Top Trial Lawyer Reveals Critical Mistake Made In Your Business Structure INCREASES Exposure
San Antonio, Texas — In a recent interview, top San Antonio Trial Attorney James Montgomery, was asked about his criticisms that appeared in an article in the American Journal of Business Planning, Critical Error Commonly Made in the Structure of Business Organizations That Increases Lawsuit Liability. Mr. Montgomery , an attorney with thirty years of experience both as a trial attorney and as a business planner, explained that most businesses are organized in a way that increases their lawsuit exposure despite using corporations and partnerships to give limited liability.
Q: How did you get into the field of business planning and what is that? Business planning is a cross between legal and non-legal disciplines in working with businesses to reduce liability, insure for liability exposure, minimize tax liability, and yet posture a company to maximize profit potential and growth. After literally taking apart transactions at the courthouse by analyzing the weak points or strategies, I was approached more and more often to participate in the initial or later structuring of the business.
Q: What are some of the weak points that you would look for? There are a number of areas but quickly, I look at what form was used for the business, what is the relationship between the owners, what is the potential exit strategy, and where are the assets and liabilities located in the overall business structure, among other things.
Q: What do you mean by the form of the business? Business can be sole proprietorships, corporations or limited liability companies, or partnerships that can be general or limited. This is a very complicated area and I have a white paper that compares the various forms.
For what we are talking about though you can think of the sole proprietorship as being an individual doing business with the maximum liability which is almost exactly the same maximum liability as a general partnership. You are as exposed as you can get if you are using those. I would not recommend sticking your neck out like that.
The classic way lawyers limit liability for their clients is to pick a form of structure that the law makes limited exposure. The stockholders of a corporation are not personally liable for corporation debts and acts normally. The members of a limited liability corporation have similar limited liability. The limited partners are not liable normally for limited partnership debts and liabilities but the general partner is fully liable. Thus, the general partner is usually a shell corporation or what I call “an empty basket”. If sued, there are no eggs in the basket for the foxy trial lawyer to get.
Q: Well, if these companies and all have limited liability, how is it that they can actually increase exposure? The classic mistake made in planning by many businessmen, and many lawyers, is not planning for the financial structure of the business. Where are the assets and liabilities in the overall structure of the business?
Let me give you an example that should just scare the devil out of some owners. It is a real example but the names and facts have been changed just a bit to protect confidences.
One morning, an hourly truck driver hooks up his tractor trailer rig and drives out of the truck yard. In the course of driving on the highway, he or she will pass you and me in our cars on the way to work. The truck will also pass school buses, vans, and regular buses in the course of the day. While truck drivers are trained professionals, they are also hourly employees and like all of us, they can have momentary distractions. They are also operating machinery that just flat cannot stop on a dime so even if they are doing everything perfect, someone else’s actions can put the truck in a precarious position.
On this particular morning, while going 60 miles an hour which was actually below the speed limit, a car swerves in and out of traffic from behind the truck. When the swerver reaches the truck, he cuts in front of the truck which slams on its breaks. The swerver keeps on merrily down the road but the truck is caught in its own circumstances. The driver fights the vehicle but loses control. The van swerves into a bus which leaves the roadway. In the crash that follows, four other cars are involved including a small compact which is carrying the owner of a business to work. To keep the story short, there are two deaths, including the business owner, and two people who are critically injured.
Fast forward two years later. The trucking company has been sued along with the driver. The driver of course has no assets of his own. The trucking company, which technically not “at fault” is not likely to fare well if the case is tried at the courthouse. The trial lawyer representing the business owner is demanding over a million dollars alone just for the death of the business owner and there are other people who have large claims. The trucking company is owned by a responsible family that had purchased not only the minimum insurance required by law but also increased limits. Nevertheless, the severity of this accident is resulting in damages that will exceed the limits of their insurance policy.
Let’s talk about what that means for a second. If the total damages are $4,000,000 as claimed and the insurance policy allows $2,000,000 in total coverage for the accident, then there is potentially $2,000,000 for which the trucking company owners do not have insurance.
Well, the owners themselves do not have to worry because they have limited liability. They normally cannot be held personally liable for more money. Their investment in the company is totally at risk but not their other assets.
The company itself though is fully liable for the whole $2,000,000 that is uninsured. To make matters worse, the insurance company provides the defense to the lawsuit. In this situation, the insurance company does its duty but decides that it is best to pay or tender the policy limits of $2,000,000 into the registry of the court. The issue then is not whether it is owed but which plaintiff gets how much.
But that action can be devastating for the trucking company because when the money is tendered, the duty to defend is over. The trucking company then has to hire its own lawyer to defend against the amount that is uninsured. Furthermore, the trucking company may end up having to write a check for the damages over the $2,000,000 already “paid” by the insurance company. Not a good situation for the trucking company or its stockholder owners.
So the trucking company owner turns to his corporate lawyer and says, I thought we had limited liability?. The lawyer replies you do but the company is fully liable for the acts of the truck and the driver. Pressing further, the owner says but we can’t write a check for that, we’ll be out of business. The lawyer just shrugs.
Q: Is this where you tell us where they went wrong? Sure, the company has a full basket. Its eggs are all in one basket. The company is not a shell. It owns real estate. It has cash in the bank. It owns other businesses. The operating company had all the eggs. Your operating company should never own anything. Bad planning.
Q: How about for profit and taxation? A structure like that is probably also structured to maximize its tax liability. It is the hardest structure to be able to lower tax brackets because there is only one level. Further, getting profits out of the company to the shareholders can be difficult. Perhaps just as critical, a lender would not offer the largest available loans or the best rates because of exactly what we described above, maximum liability.
Mr. Montgomery has been involved in multi-million dollar litigation. His practice now focuses on the structuring of business entities and transactions to reduce potential liability and potential taxation, while maximizing the potential for profit. http://www.jamesmontgomerylaw.com
What Does Computer Law Cover And Why Is It Necessary?
A decade or so ago there was no such thing as computer law. This niche of the legal system has come into being out of necessity with the proliferation of the Internet and the issues that come along with the technology that makes worldwide communication and transactions possible.
Traditional law does not cover many of the issues that occur in the online realm. Therefore it is crucial that we have a particular branch of law that exists to deal with legal problems that may arise by the very nature of the Internet and are not able to be covered by local jurisdictions.
There may be disagreements over copyright or ownership of a domain or website which cannot be resolved due to the parties being in different states or even different countries. The problem that arises here is that there are complex problems in deciding what state or country’s law and jurisdiction will have the authority to resolve the issue. In situations like this the area of law known as “Conflicts of Law” comes into play.
The increasingly complex area of computer law is exceedingly demanding in its educational requirements for attorneys who practice in this niche. The term “computer law” is kind of a misnomer since it is really the information on the computer such as software, personal info, and possible trade secrets that are the issue as well as the possibility of international disputes over domain names and copyright violations. For these reasons, those who practice computer law are usually the same attorneys who specialize in Intellectual Property Law, also known as IP Law, which covers trademarks, patents, copyrights, and trade secrets. The U.S. Patent Office requires attorneys practicing before it to hold a bachelor’s degree in the areas of engineering or science at the very least.
Some traditional areas of law are evolving to include ever-changing computer laws. Early on it was declared that software would be classified as “goods”, but the difference between normal goods and software “goods” is that one only owns the media that the software is stored on and a license to the use of the software which is now covered under the Uniform Commercial Code.
Those who hack into computer systems without authorization and use that computer’s resources or steal information from it are guilty of pretty much the same thing as what traditional law would call burglary. However, since by definition burglary means entering an actual physical residence, specific laws were added to cover this offense.
One of the biggest problems with the Internet and one that grows even larger annually is that of copyright theft and piracy. Anyone with a computer and access to the Internet can easily steal the intellectual property of another. Additionally, the piracy of media such as movies and music is an enormous problem that is plaguing those industries today. It is a fact that the area of computer law will continue to expand and be used more in the future as the use of the Internet to commit crimes continues to grow.
Gregg Hall is an author living in Navarre Beach Florida. Find more about this as well as computer law at http://www.focusonip.com
How To Avoid Legal Trouble From Trademark Infringement When You Buy A Domain Name
So you have a hot idea for a website, or maybe you want to capitalize on a hot new product that has just been released. There are some things that you will want to know first before you get yourself in a lot of hot water.
Choosing a domain name isn’t really rocket science but it is very important. You want to choose something that is as short as possible, easy to pronounce and remember for marketing purposes, and if at all possible you want to get your main keywords in the domain name. All that aside, you also have to be careful that you don’t step on the toes of a person or company who may be inclined to sue you.
For example, judges have ruled against domain name squatters in every case where they registered a celebrity’s name. They will also rule against companies that infringe upon other companies. A good case in point would be the case a couple of years ago between the World Wrestling Federation and the World Wildlife Foundation. The World Wrestling Federation called itself the “WWF”, put up a website at wwf.com, and the World Wildlife Foundation filed a trademark infringement suit against them. The Wildlife Foundation won because they had been in existence for many years before the wrestling firm and therefore the World Wrestling Federation had to change its name to World Wrestling Entertainment. Obviously this cost them a great some of money to change their name that appeared on millions of marketing products all over the world as well as the expense they had put up on their website and online marketing.
Another more recent issue that is still ongoing is the battle between Apple and the V.O.I.P. product “iphone” from Cisco. Apple announced they would be bringing a product to market called the Apple iPhone to go along with their other products that start with an “I”. Cisco promptly filed for injunctive relief and as of this writing the issue is unresolved.
There are a few basic guidelines that will help keep you out of trouble when you are choosing a domain name so you don’t run into legal trouble from violating someone’s trademark. Let’s take a look at them.
First off you need to realize that a name that is used to identify a particular service or product is a recognized trademark. Trademarks that are deemed to be suggestive and memorable are granted protection by both state and federal law.
A confliction of trademarks occurs when one trademark is in conflict with another and the deployment of both is probably going to be confusing to customers or would be customers concerning the company’s products or services. As I illustrated above, when the legal issue is with a later user of a trademark, the law rules that the first commercial user of the trademark is the legal owner and is therefore given protection. The loser will be forced to cease using the trademark and may even be compelled to pay damages to the original owner, particularly if it is determined that they were malicious in their intent.
The smart thing to do is to consult a trademark lawyer and have them check out your idea for a domain name before you invest too much in developing and marketing it.
Gregg Hall is an author living in Navarre Beach Florida. Find more about this as well as intellectual property attorneys at http://www.focusonip.com
Your Home Business Legal Points
There are several important legal factor groups to consider when getting into running a home business.
Like it or not, beyond our control, one of them is the legal field.
Did you know that there are also quite a few legalities you will need to keep in mind?
It is true, you will not be able to simply open up your doors and hang out a sign.
As a matter of fact, depending on the business you are running in your home, there are different legal rules and regulations you need to follow.
You need to search for a cheap, sympathetic to you, attorney in the beginning.
You can hold off until you have your first legal question or when your business starts to take off.
When steady business orders start coming in you need to do a short interview with an attorney.
This will prepare you for someone who will try to take cheap legal shots at you. From experience, I can almost guarantee you this will happen.
The better you get in life, at anything, the more others will come after you. Sad but true.
You want to drop $30 or $40 and go over your business with him and ask if he or she feels they can handle legal problems that will come up.
Almost all of them will say yes.
The important thing to do here is to establish a relationship, light though it may be, when a legal problem comes up and any good attorney will steer you in the right direction to solve it.
Frequently, I have found, that it only takes a brief phone call to your now business attorney.
If you say you want an attorney for potential problems in the future, at the beginning, some of them will let you off with no fee because they will hope to get steady and future business from your business legal needs.
For example, if you are planning on opening a home day care business, you will need to have a license to operate.
This will mean that a city inspector will come in and take a look at your residence to make sure it meets the safety codes and rules that your city and state has set forth for home day care centers.
Also, you will need to permit occasional visits from the overseeing government agency to ensure you are still up to code.
Do not be angry over this. They are just doing their job.
If you are living in a covenant controlled community, you will need to dig up the bylaws of your homeowner association and take a look about what it says with respect to home based businesses.
Anything, that looks critical, that you do not understand should be reviewed with an attorney.
Some associations do not permit businesses to be run out of homes within their vicinity, while others only limit the kinds of business you may engage in or the hours of operation.
Some of the associations will be more aggressive than others.
If you are not under the auspices of a homeowner association, you still need to check in with the zoning commission to make sure that your proposed home business will not violate any zoning laws in your area.
The same is true for signs. While you will need some signs that advertise the location of your business, you need to find out what the neighborhood and city limitations are.
This may pertain to size, color, and also placement of any sign. Many neighbors do not like this.
Another area to observe carefully, if needed, is insurance issues.
For example, if a customer were to enter your home business location and fell in the course of doing business with you, your homeowner insurance will probably not cover any of the injuries she or he sustains.
An opposing attorney can be dangerous to you, in this instance.
You will need to contact your insurance company to find out if you need a special waiver, rider, or a different policy altogether.
If the cost is too much, just meet people at a local fast food restaurant where the customers there are Always well behaved.
Noisy, undisciplined areas are a very bad idea. Okay?
Most people are alright with meeting in public areas and feel safer anyway.
While these legalities may appear to be a wrench in your home business, do keep in mind that they are designed to protect you, your customers, and everyone else doing a similar kind of business.
Adhering to certain standards and obtaining licenses and permits will actually give you a leg up on your competition.
You can show how your business is superior to anyone else. How? By simply displaying your licenses and permits.
It shows you are sincere in making your business a good one that customers will find to satisfy their needs effectively.
Matter of fact, you could say that being careful to follow the legalities of running a business in your home makes for a great marketing tool! Per the paragraph above, it shows you care to do a good, all around job.
James M. Lowe writes original articles, press releases, e-books, blogs and websites about home business opportunities.
http://www.contenttomarket.com/ArticleWriters/
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