Archive for Commercial Law

March 30, 2016   Posted by: Margarita Smirnova

STARTING A BUSINESS

So, you decided to start a business? Congratulations! You should have an idea that your new business has to be incorporated. There are multiple choices such as sole proprietorship, LLC, LLP, INC, and PA and taxation/liability issues that you need to tackle.

Purchasing: Perhaps, you should just buy one? Wouldn’t that create a slew of problems with previous owner(s), shares, bylaws and operating agreements? Large lump sum of money gets involved and situations get convoluted.
Benefits and risks: Pros and cons of working for self are incredible. No one can fire you! No one can tell you when, what and how you should do things unless you have partners or shareholders. It sounds great on the paper. That’s right! Put everything on the paper is very important. Starting from incorporation paperwork to operating agreements, paying attention to by-laws and employment contracts. Don’t forget to review financial statements; what company owns, its capital and debt.

Employment: Most likely, you will have someone assist you and do what you could do. If you decide to hire someone, employment laws play an important role. If you get someone who will do some work for you that you do, s/he is an employee. If you don’t pay promptly, you may be subject to criminal charges besides triple damages and your company facing a costly lawsuit. Is your head spinning yet?

Liability insurance: Incorporated business has certain protections by the state but these protections are far from enough to cover from potential litigation related to your business with specific needs.
Location: Most towns have their local rules and regulations to consider prior opening your business that need to be taken in consideration. Most likely, you will need an office. The next question is will you rent vs. own the property where your business is based. This is when you need to consider real estate issues.
Interstate: Will your business be a part of the Interstate Commerce? Will you have to deal with internet issues and contracts pertaining to your product and services? How about regulations of those states your business reaches?

If you have any questions, contact me and we will explore how your business can achieve its objectives.

By Margarita Smirnova
Call: (617)398-7482
E-mail: margarita.smirnova@gmail.com
This post is for informational and educational use only and does not create attorney-client relationship.

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June 9, 2014   Posted by: Margarita Smirnova

BUSINESSES DEALING WITH ON LINE DEAL SITES!

At one point, sooner or later, you, as a business owner or business principal will consider offering your services on a Groupon like or an on line deal sites to promote your business and show potential customers your service.   Forbes’ article Are Daily Deal Sites Like Groupon Still Worth It? points out the wariness of the consumer.  In the article, a writer didn’t use her coupon.  She stated that customers became disillusioned by the deals and burnt from experiences.  She ended her article with a list of great advice for the buyers.  The list is great to connect with customers and figure how to make your business last.  The list below will take it a little further and list issues that businesses may deal with when working with companies that providing on line deals.  Keep in mind that the list is not exhaustive and not all companies are the same.

1.     Deals are contractual agreements.  When dealing with a corporation that offers an on line deal you will be provided with an already prepared contractual agreement that contains multiple clauses.  One of the most commonly used clauses is expiration date.  Each contract varies.  In 2012, Groupon, Inc. paid $ 8.5 million and settled a class-action lawsuit, which alleged illegal expiration dates when customers didn’t use their vouchers.  See, In re Groupon Inc. Marketing and Sales Practices Litigation, 11-MD-2238, U.S. District Court, Southern District of California. The result affected businesses that now must accept monies customers paid even after the deal, sans the discount.

When facing with on line deal like contract, this is the time to review every clause very carefully.  It is important to understand the company’s motive, which is to sell.  This means what is said is not always what is in writing.  One Boston magazine offered an on line deal to a business where the salesperson verbally offered a deal-type scenario that consisted the company would provide the deal on their website and keep 100% of proceeds from the deal while the business would provide a service to the customers who would buy the deal in exchange for the publication.  When they sent the contract to the business, it was shocking to see that no deal-type scenario was included anywhere in the contract.  In fact, the business would be solely responsible for the publication.

2.     Cancel the contract clause.  Deal-type companies retain the right to cancel the contract with the business at any time without warning or explanation.  That means whatever efforts you made to prepare your business to deal will go to waste.  They also can change a day and a time of the without being liable to you.  The contract can limit the business’s right to cancel which renders the clause illegal when one sided.

3.     Another big one is condition of approval clause.  If the business isn’t careful and signs this clause, the company can get the right to strip you of your right to condition for approval, which I think, is atrocious.  You want to see your final version of advertisement before it goes out in print or on line.

4.     Watch out for your own property rights.  One company wanted to retain rights to own and sell to third parties of businesses’ pictures or images and trademark perpetually.  This means that not only they can use your images that you’ve spent time, money and energy to obtain and belong to you, but also to sell them to whoever they please forever.

5.     Customer dissatisfaction.  All on line deal like companies contain limitation clauses in their contracts.   They also will make sure to be indemnified from further liability and the responsibility will fall almost entirely on the business.  It is important to be aware what type of liability the business will absorb.

Groupon like companies retained attorneys to draft contracts for them.  There is nothing wrong if you get help from one.

Written by Margarita Smirnova, Esq.

If you have a specific question relating to your business or any other legal questions, please contact Margarita

Call: (617)398-7482
E-mail: margarita.smirnova@gmail.com
This post is for informational and educational use only and does not create attorney-client relationship.
no comments posted in: Business Law   |   Commercial Law   |   Litigation
November 8, 2013   Posted by: Margarita Smirnova

RELATIONSHIP BETWEEN BUSINESSES AND LOCAL GOVERNMENTS

On November 22, 2011, Massachusetts allowed casinos through the Expanded Gaming Act.  This month is a 2 year anniversary since the casino business became legal in this state.  So, what happened since Governor Deval Patrick signed the law.

205 CMR regulates gaming through Massachusetts Gaming Commission.  Under the 194 §1(7), Massachusetts Gaming Commission was established that consists of chair and four commissioners and it is tasked to overview fair and transparent gaming experience.  Chapter 194 §1(13) requires businesses to “have received a certified and binding vote on a ballot question at an election in the host community in favor of such license; provided, however that a request for an election shall take place after the signing of an agreement between the host community and the applicant; provided further, that upon receipt of a request for an election, the governing body of the municipality shall call for the election to be held not less than 60 days but not more than 90 days from the date that the request was received; provided further, that the signed agreement between the host community and the applicant shall be made public with a concise summary, approved by the city solicitor or town counsel…”

This means that Massachusetts requires local voters to agree before casino applicants can even obtain a state license to conduct any type of gaming activities.  While Boston residents voted against casinos entering their city, Revere residents voted for the casinos and dog racing trucks to enter their city.  Leominster residents were a bit more conservative and allowed only slot machines.   With casinos entering the area, the employment and financial improvement will affect the economic growth of the city.  At the same time, the local government will have to raise security to balance out the influx of the visiting people and to protect from potential criminal activity.  Similarly, Jamaica Plain is legendary opposed to work with chain companies.  For example franchises such as Arthur Murray, Fred Astair, and Apple store will have a tough time opening their doors in Jamaica Plain.  At the same time, a small independent dance studio or a computer store would have no problem doing their business.  What this essentially means is that people decide what business they want where they live.

Its a known fact that business owners must comply with all Federal, State, city/town to ensure their business is legal and runs smoothly.  States and cities/towns are of local nature and still hold enormous power over how they want their businesses to run.  Not all is lost.  Besides compliance, there is another way to make sure the business process in the community is doable.  Business owners can and should become an integral part of their local government.  They can work with and participate in the community to ensure they reflect the area and assist growth in the community which in turn improve their chances of staying afloat and profiting.

Written by Margarita Smirnova, Esq.

If you have a specific question relating to your business or any other legal questions, please contact Margarita

Call: (617)398-7482

E-mail: margarita.smirnova@gmail.com

 

 

 

 

 

 

 

 

 

 

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October 25, 2013   Posted by: Margarita Smirnova

BUSINESSES PARTNERSHIPS ARE COMPLEX RELATIONSHIPS

 

The U.S. businesses consist of sole proprietorships or various forms of partnerships and corporations.  It’s not unheard of that solo businesses enter business ventures with other businesses.  Due to the tough economy, more and more business partners join business partnerships with each other than before to survive.  A business partnership union can be compared to a marriage.  Like in a marriage, a business partnership has a honeymoon period filled with well-meant, and perhaps, not-so-well-meant promises.  Then, there is a drudgery of ins and outs of a daily and weekly workload and activity with potential lack of communication may lead to contempt and breach of respect and/or trust.  Does it sound too familiar?  Yes.  That’s because it happens all the time.  Luckily, there are ways to prevent a fall out, and in case if it’s too late, peacefully depart.  Similarly to a good marriage, a personal responsibility and entering the business partnership with the idea that nothing in this world is permanent is the key to success.

There are many issues that can arise among partners and wreck a business partnership.  For example, a closed company shareholder dispute over under performance, a lack of sufficient capital and an increase in business expenses, a breach of fiduciary duty, among other things such as including but not limited to business debt collection and/or personal disputes.

A scenario where business partners are partnering with each other instead of hiring happens all the time.  Sharing household tasks is not an unfamiliar approach.  In short, two or more partners with different set of skills agree to make an input and be responsible for separate aspect(s) of the business.  Sometimes one partner’s particular or unique skill or service in the beginning is what brings the company to its success.  Later, someone could be hired instead of him.  At one point, one of the partners may think that hiring someone else with the same set of skills would be a cheaper alternative than to retain the original business partner leading to a rift in the relationship affecting the daily business flow.  Perhaps, communicating would have helped.

There are many issues that can arise among partners and financial outcome be at stake.  For example, a conflict may arise in a closed company shareholder dispute may arise over an under performance, a lack of sufficient capital and an increase in expenses.  That can lead to a breach of fiduciary duty, and unfulfilled promises and wreck a business flow.  In addition, a simple business debt collection suit by a creditor or personal disputes can lead to a prolonged grudge.  This is exactly what happened in one of the cases in Massachusetts.  See, Weiler v. PortfolioScope, Inc., 83 Mass. App. Ct. 216 (2013).

In Weiler, the business structure involved a complex array of partnerships among companies and individuals making separate contractual agreements and obligations.  The outcome resulted in securities regulations preempting over contractual agreements between the parties because there was a properly secured and timely perfected creditor.

Milton Weiler (Weiler), the plaintiff in this case, was a President and CEO of the PorfolioScope, the defendant.  Weiler developed a certain portfolio that became a part of PortfolioScope, Inc. (PortfolioScope).  PortfolioScope is an entity formed when formerly named Spencer Trask acquired Computer Aided Decisions (CAD) and CAD Research along with Plaintiff’s, among with Weiler’s, software.  In 2008, PortfolioScope sued iFlex Solutions, Ltd for the theft of trade PortfoliosScope’s secrets software.  The case with iFlex Solutions Ltd. settled and PortfolioScope was to receive a lump-sum payment in the amount of $10 million.  However, in 2002, Weiler resigned leading to replacing of the CEO within the company.  Through a stock option purchase and the sale agreement with PortfolioScope, Weiler, in exchange for the sale of his portion of ProtfolioScope, retained the right to five percent (5%) of its net proceeds received in connection with the iFlex Solutions, Ltd.

Plaintiff argued that PortfolioScope breached the agreement with the plaintiff to pay (5%) of the proceeds from a settlement related to a pending lawsuit between PortfolioScope and iFlex Solutions.  See, Weiler, at 218.

The main issue was whether an agreement between the plaintiff and the defendant stating that the plaintiff was entitled to 5% of defendant’s net proceeds in connection with the third party litigation gave the plaintiff a priority over a secured creditor who had a preferred his claim.  The Trial court held that the agreement gave Weiler the priority of payment and said that the defendant “was required to pay because the agreement did not mention any creditor, secured or unsecured.” See Weiler 218-223.

The Appeals Court of Massachusetts, however, disagreed with the trial court and interpreted the effect of the contract between the parties differently.  The Court said that the payment was simply one of several parts of the consideration for the sale of his stock options back to the company…  The court held that “PortfolioScope lacked authority to encumber collateral preciously securitized in favor of the creditor…”  “The resolution of priority conflicts is governed by the general rule “first in time, first in right” See Weiler 225-226.  Because the creditor did not subordinate his interest to Weiler, “Weiler was an unsecured creditor, whatever the nature of his interest in the settlement proceeds, was not superior to other creditor who had their interest secured.

Communication is crucial.  Comparisons with marriage aside, writing is a great communication tool.  While its not always perfect it can show the meaning among the parties.  A well drafted agreement between partners could divert a disaster by laying out possible creditors.  It can also minimize the possibility of misinterpretation and help to avoid losses and costly litigation.

 

Written by Margarita Smirnova, Esq.

If you have a specific question relating to your business, please contact Margarita

Call: (617)398-7482

E-mail: margarita.smirnova@gmail.com

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November 1, 2011   Posted by: Margarita Smirnova

Welcome to the Virtual Law Office

Hi all,

I am an attorney and I am licensed to practice law in MA and NY. Currently, I practice law via Virtual Law Office in the Boston area. That means that I can meet with you after work/business hours and in the area near you; reasonably placed. If an office space is required due to the nature of the legal issue or by client’s request, I will arrange a meeting by appointment. Meetings for NY clients are available in special circumstances.

I specialize in business, family and immigration matters; will represent you during negotiations and in court. I am bilingual and speak English and Russian for your convenience.

 

If you have a specific question relating to your business, please contact
Margarita

Call: (617)398-7482

E-mail: margarita.smirnova@gmail.com

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