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Wednesday, October 6th, 2010
Maryland law does not require that a sole member limited liability company (“LLC”) have an existing, enforceable operating agreement on file. Nevertheless, there is an excellent reason to draft and execute one: by executing an LLC operating agreement, the single member of the LLC has drawn a line of protection guarding that person against personal liability for the business debts and obligations of the LLC.
Specifically, Maryland courts have held that the protection from liability that exists by virtue of the LLC’s formation can disintegrate if the LLC fails to observe certain corporate formalities. One of these formalities is the existence of a valid operating agreement. Having an operating agreement in place can protect the single member from liability when a third party attempts to sue the individual member in order to satisfy an obligation resulting from a debt of the LLC.
Without an operating agreement, it may prove more difficult for the sole member to avoid liability. Courts sometimes blur the line between a sole member LLC with its protection from liability for its individual owners, and a sole proprietorship where such protection does not exist. However, this line becomes more clear cut, and courts will as a result hesitate to “pierce the corporate veil” and hold an individual liable for the LLC’s debts, when corporate formalities like having an operating agreement are complied with.
Posted in business law, Uncategorized | 1 Response »
Tags: benefits of LLC, business contract review, business formation, business law, business name registration, business start up, corporate bylaws, corporate formation, corporate start up, limited liability company operating agreement, limited liablity company, LLC, llc agreement, llc operating agreement, maryland business, maryland business law, operating agreement, partnership agreement, shareholder agreement, shareholder dispute, shareholders' agreement, single member limited liability company, single member llc, small business, small business attorney, small business lawyer, small business needs
Tuesday, August 24th, 2010
Click this link to view an excellent powerpoint presentation discussing the application process for Maryland Minority Business Enterprise status as found on the Maryland Transit Administration website:
http://mta.maryland.gov/business/advertisingwithmta/MBE%20Certification%20Power%20Point%20Presentation.pdf
Please contact me if you need assistance with your MBE certification.
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Tags: business formation, business incorporation, business law, business name registration, business start up, corporate formation, corporate start up, DBE application, DBE certification, government contracting, government contracts, limited liablity company, maryland business, maryland business law, maryland government contracting, MBE, MBE application, MBE certification, MBE/DBE, minority business, minority business enterprise, minority owned business, montgomery county government contracting, operating agreement, shareholder agreement, small business, small business attorney, small business lawyer, small business needs, woman owned business
Tuesday, August 24th, 2010
If you are a minority-owned business, (at least 51% owned by a member(s) of one or more of the following groups: African American/Black, Female, Asian Pacific, Hispanic, Subcontinent Asian, American Indian/Native American?), and you wish to do business with Montgomery County, the State of Maryland, or the federal government, you should consider filing for MBE/DBE certification. The following is from the Maryland DOT website:
The Maryland Department of Transportation’s (MDOT) Office of Minority Business Enterprise has two primary functions: Minority Business Enterprise (MBE)/Disadvantaged Business Enterprise (DBE) certification for the State of Maryland and the administration and coordination of the MBE and DBE programs within the MDOT administrations.
To ensure that only bona fide MBEs/DBEs participate in the programs, Maryland has a comprehensive certification program. Only those businesses determined to be owned and controlled by socially and economically disadvantaged individuals are certified. A firm designated as an MBE and/or DBE will have its name appear in the MBE/DBE Directory, a reference document made available on the Internet to all State departments/agencies, the contracting community and the general public.
Recognizing that the potential for MBE/DBE participation is dependent upon several variables, each MDOT administration examines its respective contracts/purchase orders and establishes specific goals on a contract-by-contract basis. Procedures are followed to assure that an award of a contract is not made until a prime contractor has met the MBE/DBE goal(s) or has demonstrated a good faith effort to meet the MBE/DBE goal(s).
After a contract has been awarded, MBE/DBE participation is closely monitored by key personnel within each administration. Monitoring includes a review of the subcontract financial transactions, and visits to the job-site to verify actual work being performed by the MBE/DBE firm. The standards for MBE/DBE compliance are spelled out in the MBE/DBE Program Manual. Any deviation from compliance standards is documented and if it is not corrected, sanctions may be applied against the contractor and subcontractor(s). The MBE/DBE Program Manual identifies the sanctions which may be instituted.
Periodically, MDOT revises the MBE/DBE Program Manual for improvements and to include any applicable changes in federal and/or State regulations or laws. Persons having an interest in the program may find this guide helpful in understanding MDOT’s MBE/DBE Program. Copies of the complete Program Manual are available online in Adobe PDF format or at the following address for a nominal fee:
Maryland Department of Transportation
Office of Minority Business Enterprise
7201 Corporate Center Drive
Hanover, MD 21076
410 865-1269 or 1-800-544-6056
TTY 410 865-1342
http://www.mdot.maryland.gov/
To view the Uniform Certification Application to get certified as a Maryland minority-owned businesses, click:
http://www.mdot.maryland.gov/MBE_Program/Documents/DEEO-50%20Uniform%20Certification%20Applic.pdf
To see what documents need to accompany the application, click the following if you are a corporation:
http://www.mdot.maryland.gov/MBE_Program/Documents/Checklist-CORP0710.pdf
Click the following if you are a limited liability company (LLC)
http://www.mdot.maryland.gov/MBE_Program/Documents/Checklist-LLC0710.pdf
If you need assistance with your MBE application, please contact me.
Posted in business law | No Responses »
Tags: business formation, business law, business lawsuit, business name registration, business start up, corporate formation, corporate start up, DBE certification, government contracting, government contracts, maryland business, maryland business law, MBE application, MBE certification, MBE/DBE, minority business, minority business enterprise, minority owned business, shareholders' agreement, woman owned business
Tuesday, August 24th, 2010
Many of my woman-owned business clients want information dealing with the certification process in order for their businesses to get certified in Maryland as a woman-owned business.
If you are a woman-owned business and you want to do business with Montgomery County or the state of Maryland, check out the following link from the Montgomery County Department of Economic Development website which contains a ton of useful information:
http://www.montgomerycountymd.gov/dedtmpl.asp?url=/content/ded/ tech_transfer/bew_resources.asp
As you will see, the available information is extremely beneficial, including information on business coaching roundtables, networking events, the local small business reserve program, the technology women’s network, and of course, how to get the certification process started as a woman-owned business.
If you need assistance with the woman-owned business certification process, please contact me.
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Tags: business formation, business incorporation, business law, business start up, corporate formation, corporate start up, DBE, DBE application, DBE certification, Disadvantaged Business Enterprise, government contracting, government contracts, limited liablity company, LLC, maryland business, maryland business law, maryland government contracting, MBE, MBE application, MBE certification, MBE/DBE, minority business, minority business enterprise, montgomery county government contracting, operating agreement, shareholder agreement, small business, small business attorney, small business lawyer, uniform certification application, woman owned business, Women's Business Enterprise
Wednesday, July 28th, 2010
Start-up companies many times do not know the extent of their legal and other needs after forming a business. The drafting and filing of Articles of Incorporation or Articles of Organization are just the beginning of your company’s service needs. I recommend that each new business owner immediately reach out to establish relationships with the myriad of services providers your business needs, now and in the future. Such service providers include many of the following:
– a corporate law attorney specializing in employment, contracts, intellectual property, litigation and other corporate issues;
– a CPA for your business accounting and tax services;
– an insurance broker for your business liability, E&O, and other insurance needs;
– a banker with whom you have a personal relationship with;
– a financial advisor for your 401K, retirement and other accounts;
– an IT services firm to be on call for your computer networking needs;
– a payroll company to handle weekly payroll and taxes for your employees; and
– a company to develop your website, and then focus on your internet advertising, search engine optimization, and other advertising needs in order to properly publicize your business over the internet.
Please don’t hesitate to contact me should you need referrals in any of the above areas.
Posted in business law | No Responses »
Tags: breach of contract case, breach of contract lawsuit, business breach of contract, business contract review, business formation, business incorporation, business law, business lawsuit, business litigation, business name registration, business start up, corporate bylaws, corporate formation, corporate litigation, corporate start up, limited liablity company, maryland breach of contract, maryland business, maryland business law, new business formation, new business start up, operating agreement, shareholder agreement, small business attorney, small business lawyer, small business needs, start new business
Friday, July 9th, 2010
In representing franchisor clients against defaulting franchisees, it is imperative to give adequate thought to how the franchisor is going to prove its damages that resulted from a franchisee’s breach of the franchise agreement. When confronted with this issue, I most often utilize a financially competent representative of the franchisor to testify with regard to that amount of monetary damage suffered by the franchisor. The franchisor’s representative must be able to prove the damage by evaluating the franchisee’s financial statements, including revenues and/or profits, expenses, and royalties paid to the franchisor, and then determine what sums the franchisor would have earned either during and/or after the franchise term had it not been for the franchisee’s breach.
In order to testify convincingly and thoroughly, the franchisor’s representative must be able to analyze the franchisee’s financial numbers and draw a conclusion from such numbers. Therefore, a chief financial officer of a small franchisor, or an auditor or accountant of a larger franchisor, is an ideal representative in these instances, provided that the representative has been with the company long enough to be able to testify knowledgeably with regard to the details of the franchisor’s system.
Generally, a well-prepared franchisor representative will be permitted to testify as to the value or the projected profits of a franchised business provided the representative has a sufficient foundation for the analysis and opinion, including particular knowledge of the financial issues presented by virtue or his or her position in the franchisor company. This simply means that a franchisor representative may opine on the issue of lost profits where they know the franchisor and franchisee’s business and financial system intimately, and have the professional ability to analyze the franchisee’s financial statements.
To see how a franchisor SHOULD NOT approach the issue of proving its damages against a franchisee, see Lifewise Master Funding v. Telebank, 374 F.3d 917 (10th Cir. 2004), which in essence holds that a company’s witness as to damages must have personal knowledge of all items factored into his opinion in order for the opinion to be admissible. The court concluded that a business owner or executive may give “a straightforward opinion as to lost profits using conventional methods based on [the company’s] actual operating history.” However, because in this case the witness lacked personal knowledge of the factors used in the damages analysis, the opinion was inadmissible.
Posted in business law, franchise law | No Responses »
Tags: arbitration, arbitration clause, breach of contract case, breach of contract lawsuit, business breach of contract, business contract review, business law, business lawsuit, business litigation, corporate litigation, federal franchise law, franchise agreement, franchise arbitration, Franchise Disclosure Document, franchise dispute, franchise future royalties, franchise law, franchise litigation, franchise royalties, franchisee, franchisor dispute, FTC Franchise Rule, maryland breach of contract, maryland business, maryland business law
Monday, June 21st, 2010
Below please find a link to the FTC “Buying a Franchise: A Consumer Guide,” which is a must read for all prospective franchisees. Here is the link: http://www.ftc.gov/bcp/edu/pubs/consumer/invest/inv05.shtm.
While the information contained in the FTC Franchise Guide is no doubt basic to a franchise professional or franchisor representative, the Franchise Guide unquestionably provides useful information to prospective franchisees who often times know very little about the franchise sales process, federal and state franchise registration and disclosure laws, or the franchisor/franchisee relationship. Without a doubt it is an excellent foundation for a prospective franchisee’s due diligence.
Some topics addressed in the FTC Guide are: where to look for franchise opportunities, what makes up the Franchise Disclosure Document (FDD), to be aware of unauthorized financial performance representations/earnings claims from a franchisor if not found in the FDD, and where to obtain additional sources of information during the due diligence phase, including obtaining the assistance of experienced franchise counsel.
I strongly encourage any prospective franchisee reading this blog to click on the above link and download a copy of the FTC Guide.
Posted in business law, franchise law | No Responses »
Tags: Buy a Franchise, buying a franchise, buying a franchised business, federal franchise law, franchise agreement, franchise arbitration, Franchise Disclosure Document, franchise law, franchise litigation, franchise your business, franchisee, franchisor financial statements, FTC Franchise Rule, purchase a franchise, sell your franchised business, selling a franchise
Monday, April 12th, 2010
In TEKsystems, Inc. v. Bolton, (2010), the Maryland Federal District Court recently reinforced Maryland law on the point that the enforcement of a covenant not to compete is not dependent on whether the competing former employee solicits his former employer’s clients or uses its confidential information, but rather on whether or not the scope of the restrictive covenant is reasonable. The only factors that will determine whether the non-compete is valid are its temporal and geographical limits, the employer’s legitimate business interests, the employee’s unique and specialized skills, any undue hardship on the employee, and the public interest served by enforcing the restrictive covenant.
The non-compete found in the former employee’s employment agreement contained standard language prohibiting the former employee from engaging “in the business of recruiting or providing on a temporary or permanent basis technical service personnel, industrial personnel, or office support personnel” for a period of 18 months after termination of employment, and within a geographical limitation of a 50-mile radius of the employee’s former office. Both the period of time of 18 months and the geographical scope of 50 miles have been held as reasonable on numerous occasions by Maryland courts.
The Court also found that the employer had legitimate business interests in enforcing the covenant, the employee possessed unique and specialized skills, and the employee would not suffer undue hardship by enforcing the covenant. The enforcement of the non-compete was upheld against the former employee.
To read a comprehensive blog of all of the issues address by the Court in this case, visit the blog of the Business Law Section of the Maryland State Bar Association at http://marylandbusinesslawdevelopments.blogspot.com/search/label/Injunctive%20Relief.
Posted in business law | 1 Response »
Tags: breach of contract case, breach of contract lawsuit, business breach of contract, business contract review, business lawsuit, business litigation, confidentiality agreement, confidentiality clause, corporate litigation, covenant not to compete, employment agreement, injunctive relief, maryland breach of contract, maryland business, maryland business law, NDA, non compete covenant, non disclosure agreement, non solicitation agreement, preliminary injunction, restrictive covenant
Monday, April 12th, 2010
In a recent Maryland Federal District Court Case, Antonio v. SSA, LLC, (2010) it was held that the parent of a company may not be held liable in Maryland for the acts of a subsidiary corporation under the corporate veil piercing doctrine without a showing of fraud or a necessity to enforce a paramount equity.
While the parent company, in this case ABM, did have control over the operations of the subsidiary company SSA, Inc., for example: (1) ABM owned 100% of the voting securities in SSA, Inc., (2) SSA, Inc. does not hold annual board meetings, keep corporate minutes, or conduct its own audits, and (3) all but one of SSA, Inc.’s officers are ABM’s officers, the Court held that control was by itself not enough to hold the parent company AMB liable and justify piercing the corporate veil.
The Court required that in order to hold the parent liable for the acts of the successor, the plaintiff mush show fraud on the part of the parent, or necessity to enforce a paramount equity. The court did not define what in this case would have amounted to a paramount equity, only stating that in this case none existed.
To read a comprehensive blog of all of the issues address by the court in this case, visit the blog of the Business Law Section of the Maryland State Bar Association at http://marylandbusinesslawdevelopments.blogspot.com/search/label/corporate%20veil.
Posted in business law | No Responses »
Tags: business formation, business incorporation, business law, business lawsuit, business litigation, business start up, corporate bylaws, corporate formation, corporate litigation, corporate parent, limited liablity company, LLC, maryland business, maryland business law, parent company, parent subsidiary, subsidiary corporation
Tuesday, March 2nd, 2010
Your business did what it was supposed to do when faced with a customer or client that owed money for goods or services your company provided under an agreement signed by both parties: You retained an attorney, who then filed a complaint in Maryland state court, or if the agreement called for it, filed an arbitration demand with the appropriate arbitration forum, against the other side on your company’s behalf.
Your business paid the attorney out of its own pocket and did things by the book. The other side may or may not have hired an attorney, and maybe did not take part in the case at all. Your attorney propounded discovery, the other side may or may not have complied with your requests. Your attorney attempted to depose a representative of the other side. You and your attorney showed up in court or at the arbitration on the day of the hearing, the other side may or may not have, and if they did show up, maybe with or without an attorney representing them.
The judge or arbitrator sided with your company after a trial or arbitration hearing on the merits, or your company was simply awarded a judgment by default when the other side failed to appear. In any event, your company was awarded damages, and maybe even attorney’s fees depending on what the agreement at issue said.
But when you left the hearing room that day, unfortunately you did not leave with a check from the other side. Instead, you left with a court’s order, or an arbitrator’s award, merely stating that you won and how much.
So the question now is, how do you actually get paid what the court or arbitrator awarded? Often times, the trial or arbitration is not the end, but rather only the mid-way point, of the collection process.
The first thing you must do in this situation is identify the debtor’s assets, as well as determine the value of each, by following Md. Rule 2-633, titled “Discovery in aid of enforcement.” Rule 2-633 states that you may conduct discovery in writing by mailing to the other side no more than 15 questions and requests for documents regarding the assets and other financial information of the debtor. These are known as Interrogatories in Aid of Execution. The debtor has 15 days from receipt to respond to these Interrogatories.
In addition to Interrogatories, Md. Rule 2-633(b) states that you may also petition the court to order the debtor to appear before a judge and answer under oath your questions related to the identity of the debtor’s assets. This is called requesting an Oral Examination in Aid of Enforcement of Judgment. Both of the above options may take place no earlier than 30 days after entry of the judgment.
Should the debtor ignore your Interrogatories or Request for Oral Exam, there are additional measures you may take, including filing to hold the debtor in contempt of court.
Assuming the debtor complies with your written requests or your oral exam, and you have successfully determined what assets the debtor owns and the value of each asset, now it is time to turn your attention to actually collecting on the judgment. One option you have is to garnish an individual debtor’s wages, done by filing a Request for Garnishment of Wages form with the court. You will then receive the garnished wages within 15 days of each of the debtor’s pay periods.
A second collection option is garnishing an individual or corporate debtor’s bank account. This is accomplished by filing a Request for Garnishment of Property Other Than Wages form with the court, using the financial information you gathered in your Interrogatories or Oral Exam. After 30 days, you must file an additional form, a Request for Judgment Garnishment.
Yet another collection option is seizing a debtor’s property or real estate, then selling it to help satisfy your judgment. Doing so requires the recording of your judgment in the circuit court for the county where the property is located, complete and file a Notice of Lien, and then file a Writ of Execution. This process if more complicated and time consuming than either garnishing wages or a bank account. Retaining a competent business attorney to help you in your collection efforts is a smart move.
Posted in business law | 7 Responses »
Tags: arbitration, arbitration award, breach of contract case, breach of contract lawsuit, business breach of contract, business law, business lawsuit, business litigation, corporate litigation, maryland breach of contract, maryland business, maryland business law
Raymond McKenzie is a corporate and franchise attorney in the Washington, D.C. metropolitan area.
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