Asked and Answered: There are a few different ways to setup your business and for the best legal protection you will want to organize your business as either a Corporation or Limited Liability Company (LLC). Read on for some basic information on LLCs
Question: Is an LLC the best way to setup a non-profit?
Facts: I am in the process of starting a non-profit. From my research it seems an LLC would be the best to form it under. I would like to confirm this before filing.
Answer: There are three basic types of business structures - partnerships, LLCs, and corporations. For non-profits partnerships are not preferred as it is difficult to attract financial contributors and all of the principles are fully exposed to liability from those outside of the partnership and from each other. As between Corporations and LLCs, corporations have certain advantages: Ownership interests are freely transferable. Corporations are backed by years of legal cases and are better understood by the courts. As a result you may not have to go to trial in a lawsuit as compared to a LLC. However LLCs are catching up. In all other areas LLCs have advantages over corporations. Here are some: LLCs have great flexibility as to their structure. LLCs do not require as much record keeping as corporations LLCs have certain tax advantages over corporations when it comes to moving assets in and out of the LLC. LLCs are better protected as a business as to personal lawsuits against owners. So your research is correct. Moreover there are a number of websites that will assist you in filing the necessary paperwork with the Secretary of State where you will create your LLC. The one word of advice I will give you is to pay lots of attention to what is called your "Operating Agreement". Attempt to cover as many situations as possible such as member resignation, death, expulsion, retirement, transferring of interest, and more. Make a detailed list and take it to an attorney. Have the attorney write up the agreement. The rest you can take care of without much risk but not the operating agreement. Good luck with your non-profit
Asked and Answered: If you enter into a contract with another party you must adhere to the terms of the contract unless you have a legally recognizable excuse. However before claiming an excuse, get with an attorney. A single visit can save you mon
Question: What to do about a client who cancelled my payment and kept the work files that I created?
Facts: I build websites and had a client who was well pleased with my work until I was called away on an emergency; I left the state to deal with a death in my family for 10 days. I was approximately 2/3 completed with her project (for which we had a contract). She flipped out because I had to delay her project. I reassured her that I would complete it upon my return. However, she contacted her credit card company, claimed I didn't deliver what was promised, and without another word the money was removed from my bank account. She has the files I completed to date on the website, as well as the 4 domains that I paid for.
Analysis of Contract - Was it breached? Can an excuse be claimed? What is your liability?
When you enter into a valid contract with another party you are bound by the terms of the contract. If the terms call for completion by a certain date then you are obligated to complete the contract by that date. So assuming that a valid contract was formed then you breached the contract by failing to complete the contract by the agreed to date. There are some excuses that be claimed by the breaching party. Some examples are:
Waiver: If the other party relinquished a right to the contract it is called a waiver and will excuse you from performance. Here if the other party waived their right to the contract due date then you are “excused” from that obligation. According to your facts the other party did not make such a waiver.
Substantial Performance: This is a rather complex excuse but basically if the other party received substantially what they bargained for then you may be “excused” from performance. However being 2 / 3 complete does not constitute Substantial Performance.
Impossibility of Performance: This will act as an excuse if it becomes objectively impossible for anyone to perform a condition. An example would be if a contractor is nearly complete in construction of a building and through no fault of their own the building burns down. If nobody could complete the building on time then the contractor is excused. However this excuse will not apply because you could have completed the work on time.
There are a few other excuses but they clearly do not apply.
So in summary it seems as if you did in fact breach the contract and your breach is not excusable. The client has a right to recover their losses as a result of your breach. However your client has to prove those losses in order to recover and that may be difficult for them to do. If they cannot prove those losses then they are in a weak position to win in a lawsuit against you.
Remedy of Restitution - Does it apply? What can you recover?
Now let us turn our attention to the work you have performed for the client. In contract law there exists a remedy called “Restitution”. This is a remedy to prevent what we call “unjust enrichment”. From your facts it seems that your client kept items you produced even after she revoked her payment to you. Thus it seems that your client was “enriched” and that the “enrichment” was “unjust” because the client never paid for it. You have a right to demand that your client pay for those items.
Asked and Answered: Going into business with a friend? Don't be an idiot, get advice from an attorney and an agreement in writing. This question gets replayed time and time again. Do you want to be next?
Question: If my husband has the business license under his name but the ex-business partner has the fictitious business name under his name, who is liable if sued?
Facts: My husband started a business and needed some backing so he had a ” friend” partner with him for the backing. They transferred the fictitious name to his ”friends” but never the business license. That remains under my husbands name. And now the ” friend” doesn't find the business important enough to pour into so had stopped paying on the services to supply the clients who have already paid. Therefore, they are unable to use the service. So my question is who is liable if sued?
Answer: There are a few different issues in your facts, three of them are important. There are two contracts and we have to ask if they are valid and enforceable. If the contracts are valid then the non breaching party can seek a remedy from the breaching party. The other issue is the type of business that was formed here between your husband and his friend. The type of business formed will determine the limits of liability. First let us look at the type of business that was formed.
There are two types of business models that may be supported by the facts – partnership and LLC (Limited Liability Company). A LLC must be registered by the state and must follow certain rules and pay certain fees mandated by the state you are in. A partnership has no such requirement. However LLC, as the name implies, has an important advantage over partnership in that liability is limited. In a partnership liability is unlimited. If the business were an LLC then the client must limit their recovery to the assets of the business itself. However it seems from the facts that the business in question was a partnership. If the contract between the clients and the business are valid and the contract is breached the clients may seek recovery from both business and personal assets in order to recover their losses. So assuming the business is a partnership then at this point in the analysis both your husband, and his friend’s, business and personal assets are at risk.
There are two contracts in your facts. The first contract is between the clients and the business. If the business breaches the contracts then the clients may seek recovery from the business. If the business is a partnership then the clients may seek recovery from the personal assets of the partners themselves. From the facts it seems that both your husband and his friend have an ownership interest in the business. Therefore the clients may seek to recover their losses first from the business. If that does not satisfy their losses then they may seek recovery the personal assets of your husband, or his friend, or both.
Up to this point things are not going well for you but the second contract may offer some hope. The second contract is between your husband and his friend. The agreement was that the friend would provide money to the business and in return your husband would give his friend an ownership interest. If your husband held up his side of the bargain then so must his friend, otherwise his friend has breached the contract/agreement. If the friend now refuses to provide the money that was agreed to then your husband may sue his friend to enforce the agreement. That may provide the funds necessary so that the first contract is not breached.
Fictitious Business Name
Finally let me deal with the license/fictitious name issue. It does not matter who has the license or name. You have to look at who has the authority to make contracts with the client. We call this agency law. It seems from the facts that both your husband and his friend had the actual authority to enter into contracts with clients. That is all that matters here.
Asked and Answered: In the past business transactions were treated as "Caveat emptor", latin for buyer beware, transactions. It is no longer that way as buyers, especially under the UCC, have rights as well.
Question: Can a gold store make you pay back money after they buy your item and then later find out it's fake?
Facts: I had no clue that it was not genuine.
Answer: There are two areas of law that are applicable here - Common Law Contract Law and UCC Contract Law. If the gold was in such a form to make it unique than Common Law will apply, otherwise UCC will apply. The gold item is unique if it is the only one of its kind. Example would be a gold sculpture by a famous artist or a gold ring that had been in the family for many years. Those are one of a kind and cannot be replaced if lost. The facts here seem to indicate that the item is not unique. If that is the case then UCC law will apply. However I will analyze your question under both laws.
Common Law - Mutual Mistake
Mutual Mistake is a material misrepresentation of fact that goes to the essence of the contract. The facts do not indicate how you represented the gold item but if you told the gold store that the item was gold then you made a misrepresentation. If you stated to the store that the gold was the "best gold to be found in the state" then your statement is not of fact but what we call "puffing". However if you stated that the item was gold then it would be a fact. Here is suspect that you were not puffing but stating a fact to the store. Finally the fact went to the essence of the contract (your selling of the item to the store in exchange for money is considered a contract) because both you and the store believed the item to be valuable gold.
So in summary we have what is referred to as a mutual mistake. At common law there is no contract formed when both parties were mutually mistaken by the subject matter of the contract. Since no contract was formed the store has the right to request that you return the money.
UCC Law - Express Warranty
As discussed in the first paragraph I believe that UCC (Uniform Commercial Code) law is applicable here. Under UCC Law there exists a concept called "Express Warranty". An express warranty exists when the seller (you) makes a statement of fact, in writing or orally, about the goods being sold to the buyer. If you told the store that the item was gold then you have made an express warranty to the store that the item is indeed gold. If you told the store "I think this item is gold but I am not sure" then you have not made an express warranty that the item is gold. If you did make an express warranty to the store then the store can sue you to recover their loss.
Good Faith Sale
You stated that you believed the item to be gold. In legal terms we say that you acted in "good faith". However note that good faith does not "trump" an express warranty or a mutual mistake.
In conclusion, from the simple facts presented, it would seem to me that the gold store has the legal right to get back from you the money they paid for the "gold" item as long as they are willing to return the "gold" item to you.