Mind Your Business: Part Three – Agreements Among Founders and the Entity

There is a nearly infinite number of agreements founders can make amongst themselves and with the business. A few of the most common types are discussed below. Keep in mind that some agreements will not be valid if they contradict a statute that governs the operation of your particular entity type. This article does not take consideration of such statutes. As always, before drafting any agreements that will impact your business, you should consult with a knowledgeable attorney to discuss your goals and the best way to reach them. Founders’ Agreement A Founders’ Agreement is a great starting point when you first meet with your fellow founders to get in writing the things you expect from your business. It can also help to solidify your common goals and see the path of least resistance to get there. The Founder’s Agreement will often include the roles and responsibilities of each founder, the method for decision-making and operation of the business, ownership interest, how contributions will be valued, vesting of interest, and how to handle the voluntary (or involuntary) departure of a founder. It is important to keep in mind that the Founders’ Agreement is just a roadmap for the business and to be sure all appropriate topics are included in the operating documents of the entity.…

Federal Proclamation Effect on The Status of Employment Discrimination Laws in California

On October 4, 2017, Attorney General Jeff Sessions announced that under his interpretation of Title VII, gender identity and transgender status are not protected. According to Attorney General Sessions, “Title VII’s prohibition on sex discrimination encompasses discrimination between men and women but does not encompass discrimination based on gender identity per se, including transgender status.” The phrasing causes some pause, given that, in 1998, the United States Supreme Court held in Oncale v. Sundowner Offshore Services that Title VII also applies to harassment between members of the same gender. The Justice Department recently made the same argument with respect to sexual orientation at oral argument before the Second Circuit in Zarda v. Altitude Express. This is a significant departure from the Obama Administration as well as the current position of the Equal Employment Opportunity Commission, which interprets Title VII to prohibit such discrimination. While this topic continues to be debated, employers may be struggling to confirm they are in compliance with the ever-evolving legislation. Background Title VII of the Civil Rights Act of 1964, prohibits, in relevant part, discrimination and harassment “because of […] sex.” Title VII does not, however, explicitly prohibit discrimination based on sexual orientation, gender identity, transgender status, or gender expression. Until recently, Circuit Courts of Appeal unanimously interpreted the term “sex”…

Mind Your Business: Part 2 – Initial Financing and Capital Structure

Once you have selected and formed your business entity by filing the necessary documents with the Secretary of State, the next most obvious questions are: how does the company get money and how do I secure my piece of it? There are a myriad of options for financing your business depending on your particular needs. It is crucial to work with your accountant and attorney to fully understand the implications of the various options. If you have additional concerns, it is prudent to hire an attorney who specializes in taxation to advise. Interest in the company is referred to as a “security.” There are two basic ways to acquire a security in the company – equity and debt. Equity is basically an ownership interest in the company. In a corporation, equity can be common stock, preferred stock, or a hybrid of both. Preferred stock has a senior position to common stock and has a liquidation preference, meaning the holders of preferred stock get their money out first in the event of dissolution. Equity In an LLC, the equity is referred to as “membership interests.” These can have similar characteristics to common and preferred stock with the creation of classes of membership interest (e.g. Class A and Class B). Partnership equity is the percentage ownership interest…

Mind Your Business: Part 1 – Entity Selection

Starting a new business is one of the most exciting and fulfilling professional experiences a person can have. It is also nerve-wracking, emotional, and sometimes downright scary. The purpose of this three-part series is to provide a basic understanding of the process so you and your attorney can focus on how to best meet your specific business goals. Part one discusses selection of a business entity; part two provides an overview of initial financing and capital structure; and part three discusses agreements founders may want to have among themselves. There are a number of options that may be available to you when forming your new business. It is helpful to have a basic understanding of the different entities as you begin planning your future business. A qualified attorney can explain in detail how each entity structure would affect your particular business. The Sole Proprietorship A sole proprietorship is not actually an entity at all, but is often referred to when discussing business structures. A sole proprietorship means that the owner of the business has full liability of the company. Sole proprietorships are easy and cost effective, but there is no protection for the sole proprietor for any debts or liabilities of the business. Thus, this structure is only advisable where the company has little liabilities,…

Starting July 1, 2017, Employers Must Provide New Employees with Notice of Protections for Victims of Domestic Violence, Sexual Assault, or Stalking

Existing law prohibits an employer from discharging, discriminating, or retaliating against an employee who is a victim of domestic violence, sexual assault, or stalking for taking time off from work for certain purposes related to addressing the domestic violence, sexual assault, or stalking. As of July 1, 2017, employers with 25 or more employees must now provide written notice of the rights and duties under the existing law. A recent bill amended Labor Code section 230.1 to include employer notice requirements and ordered the Labor Commission to develop a sample form for employers to use to comply. If an employer chooses not to use the form, the notice used must be substantially similar in content and clarity. Whatever form is used must include information explaining an employee’s right to take time off, right to reasonable accommodations, right to be free from discrimination and retaliation, and right to file a complaint. Although the rights under Labor Code section 230 for employees who are victims of domestic violence, sexual assault, or stalking have not changed, the new notice requirement imparts more responsibility on employers and thus warrants a refresher. Right to Time Off – Employees who are the victims of domestic violence, sexual assault, or stalking are permitted to take time off to: Seek medical attention; Obtain…

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Surfrider Foundation Blocks Billionaire’s Attempt To “Drop In” On The Public’s Use Of Martins Beach

With A Recent Decision By The San Mateo Superior Court, The Surfrider Foundation Blocks Billionaire’s Attempt To “Drop In” On The Public’s Use Of Martins Beach Public access to California’s 840 miles of coastline has been a point of contention between groups attempting to preserve historic access and private landowners for decades.  One ongoing controversy is access to the northern California surf spot of Martins Beach.  Access to Martins Beach, an ideal surfing spot, secluded and protected from wind by jutting cliffs on either end, is only available by way of Martins Beach Road, an offshoot of the Pacific Coast Highway.  The road traverses 53 acres of land owned by billionaire Vinod Kholsa, a co-founder of Sun Microsystems.  Kholsa does not own a home on the land and has indicated no intention to build one.  At the edge of Martins Beach Road lies a low-slung gate.  For a time, the public was occasionally allowed access by Kholsa’s property manager, but, in 2010, Kholsa allowed the gate to be closed permanently, despite the receipt of a letter from the county demanding the gate remain open every day. Kholsa’s property manager, Steve Baugher, testified it was his decision to close the gate and stated he had even hired security guards to “deter trespassers.”  In October 2013, five…

The Sip Stops Here…but Not There, or There, or There: New Restrictions on Interstate Shipping of Wine

According to some retailers, UPS and FedEx are now limiting the interstate shipping of wine. This crackdown is not in response to any new legislation – the shipping companies are instead enforcing existing laws in many states. But First, a Primer on Shipping Alcohol Across State Lines The Twenty-first Amendment to the United States Constitution provides that the transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is prohibited. With the repeal of Prohibition, states were granted significant power over the distribution and sale of alcohol that is not present in laws related to shipping other products. This has led to wildly disparate treatment of the ability to ship alcohol across state lines. For instance, some states allow residents to order wine from any retailer in the US while others don’t allow any shipments at all. The Liquor Law Repeal and Enforcement Act (aka the Webb-Kenyon Act) prohibits shipments of alcoholic beverages between states in violation of any law of the receiving state. The Federal Alcohol Administration Act (FAA Act) requires a basic permit for wholesalers, importers, and manufacturers of alcoholic beverages. (Retailers are not required to obtain basic permits under the FAA Act.) Basic permits are…

Further Delay to the FDA Labeling Requirement

As part of the labeling requirement contained within the Affordable Care Act of 2010, the FDA was required to establish menu-labeling regulations. Enforcement was expected to begin December 1, 2015, but has been delayed twice. The first delay pushed the deadline for enforcement to December 1, 2016. In December, Congress directed the FDA to push the enforcement date until one year after publication of the final guidance. The FDA announcement on March 9, 2016 made this delay official. There has not yet been an indication as to when the final guidance will be published. The rule will require restaurants and similar retail food establishments with 20 or more locations operating under the same name and serving substantially the same menu items to post calorie information for standard menu items and provide guests with additional nutrition information upon request. Originally, alcohol was proposed to be exempted but is now included in the labeling requirement for restaurants. The majority of comments supported having alcohol beverages covered under the final rule due to impacts on public health. A restaurant that meets the parameters of the regulations will have to list calorie and nutrition information for all beer, wine, and spirits listed on a menu. Mixed drinks that are not listed on a menu are exempted, as are liquor…

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So You Won Your Case…Now What?

We tend to think of winning a case and securing a judgment as the end of the legal process. Until faced with attempting to collect on a judgment, we rarely consider the process of how one actually collects such money. Imagine you fought a long, hard battle to secure a civil money judgment. The time for appeal has passed and your judgment is final. How do you get your money? It can often be difficult to get the losing party to part with their money, even in the face of a final judgment ordering them to pay. The battle to recover money that is rightfully yours can be an even longer and more arduous process than winning the judgment itself and, at the end of the day, a judgment is nothing without the ability to enforce it. Luckily, collecting a judgment can be made less daunting by understanding the processes by which it is done. The following is a brief description of how to determine what property a judgment debtor has and how different types of property can be reached to satisfy a money judgment. This article does not discuss the exemptions to property that can be reached to satisfy a judgment.  Suffice it to say for these purposes that there are certain types of…

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“Hoooommmeeessss”: The Resurgence of the Zombie Foreclosure

If you want to write a blockbuster movie or a catchy song, zombies are great.  If you want to protect your credit, they aren’t. Upon receiving a notice of foreclosure, some homeowners move out, assuming the lender will simply take over the property. Unfortunately for these homeowners, in some cases the foreclosure process is not completed.  In the meantime, the property is left vacant and often falls into disrepair or is occupied by squatters. Since the foreclosure was never completed, title remains in the homeowner’s name. This situation is referred to as a “zombie foreclosure” and it can lead to devastating results for the homeowner. While the number of zombie foreclosures has decreased in recent years, it is a situation that still plagues homeowners. In the past year, there has been a resurgence of zombie foreclosures in California. When a home is left unattended, visible signs of distress will appear, causing the value of the property itself, and the surrounding properties, to decrease, making it even more difficult to complete the foreclosure and thus perpetuating the housing crisis. Some of the consequences for those bitten by a zombie foreclosure include liability for unpaid property taxes, homeowners association assessments, fines for failing to comply with housing codes or other ordinances, and local government bills for repairs,…