By Attorney Kelly Jesson
One of the main reasons why business owners formalize their businesses by forming an LLC or a corporation is so that their personal assets and liabilities can be separated from their business assets and liabilities. If the business is sued, the owner’s personal assets will be protected, and vice versa. However, in certain circumstances, a court may disregard the corporate entity and hold its owners personally liable for business debts if the corporate entity, at the time, had no separate mind, will, or existence of its own. In making this determination, a court will consider, among other factors, whether a business has complied with “corporate formalities.” Corporate formalities include issuing and following bylaws, issuing shares, electing a board of directors, holding annual meetings of the board and shareholders, sending proper notice of these meetings, and keeping minutes and other corporate records. Owners should not intermingle business and personal assets or employees. Owners should not deal with third parties in such a way that the third party does not know they are doing business with an LLC or a corporation. Some closely-held corporations may enter into a shareholder agreement in lieu of some of the above requirements. With an LLC, some of these corporate formalities do not have to be observed, since LLCs are subject to fewer formal statutory requirements than are corporations. If the owner of a business complies with corporate formalities and consistently lists the business’s name on contracts and other documents, third parties will be considered to have voluntarily dealt with the business, and a court will be less inclined to hold the individual owner personally liable for the business’s debts. However, if corporate formalities are being ignored, even inadvertently, that could lead to a court ignoring the existence of the LLC or corporation, which may result in the business owner’s personal assets being at risk. If you or someone you know needs assistance bringing a business in line with its required formalities, please give Jesson & Rains a call! We offer flat fee packages for these formation documents. We also offer flat fee annual plans that include preparing annual meeting notices and minutes, filing annual reports with the Secretary of State’s office, and other legal services. More information can be found here. We work with our clients to reduce the likelihood that they will ever be responsible for business liabilities.
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By Associate Attorney Danielle Nodar
May is Small Business Month in Charlotte! As a small business, safeguarding the confidential information that makes you stand out from the competition is important to the long-term success of the business. Non-compete agreements are common tools used by businesses to help protect this kind of confidential and proprietary business information and allow for business to hire talented employees without worrying that the employee will take your idea and implement it elsewhere. These agreements generally restrict an employee from working for a competitor until a certain period passes and protect confidential information from being used by an ex-employee. However, with companies transitioning to a remote working environment and widespread unemployment, more businesses and lawmakers are re-evaluating the scope and legality of non-compete provisions. Non-compete agreements are controlled by state law, meaning that each state has unique provisions for what is permissible in these agreements. In North Carolina, a non-compete agreement must meet the following requirements:
With the changes in the employment landscape in the last year, there has been a growing movement to limit or even abolish the use of non-compete agreements. As more workers are forced to find new jobs, have moved to remote working environments, or move to a state outside of their employer’s home base, the question of how and when to enforce non-competes has been more present with business owners and lawmakers. As non-competes are governed by state law, it also makes it difficult for employers with employees residing in multiple states to be able to maintain enforceable agreements without careful planning. For example, some states have limited noncompete agreements to apply only to employees making over $100,000 a year, or to be valid only when a business interest is being sold. There is also a push for the federal government to step in and put some overarching limitations on non-compete agreements that limit these agreements in cases where a narrow group of defined trade secrets are trying to be protected by a business. While it is too soon to tell if federal laws impacting non-compete provisions are on the horizon, it is important for employers to be mindful of the importance of crafting a narrowly tailored non-compete provision that works to protect their business while still allowing for fair treatment of former employees. Exploring other legal options that could be used to protect confidential business information is also crucial. If you have questions about how to best protect your business’ proprietary and confidential information, please call Jesson & Rains! By Associate Attorney Danielle Nodar & Attorney Kelly Jesson
There are numerous to-do items and deadlines business owners must keep up with to successfully run a business. However, many business owners forget that they must file an Annual Report with the North Carolina Secretary of State to keep their business in active and good standing with the state. The Annual Report is used to keep the business records up to date with the Secretary of State. On the Annual Report, you will provide basic information about your business, such as the name and address of the registered agent, the principal address of the business, and the names and signatures of company officials. Most businesses formalized with the Secretary of State’s Office need to file an Annual Report, such as Business Corporations, Limited Liability Companies (LLC), Limited Liability Partnerships (LLP), and Limited Liability Limited Partnerships (LLLP). Non-Profits, Limited Partnerships, Professional Corporations (PCs), and Professional Limited Liability Companies (PLLC’s) do not have to file an Annual Report. There is also a filing fee due with the Annual Report. For LLC’s and partnerships, the fee is $200, and for corporations, the fee is $25. The due date for your business’s annual report depends upon the type of business, but generally April 15th is the deadline for most businesses. For 2022, the Secretary of State’s office has given everyone an extra day--the annual report due date is April 18. For corporations and partnerships (LLP and LLLP), the annual report is due to the Secretary of State’s Office the 15th day of the fourth month following the entity’s fiscal year’s end. For example, if your fiscal year ends on December 31, your annual report for that year is due on April 15th. Jesson & Rains offers a yearly plan for businesses that includes serving as our client’s registered agent and filing their annual report, among other things. This plan helps to ensure your privacy (if your business is ever sued, the lawsuit will be delivered to our office’s address); you will be less likely to fall victim to a scam (we will sort through and destroy junk mail); you will be more organized and have less paper (we will scan and forward your mail immediately to your attention after sorting); and we will ensure that corporate records and Secretary of State records are kept up to date. We’re also offering an upgraded yearly plan that includes unlimited telephone access to attorneys throughout the year. The consequence for not filing an Annual Report and/or paying the fee is that the Secretary of State can administratively dissolve your business. This means that you will lose the liability protection you enjoy by being a formal business, and a creditor can come after your personal assets. If you have questions about filing your Annual Report or want to learn more about the new business services offered by our firm, please reach out to Jesson & Rains! In North Carolina, a Plaintiff (the party filing a lawsuit) can seek an “Order of Attachment” in certain circumstances. Generally, this means that any property in North Carolina that the Defendant owns, including bank accounts, can be seized by the County Sheriff to satisfy any eventual judgment pending the outcome of the lawsuit. This can be problematic for several reasons: first of all, the Plaintiff may lose the case and not be awarded any damages and the property was seized unnecessarily! Also, at the beginning of a lawsuit, the number that a Plaintiff claims he or she has been damaged may not be a realistic number and is based purely on their opinion of the case. Having large sums of money seized during the pendency of a case (which could take years to settle) could cause a business to go bankrupt.
Thankfully, an attachment order will only be issued in a few circumstances. The Defendant must be:
The Plaintiff must pay a bond to the Court which must be high enough to compensate the Defendant if the Defendant prevails in the lawsuit or is damaged by an improper attachment. Obviously that bond will greatly vary and is somewhat up to the discretion of the judge who is hearing the attachment order. Fortunately, if you have received an attachment order, you do have options to dissolve or modify the order. To dissolve the order, you must show that something was done improperly in obtaining the order (for example, that you do not fall into one of the categories of people who can have their property attached). If you are unable to make that showing, you can try to have the attachment order modified—either the amount of the attachment, the bond, the terms, or both. Attachment orders are just one more way that lawsuits can cause problems to the people involved. If you, or someone you know, receives a summons, attachment order, or notice of garnishment, the attorneys at Jesson & Rains, PLLC are ready to assist. By Attorney Kelly Jesson
While surfing through social media, have you ever seen someone post a photo or video set to music and add the caption “I do not own the rights to this music”? We assume people are doing this in hopes of getting around copyright laws. We assume they think that, by disclaiming ownership, they won’t get in trouble, but that is incorrect. A copyright protects an original work of authorship, whether in writing, video, or audio form. A person infringes on a copyright if the person uses the work without permission, even if they put out a notice that they don’t own the music. To be clear, simply using the work is infringement; not pretending you created it. A copyright owner can seek damages if you use its work without permission. There is a narrow exception called “fair use,” but it only applies when people use a work for criticism, comment, news reporting, teaching, scholarship, and research. Most social media posts are not going to fit into this category. Also, taking a picture from someone else’s website or social media and sharing it yourself is also copyright infringement. You may have heard of celebrities getting sued for posting pictures of themselves that someone else took. Bottom line: If you didn’t create it, don’t post it without permission. If you have any questions about getting a federal copyright for your original work, please give Jesson & Rains a call! By Attorney Kelly Jesson Jesson & Rains, PLLC, is offering a couple of new business plan packages that include discounted legal services. Our clients are busy and they sometimes forget to keep their information updated with the Secretary of State’s Office or file their annual reports; they pay for a registered agent who does nothing more than forward their mail; and they sometimes fall victim to scams like this and this.
We’re offering a yearly plan that includes serving as our client’s registered agent and filing their annual report, among other things. A description of the plan is attached to this email. This plan helps to ensure your privacy (if your business is ever sued, the lawsuit will be delivered to our office’s address); you will be less likely to fall victim to a scam (we will sort through and destroy junk mail); you will be more organized and have less paper (we will scan and forward your mail immediately to your attention after sorting); and we will ensure that corporate records and Secretary of State records are kept up to date. We’re also offering an upgraded yearly plan that includes unlimited access to attorneys throughout the year. No more billing for .1 emails or .2 telephone calls. We want to encourage people to contact us anytime they need us instead of being afraid to get a bill from us. This is a continued effort from us to offer flat fees instead of hourly billing. Annual reports are due April 15, and they can be filed now, so this is a great time to switch over to having Jesson & Rains handle it. Please contact us if you’re interested, and please forward to any busy business owners you think may need our help! |
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