Working capital for a small business is always in short supply. One option that a small business owner has to raise capital is to enter into a secured transaction. A secured transaction is the use of personal property such as inventory to secure a loan. The personal property is used as collateral for the loan. One popular example of a secured transaction is the use of a loan to buy a motor vehicle. If the owner fails to make the necessary loan payments, the creditor can repossess the motor vehicle and sell it at an auction. [Read more...]
There is one important legal pitfall that small business owners who sell or lease goods should be aware of—the creation of a warranty. A warranty is an assurance that leased or sold goods will perform to a certain standard, are fit for a particular purpose or are fit for their ordinary purpose. Warranties are either express or implied in law.
An express warranty is created by representations of a seller or lessor of goods that they conformed to a certain quality, condition or performance. An express warranty can be created even if there wasn’t an actual intent of the seller or lessor to do so. A small business owner should be careful in their customer relations so that they do not inadvertently do so. An owner may want to examine their advisements and review any written material or statements that they provide to customers. [Read more...]
In past columns, I have written about limited liability companies and closed corporations. In each instance, it was assumed that the owner or owners were actively involved in the operation of the business. There is, however, a business entity in which a person is considered an owner of the business but takes no part in the active operation of it. This type of business entity is called a Limited Liability Partnership.
A LLP is required by law to have a two-class ownership style. One class of ownership is the general partners who manage the day-to-day activities of the business. Another class of owner is the limited partners who invest in the partnership but are forbidden by statute from actually participating in any management activities. Essentially, a LLP has two classes of ownership: one class of ownership is the managers of the business, while the other class is the investors in the business. [Read more...]
When family members consider starting a small business, one of the first problems they encounter is deciding what type of business entity to use. Family members not only own their business, but work long hours in the business to ensure its survival since they derive their livelihood from the profits. One entity option is a close corporation.
When family members decide to incorporate their business, they should be aware of three important legal concepts. are three important legal concepts that they should be aware of. Under New York state law, a corporation is a separate, distinct legal entity from its owners. It is considered a “person” with many of the legal rights of a “natural person.” It can sue, be sued, pays taxes, has Constitutional legal rights and can even be charged with a crime. [Read more...]
It seems that embezzlement is a common news item these days. Every week or so, a news item appears in the Watertown Daily Times concerning a wrongdoer who has embezzled from an employer or organization. The type of embezzlement is as different as the creativity of the wrongdoer. We will focus on wrongdoers who use their organization’s checking account to further their scheme. The wrongdoers could work for their employer or be volunteers of a nonprofit agency or any other organization. [Read more...]
Many state and local agencies tout what a great place New York is to start a small business. That may be true, but on closer examination of their advertising brochures, one small but important piece of the information is probably left out. The key information is Section 630 of New York Business Corporation Law. This section makes the top 10 shareholders of a corporation personally liable for the unpaid wages of the corporation. New York may be the only state in the country that has such a provision. The purpose of the statute is to protect the unpaid employees from being without a legal recourse for past-due salaries and benefits of an insolvent corporation. [Read more...]
So your business is expanding and you are selling goods or services beyond Jefferson County or even New York State. Suddenly you receive a letter from a large New York City law firm stating that the name or symbol associated with your goods or services infringes with another business’s trademark. Once your business expands and sells goods or services beyond Jefferson County, the more likely you are to run the risk of infringing on someone’s trademark.
Rather than owning real property as a place to conduct your business, perhaps leasing space is a better option. It is often said that real estate ownership is location, location, location; the same can be said about commercial lease property. There are many considerations and options that a business owner should evaluate when negotiating a commercial lease. New York courts do not offer the commercial tenant the same types of protection that are afforded to a residential tenant, since the courts view the commercial landlord and commercial tenant as economic equals. Consequently, a commercial lease agreement has more legal terminology than a residential lease. It is inevitable that a small business owner will see the legal terms of “lessor” and “lessee.” A lessor is the landlord and a lessee is the tenant.
Many times a small business owner does not pursue a bounced check or customer’s failure to pay an amount due, thinking that it is too expensive. By the time attorney’s fees and court costs are paid, the cost of collecting the debt far exceeds the debt itself. There is another option for a small business owner and that is filing an action in Commercial Claims Court. A Commercial Claims Court is the equivalent of small claims court for businesses. Commercial claims actions are limited up to $3,000, and a lawyer is not necessary. A commercial claims action can only grant a monetary judgment and cannot order or compel the defendant to perform any promise that was made in a contract.
On March 9, 2011, the New York State Department of Taxation and Finance changed its policy concerning personal tax liability of minority owners of LLC or limited partnership for unpaid sales tax. Under the prior policy, minority owners could be held personally liable for unpaid sales tax even if they played no role in the business’s operation or had knowledge of the deficiency. This policy often led to harsh results; take, for instance, the case of Joseph P. Santos.