April 2015: Business Law

Maintain clear shareholder pacts

Columnist Larry Covell

Columnist Larry Covell

In February’s column, I discussed options of an owner who wants to withdraw from a Limited Liability Company when there is a falling out between any of its members. If the LLC operating agreement has contract language on member withdrawal, the matter is easy since the method has been established. However, when an operating agreement fails to address it, the member who wishes to withdraw faces an uphill legal battle. [Read more…]

February 2015: Business Law

Review LLC operating agreements

Columnist, Larry Covell

Columnist, Larry Covell

As a result of changes in the Limited Liability Company law and a recent court decision, members of LLCs should review their operating agreement to determine if revisions are necessary. [Read more…]

Understand risk of loss to cut costs

Larry Covell

Larry Covell

Shipment of goods by common carrier can be a major part of small business transactions. The goods could be manufactured, inventory for resale, or office equipment. One key concerns that a small business owner should be aware of in shipment of goods is risk of loss.
Many risks are unforeseen such as weather, fire or theft; and the loss may not be covered by the business owner’s insurance policy or if the loss is covered, the policy may be insufficient to cover the entire amount. If the value of the shipped goods is insufficient, there is little impact on business operations. However, if the value of the goods is significant, the loss could seriously impact the survival of the business. [Read more…]

Secure working capital with new tool

Larry Covell

Larry Covell

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…]

Express warranties certify standards

Larry Covell

Larry Covell

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…]

LLPs a good choice for some entities

Larry Covell

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…]

Family firms have much to decide

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…]

Safeguard your company from theft

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…]

Shareholders liable for unpaid wages

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…]

Are you infringing on a trademark?

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.

[Read more…]