  From time to time when I meet wonderful people in my life, I find myself telling them I’d hire them if I owned a business. To me this is a great compliment because owning a business is very personal, so inviting someone into that company is saying a lot about how you feel about them. Kind of like when I meet terrible people, I tell them I’d fire them out of a cannon into the sun. Hiring the right people for a business is obviously so important. But it is equally important to take steps to protect your business should the relationship with an employee turn into something reminiscent of an episode of Judge Judy or even Maury Povich. The following are some points to consider that will protect you when adding employees to your small business.
First, it is important to determine who is an employee and who is an independent contractor based on the IRS guidelines (See IRS form SS-8). There are a lot of differences between an employee and independent contractor (beyond who gets to attend the company Christmas party). Figure out which relationship works best for your company by differentiating the two roles. Second, draft an Employee Handbook to establish policies to minimize risk of wrongful termination and discrimination claims. For example, dress codes are a great way to ensure you are sending a clear message that yoga pants are not appropriate for anyone with facial hair. The third way to protect your company is to post the required employee disclosures at the office. Anything from health and safety postings to minimum wage postings can be required. It is important to figure out what is required of your business so employees know their rights if they wish to report a health or safety issue. For example, as a NICU nurse I learned from my lawyer, Elliott Stapleton, that dirty diapers are not considered a safety violation. Agree to disagree. A business must protect its assets, which include its people and trade secrets. This is why it is important to create documents such as non-compete and non-solicitation agreements for key employees to make sure other companies don’t steal all of your talent and ideas. I’m sure this is why no one from McDonald’s has left the company to join up with a former Pizza Hut employee in order to create a Big Mac Pizza store, which I think would be delicious. Hiring the right employees is paramount to running a business. But the aforementioned points are almost as important to keeping your business safe and intact. There is enough to worry about when running a business. Having a lawyer like Elliott Stapleton on your team makes this process so easy you can spend your valuable time deciding who to hire and who to fire (out of a cannon into the sun.)
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Every Limited Liability Company should have an Operating Agreement. This Agreement establishes the rules in which the owners of an LLC will conduct business.
Without an operating agreement, it is unclear to the members what rules they must abide by when conducting business, distributing profits, and voting on important ownership matters. This also allows the business to establish voting rights, creditor protections, and standards to resolve disputes among the members.  If you are considering the investment of time, energy, and money that goes into a new business, it is important to take the proper steps to protect your investment and to protect your personal assets. If you conduct any business before your LLC is in place, all of your personal assets are at risk.
Filing your Articles of Organization is not the only step in creating an Ohio LLC. Here is a summary of issues related to the proper formation. What is LLC? LLC stands for Limited Liability Company and indicates how liability is limited to the assets of the business. Ohio business law allows owners to insulate their personal assets from the assets of a business. The value of an LLC is best articulated by explaining what happens if you do not have the proper measures in place: Example: You decide to start a business that owns rental property in a college town and treat the venture as a sole proprietorship. One of the tenants is a star college athlete on the basketball team. While moving in, he falls down the stairs and breaks both legs (and is no longer eligible for the NBA draft). When the athlete files the lawsuit, he is going to name you as a responsible party. If the athlete is successful and receives a substantial judgment for the loss of his first NBA season, he will use that judgment to take whatever assets you have. This includes your rental property, bank accounts (business and personal), your home, investments, vehicles, personal property, and a percentage of your wages until paid in full. Now what would happen if we had this identical situation, but the rental property business was an LLC instead of a sole proprietorship? As long as the proper procedures are followed, the athlete can only reach the assets of the business if it is sued; rental property and bank account of the business. While you may have an insurance policy, there are limits to that policy including covered incidents and a total policy limit. In this example, even a policy limit of $500,000 - $1 million would not be enough to cover your total liability. This may seem to be an extreme example, but business owners cannot control who uses their products, services, or enters their property. It is always best to manage the amount of risk you have at any given time. Does filing with the Ohio Secretary of State automatically provide Limited Liability in business transactions? No. Filing your Articles of Organization alone does not automatically give a business owner limited liability; it authorizes you to create a business. Think of the state’s authorization as a building permit to create a business. There are steps that must be taken and maintenance that is required to achieve limited liability. What steps must be taken to ensure an Ohio business owner has Limited Liability? The key is to establish a separate entity; think of the business as a person separate from the owner. For example, the entity needs a Tax Identification Number from the Internal Revenue Service, its own bank account, and the necessary internal documents of a business. To ensure all of the proper procedures are followed, the best investment is in a qualified counsel. Feel free to contact me with questions.  Many retirees want to use their knowledge and experience after retirement, but on their own terms. This can be accomplished by acting as a consultant for either individuals or companies. In some cases, the company you retired from would still like access to your expertise.
How do I protect my personal assets? If you are considering the investment of time, energy, and money that goes into a new business, it is important to take the proper steps to protect your investment and to protect the personal assets you have worked your entire life to earn. For consultant companies, this protection can be provided by forming an Ohio LLC. What is LLC? LLC stands for Limited Liability Company and indicates how liability is limited to the assets of the business. Ohio business law allows owners to insulate their personal assets from the assets of a business. For all new businesses, I offer a free initial consultation. In that meeting, we will discuss your goals and the steps that must be taken to achieve those goals. In the first meeting, we will also discuss the fixed fees for services. To get started, feel free to contact my office and schedule an appointment. Here is a link to download an Ohio Business Checklist.  Legalzoom may have an excellent marketing strategy, but they are not a replacement for your Attorney. An Attorney is ethically bound to look out for your best interest above all else. Legalzoom exists to make a profit and if that means selling you every form they have (regardless of your needs) I assure you they will do it. Here is an article on the specific differences between a Licensed Attorney and LegalZoom. When forming an Ohio LLC, creating a Corporation, preparing contracts for your business, or registering trademarks it is imperative to obtain advice rather than relying on a reprinted form without understanding what it means, how to use it or which state it was intended to be used in. Purchasing Real Estate and leasing the property to tenants warrants the formation of an Ohio LLC or Corporation just like any other company.
Creating a separate legal entity limits potential liability to the assets of the company; rather than the company assets plus your personal assets. Why is this important?
When a person has a medical need, there are symptoms which physically manifest as a warning. There are also preventative check-ups which are used to limit future risks. When businesses have a legal need, it can be hard to recognize the symptoms or circumstances where preemptive action is necessary. When a legal problem does present itself, the cure is always more costly and time consuming than prevention. How does a business owner know what legal questions he or she should be asking? Business owners focus their work on maintaining a profitable and sustainable company. In this pursuit, legal well-being plays a vital role but can be overwhelming when the issues are unknown. To address this universal business problem, I have created a concise (one page) Legal Check-up. This Check-up is written specifically for small business owners to do a self-exam. The Check-up will provide insight into the company's current legal well-being and a road-map for action on future legal needs. Business owners are often excited about their new company. But before you invest in designing logos, printing business cards, or buying domain names you will want to make sure there is not a strong likelihood your selected name is going to infringe on another company's name.
You can do this a few different ways: 1) Search on Google using “____” around the name and other, similar name combinations; 2) Search on the United States Patent and Trademark Office website; and 3) Search the Ohio Secretary of State’s website under business name. This will give you a better idea of what is already in existence. The best practice is to file a Federal Trademark to provide the highest level of protection to your business. To use a poker term, if you are a sole proprietor or partnership you are essentially all in on every transaction. By all in I mean everything your business owns and you own is at risk if your are sued.
Forming a Limited Liability Company or Corporation, if properly created, allows you to invest into the business and limit your liability to that investment. To have this limitation of liability you must put in place a formal structure for the company and keep your business assets separate from your personal assets. |
Elliott Stapleton Attorney with CMRS Law
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