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Tuesday, November 13, 2018

Fiduciary Responsibilities and Your Business

As a business owner, you have certain responsibilities that must be fulfilled. While being a sole proprietor gives you more leeway, business owners who use any other business formation must be familiar with fiduciary responsibilities. These obligations extend to corporate officers and even managers in some situations. So, what are fiduciary responsibilities for business owners and corporate officers?

What are Fiduciary Duties?

A fiduciary duty is a legal requirement that applies to anyone who has a relationship of trust with another person or organization. While fiduciary responsibilities extend to more than just the business context, they are often associated with corporations and partnerships.

Other examples of this type of relationship include:

  • Trustee and beneficiaries
  • Investment manager and participants in an investment plan
  • Banker and customers
  • Attorney and client

In these relationships, the fiduciary often accepts legal ownership or control of property or an asset that belongs to someone else. In the business context, corporate owners and managers have this type of obligation to stockholders and investors in the business.

An Overview of Fiduciary Responsibilities

Several duties apply to those in fiduciary roles. Below is a general overview of responsibilities that likely apply to corporate owners and officers.

  1. Obedience - Officers and directors must carry out their roles according to the requirements of the corporate bylaws, articles of incorporation, and other controlling documents. They are obligated to follow voting procedures and executed decisions made by the stockholders or investors. They must also fulfill their obligations under state and federal law.
  2. Loyalty - Business owners and officers  have a duty of loyalty to the corporation and their shareholders. This means they must  put the interest of the shareholders and the company ahead of any personal aspirations or goals. Any conflict of interest should be decided in favor of the business, and officers cannot use information gained in their roles in a way that would harm the company.
  3. Care - Diligence and care are essential duties in the corporate context. If corporate officers make decisions without thoroughly investigating the implications of those decisions, that could seriously endanger the company as a whole. They should act as prudent investors and decision makers and consider how the stockholders are affected in making virtually every decision involving the company.
  4. Good Faith and Fair Dealing - Officers, directors, and owners are required to act with honesty, fairness, and good faith in everything they do for the business. This requirement applies to daily operations of the company as well as significant decision-making functions. This duty dovetails with the obligations of obedience, loyalty and care.
  5. Disclosure - Those who make important decisions for the business must disclose relevant information about those decisions to others. The duty of disclosure is often referred to as a “duty of candor.”  Officers, owners, and directors not only have a duty to to their shareholders, but to the other key decision makers as well. There is also a duty to disclose potential conflicts of interest which coincides with the duties of loyalty, good faith and fair dealing.

The Takeaway

Given the significant fiduciary responsibilities associated with running a business, owners, directors, officers and managers are well advised to seek proper legal representation in fulfilling these important duties.


Tuesday, October 30, 2018

Quick FAQs: Overtime Laws and Exempt Employees


Most employees must be paid overtime if they work over 40 hours per work week based on a federal law called the Fair Labor Standards Act (FLSA). Most states, including New Jersey, Pennsylvania, and New York have their own version of the FLSA, often providing benefits greater than federal law.

Under the FLSA, overtime should be no less than one and one-half times the employee’s regular rate of pay. However, some employees are exempt from the Fair Labor Standards Act. These employees often do not receive overtime pay, but an employer can choose to pay for hours worked over a threshold amount if they so desire.


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Tuesday, October 16, 2018

An Overview of Foundational Corporate Documents

There are a number of steps involved in forming a corporation from selecting a name, obtaining the necessary licenses and permits, paying certain fees, and filing foundational documents with the appropriate state agency. While an attorney can help prepare and file the required papers, the owners, officer and directors should have a basic understanding of these documents.

Articles of Incorporation

The first underlying document is the Articles of Incorporation which states the corporate name, and the  purpose of the business. This is typically a generic statement to the effect that the corporation will conduct any lawful business in the state in accordance with its objectives.  In addition, the type and amount of stock that will be issued (common or preferred) must be established. This document should contain any other pertinent information, including the name and address of a registered agent.

Corporate By-laws

By-laws are the formal rules regarding the day-today operations of a corporation. This document outlines the corporate structure and establishes the rights and powers of the shareholders, officers and directors. By-laws specify how officers and directors are nominated and elected as well as their responsibilities. In addition this document should clarify how disputes among the parties will be resolved. By-laws establish where and when meetings will be held, whether quarterly, annually or at other times, what constitutes a quorum, as well as voting and proxy rules. Lastly, this document should also contain information on the issuance of shares of stock and other operational details.

Meeting Minutes

After the corporate existence has begun, an initial organizational meeting of the principals must be held in order to adopt by-laws, elect directors, issue stock, and to conduct any other business. All of these activities must be memorialized in meeting minutes, which must also be prepared during any subsequent meetings.

Stock Certificates

Stock certificates are the record of any stock that was initially issued.

Once these foundational documents are in place, a corporation is also required to keep complete and accurate books and records of account and must maintain a record containing the names and addresses of all shareholders. All of these documents may fall under different names and the applicable laws vary from state to state.

Because this is a complicated process and one that requires careful analysis, you are well advised to engage the services of an experienced business law attorney to help prepare and file the necessary foundational documents. 


Tuesday, October 2, 2018

3 Must-Ask Questions if You Are Considering Buying a Business


If you are considering buying a business, you need to ask several questions first. Getting the right information will be integral to determining whether this is a smart business decision for you. It will also help you decide how to best carry on the business after you have purchased it. You should ask the following questions before you commit to buying a company.

1.
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Thursday, September 27, 2018

Developing A Disciplinary Policy as an Employer


Very few employers like to discipline employees for misconduct or poor performance. However, it may be necessary to do so to prompt workers to fulfill their job duties appropriately or behave in a specific way. Establishing a disciplinary policy long before you need it will clarify your expectations of employees and also help you minimize legal liability for wrongful termination or similar claims. 

Identifying Common Problems with Employees

If you already have employees, establishing  a disciplinary policy may be a response to unacceptable conduct you are currently experiencing. While your policy can be designed to  specifically target those unwanted behaviors, common problems your disciplinary policy should address include at the very least:

  • Non-discrimination and improper treatment of other employees, customers, vendors, and visitors 

  • Attendance (including absences, tardiness, leaving early, or taking breaks too frequently)

  • Harassment, including but not limited to sexual harassment

  • Confidentiality and protection of company confidential information

  • Performance expectations

  • Theft

  • Safety

  • Training Requirements

  • Harassment

  • Equipment and material usage and waste

  • Alcohol or substance use on company property or on company business

  • Violence or threatening words or actions

Consider specific  actions that “cross the line” in each of these areas.


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Monday, December 18, 2017

Negotiating a Commercial Lease; What to Look For.


There are number of considerations for business owners involved in negotiating a commercial lease, not the least of which is the fact that the main objective of landlords is to maximize profits. By understanding the following fundamental concepts, it is possible to make a good deal.

Market Conditions

First, understanding the market conditions for commercial properties is crucial. Generally, pricing is based on square footage, but there is a difference between "usable" square feet and "rentable" square feet.

Rentable square feet is the actual measurement of the space that is being leased.
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Monday, December 11, 2017

Caution: Sexual Harassment in the Workplace -

Given the many high profile cases in the media over the past several months, it is crucial for any business to understand its responsibility to prevent sexual harassment in the workplace. However, most people do not know what constitutes sexual harassment. Some assume it applies only to behavior between people of the opposite sex. However, this is not true...sexual harassment can be found in same sex behavior. 

Generally, sexual harassment is deemed to be a form of sex discrimination under Title VII of the Civil Rights of 1964 (Title VII), and most states have far stricter laws in place designed to prevent harassment.

There are two types of sexual harassment: quid pro quo ("this for that") and hostile work environment.

  • Quid pro quo - This occurs when an employer, most often a person in a position of authority, demands sexual favors in exchange for a job or any other benefit of employment including promotions, bonuses and raises. An employee who is fired, disciplined, or given a poor performance evaluation, for refusing a sexual advance may be the victim of this form of harassment.
  • Hostile work environment - This involves an employee being subjected to a pattern of unwelcome conduct, such as comments or visual displays, that is severe or pervasive enough to create a distressing work environment and alter the conditions of employment.

Under federal law and most (but not all) state statutes, In order to have grounds for a claim the employee must demonstrate that he or she believed the conduct was offensive or hostile. It is also necessary to show that a reasonable person in the same position would believe the conduct was hostile. Finally, the employee must prove that he or she complained to a supervisor or someone else in a position of authority and that the employer failed to take action to stop the harassment.

Before filing a federal lawsuit, the employee must file a complaint with the Equal Employment Opportunity Commission (EEOC). This is referred to as "exhausting administrative remedies" and is required if the employee wants to avail him or herself of protections afforded by federal law. If the matter is not resolved at the EEOC level, a "right to sue" letter is issued and a civil lawsuit can then be filed.

State laws may differ. For example, in New Jersey under the Law Against Discrimination (LAD), an employee can file a sexual harassment lawsuit in state court without first filing a complaint with the New Jersey Division on Civil Rights. Attorneys often recommend doing so as the remedies available under the NJ LAD may be better than under federal law or the employer may not be covered by federal law because it has too few employees.

In short, all employees have a right to a workplace that is free from sexual harassment. It is crucial for any business to establish policies to prevent such conduct, and institute procedures to address any employee concerns. Ultimately sexual harassment is bad for business because it can create a toxic work environment that adversely impacts employee morale. Moreover, a lawsuit can not only lead to a costly settlement, but also damage a company's reputation.

If you believe you are the victim of sexual harassment or any form of discrimination on the basis of your gender, gender identity, or sexual orientation, do not wait and hope "it will go away" on its own. Contact an employment law firm, such as The Law Office of Randall P. Brett, to discuss your situation and what can be done.

If you are an employer, do not tolerate any form of harassment, whether sexual or not (including bullying). Contact an experienced employment law firm, such as The Law Office of Randall P. Brett, to review your policies and procedures and provide guidance regarding permissible supervisor behavior and management responsibilities. 


Thursday, December 7, 2017

Franchise Agreements - What, Why & How

A franchise agreement is a contract that governs a franchise relationship.  These agreements are entered into by the franchisor, the entity that owns the business model, and the franchisee, the individual or entity that will run a location of the business.  While the terms of each contract are unique to the particular deal, most include similar provisions. 

Most franchise agreements will include provisions describing where the franchise will operate and whether that territory is exclusive.  The agreement will also detail how long the franchise relationship will last.

These contracts will most likely include terms regarding franchise fees and royalties the franchisee will have to pay the franchisor.  The agreements will also usually contain provisions relating to how the franchise is to be run on a day to day basis, including details as to what training is to be provided by the franchisor.

Terms relating to intellectual property owned by the franchisor are very important in franchise situations.  Franchise agreements include provisions instructing how patents, trademarks and copyrights can be used by the franchisee.  Advertising terms are also usually included in these contracts as it is likely that the franchisee will have to contribute toward advertising costs.

Termination and renewal terms are also essential parts of a franchise agreement.  These detail how the franchise relationship can be ended before the natural expiration and how the relationship can be revived if the parties so choose.  It is also common to find terms relating to disputes that may arise between the franchisor and franchisee and how these disputes are to be resolved.  This is where alternative dispute resolution and choice of law clauses may be utilized.  Terms relating to the resale of the franchise might also be present, as many franchisee’s have this option, although there may be a right of first refusal clause accompanying it.  This would provide the franchisor with the option of buying back the franchise before anyone else.

Franchise agreements determine all of the details of the franchise relationship and therefore must be clear and understood by all parties.  They can often be complex and it is therefore of the utmost importance to consult with a business law attorney who has experience with franchise law to advise you and negotiate with the franchisor. The Law Office of Randall P. Brett has assisted many entrepreneurs in evaluating and launching new businesses, including franchises.


Tuesday, May 30, 2017

Negative Online Reviews - Do They Constitute Business Defamation?

We are living in the digital age and consumers use the internet to make a variety of decisions, including what products to buy and what professionals to hire. During their research,  many savvy consumers go online to look at the reviews the business has received on local business directories like Yelp or Google+.  These online reviews can have a profound effect on the success of your business so it is important to understand your rights should your business receive a negative one. 

In the case that your business has received a negative online review, you may have recourse under state or Federal defamation laws.  However, before pursuing that route, you should consider using any dispute or review process provided by the review site.  Defamation is generally defined as the act of intentionally publishing a false statement that has the ability to negatively effect another’s reputation.  Defamation laws protect individuals and businesses alike.  Publication is the communication of the defamatory statement to another person and the act of posting a review to a website usually qualifies.  Whether a statement has a negative effect on another’s reputation is judged using a reasonable person standard and will be looked at on a case by case basis.  In order for the statement to actionable, it does not have to be intentionally defamatory; it just has to be intentionally published.  Defamatory statements must be false and cannot be opinions.  Whether your situation meets the necessary threshold for defamation may be difficult to ascertain, so it is important to consult with a qualified attorney before pursuing a claim for business defamation.

If you believe that your business has received an online review that contains false information and is damaging to your business reputation, you might have a claim for defamation.  Recent civil cases for this type of wrong have resulted in large verdicts for the businesses that were injured.  While you most likely cannot pursue an action against the hosting website, as they are usually exempt under the Digital Millennium Copyright Act (DMCA), you might be able to recover from the individual that made the statement.  All litigation should be considered using a cost-benefit analysis and business defamation cases resulting from online reviews are not any different.  


Tuesday, April 11, 2017

Why Your Business Needs an Email Policy.


In the contemporary workplace, email is an essential and efficient form of communication. Whether it is used internally among staff members, or for exchanges with vendors and customers, email is a necessary business tool. At the same time, misuse of this technology can expose an organization to legal and reputational risks as well as security breaches. For this reason, it is crucial to put a


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Tuesday, April 4, 2017

Entrepreneurial Immigrants: Building the American Dream.

The American Dream of starting your own business and pulling yourself up by your bootstraps is alive and well. If you are an immigrant and are considering starting a business in your new homeland, there may be a number obstacles ahead of you.
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