market. Although the percentage decline in foreclosures in Sacramento has closely mirrored the national percentage decline, Sacramento real estate is in much worse shape than real estate nationwide.

In the greater Sacramento area, 1 in every 210 properties is in foreclosure. Nationwide, the current figure places 1 in every 637 properties in foreclosure. Properties owners in Sacramento are three times as likely to have experienced foreclosure in the past year than their national peers. Nevertheless, the local decline in foreclosures is a welcome indicator of economic momentum.

I'm staring foreclosure in the face. What can I do?

If you are in danger of losing your home or commercial space to foreclosure, the new figures may be less encouraging to you. Foreclosures are still a real danger to the Sacramento homeowner.

Creditors can be fierce and tireless in collecting their debts. Your best defense is to contact a Sacramento real estate lawyer skilled in handling Sacramento foreclosures. Make no mistake: debt collection practices are specific to each region. Your creditors have agents who know the ins and outs of the Sacramento real estate market. This local knowledge helps your creditors determine the costs and benefits of pursuing foreclosure.

Your legal counsel should be just as well-versed in the Sacramento real estate market. It is only armed with this particular knowledge that your attorney can craft your particular foreclosure solutions.


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Should I incorporate my business?

April 3, 2012,

business.jpgSo you've take the plunge. You've started your own business. Perhaps you've gone the traditional route and purchased or leased a Sacramento-area storefront. Or perhaps you've capitalized on the infinite merchant opportunities that the internet provides. Perhaps your side source of income has grown into a full-time gig.

No matter the case, the prudent, established Sacramento business owner knows that entity formation is in his or her business's best interest. But perhaps your business is in its infancy. Perhaps you are not yet established among Sacramento consumers. Perhaps you are unsure if you should incorporate your California business. An experienced Sacramento business entity lawyer can help you determine whether your business is a candidate for incorporation.

The Advantages of Business Entity Formation

The advantages of forming a business entity are numerous.

First and foremost, incorporating your business adds instant legitimacy in the eyes of your consumers, vendors, and business partners. An incorporated business is more likely to secure a commercial mortgage loan - and at a better interest rate - than an unincorporated business. Products and services from an incorporated business carry with them an implicit quality that products and services from an unincorporated business do not. Anyone can sell produce from the back of a pickup truck and makes some money on the side. But the reality is that today's modern consumers are more likely to purchase produce from "Mom and Pop's Produce Market, Inc." because the full legal entity title implies structure and legitimacy.

Incorporating under such a name also prevents another merchant from operating under the same name, protecting your business's profitability by ensuring name and brand recognition in the market.

Another primary reason to incorporate is to separate one's personal assets from the assets of the business. The main implication of this separation appears on the business owner's income taxes. Suppose your business brings in gross receipts totaling $100,000 in a year. But suppose it cost you $60,000 to maintain your business's daily operations over the course of the year. If your business is an incorporated entity, you can deduct the business expenses, such as rent, mortgage, employee wages, and energy bills before allocating income to the owner. In this example, the business owner pays income taxes on the $40,000 paid from his business rather than on the $100,000 in gross receipts. Your business does not evade taxes altogether, but generally small businesses are taxed at vastly different rates than personal income.

In the same vein, there are legal liability advantages to the separation of one's personal assets from business assets. Suppose a negligent employee drops a banana peel on floor of Mom and Pop's Produce Market. If a customer is injured as a result of slipping on the banana peel, the customer may only sue for assets tied up in the business, and may not sue the business proprietor personally.

This list is by no means exhaustive, but the final advantage worth noting here is that corporate entities exist perpetually, as opposed to sole proprietorships and partnerships that automatically dissolve when one person leaves. The advantage of perpetual existence is that the business entity may exist even when its creator is no longer in the picture. Corporate entities may be bought and sold, or even passed down to one's next of kin.

What options are available to me?

Generally speaking, a business owner may have several options in entity formation. He or she may incorporate under a host of business suffixes, including "Inc.", "LLC", "LP", "LLP", and "PC", among others. There are many considerations that go into deciding which entity type to choose, including the realities of your geographic market. Sacramento business owners should consult a Sacramento business entity attorney, who can help determine which of these entity types are right for your situation.

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Commercial Delinquencies on the Rise in Sacramento

March 29, 2012,

office building.jpgAccording to a recent article in the Sacramento Business Journal, commercial mortgage delinquencies are up from a year ago. Trepp, LLC, a New York-based analytics and business consulting firm that tracks commercial mortgage-backed securities debt, reports that 16.6 percent of the commercial mortgage loans in the Sacramento area are currently delinquent as of February. That figure climbed from 14.2 percent a year ago. According to Trepp, more than 400 properties in the Sacramento metropolitan area have commercial mortgage-backed securities debt, and 42 of them are currently delinquent in their mortgage payments.

The report reflects the realities of the Sacramento real estate market, where many businesses are failing to make payments on their commercial mortgages. Almost every Sacramento commercial real estate lawyer is seeing an increase in distressed properties and higher rates of short sales for those properties.

What are some commercial loan delinquency solutions?

There are options for those facing these issues in our area. A business and real estate attorney in Sacramento can help alleviate some of the problems with the debt crunch. Each possible solution has its own benefits and drawbacks, and this is by no means an exhaustive list.

One option is to negotiate a modification to the existing mortgage. Businesses who are delinquent on their current payments may request that the mortgage term be extended to a greater period of years. This strategy lessens the monthly payment to a more manageable sum and might allow a business to start taking a bite out of the delinquent debt they have accumulated.

The drawback to this strategy is that the mortgage will cost the business more money in the long run, as interest will accrue over a longer period of time. You must be comfortable with paying more in the long-run to alleviate your current financial hardship. It may also be important to consider other possible effects of these modifications, including potential credit ramifications.

Another option is to maintain your current mortgage payments as best as you can and hire a Sacramento debt settlement firm to negotiate a lump sum settlement of your outstanding business mortgage debt. Your creditors may be willing to accept a lump sum payment totaling less than your current delinquent amount. A debt settlement firm would help you make that lower lump sum payment in order to discharge your total debt.

Be aware that debt settlement can have an adverse effect on your credit. After all, the creditor may decide to accept an amount lower than what you really owe. This can sometimes be a red flag to future creditors and may impact future interest rates. The reason your current creditors may be motivated to take a lump sum settlement in an amount lower than your current debt is that they would rather take the lesser amount than run the risk of your business filing for bankruptcy. A lump sum settlement, though less than the total sum, provides instant gratification to the creditor, whereas the creditor would have to wait for a business's assets to be liquidated via bankruptcy.

Each debt situation is as unique as its eventual solution. If you are delinquent in your commercial mortgage or are a commercial landlord with delinquent tenents, you should consider consulting an Sacramento commercial real estate attorney to explore these and other possible solutions.

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