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.…

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,…

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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…

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Critical Steps to Follow Upon Receipt of an Accusation

I Received an Accusation, Now What? If you are a licensed medical professional, you may, at some point during your career, receive a “Notice of Accusation.”  A “Notice of Accusation” should not be ignored or taken lightly. An Accusation is the vehicle by which your licensing agency (the California Medical Board) initiates a disciplinary proceeding against you, the licensee. Upon receiving an Accusation, it is incumbent on the licensee that the Accusation is read carefully. The Accusation lays out the charges sought by the agency and must specify the statutes and rules the licensee is alleged to have violated. (Gov. Code. § 11503.)     If you have received an Accusation the following has already occurred: A Complaint was filed with the Medical Board; The Medical Board investigated said Complaint; and, The Medical Board found a violation of the Medical Practices Act. Note: Up to this point, the complaint and Investigation are not public information. However, this information becomes public once an Accusation has been filed. If a violation of the Medical Practices Act is found, the Medical Board may pursue disciplinary actions against the licensee following the Administrative Hearing.  Such actions include: Revoking of the medical license; Suspension of the license for up to 1 year; Placing the license on probation, restricting the license,…

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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,…

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Post-Judgment Interest Following Appeal: When a “Reversal” is Really a Modification

Most practitioners are generally aware that interest on a judgment runs from the date of entry, and continues to accrue even pending an appeal. The accrual of interest at the standard rate of 10% per annum (7% for public entities) can be a significant consideration in evaluating the potential costs and benefits of an appeal. If you are successful in obtaining an outright reversal of the judgment, all is good: post-judgment interest goes the way of the judgment. However, if the matter is reversed and remanded for further proceedings, or reversed with directions, what happens to post-judgment interest is entirely dependent upon the “substance and effect” of the appellate court’s disposition. A disposition which effects a true reversal of the judgment will result in interest running from the date of entry of any new judgment following remand, whereas a disposition which effects only a “modification” of the original judgment leaves interest accruing from the date of the original judgment. Knowing which is which is critical, and educating the trial court prior to entry of any new judgment can save the parties the expense and delay that would be occasioned by a second appeal on this issue. A true reversal is one which requires the trial court to conduct further fact-finding to resolve the matter at…

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Fighting Fair: The Benefits of Alternative Dispute Resolution

In nearly every litigated case there is a benefit to engaging in early alternative dispute resolution (“ADR”). Although there may be some tactical advantages of delaying the scheduling of a mediation session, such as the filing of a dispositive motion to make unreasonable offers more narrowly tailored to the facts of the case, in the end you may find yourself at the edge of the cliff with limited resources before you even reach the courthouse steps. Many clients embarking on the battle that is litigation find that costs surmount quickly and energy is rapidly drained. This article attempts to describe the several types of alternative dispute resolution to be considered at the onset your case. Although many people conceive ADR to be a new age concept its roots are ancient, with commercial arbitration agreements dating back to Phoenician and Greek Traders. (See Kellor, F., American Arbitration: Its History, Functions, and Achievements, 3 (Port Washington, N.Y.: Kennikat Press 1948).) In the United States, ADR predates both the Declaration of Independence and the Constitution.  The right to privately settle claims outside of the courtroom was known in the time of our forefathers, but it was not until 1922 that ADR became institutionalized in the United States. Presently, clients are faced with a plethora of choices for ADR.…

Sledding is Not Child’s Play Anymore: Public Agencies Balance the Risk of Litigation, Murphy Campbell a Sacramento law firm

Sledding is Not Child’s Play Anymore: Public Agencies Balance the Risk of Litigation

The fear of litigation is causing some public agencies to prohibit activities which were once considered a normal part of childhood play. On January 7, 2015, the City Council in Dubuque, Iowa voted to ban sledding in almost all of its 50 parks. Other cities in the country have taken similar action, including: Des Moines, Iowa; Lincoln, Nebraska; Columbia City, Indiana; and various locations in New Jersey. While such actions are directly associated with child safety, often the biggest motivator for imposing such restrictions is fear of legal liability. For example, in Omaha, Nebraska, the family of a five year old was awarded $2.4 million dollars as a result of a sledding accident involving their child. In Boone, Iowa, a sledder was awarded $12 million dollars, and in Sioux City, Iowa, a sledder who crashed into a stop sign was awarded $2.8 million dollars. Those jury awards are noticed by other public agencies and their insurers. One study estimated that 20,000 children are injured per year in the USA, although most injuries are relatively minor. Avoiding litigation also has prompted various public agencies to modify playgrounds. In some areas, swing sets have been removed, such as in Cabell County, West Virginia, where a school district was confronted with two different lawsuits from the same parent…