Tag Archives: Law

Does your business partner have his hand in the company cookie jar?

Some people just cannot resist putting their hands in the proverbial company cookie jar.  Read on for tips for what to do if you have concerns that your  business parter is stealing money or goods from your business, or using them for his or her personal use.

First, you must act quickly and carefully to protect your interest and to keep yourself out of hot water. The first thing you should do is locate a copy of your operating agreement, partnership agreement, or bylaws.  If you never got around to reducing your agreement to writing, perhaps now you are realizing why that step is so important. Even if you do not have a formal agreement, gather any emails, letters, napkin writings, whatever, that will be helpful to prove  the agreement with your partner.  If you do not have any formal agreement, Florida’s “default” LLC rules will apply to you.

cookiejarNext, read the agreement (and consult an attorney) to see what it says about obtaining books and records of the organization. Many business agreements contain detailed information about when and how the partners or members are allowed to review the books and records. You still need to comply with “the rules” of your agreement during the time you are investigating your partner, but that doesn’t mean you can’t use all options available to you to obtain the information that you need.  For example, review (and print or save) the bank accounts of the company directly (if you have that access — as a partner or managing member, you should), talk to loan officers that work with your company, or even speak with vendors or employees of the company if you think it may be done appropriately.   Also consider whether company records on the cloud or at remote locations  might be easily corrupted or deleted without your knowledge.

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Do I need an operating agreement for my single-member LLC?

Every Friday, I ask my Twitter followers to submit a legal question to be answered anonymously the following week.  Here is last week’s question:

I just filed a single-member LLC for my flower business.  Do I really need an operating agreement if it is just me running the business?

The answer:  Yes, you should have one.  It sounds crazy, since you have no one to agree – or disagree- with but yourself.  However, an operating agreement is an important document that confirms the limited liability status of your business.  It clarifies the status of your business as separate from you personally — do not be fooled into thinking that simply filing an LLC and going about your day is enough.

Why should you care and why spend the money for this simple document?  Well, if you do not maintain your “corporate personhood” as separate from you personally, you might expose your personal assets to collection from your business creditors.  A sharp lawyer on the other side will try to convince a court that you are running the business personally and should be made to pay the debts of your business from your personal assets.  This is called “piercing the veil.”

A court will look at many factors to determine whether you were actually operating a legitimate business, and things like maintaining separate bank accounts, using your corporate name in all transactions, and having an operating agreement will be crucial for maintaining your limited liability status.  These things may seem like silly “legal” distinctions, but under state and federal law those minor factors can carry big weight.  You have an LLC — now use it for the purpose it was created — limiting your liability.

An operating agreement for a single member LLC must contain certain provisions that are more important for its purposes than a multi-member LLC.  Consult with an attorney to make sure you have all of your bases covered.

“My tenant wants to keep a pet that he says provides ‘emotional support’ — what’s the deal?”

Each Friday, I ask my Twitter followers to submit an anonymous legal question that I will then answer the following week.  Below is last week’s question:

I own a condominium in a building that prohibits all pets except service animals.  My tenant recently told me that he has an emotional condition and needs to get a cat.  I heard somewhere that a cat can be considered a service animal.  What’s the deal?

     There are two categories of animals when it comes to housing.  Service animals, which can only be dogs, generally cannot be prohibited under any circumstances under the Fair Housing Act (“FHA”) and other state and federal laws.

     The second category, emotional support animals, have been gaining popularity in recent years.  Sometimes referred to as “prescription pets,” residents in condominium properties that otherwise prohibit animals may be able to get around the rules against these animals by proving their animal assists them in coping with every day life.  Under the FHA, people have been allowed to keep monkeys that feed them, rats that detect muscle spasms, and snakes that can sense seizures.

     Generally speaking, the FHA is favorable to owners of “emotional support animals.”  There is no requirement that such an animal is specially trained or certified.

     The only requirement before a person is permitted to have an “emotional support animal” is a letter from a mental health  professional stating that the animal is needed to alleviate symptoms related to the underlying illness or disability.   The letter should demonstrate how the animal will affirmatively enhance the sick or disabled person’s quality of life, but there is no requirement that the “condition” be specially recognized by law.

     As a landlord and/or condominium board, it is important to be cautious when asking for further documentation of the person’s alleged “condition.”  You are not entitled to medical or psychiatric records.  If you are skeptical, it is ok to ask for additional proof, but be extremely careful because recent law indicates a trend in favor of the resident’s privacy.

     You can insist that your tenant provide evidence of the animal’s inoculation and vaccination.  Moreover, if you feel the animal could be a threat to others in the property, you have the right to request proof that the animal is safe.  Be cautious, however, in demanding a “pet deposit” or other financial guarantees related to the animal.

    The bottom line:  Your tenant can probably have his cat, if he gets a valid note from his mental health professional.  However, you should speak with an attorney regarding the details of your case and to make sure you comply with all applicable laws.

Five Essentials for Your Website’s Terms of Use Agreement

In a previous post, I talked about the importance of website Terms of Use or Terms of Service (TOU) Agreements and ways to help make yours more enforceable.  This article will cover five key sections that should be in every TOU.  The list is not exhaustive, and depending on your business you may require many, more specific provisions.  Also, interpretation of these issues varies by state.  Nonetheless, these will give you a good start.  You should consult an attorney to review the TOU that you have in place or to draft a new one for you including the precise language needed to give your business maximum protection.

1.     Disclaimer/Limitation of Liability

You will want your agreement to limit your liability for the user’s use of your online product or service.  Of course, you cannot simply put a provision in your TOU that limits all liability, but there are certain categories of damages that you may be able to limit by contract.  Consult an attorney for more detailed information.

2.     Warranty

You make certain promises about your product or service to your customers.  That is good and sensible business practice.  There are also certain warranties provided for by law.  However, there are certain limitations you may want to place on those warranties through your TOU and you should do so to the extent permitted by law.  These must be clear and conspicuous to your customers, so consult an attorney to draft them for you.

3.     Privacy Policy

The importance of this provision cannot be underscored.   This section should disclose the way you gather, manage, use, and disclose a customer’s data.  There are state and Federal laws that mandate the way you use (or don’t use) this data, and disclosing details about that information in your TOU is essential.   It also gives your users a sense of security that is important to maintaining your client base.  Sometimes, the privacy policy is even separate from the TOU.

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