SIMPLE “FEHA” DISTINCTION BETWEEN RACE HARASSMENT v. DISCRIMINATION

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To prove a violation of FEHA (Fair Employment and Housing Administration Act) for race discrimination (Ca. Gov’t. Code §12940(a)), you have to prove that you suffered an adverse employment action because of your race and that you suffered damages therefrom.

Alternatively, to prove a violation of FEHA for race harassment, (Ca. Gov’t. Code §12940(j)(1)), you have to prove that you experienced severe or pervasive conduct or comments based on your race that changed the fundamental nature of the workplace environment, rendering it hostile to you based on your race.

Conceivably you could have damages for harassment while working and other damages arising out of the adverse employment action, such as a termination for example.

INTERACTION BETWEEN SPENDTHRIFT & DISCRETIONARY TRUSTS TO OBTAIN BEST ASSET PROTECTION GOALS

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A spendthrift trust is a kind of trust that limits or altogether prevents a beneficiary from being able to transfer or assign his interest in the income or the principal of the trust.  Spendthrift trusts are sometimes used to provide for beneficiaries who are incompetent or unable to take care of their financial affairs.

If a trust incorporates a spendthrift clause, the beneficiary is precluded from transferring his interest in either income or principal. Accordingly, the beneficiary’s creditors will not be able to reach the beneficiary’s interest in the trust.

The protection of the spendthrift trust extends solely to the property that is in the trust. Once the property has been distributed to the beneficiary that property can be reached by a creditor, except to the extent the distributed property is used to support a beneficiary. If a trust calls for a distribution to the beneficiary, but the beneficiary refuses such distribution and elects to retain property in the trust, the spendthrift protection of the trust ceases with respect to that distribution and therefore the beneficiary’s creditors can now reach trust assets.

A trust is called “discretionary” on the other hand, when the trustee has discretion (as to the time, amount and the identity of the beneficiary) in making distributions. Because the trustee is not required to make any distribution to any specific beneficiary, or may choose when and how much to distribute, a beneficiary of a discretionary trust may have such a tenuous interest in the trust so as not to constitute a property right at all. If the beneficiary indeed has no property right, there is nothing for a creditor to pursue. The statutes that follow this line of reasoning essentially provide that a trustee cannot be compelled to pay a beneficiary’s creditor if the trustee has discretion in making distributions of income and principal to begin with.

If the trustee of a self-settled trust (where the creator of the trust is also a beneficiary of the trust), has any discretion in making distributions, then the creditors of the settlor (creator) may reach the maximum amount that the trustee may distribute in his discretion to that particular settlor-beneficiary.

Consequently, when a trust is self-settled, to obtain any asset protection for the settlor, discretionary powers should be avoided in favor of a more desirable standard, emphasizing the fact that the trustee “may” exercise his discretion in designated allowable types of distributions, but only if he/she so chooses.

 WFB LEGAL CONSULTING, Inc.

A BEST ASSET PROTECTION SERVICES GROUP

7 LEGAL STEPS YOU MUST TAKE BEFORE OUTSOURCING CONTENT CREATION

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  1. Identify your content needs.

In order to hire great content creators not to mention put together the kind of contract we’ll discuss shortly, you have to first define what types of content you need.

For example, you could include:

  • Weekly blog posts
  • Social media updates
  • Guest blogging
  • Email marketing
  • Pay-per-click ad copyrighting

Identifying the specific types of content needed may not appear to be a legal step. However, at the outset, these are incredibly important things to consider, all of which will enable you to outline both your job advertisement and various aspects of your contractual agreement.

  1. Assign copyright.

The act of simply paying someone does not automatically turn over copyright of that content to the end user. Unless you specifically list the terms of use in your contract, the content creator maintains ownership of that content. In this case, you only have an implied license, therefore, you’ll need express permission to re-purpose any of that content for other things, such as turning a blog post into an eBook or social-media posts.

It’s also important that you consider protection against indemnification for images or content that may be the property of others. At the end of the day, you will be responsible if the content published on your site or in your materials is found to breach copyright law.

For text-based copy, using a service is standard practice. But with image attribution, this is particularly difficult, since there’s no good way to test the copyright short of either buying the rights or waiting for an angry digital millennium copyright act notice from the infringed-upon owner.

             3. Clearly outline outsourcing requirements.

Be as specific as possible when outlining requirements so that freelancers know your expectations, including bench-marking and measuring success or failure. You may also want to include a Service Level Agreement that clearly outlines performance details and standards.

  1. Consider legal liabilities in your content.

You may need to take further precautions if the content you’ll be outsourcing is subject to any regulatory requirements. For instance, if you’re publishing medical content or financial advice, you may need to include relevant disclaimers or ensure materials produced meet certain standards to protect yourself legally.

If the content you publish on your website is something you could be held legally liable for, be sure your outsourced creators are able to meet any necessary requirements.

  1. Preparing in advance for termination.

Ideally, you’ll find in a freelancer a long-term partnership for your content creation needs. But since turnover is inevitable, it’s far better to protect yourself up front. Your termination clause is hugely important, as it sets forth the conditions under which the customer may exit the outsourcing relationship.

The termination clause needs to outline the common reasons that give rights to you and your company to exit the clause along with the rights of the contractor. It’s also wise to include both party’s respective rights upon termination with regards to ongoing privacy and protection as well.

  1. Put it all in a contract.

Once you’ve covered all your legal bases, document them in a formal written contract that both you and your freelancers will sign. In most cases, it’s a good idea to consult with an actual lawyer to do this.

  1. Take out an insurance policy.

Last, it’s definitely worth investing in an insurance policy when it comes to protecting your legal rights as a content creator and purchaser. At the end of the day, you need to be prepared for any legal ramifications that could occur from the content you publish, or, at the very least, be fully aware of who’s liable for anything that may occur.

Though the Internet has blurred the rules and lines concerning outsourcing, it’s best to stick to guidelines and follow the rules to protect yourself. If you have any doubts, always consult a lawyer.

FIVE WAYS TO SABOTAGE YOUR LIABILITY PROTECTION AFTER INCORPORATION

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Many new business owners understand that incorporating or forming a Limited Liability Company (LLC) helps shield a business owner against being held personally responsible for their company’s liabilities and debts. This is known as the corporate shield or corporate veil as it separates your personal assets from those of the business.

Liability protection is not absolute and there are several instances where a business owner can be personally liable in business despite the fact he or she created a business entity.
Here are five of the most common ways this can happen:
1. Negligence and Personal Liability
In many situations, the limited liability protection from an LLC or corporation will not shield you from being liable for your own personal negligence. A person is typically liable for his or her own personal conduct when that conduct injures someone else. For example, if an electrician installs some wiring in a customer’s home and forgets to cap a live wire, the electrician can be personally liable if someone gets electrocuted. Likewise, if you’re driving to a client meeting in a company car and are negligent and hit someone, you can be personally liable for any injuries and damages.
2. Fraud
If you make untrue claims about a product or service, this is considered fraud. For example, if you’re marketing a milkshake supplement and guarantee that customers will shed 20 pounds per month just by drinking it, this could be a clear case of misrepresentation or fraud. If you claim that your glass container is BPA-free (when actually it does contain BPA), this also is fraud. In such cases, both the manufacturer as well as the company selling the product may be liable.
3. Personal Guarantee on Business Loans
When you first start your business, many third parties and creditors won’t be willing to do business with your LLC or Corp, as the entity is brand new and probably does not have a lot of assets or hasn’t built its own credit history yet. As a result, a bank or landlord may require the business owner or LLC member to “personally guarantee” a loan or lease. If you sign such an agreement, then you will be personally liable for those specific obligations.
4. “Piercing the Corporate Veil”
Many new business owners form an LLC or Corporation and then continue to operate their business as if that business entity didn’t exist. It’s very important that you follow through with all corporate formalities required for your LLC or corporation. For example:
• Pay your business’ state and federal taxes
• Don’t commingle your personal and business finances
• File your annual report (if required by the state)
• Keep up to date with your corporate minutes and resolutions (if necessary)
• Record any changes with ‘Articles of Amendment’ (if necessary)
• Have a board of directors and hold annual meetings of shareholders (if necessary)
You’ve got to make sure that your corporation or LLC remains in good standing. Why? Because if your business happens to be sued and the plaintiff shows you haven’t maintained your LLC/Inc to the letter of the law, your corporate veil is pierced and you can be personally liable again.
5. Conducting Business Out of State
If you’ll be conducting business in a state other than the state where you formed your corporation or LLC, you will need to obtain authority to do so. In most cases, this entails qualifying as a Foreign Corporation or LLC within the state that you will be doing business. Specific licenses and permits may also be required for certain types of businesses as well.
For example, let’s say you run a small software development company based in Nevada and your company serves clients located outside Nevada. At this point your company is most likely not considered to be operating out of state. However, once you open a small development office with a few employees in California, your business will probably be considered to be doing business in California and you will have to file a Statement and Designation by Foreign Corporation form with California.

BUYING OR SELLING A BUSINESS? WHAT YOU NEED TO KNOW.

wfb_legal_consulting_inc_largeThere are numerous issues important to Business Buyers or Business Sellers or both. Generally, Sellers are interested in:

● Sellers want to be that they will be paid, especially if payment of the purchase price is deferred.
● Sellers want to avoid the possibility that a Buyer will later make a claim because the business fails to meet a Buyer’s expectation.
● Sellers are often concerned about continuing liability to former customers, employees and vendors, and in the case of the sub-leasing the business location they often remain liable to the landlord until the expiration of the lease term.
● Sellers are often required to respond to Buyers’ due diligence requests that can be very burdensome with serious legal significance.

Generally, Buyers are interested in:

● Buyer’s usually want to avoid the Seller’s prior vendor, customer, employee and tax liabilities.
● Buyer’s want to be sure that they get what they are paying for.
● Buyers want to be sure that the Seller does not start competing for the same customers or use technologies and information that were part of the transaction
● When the location is important Buyers want to be sure that the commercial lease provides them the duration they require.
● Buyers want to be sure that key employees intend to stay with the business and/or if they leave, it is not a situation where they are capable of taking important customers with them. (Note that key employees who are not owners may in California compete against their former employer.
● Buyers may require assistance with respect to financing.

Other Considerations:

● if you are buying into an existing business or merging your business with another you will want to have investigated what the other party understands your role to be and how someone will share control over a business that they formerly ran themselves.
● If you are buying a Franchise you will likely be required to be approved by the Franchiser and sign an agreement with the Franchisor.· A Bulk Sale escrow is the purchase of the business assets but not the business.
● Sometimes when you sell your business an equally if not more important part of the transaction is your continuing relationship with the new owner as an employee or consultant.
● When there is a business broker involved in the transaction, especially when the broker is giving advice to both the Buyer and the Seller you may find yourself under pressure to finalize the transaction too quickly

When you are buying a Business there are usually related legal needs as well:

● Forming an Entity
● Commercial Lease
● Employees and Independent Contractors
● Standard Terms and Conditions
● Contracts and Agreement
● Trademarks and other intellectual property

Once you’ve agreed to purchase a business, you’ll need to formalize that agreement. This is typically done using a purchase agreement, which is a legal contract that outlines the details of the sale. (This may also be known as a business purchase agreement, asset purchase agreement, stock purchase agreement or something similar depending on the exact nature of the sale.) Attorneys for both the buyer and seller should work together to draw up the purchase agreement to ensure that it is fair to both parties.
The purchase agreement typically includes:

• Purchase price and method of payment
• Terms and conditions of the sale
• Representations and warranties of the seller
• Representations and warranties of the buyer
• Actions the seller has agreed to take prior to the sale (such as paying off existing loans or securing the resignation of employees who will not be employed by the new owner)
• Details of the business to be purchased, including a list of all assets, inventory, contracts and equipment
• A list of all existing creditors who are to be paid off with the proceeds of the purchase
• How much commission is owed to a business broker (if one was used) and who is responsible for paying that broker’s commission
• An agreement to resolve any disputes arising from the sale in a specific court of law or with a specific arbitration company
• Additional relevant documents known as exhibits and amendments

The exhibits may include items such as:

• Bill of sale
• A set of corporate documents including leases, financial statements, tax returns, accounts receivable and payable, articles of incorporation, bylaws and minutes
• An agreement that the seller will act as a consultant to the business, remain as an employee or agree not to compete with the business or operate in a particular territory for a certain period of time
• An escrow agreement, detailing the responsibilities of the escrow agent, if the purchase money is being held in escrow for a certain period of time
• Property deeds if the business owns real estate
• A promissory note if the buyer is paying the purchase price in more than one installment or paying the entire purchase price at a later date
• Assignment of leases and the landlord’s consent to the lease assignment

Questions for Your Attorney

An attorney who has experience working with business sellers and purchasers can help guide the process of creating a purchase agreement, and should give you peace of mind in knowing that no detail has been overlooked.
Among the questions to consider asking your attorney:

• Have you previously written purchase agreements?
• What red flags should I be aware of?
• How much do you charge for your services?

CAN I BE FIRED BECAUSE I USE MEDICAL MARIJUANA FOR A DISABILITY?

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So far, courts that have considered this question have ruled against employees. Your legal right to use medical marijuana protects you from criminal prosecution, but not from employer drug testing programs. If you were taking a different legally prescribed drug for your condition, you would most likely be protected by the Americans with Disabilities Act (ADA). However, this protection hasn’t been extended to medical marijuana.

The ADA prohibits discrimination against employees with disabilities. A disability is a physical or mental impairment that substantially limits a person’s major life activities, including major bodily functions. There may be people with glaucoma who do not have a disability under the ADA, based on this definition. However, if your glaucoma substantially limits your ability to see (a major life activity), you are protected.

Employees with disabilities have a right to reasonable accommodation to allow them to do their jobs. This extends to the measures an employee uses to control and function with a disability. For example, an employer might have to lower a desktop to accommodate an employee’s wheelchair. The same rule applies to drugs that are legally prescribed for a disability. The employer may have a legal duty to accommodate the employee’s drug use, including the side effects that the drugs have on the employee, under the ADA. If, for example, an employee takes medication for depression that makes him or her drowsy in the morning, the employer may have to alter the employee’s start time to accommodate that side effect.

But medical marijuana hasn’t been treated this way, at least so far. Courts have held that a person’s right to use marijuana for certain medical conditions doesn’t extend to a right to have that use accommodated by an employer. Marijuana use remains illegal under federal law, and the ADA explicitly does not protect employees who use illegal drugs. This lack of consistency between federal and state laws has led to the unfortunate result that an employee can be fired just for following doctor’s orders.

WHAT EXACTLY ARE IRA BENEFICIARY “SEE-THROUGH” TRUST PROVISIONS?

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IRA BENIFICIARY “SEE-THROUGH” TRUST PROVISIONS

A valuable tool for protecting IRA assets as a component of estate planning is the use of a trust as an IRA beneficiary. These “see-through” trusts can provide valuable flexibility in a comprehensive estate plan, but also carry both income tax consequences and very strict IRS requirements for qualification. Estate planning counsel must know the detailed IRS rules in drafting these “see-through” trusts to meet requirements for Required Minimum Distributions (RMDs) and income accumulation.

IRA beneficiary trusts generally come in two types: “conduit trusts,” and “accumulation trusts.” Conduit trusts are marked by specific requirements as to how to calculate required minimum distributions over the lifetime of specified beneficiaries. It is important to note that IRA beneficiary trusts are drafted as trusts (whether QTIP trusts or any other) valid under state law, but contain specific language and provisions that qualify the trust for see-through treatment.
Whether estate counsel is drafting a trust to function as a conduit trust or an accumulation trust, estate planning counsel must know the rules and required language in drafting an IRA beneficiary trust in order to avoid serious tax consequences.

Be sure to visit: http://wfblegalconsulting.com/blog-2/articles/ to review other important topics in the business-related areas of Employment Law; Asset Protection; and Estate Planning.

THE OPERATING AGREEMENT AND THE LLC: WHY THEY MUST “GO STEADY.”

Contribution by: Jarom Bergeson

Perhaps no other innovation is as indicative of America’s particular devotion to (and knack for) creative capitalism as the limited liability company (“LLC”). Born in America’s smallest state (Wyoming) in 1977, the LLC combines the pass-through taxation of a partnership or sole proprietorship with the limited liability protections of a corporation.

This unique combination of liability protection and pass-through taxation explains why the LLC was quickly adopted in all 50 states, and why it is easily America’s most popular corporate form today. In 2012, more than 2.2 million LLCs filed partnership tax returns, and current estimates are that 55% of LLCs are single-member entities that file no tax returns at all, which means that there are probably somewhere in the neighborhood of 5 million LLCs in existence in America today. Approximately 3,000 new LLCs are created each month … in Utah alone (our home-office state and one of the best LLC laws in the country!).

The big mistake!! Another reason why LLCs are so popular is that they are easy to form, however, this can also be their downfall. Unfortunately, there are thousands of entrepreneurs who believe hitting “submit” and receiving back stamped Articles of Organization from the state completes the formation of the LLC.

In most states an LLC can be established by clicking through a government website and paying a filing fee. Technically, that puts the LLC on the ‘radar’ of the State. However, smart business owners and investors know this is really where the formation process begins.

Every LLC, whether it has one member, five members, or 100 members, should have an Operating Agreement and there are several important reasons why.

First, the Operating Agreement establishes the asset protection veil and the ‘formality’ of signing the Operating Agreement and the initial minutes is critical to show a court and a plaintiff that you took the LLC formation seriously.

Second, is the fact that your LLC Operating Agreement is your chance to write the “law” for your LLC. This is why the LLC is such a great choice for partnerships. The Operating Agreement gives partners the ability to delineate roles, rights, and responsibilities for the LLC owners, and to make specific plans for what happens if a partner dies, becomes incapacitated, or gets divorced.

What happens if you don’t have an Operating Agreement? Well, in their wisdom, the various state legislatures have planned for this, and each state LLC statute provides a set of “default rules” for how LLCs are to be governed if and when the LLC owners don’t take the time or effort to make those decisions for themselves.

However, as with most statutory language, these default rules can be difficult to decipher. In addition, the rules can and do change when the LLC statutes are amended, and all 50 states have different rules within the same framework. To boot, sometimes a state’s particular default rules just don’t make sense.

To illustrate, Utah adopted a new LLC statute in 2013. This statute becomes fully operational, applying to all existing and newly-formed LLCs, on January 1, 2016. While I’m sure the legislature and the governor had good intentions in passing the law, it certainly contains some provisions that create surprising outcomes.

For example, the new statute says: “A manager may be removed at any time by the consent of a majority of the members without notice or cause” (U.C.A. §48-3a-407(3)(d)). It does not say “a majority of the ownership” or “a majority of the profits interests.” This means that in an LLC with three owners, where one owner is the manager and owns 90% of the company, and the other two owners each own 5% of the company, the two 5% owners can get together and vote out the 90% owner as manager … as long as the LLC has no Operating Agreement and the statutory default rules apply. If the LLC does have an Operating Agreement, then the provisions of the Operating Agreement trump the default rules from the statute.

The moral of the story is that if you don’t want your LLC to be subject to potentially odd default rules that can be adopted and changed at the whim of state legislators who have never owned or run their own business, then your LLC needs an Operating Agreement and you need to know what that Operating Agreement says.

Do not create an LLC that does not have an Operating Agreement, and if you have already made that mistake, fix it by having one drafted and adopting it retroactively to the date your LLC was established.

 

DO I NEED AN ATTORNEY TO FORM AN LLC?

YES, in my opinion. While an attorney is not a legal requirement, online formation services and document providers will typically only provide you with fill-in-the-blank forms (form Operating Agreement, form Organization Minutes, and form Membership Interest documents), which unfortunately eliminates the main benefit of the LLC – the ability to customize the relationship of the members. These online services also often leave the members to operate the LLC with little or no instruction, which in a majority of cases causes the LLC members to lose their personal limited liability protection, thus exposing each of the members to potential personal liability for the LLC’s debts and obligations. “Would you go to a nurse, instead of a doctor, for cardiac surgery?” But the reality is most people will not see a lawyer until they are forced to hire a litigation attorney, or bankruptcy attorney, who informs them that they could have protected their personal assets, but didn’t.

Most attorneys, especially civil litigators, have a lot to gain from owners of companies (especially LLCs and Corporations) who fail to form and operate their business with the required formalities because instead of spending a few hundred dollars a year with a business attorney or corporate attorney to dot the i’s and cross the t’s, now the individual is going to spend $10,000 to $50,000 to defend a lawsuit, and still face the real probability of not only having to file a company bankruptcy, but a personal bankruptcy as well.

The reason for the custom documents is to provide, amongst a multitude of other things, (1) detailed instructions on how to run and operate the LLC; (2) qualifications as to who can be a manager of the LLC; (3) restrictions on which members/managers can bind the limited liability company; (4) provisions to reduce the likelihood of disputes among the members; and (5) a mechanism to resolve disputes or a deadlock among the members without costly litigation (at least where possible).

WHAT IS THE FOCUS OF A FRANCHISE DISCLOSURE DOCUMENT?

 The Franchise Disclosure Document (FDD) is a legal document that franchisors must furnish to prospective franchisees, by law. The Federal Trade Commission (FTC) is the regulatory body that enforces it. That makes it kind of a big deal. The FDD contains information…facts and figures on the franchise business opportunity, and is provided to help you analyze the offering. You, as a prospective owner of a franchise, must receive the FDD at least 14 days before you are asked to sign any contract or pay any money to the franchisor or an affiliate of the franchisor. You have the right to ask for and get a copy of the disclosure document once the franchisor has received your application and agreed to consider it.

Look for more on this subject in next month’s July 2015 issue of the Bottled Business Sense Newsletter.

by: BEST ASSET PROTECTION LAWYER FOR BUSINESS: http://www.wfblegalconsulting.com