Can I convert my business?

  Dear Clients, Friends and Colleagues, Very often, liability can be reduced or the financial and operational goals of business owners can be better achieved by changing a company’s legal structure, e.g., general partnership (GP) to limited liability partnership (LLP), for-profit corporation to non-profit corporation, corporation to limited liability company (LLC), etc. There are a number of ways a company can change its structure. Consider the following brief summary of the more widely used methods for transforming companies... One-Step Transformations... At times, a transformation can be achieved without the separate transfer of assets or ownership interests. Conversion. In recent years,…Continue Reading

Are your workers properly classified?

Both large and small companies are suffering serious consequences for misclassifying individuals who they compensate for services. Consider the following... Employee or Independent Contractor? One who is compensated for providing services to another is either an employee or an independent contractor. If the service provider is an employee, the employee receives the benefit of, and the employer incurs costs associated with, the employer's obligation to pay employment related federal and state taxes, the employer's obligation to provide worker's compensation insurance coverage, the employer's obligation to fund income stability programs such as mandatory unemployment compensation and disability insurance, and the employee's…Continue Reading

You’ve been sued… via Facebook. Like That!

The process... When someone is sued, the procedures for "serving" the defendant (i.e., the procedures for delivering court papers to the person being sued) are stated in court rules. Traditionally, "personal service" (i.e., the act of hand-delivering the papers to the defendant) is the preferred method. Court rules provide alternative methods for service when personal service cannot be achieved. As a last resort, a court may specify a procedure for service. A New Jersey trial court recently allowed service by Facebook! The case... The plaintiffs were the parents of a teenager who was receiving disturbing and suspicious communications via Facebook…Continue Reading

Keep Your Companies Separate!

Are your companies too close for comfort? A recent New Jersey case illustrates the principle that New Jersey courts may have jurisdiction over business entities if they "lead a double life" in New Jersey. Consider the following... The Case The facts of the underlying case are simple enough. Tyler Bell ("Bell") personally guaranteed a loan made by Investors Bank ("Investors"). As part of its collection efforts, Investors obtained a judgment against Bell as well as an order directing that a portion of Bell’s income be paid over to Investors to satisfy the judgment. Here’s where things get a bit unwieldy.…Continue Reading

A partnership with one partner?

The Case of the Departing Penultimate Partner Can one hand clap? There are many disadvantages associated with structuring a business as a general partnership. One disadvantage is that, unlike limited liability companies and corporations, the departure of one of the remaining two owners will, in all likelihood, result in the dissolution of the company and will, in all certainty, create legal and practical challenges. Consider the following... The general partnership... A general partnership (“partnership”) is a for-profit business entity that is formed by the mere joining together of the co-owners rather than the filing of a document with a state commercial…Continue Reading

Should I transfer my home to an LLC?

I am often asked whether to transfer residential property into a limited liability company (LLC). Consider the following... Why transfer residential property to an LLC? It is not uncommon for an individual or a group of individuals to derive rental income from residential property such as a vacation home, a shore house or multifamily house. Like any business endeavor, if the property is owned by an individual (i.e., sole proprietorship) or a group of individuals (i.e., a general partnership), the owner(s) face unlimited personal liability for debts that arise in the course of operating the property. As a general rule,…Continue Reading

Why do so many (large) companies choose to incorporate in Delaware?

Many are surprised to learn that the chief reasons are unrelated to taxation. In fact, they are... 1. The Statute. The Delaware General Corporation Law is regarded as relatively flexible, which allows great ability to structure the relationship between a corporation's shareholders (i.e., owners), directors (i.e., managers) and officers (i.e., executive agents). 2. The Case Law. Given the age of Delaware's corporate law and the large number of Delaware corporations, there are many reported cases law interpreting corporation law and resolving difficult questions. 3. The Courts. The Delaware courts are regarded as being comprised of judges who are very knowledgeable in…Continue Reading

Changing Your Company’s Structure

Very often, liability can be reduced or the financial and operational goals of business owners can be better achieved by changing a company’s legal structure, e.g., general partnership (GP) to limited liability partnership (LLP), for-profit corporation to non-profit corporation, corporation to limited liability company (LLC), etc. There are a number of ways a company can change its structure. Consider the following brief summary of the more widely used methods for transforming companies...  One-Step Transformations... At times, a transformation can be achieved without the separate transfer of assets or ownership interests. Conversion. In recent years, a variety of one-step conversion approaches…Continue Reading

Does clicking “I’ve read” mean “I agree”?

IT SEEMS TO. In a recent case, a United States appeals court ruled that, an employee who checked “I’ve read the agreement” on an “web-based” non-compete agreement and subsequently accepted the benefits of the position, is deemed to have “accepted” the agreement as well. The court rejected the employee's argument that acknowledging that the agreement was read does not mean the employee agreed to its terms. The court also held that the fact the employee didn’t remember having read the agreement is immaterial. ADP v. Lynch (2-16-cv-01053). DISCLAIMER: This BLOG post is provided solely for the general interest of the…Continue Reading

Minors as LLC members

An "owner" of a limited liability company ("LLC") is referred to as a "member." Is it possible (or wise) to have a limited liability company whose members include a minor? Consider the following... LLC members' interests and rights... As a starting point, New Jersey's LLC Act does not expressly preclude a minor from being a member of an LLC. The Act defines "member" as a person having been admitted into the LLC. The Act further defines the term "person" to include an "individual"---without any qualification based upon age. An LLC member typically receives an "interest" in the LLC—namely, the right…Continue Reading