The High-touch Legal Services® Blog • For Startup Companies » General Legal

Attention Entrepreneur: Have You Planned Your Estate?

Dana — Fri, 08 Jul 2011 19:09:11 +0000

I frequently talk to individuals who are about to start new businesses. Sometimes, our conversation reveals that the nascent entrepreneur is:

Age 30-something,
Married, and
Parent of a young child, or has a first child on the way.

When I learn this, I immediately ask, “Have you done any estate planning?” The answer invariably is “No.”

My response, then, often is, “At this point in your life, estate planning is even more important than starting your business. Tend to that, first.”

Everyone should have an estate plan, but the need is especially great once you have a child, and even more so if you are the family’s principal wage earner.

Estate planning need not be complex or expensive if one has limited financial means. There are many free resources to help you get pointed in the right direction. For example, the State Bar of California page about wills, trusts and estates discusses such questions as:

Do I need a will?
Do I need estate planning?
Do I need a living trust?

In addition, Nolo’s Wills, Trusts & Estates Center provides a great amount of information, plus books and form documents for do-it-yourself estate planning.

Starting a new business takes a lot of time and energy, but it is no excuse for failing to provide protection against the worst for your family.

Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.

Re-incorporation Won’t Save Amazon Affiliate from Termination

Dana — Thu, 07 Jul 2011 00:20:00 +0000

This post is based on a question that I answered on LawPivot: Q. I have a web business that has been adversely affected by the termination of Amazon’s affiliate program in California, where I currently run the business, resulting from the state’s new sales tax law. Does each state have its own requirements as to what constitutes “doing business” in that state, and is there any way I could maintain CA as my primary place of residence, were I to incorporate in a different state?

A. I believe your question about doing business is misdirected. While each state does have its own definitions of doing business (see When “Doing Business” isn’t “Doing Business”), other states’ definitions will not affect your relationship to CA: If you continue to run the business in CA, you will need to register in CA. More important, as shown in the following termination notice, Amazon is cutting off CA residents – and you still will be one:

When “Doing Business” isn’t “Doing Business”

Dana — Tue, 05 Apr 2011 03:31:08 +0000

Significant responsibilities or liabilities can depend on whether one is “doing business” in a state. As this post explains (principally referring to California law for examples), “doing business” can mean three different things in three different contexts.

First, an out-of-state entity will need to register with a state as a “foreign” entity if it is doing business in the state. As explained in “Doing Business in CA? Be Sure to Register”, the term used in the California Corporations Code is to “transact intrastate business”, which is defined as “entering into repeated and successive transactions of its business in this state, other than interstate or foreign commerce” (emphasis added).

Second, one will need to pay taxes to a state if it is doing business in the state. The term used in California Revenue and Taxation Code Section 23101 is whether a business is “actively engaging in any transaction for the purpose of financial or pecuniary gain or profit” (emphasis added).

Third, one will be subject to personal jurisdiction in a state (i.e., one can be sued there) if one is doing business in the state. The test set forth in California Code of Civil Procedure Section 410.10 is the broadest one that is legally possible: “A court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States” (emphasis added).

Interestingly, the limit of what is consistent with the U.S. Constitution is discussed in New York Department of State Legal Memorandum CO01, which addresses the three tests for “doing business” in New York:

The classic statement of that principle is that for a state to assert jurisdiction the defendant must have “certain minimum contacts . . . such that the maintenance of suit does not offend traditional notions of fair play and substantial justice.” International Shoe Co. v. Washington. A party subjects itself to jurisdiction consistent with traditional notions of fair play and substantial justice when it “purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws.” Hanson v. Denkcla. Conducting activities without the state that are purposefully directed at the forum state also satisfies the constitutional standard. Burger King Corp. v. Rudzewicz. The defendant’s conduct and connection with the forum state must be such that he should reasonably anticipate being brought into court there. World-Wide Volkswagen v. Woodson. [Citations omitted.]

Bottom line: If you want to know what constitutes doing business in a state, be clear on why you are asking the question.

Photo credit: Rose Ann via stock.xchng

Paid Online Endorsements – It Appears that Amazon.com Cares, Too

Dana — Thu, 24 Feb 2011 23:38:47 +0000

About a year ago, in” Educate Employees about Online Endorsements – the FTC is Watching!” I discussed the Federal Trade Commission’s Guides Concerning the Use of Endorsements and Testimonials in Advertising. It appears that at least one online site – Amazon.com – may be taking the FTC’s guidelines pretty seriously.

A prospective client called me recently. She was upset because many of the book reviews she had written on Amazon.com – which were paid for by authors – had been removed on at least two occasions.

I asked whether the reviews stated that they were paid for by the authors. She said “No.” I asked whether she was familiar with applicable FTC guidelines. She again said “No.”

I pointed out that FTC regulations, to protect consumers, require that the reviewer disclose that the review was written for payment. And while I did not know why her reviews were removed, violation of the regulations could be ample reason for removal.

Amazon.com’s Conditions of Use state that “Visitors may post reviews … so long as the content is not illegal ….” Furthermore, “Amazon reserves the right (but not the obligation) to remove or edit such content ….”

I felt badly for the caller. A significant portion of her business was at serious risk. And if she complied with the FTC’s guidelines by explaining that reviews were being paid for, they probably would be removed, anyway.

Bottom line: While the Internet provides plenty of ways for dishonest people to to carry out their schemes with anonymity, those of us who want to run legitimate businesses must be prepared to satisfy an ever-increasing demand for honesty and transparency.

What is the Difference between a Lawyer and an Attorney?

Dana — Tue, 15 Feb 2011 02:04:01 +0000

From time to time – most recently on Quora – people ask what the difference is between a lawyer and an attorney. Here is what I was taught many years ago….

Although most people (including, it appears, most lawyers) treat the terms as synonyms, they can have different meanings:

“Lawyer” denotes a profession (I am a lawyer).
“Attorney” denotes the relationship of a lawyer to his or her client (as an attorney I represent my clients).

I recently pulled my decades-old Black’s Law Dictionary off the shelf. (Yes, sometimes there is information that is better researched in printed form rather than online.) It cites case authority stating the “lawyer” and “attorney” are synonymous.

However, the dictionary also provides the the following definition for “attorney”: “In the most general sense this term denotes an agent or substitute, or one who is appointed and authorized to act in the place or stead of another.” It then explains specific uses of the word – attorney at law, attorney in fact, etc. – and, thus, supports the distinction made above.

Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.

What If I No Longer Need My DBA?

Dana — Wed, 09 Feb 2011 04:31:43 +0000

Let’s assume that you have been doing business under a fictitious business name (also known as a DBA for “doing business as”). You are about to shut the business down, so you would like to get rid of the DBA as part of you effort to minimize the likelihood of any ongoing obligations or liabilities. How can you do this?

In California, the answer is provided in the Business & Professions Code. Section 17920(c) says (emphasis added) “A fictitious business name statement expires when the registrant files a statement of abandonment of the fictitious business name described in the statement.”

Section 17922 prescribes the information that must be included in the statement of abandonment, which typically can be found on the county clerk’s website.

Related post: When should I apply for my DBA?

No, You Can’t Marry a Corporation

Dana — Thu, 04 Nov 2010 00:28:15 +0000

Now for something on the lighter side, a Quora question and my answer: Q. If marriage is a constitutionally protected right between people, and corporations are guaranteed the rights of a person, is it possible to marry a corporation? (Emphasis added.)

A. No. Marriage is reserved for natural persons (let’s not get into which pairs of natural persons). Corporations and other business entities are artificial persons.

Photo credit: Andrew C. via stock.xchng

Why I Founded the Bay Area Business Attorneys Network (BABAN)

Dana — Mon, 25 Oct 2010 18:12:39 +0000

A friend who knows that I am founder of the Bay Area Business Attorneys Network said she was surprised that I had not written about BABAN on my blog. This post corrects that omission.

When I started my law practice in 2004, a marketing consultant recommended that I form an organization with other lawyers. The objective: Obtain referrals.

I formed BABAN a few months later. Membership is limited to solo and small-firm lawyers who serve business clients. We started with four members, and now have 14.

While I have, indeed, obtained referrals, BABAN is far more valuable to me for another reason: Although there are many ways I can help startups and other small businesses (please see the Services page), I now have a group of trusted colleagues to whom I can refer clients who have needs in areas I do not address, such as:

Immigration
Insolvency and bankruptcy
Labor and employment
Litigation
Mediation
Patents
Real estate
Securities
Taxation
Trademarks

In summary, BABAN helps me do what I do best: Apply the law to solve clients’ business problems.

Why Your Lawyer Need Not Sign an NDA

Dana — Mon, 11 Oct 2010 22:10:12 +0000

Once in a while, when I send an engagement letter, the prospective client wants to add confidentiality provisions to protect its trade secrets. The following is the explanation that I provide as to why such provisions – let alone a separate nondisclosure agreement (NDA) – are not required in an attorney’s engagement letter.

California Business and Professions Code Section 6068 specifies the fundamental obligations of an attorney. Subsection (e)(1) states that each attorney must “maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client.” (Emphasis added.) Attorneys in other states have similar obligations.

This standard is much more stringent than the obligations set forth in the typical NDA. See, for example, the Sample Mutual and Unilateral NDAs available as Free Downloads using the Sign Up button in the sidebar.

Interestingly, the attorney’s obligation to maintain client confidences may arise even if no attorney-client relationship is created! The State Bar of California’s Formal Opinion No. 2003-161 states this situation can occur if “the attorney’s words or actions induce in the speaker a reasonable belief that the speaker is consulting the attorney, in confidence, in his professional capacity to retain the attorney or to obtain legal services or advice.” (Emphasis added.)

Presenting “Social Media for Lawyers” at State Bar Annual Meeting

Dana — Thu, 23 Sep 2010 18:43:57 +0000

On Saturday (September 25), at 2:15 pm, I will be on a panel presenting “Social Media for Lawyers” at the State Bar of California’s 2010 Annual Meeting. With 25% of my new clients during the past year coming directly from my online activities, I have been asked to help fellow lawyers understand that the law must be practiced with an eye on the future, rather than being stuck in the past.

As the sole business / transactional lawyer on the panel (Mark Ressa practices family law, and Brett Burlison is a personal injury lawyer), I have a different perspective from that of my colleagues. The topics that I will discuss include:

Blogging successfully
Using social media sites (LinkedIn, Avvo) to generate blog traffic
Developing an effective social media methodology (why, who, what, where, when, how)
Complying with ethical requirements (testimonials, confidentiality)

* * *

Follow-up: What Lawyers Want from Social Media discusses what I saw and learned at the session and provides access to our PowerPoint slides.