Key Facts Your Organization Needs to Know About the Revised Uniform Limited Liability Company Act

San Diego business lawyers at Gehres Law Group, P.C. provide advice to companies on rules and regulations governing different types of business entities.  Limited Liability Companies, or LLCs, are a popular option because they can provide protection from liability but be simpler in terms of administrative and corporate documentation and related costs, as well as ongoing operational requirements than S-corporations or C-corporations. However, the rules for LLCs changed in 2014 with the passage of the Revised Uniform Limited Liability Company Act. Both existing LLCs and new organizations must maintain compliance with these new rules and requirements. 

Key Rules from The California Revised Uniform Limited Liability Company Act

The Revised Uniform Limited Liability Company Act (RULLCA) establishes many default rules regarding the management of LLCs as well as the obligations of members of a member-managed LLC. For example:

• All members of a member-managed LLC owe a duty of care, a duty of loyalty, and a duty of good faith and fair dealing, while the manager of a manager-managed LLC owes the same duties. These obligations require managers and members to refrain from intentional misconduct, willful legal violations, or gross negligence, as well as requiring members and managers to deal honestly with each other and avoid the misappropriation of company assets or any conflicts of interest.  However, if an LLC is a manager-managed LLC, the RULLCA makes clear that members of the LLC do not owe any fiduciary duties.
• If an LLC is member-managed, the LLC must indemnify members who have acted in accordance with their obligations and duties. Under a manager-managed LLC, the LLC must also indemnify managers who have complied with their obligations.
• When an LLC is manager-managed, the manager is not permitted to act outside of the ordinary course of business without first obtaining consent from the LLC members.

It is important to note that most of the rules established by the RULLCA simply establish the default rules that will apply if there is no LLC operating agreement that provides for different rules and requirements. This means that members of an LLC are permitted to negotiate an operating agreement and adopt rules that deviate from the defaults established by the Act.  If the rules adopted in the LLC operating agreement differ from the default rules under the RULLCA, the rules in the operating agreement generally take precedence and govern how the LLC operates. This means organizations that want to opt out of the default are permitted to do so.

Getting Help from San Diego Business Lawyers

San Diego business lawyers at Gehres Law Group, P.C. will provide the personalized advice necessary to understand how LLCs work and to determine if a Limited Liability Company is the right type of business entity for your organization. Our legal team can also provide you with assistance creating an operating agreement to establish the rules that best suits your business needs, within the confines of RULLCA and other applicable laws.

To find out more about how our firm can assist with LLCs and other types of business structures, give us a call at 858-964-2314 or contact us online today for your complimentary consultation.

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Can Your Company Create a California Professional Corporation?

San Diego business attorneys at Gehres Law Group provide advice to companies on how best to structure their business entity. This decision should ideally be made with the help of business formation attorneys when operations first begin. However, as companies expand and change, many alter their business structure. Making changes to the type of business entity could also become necessary as a result of regulatory changes, such as tax reform, that makes a particular organizational type more or less attractive. 

There are many different kinds of business entities that could be created. One option for California companies is to operate as a California professional corporation. This option is not available to all businesses, but companies that are eligible to operate as a professional corporation should work with an experienced attorney to understand the option and to determine which business entity makes the most sense.

Can Your Company Operate as a California Professional Corporation?

The California Corporations Code establishes the rules and requirements for when a company may operate as a professional corporation. In particular, the Mascone-Knox Professional Corporation Act details exactly when a company may operate as this type of business entity. The types of entities which may operate as a professional corporation include attorneys (Gehres Law Group is organized as a professional corporation), some medical professionals, CPA’s, psychiatrists, psychologists, and others. These types of organizations may not operate as a limited liability company.

The relevant law stipulates that a professional corporation is organized under the Moscone-Knox Professional Corporation Act and the General Corporate Law. The professional corporation must generally be engaged in the business of rendering professional services in a single profession.

The professional services that are offered through the professional corporation must include services that are lawfully provided to the public only by someone who is licensed, certified, and/or registered.  The licensing, certification, or registration must be documented in the Business and Professions Code, the Osteopathic Act, or the Public Accountancy Act.

Any organization that operates as a professional corporation must do so pursuant to a certificate of registration that has been issued by the appropriate regulatory body with jurisdiction over the profession and with authority over the way in which that the profession is practiced, such as the State Bar of California. A business that chooses to operate as a professional corporation must make certain to designate that it is operating as this specific type of business entity and in compliance with the rules promulgated by the regulatory body governing such profession.

Getting Help from San Diego Business Attorneys

The San Diego business attorneys at Gehres Law Group will provide guidance and advice on whether your organization is eligible to operate as a professional corporation. If you can and should operate as a professional corporation, we can assist you in completing the required process to create your corporation and give your business it’s own identity in the eyes of the law. If a professional corporation is not an option for you, or is not the correct option based on your circumstances, our business formation lawyers can provide assistance in selecting the type of company structure that is right for you.

To find out more about how Gehres Law Group can provide you with assistance in forming the right type of business entity to accomplish your company goals and provide your company with desired protections, give us a call at 858-964-2314 or contact us online today for your complimentary consultation.

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California Extends Family Leave

The San Diego business lawyers at Gehres Law Group, P.C. assist companies and employees in understanding their rights and obligations. Consulting regularly with an attorney is important to monitor changes in the law. One such change occurred recently when California extended family leave to millions of new workers. 

California Extends Family Leave

California has long been among the minority of states that provide broader protection for employees with short-term disabilities and family-care needs than the federal government offers. Now, California has once again expanded the basic protections guaranteed by the federal government so workers in the state have more rights than workers in most other states.

This time, California expanded the rights of workers in connection with family leave. Two decades ago, the Clinton administration passed the Family and Medical Leave Act (FMLA), which provided federal protection to employees who needed to take unpaid family leave. Under the FMLA, workers employed by companies that had 50 or more employees were guaranteed the right to take up to 12 weeks of unpaid leave for certain qualifying family events such as the birth of a child. While employers are not required to offer paid leave (California does provide separate disability benefits paid from a state fund), the FMLA prohibits certain employers from terminating or retaliating against a worker for taking up to 12 weeks of unpaid leave for certain types of personal and family member medical conditions, including the birth of a child. For more information on covered conditions and family members covered by the Act, click here.

When the FMLA was passed, California matched its state laws to the federal regulations. However, no protections in the form of guaranteed unpaid leave were provided to employees who work for small businesses with fewer than 50 employees in the state. As the Sacramento Bee explained, this left millions of California workers without a guaranteed right to take time off if they added a new baby to their family.

This has now changed. Governor Jerry Brown signed Senate Bill 63, which will take effect on January 1, 2018, and which will make 2.8 million small business workers in California eligible for unpaid family leave. These workers, like those previously covered by the FMLA, will be protected from adverse employment actions as a result of taking leave. Eligible workers must work for companies that employee at least 20 people, and they must have at least a year of experience. They also must have worked for at least 1,250 hours with their employer to qualify for leave. The bill not only covers situations when a new baby is born to a family, but also extends to situations when parents have adopted a child or where a foster child is placed with the parent-employee.

California workers also receive broader protection in another important way. In 2004, California had enacted a law allowing parents who take time off to care for children to apply for and receive disability compensation. Since workers of small businesses were previously not protected from losing their jobs if they took time off, many employees who worked for small companies were not able to take the leave and also take advantage of the disability benefits due to a fear they would not have a job to return to. With their jobs now guaranteed, new parents at small companies can take off that 12 weeks to spend with their child, can receive unemployment disability benefits during that time period, and can return to work without fear their position will have been filled.

Getting Help from San Diego Business Lawyers

The San Diego business lawyers at Gehres Law Group, P.C. provide representation to companies who wish to ensure they are in full compliance with all updated laws and policies applicable to their organization. Our legal team can also provide representation to employees who are concerned their rights may have been violated. To learn what our firm can do to help you or your organization, give us a call at 858-964-2314 or contact us online today for a complimentary consultation.

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The Supreme Court is Considering Arbitration Clauses in Workplace Contracts

The business contract lawyers at Gehres Law Group, P.C. provide advice on the drafting, negotiation, and enforcement of contracts. One especially common provision in many different types of business contracts is called an arbitration clause. Arbitration clauses have become more widely used in recent years and have become the subject of a series of contentious court cases. Most recently, a case has arisen in connection with arbitration clauses in employment contracts. As the New York Times explains, this case is now being considered by the United States Supreme Court. 

Can Employers Include Arbitration Clauses in Employment Contracts?

Arbitration clauses require a dispute to be resolved through arbitration rather than litigation. Companies regularly include arbitration clauses in consumer contracts and these clauses frequently prohibit class actions and group arbitration. A ban on collective action creates a de facto bar on the pursuit of many small claims because bringing individual causes is often not worth the time or effort.

The Supreme Court has largely upheld the use of arbitration clauses in consumer contracts, and while the Consumer Financial Protection Bureau issued a rule restricting the use of these contracts in the financial services sector, Congress used the Congressional Review Act to overturn this proposed rule and to once again permit banks, credit card companies, and related businesses to use arbitration clauses that make it more difficult for consumers to pursue claims. Learn more about the Court’s history of enforcing arbitration provisions here.

Now, the Supreme Court is considering a case related to the use of arbitration clauses in employment contracts. This could curtail the rights of workers to take collective action. Employees may wish to take collective actions in cases such as when employees are all adversely impacted by things like wage-and-hour violations or employment discrimination. However, when this collective action is barred, there may be grievances employees have that are difficult to pursue in independent arbitrations.

The Supreme Court will soon be ruling on a series of three consolidated cases. See Epic Systems Corporation v. Lewis, No. 16-285, Ernst & Young v. Morris, No. 16-300 and National Labor Relations Board v. Murphy Oil USA, No. 16-307. The question in these cases centers around whether employment contracts can require workers to waive the right to collective action in arbitration or whether this an impermissible restriction on employee rights.

Attorneys for the federal government actually appeared on both sides of the case, arguing before the Supreme Court. The National Labor Relations Board is, of course, opposed to permitting employers to use arbitration clauses barring employees from bringing collective action in arbitration. During its arguments before the Court, the NLRB’s general counsel argued that while no class action waivers should be permitted in employment contracts, he conceded that the private entities conducting arbitration could require that the cases be pursued independently. However, one of the Court Justices pointed out the weakness of such an argument which could result in an employment agreement which does not waive an employee’s right to pursue a class action suit, but where the employee is nevertheless prevented from pursuing such claims because the applicable arbitration association does not permit class arbitration, essentially make collective action impossible.

It remains to be seen how the Supreme Court will rule on this issue. While some justices suggested workers could potentially band together if they hired the same attorney who then filed individual arbitration cases for each of them, Justice Kagan expressed the belief this may not be good enough to protect worker rights since it takes away or restricts many of the avenues employees have for addressing their grievances.

Getting Help from a Business Contract Lawyer

The decision made by the Supreme Court could affect approximately 25 million employment contracts throughout the country, so both workers and employers should ensure they are aware of such developments with regard to their workforce contracts. The business contract lawyers at Gehres Law Group, P.C. add value to your business by remaining abreast of such developments and helping you understand the applicable rules and regulations when drafting arbitration clauses, as well as other key provisions that should be included in your business contracts. To find out more about how our firm can help you, give us a call at 858-964-2314 or contact us online today for your complimentary consultation.

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State Payroll taxes California Employers Should Know About

Business attorneys at Gehres Law Group, P.C. advise companies on their obligations as employers. California imposes myriad requirements on companies that hire staff members. Among those requirements are rules related to payroll taxes. 

California Payroll Tax Rules for Employers

The Employment Development Department in California provides a comprehensive guide to state payroll tax rules for companies. Some of the key rules that employers should know about include the following:

• Employers with one or more employees must register with the Employment Development Department if they pay any employee more than $100 in a calendar quarter. However, if you pay wages to gardeners, housekeepers or others who work around your home, you are considered a household employer and must register only after paying $750 or more in wages per calendar quarter.
• Employers with 10 or more employees are required to file and submit tax returns, wage reports and payroll tax deposits electronically as of January 1, 2017.

Anyone who is considered an employer in California must comply with payroll tax obligations. There are four payroll tax programs in California which are administered by the Employment Development Department. These payroll taxes include:

• Unemployment tax: Unemployment tax must be paid on the first $7,000 in wages employers pay to each employee during the calendar year. Employers pay this tax on a quarterly basis. Tax rates vary based on factors including whether the employer is a new employer as well as the employer’s experience with the unemployment program. Taxes could vary between 1.5% and 6.2%. This tax funds unemployment payments for workers who are laid off from their jobs.
• Employment training tax: Employment training tax is charged at a rate of .1% of the first $7,000 in wages employers pay to employees during each calendar year. The tax provides funding to train employees in industries necessary to keep California businesses competitive. Employers pay this tax.
• State disability insurance: State disability insurance is funded by a tax on employee wages. Employees pay this tax. Employers must withhold .9% of the first $110,902 in wages that are paid to employees during each calendar year. The taxes fund short-term disability payments and paid leave for eligible workers who take time off to care for a new child or for a sick child, parent, grandparent, sibling, spouse, or other close relative.
• California personal income tax withholding: California personal income taxes are paid by workers on income they earn within the state of California. Employers must withhold an appropriate amount of money from an employee’s entire salary based on the information provided by employees on their W-4 forms.

Employers are responsible for the payment and/or collection of each of these payroll taxes as well as for the timely submission of payroll tax forms and payments of all taxes due.

Getting Help from California Business Attorneys

Gehres Law Group, P.C. provides assistance to employers in understanding payroll tax obligations. Payroll tax obligations are just one of many legal requirements employers must comply with when operating a business within the state of California. Business attorneys at our firm can help you to understand the full range of laws applicable to your organization so contact our legal team for help as soon as possible after beginning operations or when you hire a staff member for the first time.

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Steps to Take Before Forming a Partnership

San Diego business attorneys at Gehres Law Group, P.C. will help you to determine if you should form a partnership and will guide you through the partnership formation process. Give us a call if you are considering organizing your business entity as a partnership. 

Steps to Take Before Forming a Partnership

A partnership is one of several options to structure a business entity. Partnerships are an alternative to Limited Liability Companies (LLCs) and corporations. If you are considering starting a partnership:

• Determine if a partnership is the right business structure. Corporations and LLCs can provide broader protection from liability for all partners. Corporations can also provide more tax flexibility and can make business succession simpler, although paperwork requirements and ongoing expenditures for corporate compliance can be higher.
• Decide between a general partnership and a limited partnership. If you form a general partnership, all partners can be held legally liable for debts of the business and judgments against the business, creating significant risk of personal liability. A limited partnership protects some partners, but there must be at least one general partner with unlimited personal liability, making even limited partnerships more risky than most other entities.
• Ensure you meet the requirements for partnership formation. For example, to form a general partnership in California, you must have two or more people or entities engaged in a for-profit business, according to the California Secretary of State.
• Select a business name: You are permitted to use the partners’ surnames as your business name or you are allowed to create a fictitious business name as long as the name is not too similar to any other existing company that is currently registered with the state of California. If you have made the decision to use a fictitious name, after you have chosen the company’s name you will need to file a fictitious business name statement with the clerk of the county where the business will operate. You do not have to register the name of your partnership if you will be using the surnames of the partners.
• Negotiate, draft and sign a partnership agreement: This is an optional step not required by California law but is an important step so you and your partners can ensure you are on the same page in terms of what each partner will contribute, how profits and losses will be distributed, and how authority is shared among the partners for business operations. This step is too often overlooked, leading to costly disputes and even lawsuits.
• Complete the required forms. If you wish to form a limited partnership, you must submit a Certificate of Limited Partnership (Form LP-1) with the Office of the California Secretary of State. If you wish to register your general partnership with the state, you must submit a Statement of Partnership Authority to the Secretary of State. Registering a general partnership with the state is optional.
• Obtain an employer identification number: Your partnership will need an EIN if you intend to hire any staff members.

Getting Help from San Diego Business Attorneys

Gehres Law Group, P.C. can guide you through all of the steps to form a business partnership. We can also advise you on other types of business entities you wish to create. Give us a call at 858-964-2314 or contact us online today to find out more. We offer a complimentary consultation to new clients.

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What is the Process to Copyright Creative Works?

A copyright attorney at Gehres Law Group, P.C. can help you through the process of registering your creative works so you get legal protections. Contact our legal team to determine if you can copyright a work and to get help with the registration process. 

The Process of Registering a Creative Work

The Copyright Basics Guide prepared by the United States Copyright Office explains the laws in the United States protecting creative works.

According to the Copyright Office, registration has not been required since March 1, 1989, as a copyright exists automatically when an original work of authorship is created in an eligible medium. However, registration of copyrighted work is required to enforce copyright protections. In other words, if you want to be able to sue to stop someone from improperly using your copyrighted material, you must have registered that material. Learn more about the benefits of registering your copyrights here.

To register your creative work, you’ll need to take these key steps:

• Ensure the work can be copyrighted: You can copy musical works and lyrics; literary works; dramatic works including soundtracks and musical scores; choreographic work; pantomimes; pictorial and graphic arts; sculptural works; motion pictures; audiovisual works; sound recordings including music, spoken word and other recorded sounds; and architectural work. You cannot copyright widely-used symbols or designs; variations of letters or typographic ornamentation; ideas or procedures; or lists of contents or ingredients.
• Determine if you have the rights to copyright the work: You can copyright creative works that you produce. You can also copyright works made for hire, which include works created by your employees as part of their customary duties.
• Submit an online application to register your work with Copyright.gov or mail in your registration application. If you are going to electronically register your work, there is a registration portal where you can go through the registration process. You will need to select the type of work you want to copyright and go through the specific application necessary for that type of work product. If you are registering electronically, are the sole author of the work, and are registering one work, you can submit a streamlined single application; however using this application when you are not eligible could cost you additional fees and could result in registration delays. You will also need to make a payment to the Copyright Office and will need to either ship a copy of your work to the office or will need to upload a digital copy of your work depending upon what you are copyrighting.

Once you have registered your copyright, you have legal protections. If someone attempts to use your copyrighted material without your authorization, you can pursue litigation to stop the misuse of the copyrighted material and, in some cases, to obtain damages for loss.

Getting Help from A Copyright Attorney

Gehres Law Group, P.C. can provide assistance with determining if your creative work is eligible to be copyrighted or if you should use an alternate approach, such as filing a patent or trademarking your work product. Our legal team will also guide you through the formal process of applying to register your copyright, which can be a difficult process that begins with choosing the correct application. Just give us a call at 858-964-2314 or contact us online to find out how we can help; we offer free consultations for new clients. Learn more about our copyright flat fee packages here.

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