Crafting a sales agreement that will maximize your return on investment and limit liabilities

Large risks are involved when starting a business. According to the Small Business Administration, only half of new businesses survive past five years. One way to reduce the risk of being a business owner is to buy an existing business with proven cash flow or profits. Although buying an existing business reduces risk, it comes with a heavy price. To protect the investment, a purchaser needs to make sure that he receives what he bargained for. This can be accomplished by ensuring that a comprehensive sales agreement is created.

When buying a business there are many issues that need to be addressed. An attorney can assist you by asking the key questions and focusing on the areas that will have the greatest impact on the business’s future success. For example, what parts of the business should you buy? Is it better to buy the existing business entity or should a new entity be formed to only purchase the assets? The manner in which the business is purchased can have a great impact on a business’s future liabilities. The answer to these questions will depend on the specific circumstances surrounding each business purchase. And how you answer can make a huge difference as to your taxes, profits and potential problems down the line.

When buying a business, there is frequently a concern that the previous owner will form a new competing business. To solve this potential, an attorney can create a Covenant not to Compete. This covenant should be an essential part of the sales agreement as it will prevent the previous owner from becoming a competitor for a determined amount of time, increasing your chances for success.

Buying a business without a comprehensive sales agreement exposes you and your business to financial risk. With the help of an experienced business attorney, you can limit your risks and increase your potential earnings by having a favorable sales agreement that addresses the key issues.

With the help of online tools and books, thousands of people bypass lawyers to create their own wills, powers of attorney and other estate planning documents. The pros and cons of creating your own legal documents without professional help vary by individual. For people with complicated family or legal situations involving children from multiple spouses or significant wealth, professional help is essential. For young, single people with relatively straightforward needs, very few assets and no complicating factors there’s room for disagreement.

Often times even in very simple circumstances, people make mistakes when they fill out their own forms. People often get a false sense of security from creating their own legal documents, where answering one question incorrectly or overlooking something such as appointing a guardian for children or not anticipating a beneficiary; future needs and challenges can lead to major problems down the road.

Experienced estate planning lawyers know the questions to ask, and know what to do with the answers.

Without an estate planning lawyer’s guidance, you might not understand the technical but important terms of critical documents. Therefore, you could inadvertently give someone more power than you want to at the wrong time when creating a “durable power of attorney” document, for example. That document essentially gives someone else the power to take care of your finances. If that person isn’t trustworthy, he or she could steal from you. If the document isn’t executed properly or does not have certain required language then it might not be valid.

Another risk is when it comes to transferring your property to your intended beneficiaries after you pass away, a self-written will might contain omissions or statements that lead to unintentional consequences. Without the help of an estate planning lawyer, a person might not prepare for contingencies such as being pre-deceased by children, divorce, or the births of new children, unknown creditors of beneficiaries, etc.

The complicated world of estate taxes is also a risk when creating your own legal documents. If you do not know the current state and federal tax laws your estate could pay too much in taxes, leave less to your beneficiaries then you had planned or result in a very different distribution of your estate than you intended.

If you don’t think you can afford a complex estate plan now, start with what you can afford. Then, let your planning develop and expand as your needs change and your financial situation improves. Don’t try to do this yourself to save money. An experienced estate planning attorney will be able to provide critical guidance and peace of mind that your specific plan meets your specific needs.

Immigrants who are victims of serious crimes in the United States need no longer fear deportation when reporting serious crimes, even if their stay in the U.S. is illegal. To encourage the cooperation of immigrants in the investigation and prosecution of crimes serious in nature, congress created the U Visa. Because immigration laws are complicated and always changing, when applying for the U Visa, the immigrant should contact an immigration attorney to seek protection under the U Visa. If granted, the U Visa can help protect immigrant victims of crimes be giving legal status to reside and work in the U.S. and place them on a path to permanent residency.

The U Visa was created as part of the Victims of Trafficking and Violence Prevention Act in October of 2000. Among other things, this act provided protection to immigrants who were victims of human trafficking, extreme violence, and/or sexual crimes. Seven years later, the act became affective when the U.S. Citizenship & Immigration Service (USCIS) published their final Regulations on U Visas. These Regulations provide that immigrants who are the victims of serious crimes who have cooperated with authorities in the prosecution of the perpetrator, will be given a U Visa, which gives the immigrant victim legal status to reside and work in the United States.

General Requirements to obtain a U Visa

The U Visa generally applies to immigrants, both documented and undocumented, who are victims of serious crimes, who have cooperated with authorities in the prosecution of the the perpetrator. The purpose of the U Visa is to encourage foreign nationals who are victims of certain serious crimes to work with the law enforcement authorities, the help with prosecution. The general requirements are:

• The foreign national must have substantial physical or mental abuse  as a result of the serious crime;
• The criminal activity violated U.S. law and occurred in the U.S.;
• Law enforcement must certify that the foreign national has helped or will help with the investigation or prosecution of the crime.

The Foreign National must have suffered substantial physical or mental abuse as a result of the serious crime.

The victim must show he/she suffered substantial physical or mental abuse from the crime. The U Visa is not available to any victim of any crime. The foreign national must have suffered substantial physical or mental abuse as a result of a serious crime. The crimes include, but are not limited to:

• Abduction, incest, rape
• Abusive sexual contact, involuntary servitude, sexual assault
• Blackmail, kidnapping, sexual exploitation
• Domestic violence, manslaughter, slave trade
• Extortion, murder, torture
• False imprisonment, obstruction of justice, trafficking
• Felonious assault, peonage, unlawful criminal restraint
• Hostage, prostitution, attempt, conspiracy or solicitation to commit any of the above crimes.

The criminal activity must have violated U.S. law and occurred in the U.S.

The criminal activity must have violated U.S. law and occurred in the U.S. The victim may still qualify for the U Visa even if they are currently outside of the U.S., as long as the crime occurred while the victim was in the United States. In such a scenario, the immigrant and/or family members may file for the U Visa with the U.S. embassy or Consulate in the Immigrant’s country. A U Visa can even be applied for if the foreign national has a deportation order.

The Foreign National must have useful information concerning the investigation and prosecution of the crime, and must have helped or is likely to help with such investigation or prosecution.

The immigrant must have useful information concerning the crime, and must have helped, or must be likely to help in the investigation or prosecution of the crime. To ensure this, before granting the U Visa, a law enforcement agency must certify that the foreign national has been the victim of one of the qualifying crimes and has cooperated, is cooperating, or will cooperate with the investigation or prosecution of the crime. The certification can come from most agencies that take part in the investigation or prosecution of the crime. An immigration attorney can assist the foreign national in obtaining everything they need for this requirement.

Effects of the U Visa

If granted a U Visa, the victim is entitled to remain in the U.S. for up to four years and may even bring family members into the United States. They also receive automatic work authorization and even have potential to gain permanent residency. Further, the legal status granted by the U Visa extends to spouses of victims, children of victims, parents of victims who are children, and to siblings (of minor age) of victims who are children. If the victim is under 16 years old, the parent, guardian or next friend who has information about the criminal activity can apply. Naturally, in such a scenario, the victim will also be granted the U Visa.

Fees

There is no fee or application charge for applications for a U Visa. There are fees for other things in the process like, fingerprints and other related forms. However, these fees can be waived. Because immigration laws are complicated, the foreign national is encouraged to consult with an immigration attorney before applying. An experienced immigration attorney can get the law enforcement to fill out the appropriate U Visa certification, can help the foreign national apply for fee waivers, and can help with any other issues that may be present.

I recently had to seek legal advice concerning the selling of my home in Mesa and I was extremely pleased with the immediate attention he rendered when I sought guidance on my pending real estate transaction. I was especially impressed with his very calm, friendly and understanding demeanor and the time he took to answer all of my questions with full explanations and details.

Within the first few minutes of my visit with him, I immediately sensed his outstanding professionalism coupled with a very intelligent, helpful and positive attitude. In fact, he immediately made me feel that my problems were a priority with him and he was there to help and support me.

Mr. Millett presented me with an array of options and strategies to consider and explained the steps involved with each one. Because of his support and guidance, I was able to make an intelligent decision and resolve my real estate issues.

Additionally, I would like you to know that I appreciated his willingness to offer me his full availability and he always took his time to listen and answer me when I followed up with questions via the telephone or emails.

I truly feel honored to have met him and I know that if it wasn’t for Mr. Millett’s support and advice, I would not have made the right decisions.

~Dennis Orr 5/01/12

Employment anti-discrimination laws prohibit employers from asking interview questions that discriminate illegally. Title VII of the Civil Rights Act of 1964 prohibits employment discrimination on the basis of race, color, religion, sex, disability, age or national origin. The EEOC (U.S. Equal Employment Opportunity Commission), created by the Civil Rights Act of 1964, enforces these laws. This protection against discrimination extends to hiring, firing, promoting, setting wages, testing, training, and all other terms of employment. Accordingly, certain questions asked during interviewing may be discriminatory, and consequently, the interviewing employer may be vulnerable to discrimination suits. To interview effectively, employers should know these discriminating questions and possible alternatives to avoid such liability.

Questions to Avoid
Employment anti-discrimination laws prohibit employers from asking direct questions about race, color, sex, religion, national origin, birthplace, age, disability, and marital or family status. Some examples of questions employers should not ask are:

Race, Color, Religion, National Origin:

• Are you a U.S. Citizen?
• Where did you grow up?
• Will you need personal time for particular religious holidays?

Age:

• When did you graduate from high school?
• Are you comfortable working with co-workers older/younger than you?
• How long do you plan to work before you retire?

Gender & Family Status:

• How many children do yo have? How old are your children?
• What arrangements are you able to make for childcare while you are at work?
• Do you have plans to have children soon?
• What does your spouse do for a living?
• Are you comfortable working for a female boss?

Disability:

• Do you have any visual, speech, or hearing disabilities?
• Are you planning to have a family and when?
• Have you ever filed a workers’ compensation claim?
• Have you had any serious illnesses in the past year?
• How many days of work did you miss last year due to illness?

Possible Legal Alternative Questions:
Rather than asking directly about race, color, religion, national origin, age, gender, family status or disability, the focus of the questions should be on behaviors, skills and experience needed for the position. The questions should be used to discover and predict job-related performance of the potential employee, rather than discovering personal information. Some examples of possible legal alternative questions are:

Race, Color, Religion, National Origin:

• Are you authorized to work in the United States?
• Do you have any language abilities that will benefit you in this job?
• Are you part of any professional or trade groups or other organizations that you consider relevant to your ability to perform this job?
• Are you available to work on Saturdays or Sundays?

Age:

• Are you over the age of 18?
• Can you provide proof of age after employment?

Gender & Family Status:

• Would you be willing to relocate if necessary?
• Do you have any restrictions in your ability to travel?
• Do you have any responsibilities or commitments that will prevent you from meeting your specified work schedules?

Disability:

• Are you able to lift 40 lbs and carry it 100 yards, as that is part of the job?
• Are you able to perform the essential functions of this job with reasonable accommodations?

Employers should know what questions may and may not be asked according to employment laws. Rather that direct questions regarding race, color, religion, national origin, age, gender, family status, or disability, the questions should focus on skills, behavior and experience needed for the position. Our attorneys at Gunderson, Denton & Peterson, PC can assist you with employment and other business related matters.

Generally, owners of corporations and limited liability companies are not personally liable for business liabilities.  However, under some situations, courts allow creditors to “pierce the corporate veil,” to access a corporation or LLC owner’s personal assets.  It is vital for business owners to know how, when, and why their personal assets may be vulnerable to their business liabilities.  The major considerations the court looks to are whether the company is undercapitalized and if the owner is using the company as an alter ego.

Undercapitalization & Alter Ego

Arizona requires corporations to be adequately capitalized at the time of formation and through the life of the corporation.   No exact amount is required, but the purpose is to protect creditors and others with whom the company has liabilities.  “Alter Ego” refers to when the owner treats the company as a sole proprietorship, a partnership, or a personal asset rather than as a separate business entity.  Accordingly, it is important to take the following steps to avoid piercing of the corporate veil:

1. Maintain adequate business capitalization from the inception of the company forward.
2. Engage in the necessary formalities required for the business entity.
3. Avoid commingling business and personal assets and activity.
4. Make the corporation or LLC status known to your clients.
5. Document all business actions.

1.      Ensure adequate capitalization from the inception of the company forward.

All corporations, at the time of formation and throughout the life of the corporation, must be properly capitalized to respond to claims and liabilities arising out of the corporation.  No exact amount is required. However, the general test of capitalization is at inception.  Therefore, the most important time to have your company capitalized is at its inception.  Business owners should then continue to keep the company adequately capitalized throughout the company life relative to current and foreseeable liabilities.  Doing so will protect others from piercing the corporate veil to access owners’ personal assets.

2.      Engage in necessary formalities.

Corporations have formalities that they must follow.  Although LLC law is not as stringent, it is also smart for owners of an LLC to follow such formalities.  The court views a company that lacks the necessary formalities as a possible indication the owner is using the company as an alter ego.  If the court believes that the owner may be using the company as a sole proprietorship, partnership, then the court may treat the company like a sole proprietorship or a partnership, by allowing the corporate veil to be pierced making the owners personally liable.  Owners should ensure their company takes part in the following formalities to avoid personal liability:

Corporations:

• Create, maintain, and update bylaws.
• Issue shares of stock to stock owners.
• Maintain a stock transfer ledger.
• Hold initial and annual meetings with directors and shareholders.
• Keep annual filings, fees, and taxes current with the state of incorporation.

LLCs:

• Issue membership certificates to owners.
• Keep a membership transfer ledger.
• Hold initial and annual meetings of the members and managers.
• Keep annual filings, fees, and taxes current with the state of incorporation.

3.      Avoid commingling business and personal assets and activity.

Owners should set up a business savings account, business checking account, and business credit cards.  They should pay for business expenses with business accounts and personal expenses with personal accounts.  Owners should keep their personal assets in their name and the business assets in the name of the business.  This will protect business owners against any allegations that they are using the business as an alter ego.

4.      Make the corporation or LLC status known to your clients.

Business owners should make the status of the corporation or LLC known to their clients.  Business cards and other labels should name the company as a corporation or an LLC.  All contracts and documents should be assigned to the business and not the individual owner.  Invoices should have the company’s name rather than the owner’s.  This will protect against alter ego allegations claiming creditors and clients were unaware the company was a corporation or LLC.

5.      Document all business actions.

Business owners should document everything.  They should document when they engage in formalities, any evidence that shows they maintained separate accounts for personal and business activities, and any documents showing they maintain adequate business capital.  These documents will be the evidence needed to protect the business owner’s personal assets if a creditor attempts to pierce the corporate veil.

Business owners should treat their company as a separate entity, should engage in all the necessary formalities required under corporation law, and should document everything.  It is always best to seek out attorneys at the inception of the company and throughout as needed.  The Arizona business attorneys  at Gunderson, Denton, and Peterson PC assist clients with these and many other business legal needs.

Ensuring that the employee handbook does not create unnecessary restrictions

Employers have expectations of their employees, just as employees have expectations of their employer.  An employee handbook is one of the most effective ways for these expectations to be communicated.  When creating an employee handbook, employers do not usually expect the handbook to become a binding document, but some courts have bound employers to provisions within their employee handbook. Arizona employment lawyers are experienced in working with employers on their legal issues.

Employment at Will and the Implied-Contract Exception

As a general rule, both employer and employee are able to terminate the employment relationship at any time without giving prior notice, unless the duration of employment is previously agreed to in writing.  This is known as employment at will.  However, most states have exceptions limiting at-will employment.  One of the most common exceptions that are accepted in thirty-eight of the fifty states is the implied-contract exception.  A common application of this exception occurs when a court determines that the employee handbook becomes a contract between the employer and employee.  This can be a problem when the employee handbook has statements that appear to limit an employer’s actions.  For example, employee handbooks often state that employees can only be terminated for certain actions or that before an employee can be terminated, certain procedures must be followed.

Employee Handbook Disclaimer

Employers can take certain steps to ensure that their employee handbook does not become a binding document.  One of the most important actions an employer should take is to include a disclaimer stating that the handbook is does not create contractual obligations.  This disclaimer should be in a conspicuous location and be signed by the employee.  It is also important that an experienced attorney look over your employee handbook to ensure that it does not create any liabilities or obligations for you or your business. Attorneys at Gunderson, Denton & Peterson, PC, are available to review and analyze your employee handbook or address any other employment law concerns that you may have.

Making sure you are not on the wrong side of a one-sided agreement

Most businesses lease the property where they do business. The lease can be a significant investment for a business, and sometimes can even be the difference between enjoying a profit or suffering a loss. The lease can also commit a business for an extended period of time, closing off other possibilities. Consequently, it is very important that business owners negotiate carefully when choosing their lease terms and hire an experienced Arizona real estate attorney to review the contracts.

Commercial Lease Negotiation

Forming a commercial lease is very different from forming a residential lease. Commercial tenants are assumed to be more sophisticated and so they are given fewer protections under the law. Furthermore, the terms of a commercial lease are generally much more negotiable than the terms of a residential lease. The first draft of a commercial lease that is given to a potential tenant usually has terms that strongly favor the landlord. However, it is expected that the tenant will negotiate more equitable terms. The following are some basic questions that should be clearly answered in your lease:

• What is the term of the lease and when does it begin? Is there a renewal option and whose option is it?
• Is the leased property clearly described? Does it include bathrooms, common areas, or parking?
• Who pays the utilities, repairs, taxes, and insurances?
• Do you have a gross lease, a net lease or some combination?
• Is there an exclusivity clause that prevents the landlord from renting to a competitor? What is the definition of a competitor?
• How much is rent? Does the rent increase each period? Is there a cap on the amount that rent can increase?

Careful Review of your Commercial Lease

There are many, many more significant provisions that will be important in your lease. Commercial leases can become complex, and it is important that you consult with an attorney experienced in real estate transactions to ensure that you obtain a fair commercial lease that will benefit your business. Many of the Mesa real estate attorneys at Gunderson, Denton & Peterson have experience reviewing, negotiating and litigating commercial leases, and frequently counsel with clients to identify key issues and protect clients’ specific lease interests.

Mark Twain once said, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” If you purchased or refinanced residential property between 2005 and 2007, you have important questions and probably more than a few wrong ideas about your real estate investment that a Mesa real estate attorney can help you with.

How much is that property worth today, realistically? Chances are it’s worth significantly less than what you owe, so now what?

Short sale, foreclosure and real estate taxes

You’ve considered walking away. You’re hoping you can get a break through a government bailout program you heard about. You wonder if it’s better to short sale the property or simply let it go to foreclosure. You want to know how all of this may affect your credit. What about taxes? There seem to be a hundred other gnawing questions festering in your mind as you review this year’s property tax valuation notice confirming yet another year of steep decline in property value.

Distressed Real Estate: find the solution that fits you

Unfortunately, there is no one-size-fits-all solution that makes sense for everyone. In fact, it is extremely unlikely that what makes sense for you will make sense for the next person. It is even more unlikely that your best course of action will simply occur to you. False assumptions and misinformation abound. Even more prevalent is the constant bombardment of advertising from opportunistic persons offering you a uniform solution that benefits them with little consideration for what is really in your best interest.

Distressed Real Estate: a complex business decision

The truth is this: you are facing a very complicated and nuanced business decision. Like any business decision, you must be informed on all relevant considerations and options, or you are likely to choose poorly. You might be surprised to learn what facts and circumstances really make a difference in your range of options. The most important factors can be boiled down to the nature of the property and the financing history. From there, any number of irregular circumstances can make a big difference. Things like whether it is a VA loan or whether only one of a married couple signed the loan documents. The key is to properly identify and understand the significance of your favorable facts as well as your troublesome facts.

That is where we come in. We’ve advised hundreds of homeowners searching for answers regarding their distressed real estate. We have thorough knowledge of the relevant statues, case law and lender practices to help you determine just where you stand. More importantly, we can help sort through your issues and available options and develop a customized strategy based on your best interests. You have important questions and we have the answers, including answers to questions you don’t know you have yet. Contact us today to discuss what you don’t know regarding your distressed real estate, and more importantly, “what you know for sure that just ain’t so.”

Mesa Arizona Business Attorney Article On Franchise Disclosure

Franchise Law Disclosure Requirements

The requirements of the Federal Trade Commission’s Franchise Rule
The franchise industry is large and growing larger.  The U.S. Census Bureau recently collected franchising data for certain industries and found that in those industries 10.5% of businesses were franchises and $1.3 trillion of the $7.7 trillion total sales were from franchises.[i]  There is a lot of money in the franchise market, and it can be very lucrative for an individual with a successful business to franchise that business.  However, in order to comply with the law and ensure long-term profitability, a franchisor needs to abide by the franchise rules and regulations set forth by the Federal Trade Commission – specifically the Franchise rule.  The Federal Trade Commission has brought cases against hundreds of companies based on the Franchise Rules. An Arizona Franchise Attorney can help navigate the complex rules.

A key part of the Federal Trade Commission’s Franchise Rule is the Franchise Disclosure Document (FDD).  The FDD is a legal document given to potential franchisees by the franchisor to disclose information on many areas of the franchise business.  Use of the FDD was mandated by recent changes to the Franchise Rule, and it replaces the previously used Uniformed Offering Franchising Circular (UFOC).  A franchisor is required to provide this document at least 14 days before a sale is made, as his Arizona franchise lawyer can tell him.  The Federal Trade Commission’s regulations require certain specific information to be included in the FDD.  The Franchise Rule contains 23 Items that must be included in the FDD.  The following is a brief description of six of the Items:

-          Item 2: Business Experience – The FDD must have the business experience over the previous five years of key individuals in the franchisor’s business.  Key individuals usually include the franchisor’s directors, trustees, general partners, and principal officers.

-          Item 5: Initial Fees – Any money that must be paid by the franchisee to the franchisor before the franchisee’s business opens must be disclosed.  If the fee is not set, the possible range of the fee or a formula to determine the fee must be given.  

-          Item 12: Territory – The Franchisor’s FDD must specify whether the franchise is for a specific geographic location.  The Franchise Rule contains specific language that must be included if the franchisor is not granting an exclusive territory.  If the territory is exclusive, remedies must be given in case there is an intrusion into that territory, as stated in the franchise agreement negotiated by the Arizona business franchise lawyer.  Any restrictions on the franchisor from soliciting or accepting orders from consumers inside the franchisee’s territory must be specified.

-          Item 17: Renewal, Termination, Transfer, and Dispute Resolution – A table must be added to the FDD that outlines the franchise relationship.  A brief description of required contract provisions must be included in the table.

-          Item 21: Financial Statements – The franchisor must include a balance sheet and statements of operations, stockholders equity, and cash flows.  These statements should be audited by an independent auditor and be completed according to GAAP (generally accepted accounting principles).  There are specific exceptions for start-up franchisors, but even then audited financial statements should be provided as soon as practicable.

-          Item 23: Receipts – The Franchisor’s FDD must have two copies of a detachable acknowledgement of receipt.  The Franchise Rule contains specific language that must be used in the acknowledgement of receipt.

This is just a small sample of what must be included in the FDD.  As can be seen, franchise law and the requirements for the Franchise Disclosure Document are evolving and complex.  Having an experienced franchise attorney is essential if you are franchising your business or looking to buy a franchise. Attorneys at Gunderson, Denton & Peterson, PC are experienced in working with franchisors and franchisees on their franchising issues.  Attorneys from the firm are available to meet with you to review and analyze the Franchise Disclosure Document or address any other franchise or business issue.

[i] http://www.census.gov/newsroom/releases/archives/economic_census/cb10-141.html

Gunderson, Denton & Peterson welcomes Bert Millett to our firm as an Associate Attorney.  Bert focuses his practice primarily on Business Law, Real Estate Law and contract issues.  He prides himself on his ability to advocate effectively for his clients with an eye for detail and precision in the matters he handles.

Bert graduated fromArizonaStateUniversitywith a B.S. in Business Management in 2002 and a J.D. from Sandra Day O’Connor College of Law in 2006.  Prior to attending law school at ASU, Bert managed a mid-sized business where he gained first-hand experience in the legal issues faced by business owners.  Since then, Bert has helped business owners with contract issues, business disputes, securities offerings, and much more.

- Ken B. 12/17/11

- Cheryl B. 11/15/11

- Denny 12/8/11

There is no question that I would not hesitate to recommend both Mr. Millett, and your firm, to others. As you know, there are a great many lawyers, but in your profession, as in the retail world, customer service is often the deciding factor in selecting representation. Mr. Millett demonstrated that your firm is committed to caring for its clients, as they proceed to solve their problems.

- Robert G. Bradford, Ph.,D

- Mary G. 10/27/11

- Mark Greenburg