A few weeks ago I wrote about the concept of piercing the corporate veil. I received an e-mail asking what happens when someone breaches a contract he signed that included a personal guaranty. Short answer – get a lawyer. Here’s the long answer…
A personal guaranty is sometimes required for a contract. Commercial landlords often require one before leasing space, as do banks when issuing lines of credit. The terms of the guaranty are usually set forth in a separate section of the contract, or sometimes in an entirely separate contract. Personal guaranties are signed by someone not in his capacity as a business owner, but in his capacity as an individual. This is a significant difference and you should be aware of the implications when you’re asked to sign
Continue reading Personal Guaranty – Taking Scissors to the Corporate Veil
Virtual offices and executive suites provide a fantastic alternative for business owners who want the trappings of an office without the significant overhead. As beneficial as these arrangements are, they can leave clients high and dry if the virtual office owner stops paying rent.
There are three rungs on this particular ladder:
Virtual Office/Executive Suite Owner (VOO)
Virtual Office/Executive Suite Client (VOC)
The VOO rents space from the building owner and their relationship will be set forth in a lease agreement. Similarly, the VOC rents space from the VOO and their relationship is set forth in a lease or license agreement. Things get tricky when the VOO stops paying rent and the building owner evicts the VOCs. Unless a VOC’s
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Yes. The End.
The IRS, business license bureaus, taxation departments, and sometimes secretary of state offices require an identifying number for your business. Without an EIN, your social security number is used, which causes identity theft concerns. Also, obtaining an EIN is another way to distance yourself from your business in the interest of keeping your corporate veil intact.
The IRS provides a quick and simple way of obtaining a separate identifying number for your business, called an Employer Identification Number. The application takes only a few minutes, the process is free, and most banks require the number to open a business account.
So what are you waiting for? In the immortal words of Toy Story’s Woody, “if you don’t have one, get one!”
Last week I met with a small business owner whose registered agent had access to her business bank accounts. A short investigation revealed this particular registered agent had formed dozens of corporations and named himself secretary, giving him access to the bank accounts. We quickly dissolved the corporation and reformed an LLC with no one but the business owner having access to the company’s money.
Registered agents are required for businesses but serve a very limited purpose – they provide a physical location where a human being can accept service (lawsuits and official papers from the state or taxation departments) on behalf of the company during business hours. The business owner can act as his or her own registered agent, but it may be difficult to ensure someone is available either
Continue reading What Does a Registered Agent Do?
I make spanakopita, a Greek appetizer, every New Year’s Eve. It keeps for a few days, reheats well in a toaster oven, and saves me from having to cook New Year’s Day when I just want to sleep in. This is especially important this year because tonight I am breaking out the margarita machine I got for my birthday.
I believe the traditional recipe calls for spinach, which always tastes gritty to me, no matter what kind of spinach is used. And requires it to be layered like a lasagna in a baking dish, which lacks the flaky deliciousness of phyllo dough. I thought I’d share my recipe for your NYE celebration.
The trick to working with phyllo dough is to thaw it in the refrigerator, unroll it onto a
Continue reading Spanakopita – My New Year’s Eve Tradition
The holidays are almost over and you’re looking forward to the new year. You may have taken some time off in December to spend with family and friends and your business has taken a back seat. In a day or two it’s time to get back into the swing of things. For the new year, what should you do with your business?
Make sure you’ve attended to all your corporate formalities – holding an annual meeting and putting your minutes in your corporate book, assembling all your receipts and records for your accountant, and making any last-minute charitable contributions. But what about the bigger picture?
First, take a few minutes to clear your head of any negative thoughts about the previous year. We all make mistakes and it’s important to
Continue reading Year End Tips for Small Business Owners
Um…with a pen?
Seriously, though. It sounds simple, but you should consider the implications of how you sign documents on behalf of your company. As a business owner you have a split personality. In any situation, you will be either Jane Doe The Individual or Jane Doe The Business Owner. Before you sign something that involves your company, think about the role you’re playing. If you simply sign your name, the party on the other side, namely a creditor, will try to pierce the corporate veil and come after your personal assets.
As a simple yet effective way of helping prove you are consistently treating your company as a separate legal entity, you should sign documents binding the company like this:
Jane Doe, as [Title] of [Company, Entity
Continue reading How Do I Sign Company Documents?
No, it doesn’t involve a safety pin or have anything to do with a wedding. This is one of those often-used yet rarely-explained phrases that every small business owner should understand.
If formed and managed properly, corporations and LLCs are treated as legal entities separate from their owners. This is why we business lawyers are constantly nagging sole proprietors to form a legal entity. Doing so allows the business owner to protect his or her personal assets from lawsuits against the company. Without a legal entity, a sole proprietor’s home, bank accounts, cars, etc. can be lost in court. The formal legal entity, such as a corporation or LLC, provides a “veil” of protection between the company’s assets and those of the business owner.
But it’s not enough just
Continue reading What Does “Pierce the Corporate Veil” Mean?
I often speak with business owners who are ready to hire workers. While this is a big step for a small business, many owners believe they can avoid paying employment taxes simply by calling these workers independent contractors. I hate to be the bearer of bad news, but calling them independent contractors does not necessarily make them independent contractors. This issue is particularly important now, because the IRS is cracking down on companies who aren’t paying taxes on workers that are actually employees.
How do you determine whether your worker is an independent contractor or an employee? One word: control. If the employer has it, the worker is an employee. If the employer doesn’t, the worker is more likely an independent contractor. The IRS considers three aspects of the employer/worker
Continue reading Hiring: Employee or Independent Contractor?
Last week I was on the panel for a continuing legal education class at the UNLV Boyd School of Law called “How to Start a Law Practice.” The audience was comprised of law students, recent graduates, and licensed attorneys. We had a good turnout either because of widespread layoffs in the legal profession or because all the lawyers had just received notice of a shortage in their CLE credits for the year. I’m going to suspend reality for the purpose of this article and assume everyone was truly interested in the topic and not just the CLE credits.
The five lawyers on the panel represented a diverse mix. On one end of the spectrum was the alum who, in four years, built a solo practice into an eight attorney personal injury
Continue reading Lawyers Are Business Owners Too