Proper (Business Attorney Assisted) Set Up and Maintenance Crucial to Limited Liability Protection of Corporations and LLCs

Couldn't agree more with this excerpt from today's article by fellow Southern California WealthCounsel attorney Alexis Martin Neely:

You'll recall from last week, that I said the purpose of your business entity is to limit your liability as a business owner. This is to encourage business owners to take risks that they would not take if they had unlimited personal liability.

Here's the thing though, the shield is only intact if certain formalities are maintained, such as proper filings with the State, annual meetings of the shareholders (for corporations), and separation of all financial activities between you and the entity.

Far too often, I've come across business owners who used an incorporation service, a shoddy lawyer, or a CPA to incorporate their business and when I asked these business owners where their operating agreements, bylaws, annual meeting minutes and state filings were kept, they couldn't tell me.

Why is that? Because they didn't realize that merely filing articles of incorporation with the State does not provide liability protection.
Your corporate entity must be established correctly from the beginning with governing documents and then maintained on a yearly basis.

If you don't do that, you may come to find out too late that your business entity doesn't provide the protection you thought it did.

So, make sure that once you decide what kind of an entity to use, you set it up right and then maintain that entity.

While I'm open to a pleasant surprise one day, thusfar I have yet to review one corporation or limited liability company that was properly set up and maintained by a do-it-yourselfer (including those who used online incorporation services, paralegals, CPAs, non-business attorneys).

Holiday Parties: How Businesses Can Avoid Sexual Harassment Lawsuits

Guest Post by Jessica Hawthorne

As holiday decorations start to go up around the office and everyone is full of seasonal cheer, many businesses may find that work parties, along with a more relaxed environment, can lead to sexual harassment claims.

Much too often – especially if the event is off-site and the alcohol flows freely – the office holiday party becomes a breeding ground for this sort of behavior. It seems that some employees can get the impression that professional behavior isn’t necessary at the festivities.

But that’s not the case. If it’s a work-sponsored event, workplace etiquette applies. And unfortunately for employers, liability can be the unexpected Christmas delivery if things aren’t handled properly.

Every year, claims and lawsuits over sexual harassment problems cost companies millions of dollars. In 2007, for example, the Equal Employment Opportunity Commission received nearly 25,000 sex-discrimination complaints and fined businesses more than $135 million for violating these workplace protections, the highest level since 2002.

But businesses can protect employees against legal turmoil by taking simple steps to prevent harassment from occurring at the office holiday party – or anywhere else:

• Advise employees of all relevant policies, such as harassment, dress code and appropriate workplace behavior.
• Make sure all supervisors have received sexual harassment training.
• Make sure everyone knows how to report unwanted or unwelcome behavior.
• Remind all employees that the company's sexual harassment policies will be in full force and effect during the event.

Despite training and preparation, sexual harassment claims could arise, so employers should also be aware of how to mitigate the situation. It’s important to act swiftly if there are any complaints to determine what happened and how best to deal with the claim. That way, you will have done your harassment prevention due diligence if any legal situation arises later.

The best way to accomplish this – and follow California law – is to conduct proactive employee training and awareness against all forms of harassment.

All organizations, and that includes businesses, government agencies and non-profits, with 50 or more employees are required to train all supervisory personnel in sexual harassment prevention. Employers must prove that all of these employees take an interactive, two-hour harassment prevention course within six months of hire and every two years thereafter.

So keep in mind that while sexual harassment prevention is relevant all year round, now is a good time to give your office a refresher course. Your business should enjoy this festive time of year by keeping employees aware and preventing sexual harassment before it starts.

Jessica Hawthorne is an employment attorney the California Chamber of Commerce. More information on sexual harassment prevention training and many other workplace issues can be found at www.CalBizCentral.com.

Initial Birmingham Angel Network Screening Meeting

The 1st BAN screening meeting is set to be held at the Summit Club on Wednesday Oct. 29th at 7pm.

Members and Board members will be discussing the over 30 companies that have submitted and selecting the few that will be asked to present to the entire group later this year.

www.birminghamangels.com

Freehold Licensing Ltd.

I had an interesting company pass my way that we have begun to work with that I think has some real application to our current financial and liquidity crisis.

Freehold Licensing Ltd. (http://www.freeholdlicensing.com/) of Texas is helping their clients create long-term revenue streams by creating for-profit transfer fee rights in property owned by their clients.

The company says:

Freehold Licensing enters the world of Real Estate Transfer Fee Rights as the creator of a unique business process and the leading experts at advising property owners how to restructure property rights by easily and efficiently creating a long-term income stream.

The process was originally developed in response to a common problem faced by virtually every real estate developer: How To Add Improvements Without Unfairly Burdening The Initial Buyer?

The result is a fully collateralized income stream that continues to grow year after year. The existence of Transfer Fee Rights benefits both current and future buyers and sellers alike. This approach to structuring real estate transactions is well suited for many different types of owners of large portfolios of real estate such as builders, developers, REIT's, bank REO departments and more, as well as work-out professionals and bankruptcy trustees seeking to maximize the value of estates with large real property holdings.

After looking at the process, these revenue streams seem to be ideally suited for banks to utilize as additional assets that can help shore up lagging balance sheets. Furthermore, it appears that recent SEC and FASB guidance (http://www.sec.gov/news/press/2008/2008-234.htm) provides a pretty clear standard opinion on the valuation of non-market assets such as these rights. (Although the company has plans to create a securitized product option that would likely have a market.)

Given that the world governments are being forced to take extraordinary actions to protect our world economy from what appears to be an indirect run on the banks by rapidly deflating balance sheets due at least in part to disfunctional actions of the mortgage backed securities markets it would appear that it is in all our best interests to locate every alternative available for our banking system to "re-flate" their balance sheets and this appears to be a very viable option.

Layoffs Can Lead to Unlawful Termination Claims

Down Economy: Layoffs Can Lead to Unlawful Termination Claims
What Businesses Need to Know to Protect Against These Lawsuits

By Jessica Hawthorne, Special to California Business Law Blog

By any measure, it’s a pretty rough economy out there and inevitably, there have been and will continue to be layoffs – a process that’s an emotional and complicated procedure, and no less so than during tough economic times.

So what do employers need to know to protect themselves from wrongful termination lawsuits before they are forced to lay off members of their workforce?

The truth is that no one procedure guarantees businesses freedom from exposure to wrongful discharge liability or, even in the absence of liability, prevention of the filing of a wrongful termination action by an employee. But there are a number of things that can be done to mitigate potential issues:

• Businesses should have all new employees sign agreements at the very beginning of employment that protects their status as an at-will employee.
• Standardize termination procedures in a way that maximizes company protection from wrongful termination suits, and ensures that the procedures are consistently applied.
• Train supervisors thoroughly in the area of protecting the at-will nature of employment and to follow all company policies especially related to terminations and layoffs.
• If your company is considering a layoff, be sure to establish objective, nondiscriminatory criteria for selecting the employees to layoff.
• If termination of an employee becomes necessary: do not make the employee's situation so miserable that he or she resigns just to get away.

If an employee feels singled out during a layoff or was unaware of performance issues before being terminated, they may also file a suit for wrongful discharge in violation of an express state or federal government public policy.

Further, be careful and consult with legal counsel before laying off employees with actual or perceived disabilities, those who have just returned from a protective leave of absence, and even those who have reported inappropriate activity such as harassment or safety violations. These employees may have or believe they have more rights than other employees. And angry employees or ones who feel wronged are more likely to sue.

In addition, the federal Worker Adjustment and Retraining Notification (WARN) Act and comparable state law require businesses to provide written notice to employees before laying off a significant portion of their workforce.

Unfortunately, there are literally layers of laws that deal with layoffs and terminations, which can make navigating this area of employment law a potential minefield. But if employers act in good faith, make their policies clear and offer ample notification of pending action, the likelihood of a wrongful termination lawsuit succeeding is minimal.

Jessica Hawthorne is an employment attorney the California Chamber of Commerce. More information on terminating employment and many other workplace issues can be found at www.HRCalifornia.com.

Birmingham Angel Network adds a new board sponsor

For BAN the hits just keep on coming.

I am very pleased to announce that Warren, Averett, Kimbrough & Marino, LLC has signed on as the Birmingham Angel Network's fifth sponsoring board member. Warren Averett is a nationally recognized accounting firm ranking among the nation’s largest firms and serving some of the South’s largest companies.

Warren Averett will be represented by Al Murray a member in the firm's Birmingham office. Al has over 20 years experience with closely-held businesses in all areas of accounting, taxation and business consulting. He has extensive experience with audits of retirement plans, manufacturers and distributors, not-for-profits, healthcare organizations, contractors and start up businesses.

Welcome Al.

Competitions provide opportunity

This week we have had two significant opportunities announced for local startups.

Alabama Launchpad announced the begining of the 2008-09 business plan competition and the Venture Club opened nominations for this years Accelerator Program.

The two can be reached at:

Alabama Launchpad - Plan Competition , and

Venture Club - Accelerator