The Mistake of a Business Owner in Purchasing a Business Hypothetical: Heidi and Gail want to purchase Couture Cupcakes, Inc. (CC). CC’s business attorney drafts the documents for the sale, and Heidi and Gail believe that the documents look reasonable. They do not consult with a business attorney prior to purchasing CC. After they purchase CC, numerous problems arise. Heidi and Gail seek the advice of a business attorney.  Issue: Three months after the purchase, Heidi and Gail find out that there were leases and contracts in the name of CC. Heidi and Gail claim that they are not responsible for those leases and contracts, which total...

Steps For Hiring an Employee

Oftentimes business owners make the mistake of rushing through the process of hiring an employee. The owner focuses solely on hiring someone without first making certain that the owner is protecting the business (and the owner’s personal assets). This article focuses on employees and not independent contractors (note: the law looks generally disfavorably upon independent contractors, and there are legal tests that must be met to lawfully classify a worker as an independent contractor). Best practice is first to form a legal entity such as a corporation or an LLC (limited liability company). The type of entity structure you would choose...

The Potential Pitfalls of Being Your Own Client

Billy Swanson dreams of owning his own business. He decides that he is going to open a business catered to the needs of homeowners. Specifically, he is going to provide cleaning services, lawn care services, and snowplowing services to homeowners. So, he decides that he is going to name his business, “The Perfection of a Home, Corp.” He decides to use “Corp” after his name because he believes his business looks more official. So, his buddy tells him that opening up a corporation is easy—you just go to the Secretary of State’s office and register your business as a corporation—because...

Commercial Lease Pitfalls

Hypothetical:  Mary’s floral shop, Mary’s Wedding Flowers, Inc. is excited because the shop has outgrown the space, and therefore, she needs to rent a larger space.  Mary has negotiated the contract with the potential new landlord. She brings the contract into her meeting with her business attorney as she realizes after being in the school of hard legal knocks that before she signs anything she needs her attorney to review it.  Mary explains to the attorney what she believes the agreement is and waits to hear the attorney’s response.  The attorney points out the following: Although Mary understands that she...

Failure to Properly Incorporate and Piercing the Corporate Veil

Hypothetical:  Mary works in human resources during the week. On weekends she makes fantastic floral arrangements for her friends’ weddings.  Mary unexpectedly gets laid off. She decides to turn her hobby into a business. Mary talks to her friends who own their own businesses on how to proceed.  Mary goes to the Secretary of State’s office and files the Articles of Incorporation for Mary’s Wedding Flowers, Inc.  On the day Mary opens up her flower shop, she immediately is swamped with business.  She doesn’t meet with any professionals, including an accountant or an attorney because she can do all of...

Complying With a Subpoena

As a business owner, your business could be served with a subpoena demanding that you turn over certain documents, which is referred to as a subpoena duces tecum. As soon as you are provided with a subpoena, you should immediately contact Spangler and de Stefano, PLLP so that we can guide you and protect you in complying with a subpoena. A subpoena is a court order. However, that does not automatically mean that you must comply with the subpoena. Generally, you should only comply with a lawful subpoena. Therefore, it must be properly served upon your business. For example, receiving a...

Personal Property List

Under Minnesota law, upon death, a person can dispose of tangible personal property through a written list that is referenced in a will or trust. The list cannot dispose of money and coin collections or property used in a trade or business. A personal property list is effective in ensuring that certain items that you own (i.e., jewelry, family heirlooms, etc.) are distributed to the person whom you want to have it (i.e. devisee).  For example, if you want certain jewelry to go to specific members of your family, you can make a specific gift in your will/trust or you...

A Nonprofit Charity is a Business Entity

Helping others through a nonprofit charity is often viewed as noble. But a charity’s good deeds does not provide it carte blanche. In fact, nonprofit charities are highly regulated, and failing to understand those regulations can be disastrous. There are two dozen different types of tax exempt exemptions under the Internal Revenue Code. This article uses the most common exemption – 501(c)(3) – as the example. First and foremost, the nonprofit charity is a business entity. In Minnesota, first the nonprofit files with the Minnesota Secretary of State as a business entity. Second, the nonprofit applies to the IRS for its...

Best Practices for Employers Regarding Sexual Harassment

In the era of #MeToo, employers need to adopt best practices regarding sexual harassment. At a minimum, adopt a strong anti-harassment policy, periodically train each employee on its contents, and vigorously follow and enforce it. The policy should include: A clear explanation of prohibited conduct, including examples; Clear assurance that employees who make complaints or provide information related to complaints will be protected against retaliation; A clearly described complaint process that provides multiple, accessible avenues of complaint; Assurance that the employer will protect the confidentiality of harassment complaints to the extent possible; A complaint process that provides a prompt, thorough,...

The Mistake of a Business Owner in Ignoring Sexual Harassment

Hypothetical: Jordan owes Jordan’s Construction, Inc. She hired her first employee the first day she started her business. She did not consult with a business attorney or a human resources consultant. There was no time. The business needed to start immediately, and she couldn’t take the time to “dot the i’s” or “cross the t’s.”  This was her third business and she had never had any problems.  She had 10 employees.  Two of them were supervisors. One of them Chris was a flirt. Chris’s behavior was well-known, but in the construction industry, “it was acceptable.” A new employee, Sam started...