Filing the initial and the biennial (every two years) Statement of Information recently became much easier for California limited liability companies (LLCs). California LLCs can now file their Statements of Information online. When filing a California limited liability company Statement of Information (SOI) on-line, filers can receive a free PDF copy of the filed SOI.
When consulting with startup business owners and entrepreneurs, common issues arise regarding key elements of the business and its structure. These issues can expose the business, and the owners, to unnecessary litigation and other legal expenses. Below are three common mistakes that startup businesses make and how you can avoid them.
Failing to Use and Maintain Proper Employment Documentation
We’ve all heard the stories about businesses getting started in a parent’s garage and suddenly becoming a multi-million dollar success. However, as the business grows, there has to be a protocol in place for hiring new employees and what employment status they have with the business. Unfortunately, many startups encounter problems when they fail to maintain proper employment documentation exposing the founders to lawsuits if an employee feels they get short-changed in terms of pay, benefits, title, equity, etc.
Two important bills passed recently by the California state legislature will become law on January 1, 2015. The first of these new business laws will affect what up to now has been called the Corporate Flexibility Act of 2011. The second bill standardizes the business entity filing process. If you may be affected by either of these new laws, it is important that you discuss them with an experienced California business law attorney.
Changes to What Was the Corporate Flexibility Act
Governor Brown signed the first of these bills into law on September 27, 2014. The bill is Senate Bill 1301. The first thing the new law does is change the name of the law. It will now be called the “Social Purpose Corporations Act.” It also changes the name of the type of corporation the Act authorizes to “social purpose corporation.” This type of corporation used to be called a “flexible purpose corporation.” A social purpose corporation is a corporation that has a designated purpose in its articles of incorporation.
Starting your own business can be daunting. There can be a seemingly endless list of things you have to consider and decisions you have to make. One of those decisions is whether you are going to strike out with your own concept, or whether you are going to enter into a franchise agreement to become a part of a larger business that already has a proven track record. If you go the franchise route, you will have to sign a mostly binding franchise agreement–a sometimes long and sometimes quite complicated document that should be reviewed by an experienced lawyer. I say “mostly binding” because a California court held that one common part of these agreements is not enforceable in California.
Frango Grille USA Inc., v. Pepe’s Franchising Ltd.
The case in which the Court made this decision is Frango Grille USA Inc., v. Pepe’s Franchising Ltd. Pepe’s Franchising is a company from the United Kingdom that grants aspiring business people the right to operate and franchise Pepe’s restaurant. Last year, Pepe’s Franchising entered into such an agreement with Frango Grille which gave Frango Grille the right to operate Pepe’s restaurants in California. Then, this year Frango sent a letter to Pepe’s saying it wanted to end the agreement. Frango also sued Pepe’s in Los Angeles, making allegations that had to do with breaches of franchise law.
The Small Business Administration (SBA) has a seemingly wonderful program under which certain federal contracts are supposed to be reserved for competitions among small businesses, called the “8(a) Business Development Program.” The SBA describes the program as “a business assistance program for small disadvantaged businesses” and states that the program “offers a broad scope of assistance to firms that are owned and controlled by at least 51% by socially and economically disadvantaged individuals.” The program is supposed to provide business for startups run by members of various racial minorities who have suffered from economic disadvantage. It does this in part by setting aside certain government contracts for small firms to compete over without having to compete against larger corporations. However, it turns out, the government contracts that are supposed to be handled by these small businesses are actually being handled by large corporations.
Problem with the 8(a) Program
The Washington Post reports that contracting officers from various federal departments are not ensuring that work awarded to small businesses under the 8(a) program is being performed by those small businesses. Historically the program has been abused, usually by the small business getting the contract and then passing much of the work (and a portion of the profits) along to a large corporation that did not have the right to bid on the contract. To stop this abuse, regulators put strict limits in place on how much of the work the small business awarded the contract can subcontract out. If the limits are violated, the small business can be fined $500,000.
In the aftermath of the Affordable Care Act (ACT), which is also colloquially known as “Obamacare,” many small business owners and potential small business owners have been deeply concerned about the cost of employee health insurance. However, there is good news that should help calm some of those concerns. The cost of employee health care premiums is growing at a slower rate than it did before the ACA became law.
The Kaiser Family Foundation Report
The New York Times reports that the Kaiser Family Foundation published its annual survey this week on health plans that employers nationwide are offering to employees. According to the Times, the Kaiser survey is generally considered the most reliable measure of what is happening in the employer health care market. The Kaiser Family Foundation has existed since 1948, and was revamped in 1991 with a goal of providing trustworthy information about health care not biased by the large number of stakeholders who may have personal or professional agendas. This is the sixteenth year that the foundation has published a study like this one. The study’s big finding was that “growth in health insurance premiums was only three percent between 2013 and 2014.” This is the lowest that growth rate has ever been in those 16 years (although at least one of those other years tied the 3% growth rate). Typically, the growth in the premiums employers pay for their employees’ health insurance has been in the double digits, making this extremely low number even more encouraging.
Los Angeles Mayor Eric Garcetti proposed this week that the city raise the minimum wage to $13.25 by 2017. The current minimum wage in Los Angeles is $9.00 per hour. This is the minimum wage for all of California, but some cities throughout the state have enacted even higher minimum wages. For example, San Diego has approved a minimum wage of $11.50, and San Francisco voters will decide later this year whether they want to increase that city’s minimum wage to $15 per hour. This potential wage increase of nearly fifty percent in Los Angeles carries with it serious pros and cons that have to be considered both by anyone planning on creating a new business in Los Angeles, or anyone considering expanding a business to Los Angeles.
How Would the Minimum Wage Increase Work?
According to USA Today, the proposed increase would make the minimum wage in Los Angeles one of the highest in the nation. Of course, the mayor cannot act unilaterally, and will need the approval of the City Council to make the increase law. As the proposal stands now, the increased would be gradually phased in. In 2015 it would jump to $10.25, then in 2016 it would increase to $11.75, and finally in 2017 it would increase to $13.75. Then, in the future, additional increases would be tied to the Consumer Price Index for urban wage earners.
Every state wants to attract businesses. Whether it is an existing business, or a brand new startup, politicians are always courting business people to move to their jurisdiction. While there are usually many states (or cities within states) vying for a new business, it used to be uncommon for states to directly attack one another in these quests. However, that is all starting to change, as evidenced by a current battle between Texas and California.
Battle Starts With Texas Poaching California Businesses
The Los Angeles Times recently reported on the ongoing battle between California and Texas over businesses. This battle has been going on, in a one-sided fashion, for more than a decade. It began with recently-indicted Texas Governor Rick Perry publicly pushing California businesses to move to Texas. And, his public statements along with pro-business government programs have been effective. One out of five businesses that relocated to Texas in 2011 and 2012 were previously California Businesses.
In some ways, the internet has made the world a lot easier for new small businesses. Ordering your own supplies, allowing customers to place orders or make reservations, advertising your goods and services, payroll, and taxes all take on a different and sometimes much easier face with the World Wide Web. Even finding the right real estate for your new business or expansion can be done in large part online, at least in the shopping stage. But the online demands of business have created a serious concern that business men and women of earlier generations did not have to confront: online security.
While businesses have always had to consider surveillance equipment and alarm systems to keep local predators at bay, security threats online can come from the other side of the globe. Fortunately there are things you can do to protect your business and your customers. CIO, a media outlet specializing in information for people in the information technology industry, recently reported on this issue. In the report they looked at four real life scenarios faced by specific small businesses, and then provided types small business owners can follow to be more secured.
How Small Businesses Can Increase Online Security
Starting a new business requires help from a lot of sources. You need excellent employees, the advice of an experienced and licensed Sacramento small business attorney, and investors. Throughout the down economy, that third requirement was sometimes hard to meet for small business people. Fortunately, those times are changing.
Easier to Find Bank Loans
The New York Times reports that small businesses are finding bank loans easier to come by. Its report tells the story of Jake Fitzsimmons, the owner of a burger joint. Mr. Fitzsimmons opened his bar and restaurant in 2010, immediately after the recession. Thinking getting a loan would be impossible in the financial climate, Fitzsimmons wound up borrowing the money he could not save from his father. He did the same again when he opened his second restaurant in 2012. But now that he is opening a third location, things are different. He had banks bid on the opportunity to finance his expansion; and it worked. As banks become more eager to lend to the right borrowers, they are willing to compete with one another, resulting in better terms for the borrower than Fitzsimmons could have imagined back in 2010.