The attorneys at Nissenbaum Law Group offers a wide range of legal services for starting or growing a small business in New Jersey, New York, Pennsylvania, and Texas, including

• drafting corporate bylaws or a limited liability company operating agreement,
• filing copyrights and trademarks to protect a business’ intellectual property,
• preparing customer agreements, distributor agreements, website terms and conditions and privacy policies,
• preparing employment agreements, manuals and surrounding documentation,
• assisting with collection of accounts receivable,
• reviewing financing documentation for commercial loans,
• starting a small business, including obtaining federal and state tax IDs and applying for licenses and permits,
• forming and registering an entity in New York, New Jersey, Pennsylvania or Texas
• drafting an initial set of organizational resolutions for the limited liability company’s members or the corporation’s board of directors,
• issuing membership certificates for the limited liability company or shares for a corporation,
• representing the business in commercial lawsuits in the state or federal courts,
• responding to administrative proceedings that are initiated against businesses that are subject to federal or state regulation,
• defending licensed professionals in regard to claims of acts or omissions that violate their licensure status and
• providing general commercial law advice and guidance.

FAQs — Frequently Asked Questions About Small Business Legal Matters in NJ, NY, PA, & TX

FAQ #1 — How do I start a small business in NJ, NY, PA or TX?

The process for starting a business usually begins the same way: filing the initial documentation with the state agency in charge of keeping a record of the businesses that have been formed in that state. The documentation will be slightly different if it is a corporation, limited liability company or other entity.

But that is only the start. It is critical that a corporation also have an initial set of bylaws and that a limited liability company have an initial operating agreement. There are also attendant resolutions that will be necessary, and of course, an accountant should be consulted for any necessary tax filings.

FAQ #2 — What is the preferred model for a small business, an LLC or a corporation?

There are pluses and minuses that need to be taken into account when making the decision whether to form a new business as a limited liability company (“LLC”) or a corporation. The key advantage in filing as an LLC is that it can reduce the resulting taxes in states that have a corporate business (or similar) tax. That is because the business revenue will “pass through” the entity and becomes the personal income of the owners, usually in proportion to their ownership interest. In the parlance of the Internal Revenue Service, the LLC is considered a “disregarded entity.” Essentially, that means the taxes paid will generally be limited to personal income tax, rather than corporate business taxes as well.

On the other hand, some businesses prefer to file as a more basic C-corporation. Notably, once they do, they may, nevertheless, apply for similar tax treatment to an LLC; in other words, the same pass-through tax configuration. That process involves applying to be an S-corporation, rather than a C-corporation. Accordingly, if saving taxes is the primary objective, an S-election may make sense. On the other hand, leaving the company in its original configuration as a C-corporation without applying for the S-election can be useful for other tax planning and  purposes, including capital gain treatment when the business is sold.

Having said that, there is another important reason a business may choose the C-corporation model: when it intends to issue a private or public offering of stock. Under those conditions, there may be thousands or even tens or hundreds of thousands of stockholders, none of whom will presumably want the company to “pass through” the corporation’s revenue, so as to be attributed as their personal income for tax purposes. Instead, they will likely want to be taxed without the revenue passing through; that means they will likely be taxed for the capital gain when the stock is sold or otherwise transferred. Indeed, it is doubtful that the underwriter for the private or public offering of stock would be able to complete the aforementioned process for an S-corporation. All-in-all, the better approach will generally be to have the entity remain a C-corporation without applying for the S-election if it wishes to effect a private or public offering of stock.

FAQ #3 — What do I do if I am personally sued for something I did while acting as a representative of my small business?

The key question that should be immediately explored is whether it makes sense to file a motion to dismiss the claims against the individual. The general basis for doing so is that the acts or omissions alleged against the company and the individual should only be framed as the responsibility of the company, and not the individual. The general principle of law (subject to the specific holdings of the case law that may apply in your state) is that an individual acting in their capacity as a representative of the company should not be held personally liable for the acts or omissions taken within the scope of their authority. Of course, there can be exceptions to that principle, such as whether the act or omission was intentional rather than negligent, but generally speaking, it always makes sense to at least consider whether a motion to dismiss should be made in that circumstance.

Having said that, what might be a reason not to file such a motion at the incipient point in the litigation? There are two examples that are fairly common. First, if service of process on the individual defendant was defective, a motion on that basis may be made. Second, if there are  facts asserted in the pleading against the individual that would create a putative reason to keep them in the case, it might make sense to seek additional discovery on those issues before filing the motion to dismiss.

FAQ #4 — Does a small business necessarily need a trademark?

If your business is known by virtue of a word, phrase, logo or even tagline, a trademark should at least be considered. The reason that is important is that another business could inadvertently use the same way of identifying themselves in commerce and cause confusion as to whether they are acting on your behalf or vice versa. Of course, there is also the possibility that the confusion might be engendered intentionally by a competitor who is seeking to obtain an unfair advantage, so as to reap the benefits of your business’ success in the marketplace.

Setting that aside, it is generally a good idea for a business to conduct a search to determine whether its use of such words, phrases, logos or taglines are infringing on someone else’s trademark. That can avoid a situation in which the business invests significant time and resources building its brand, only to receive a cease and desist letter that results in withdrawing that brand from the marketplace.

FAQ #5 — From a legal perspective, what documents does my business need to generate when I hire employees?

You will need the basic sets of documents that businesses utilize to frame the rights and responsibilities of their employees. Examples include an employee manual and an agreement, which can include such items as confidentiality, compensation, dispute resolution and so forth. There are new statutes and regulations that have been paring down the provisions that can be included in such contracts, so it makes sense to have an attorney conduct legal research before they are finalized.

In addition, your business may be required to take certain actions that are mandated under the relevant statutes or regulations when you have employees. An example of this would be the fact that certain notices need to be posted for your employees so they understand their rights and responsibilities.

FAQ #6 — How do I avoid my small business being sued?

There is no one way of doing so, but a very important aspect is to have your contracts with vendors, employees and customers reviewed carefully before there is a problem. You should also consider whether to include a binding arbitration or mediation provision that can prevent your company from being sued in court.