IS RUNNING A HOME-BASED BUSINESS FOR ME?

                Running any type of business is challenging, but running a home-based business has its own set of challenges. If you are considering running a home based business you should thoroughly weigh the pros and cons for your type of business and your personal needs. You need a fit for both to be successful and happy.

                A wide variety of small businesses are home based. Examples include, daycare, home improvement, retail, cleaning services, bed and breakfasts, catering, baking and some franchises. Technology and the ability to run and stay connected to a business remotely, have made home based businesses much more common and acceptable today. According to the U.S. Small Business Administration (quoting Forbes magazine), more than 52% of all small businesses in the U.S. are home based. https://www.sba.gov/blogs/5-reasons-start-home-based-internet-business.

                In many ways, thoroughly evaluating two factors before you start a home based business are the most important:

                1. Does my type of business lend itself to being home based?

                2. Does my personality have the characteristics for a successful home based business?

                Oftentimes, the first thing people jump to is the legal requirements for running a home based business without really thinking through what it takes and whether it is the best scenario for you and your business. This is a big decision which should not be based solely on saving money or not paying rent.

                On the type of business, ask yourself if it's feasible to run your business from home? What kind of equipment or tools will you need? How much space will you need? Do you have a separate and dedicated office, computer, and phone? Do you have a business address? Does it matter? Will you need to meet with clients or customers? Will they be deterred from hiring you if you work from home? What zoning requirements are there for your type of business? Will you have room for employees and growth? What about parking? What about homeowner's nearby or homeowner association covenants? What about traffic flow? What about supplies and technology you will need?

                On whether a home based business suits your personality ask yourself if you would like not being in an office or around others regularly? Are you disciplined enough to work at home and ignore household chores and other distractions? Will you put in the required hours? Are you good at or do you have the money to hire someone to help you with taxes, payroll, necessary filings, accounting, marketing, equipment repair and maintenance, and every other aspect to keep your business afloat and flourishing? Can you really treat your home office like an office? Are you good at time Management? Do you have the discipline to treat this like your real job, which it is, without being tapped by friends and family during the workday to run errands or do non-work related things?

                Like any other type of business, there are people who love working from home and others who hate it. This is a personal decision. To help you, here are some links to websites and articles discussing this topic:

• https://www.sba.gov/content/home-based-business-zoning-laws
• http://commerce.maryland.gov/start

                If you decide that a home based business is right for you, you must still form the right type of business, get any necessary licenses, and comply with tax laws and other laws and regulations. http://www.taylorlegal.com for more information about Katherine Taylor, a Maryland business attorney. 

   

WHY YOUR START-UP COMPANY NEEDS A LAWYER

            If you are starting a new company in Maryland, particularly a small business, you may wonder, "why do I need a lawyer?"  With the abundance of information readily available on the Internet, couldn’t you save money on lawyer fees by not retaining a business lawyer from the outset and just hope legal issues either don’t arise or are simple enough for you to navigate on your own?  After all, you can find a lot of legal information readily available in Maryland, for example, on the State Department of Assessments and Taxation (http://dat.maryland.gov) and Department of Commerce (http://commerce.maryland.gov/start/resources) websites, such as the types of legal entities recognized, the forms to set up the type of entity you select, and some basic business information.

            However, retaining a knowledgeable Maryland business lawyer from the start has many advantages, including: advice on planning and starting your business, evaluating the right type of business entity for your needs, selecting a location, complying with zoning laws, tax planning and business deductions, employee issues, copyright/trademark, complying with regulations and business filing requirements, safeguarding your work product, understanding covenants not to compete, licensing and permit requirements, technology, financing, loans, and many other issues just to get our business off the ground and started on solid footing. Often starting a business is much more complicated and involved than most people realize.

            Consequently, advanced planning with the business knowledge of a reputable Maryland business attorney can save you headaches, money, and avoid potential costly legal battles that may have been avoided. An  attorney who understands your business model, goals, customers, competition, and cash flow can offer a wealth of wealth of strategic advice and help you steer clear of  rouble areas or effectively resolve them.

            So, while you can try to “wing it,” trying to piece together information from the Internet (perhaps not knowing whether certain cites are up to date or credible), it is advisable to have a trained lawyer skilled in understanding, explaining, and keeping up to date on statutes, regulations, and case law governing start-ups in Maryland.

            Katherine Taylor is an experienced Maryland business attorney and a former CPA who understands the ins and outs of starting a business. Go to www.taylorlegal.com to see more about TaylorLegal.

EMPLOYERS BEWARE! YOU MAY BE LIABLE FOR AGENTS' AND EMPLOYEES' ACTS

                In Maryland an employer can be liable for the negligence of an "agent, servant, or employee." The legal term for this is "respondeat superior." In Latin this literally means "let the master answer." First, while we often hear the word "negligence," what does it mean in this context? In general, negligence is a breach of a duty owed that "proximately" (or directly) causes the alleged harm. This is a threefold test and all three elements above are required to establish negligence. Therefore, questions arise in evaluating an employer's responsibility for an employee's  negligence include: Is the person someone to whom a duty was owed? What is the applicable "standard of care" (this varies depending on the context)? Was there any intervening act or omission that caused or contributed (called "contributory negligence") to the alleged negligence? If so, does this break the "chain of causation?" Applying this to the employer context, an employer can be held "vicariously liable" for negligent acts of an agent, servant or employee.

                Who is an "agent, servant or employee?" The definition of an employee was discussed at length in a previous blog written by Maryland business attorney Katherine Taylor (Employee or Contractor?). An agent is someone doing something on behalf of an employer, who Figuratively stands in the shoes of an employer and acts on his or her behalf. The arcane term Servant" comes from early Maryland common law and does not mean "servant" in the way we think of it today. Instead, it is basically another term for employee.

                Under what theory does someone sue an employer for negligence of an employee? The Theory is that an employer is responsible for the acts of an employee. Are there any prerequisites? An employee must be "acting within the scope of employment" before employer liability can attach. How does this work in the real world? Say an employee is driving a delivery truck for an employer and causes an accident. The first question to ask is whether the employee was acting on behalf of the employer. For example, when and where did the accident happen? Was the employee using the truck during regular work hours? Was the employee on a "mission" for the employer or was the employee doing personal business unrelated to the employer? Did the employee have a valid license? Did the employee have training or ability to drive the type of truck? Did the employee have a good driving record? If not, did the employer know this or should the employer have know about this?  Was the employer aware of any issue that should have prevented this employee from driving this truck for this mission?

                As you can see, there are many issues that can arise in the employer/employee context. What can an employer do to reduce the chances of being held liable for an employee's negligence?

The following tips can help:

                1. Carefully screen and interview potential employees to make sure they are a good fit for you and your business.

                2. Do a background check, including driving record and criminal history.

                3. Check references.

                4.  Communicate clearly what is expected and what is prohibited during employment hours.

                If an issue arises, you should think about contacting a Maryland business attorney who can help you wade through the many layered issues in an employer liability case.  A business lawyer experienced in this area can help you evaluate the facts, understand the law, advise you, and assert any available defenses on your behalf.

Katherine Taylor is a Maryland business attorney who has extensive experience dealing with employer/employee issues. Go to www.taylorlegal.com for more information.

Taylor Legal

Do I Have a Valid and Binding Contract?

          Is the agreement I just entered into a legally binding contract? In general, a valid contract requires four elements: offer, acceptance, consideration, and performance. The process begins when one party offers the terms for the contract. Next, the other party can accept, reject, or request to modify the contract. At this step there is often back and forth, with negotiation on the terms of the contract. If the parties agree to the terms, then consideration or something of legal value must be offered and accepted. This could be and is often money or services. If the above are met, the next step is performance. In order for the contract to be completed, there must be performance according to the terms of the contract.

            But before you can have a valid contract you must also have parties who have "capacity." In Maryland, this means that the parties must have reached the "age of majority," or 18. In addition, a party must not be under a disability that would prevent them from understanding the contract. They cannot be under "duress," which means unlawful coercion or force, taking away the voluntary consent to contract. A contract with willful misrepresentations may be  fraudulent and nonbinding. Instead, the basis of a valid contract is a mutual agreement, sometimes referred to as "mutual assent," and a "meeting of the minds." Contracts, to be valid, must be entered into freely.

            There are many issues that may arise after a valid contract is entered into. There may be issues such as what contract terms mean, the scope of the contract, the manner of performance, the consideration and the time frame, among others. The language used in a contract is critical. People drafting or signing contracts may not realize the legal implications of terms used.

            Most contracts can be oral or written. Certain contracts, however, such as those under the Uniform Commercial Code for the sale of "goods" must be written. Nevertheless, it is usually advisable to have a written contract. It is important to know that a written contract is interpreted from "the four corners," of the page, and cannot be modified or explained by "parole evidence," or outside evidence regarding what the contract really means. Consequently, it is critical that the written contract accurately says what you intend. There can be many legal issues with both the drafting and enforcement of a contract. If there is a "breach" of contract, or failure of one party to uphold the terms of the contract, legal action may be required.

            If there is a proven breach of contract, another issue is the measure of damages. This can be complicated and may require experts.

            The statute of limitations, or time in which to file suit for a breach of contract in Maryland is generally three years. However, there are some exceptions. Consult an attorney for the specific statute of limitations in any breach of contract case you face.

            Whether you are the promisor (person making the offer) or promissee (person to whom the offer is made), it is advisable to contact an attorney. Often doing so at the negotiation stage can save a lot of headaches and ensure that the contract says and does what you intend.

           

WHAT IS AN "OPERATING AGREEMENT" AND WHY DOES MY LLC NEED ONE?

             Say you've decided to form a limited liability company, commonly referred to as an "LLC." You've heard that an LLC needs an "operating agreement" in Maryland but you don't know what that means or how to proceed. This article will guide you.

            The first thing is to be sure that you have the correct legal entity for your business (see prior blog link on choosing a proper legal entity. You may want to consult a lawyer to discuss the pros and cons of each. If you do decide that an LLC is the correct entity for you, you first need to register the entity with the Maryland State Department of Assessments and Taxation (SDAT). A good link on creating an LLC can be found at http://www.dat.state.md.us/sdatweb/artorgan.pdf.

            Maryland law does not require that an LLC have a written operating agreement. However, it is advisable to put your agreement with your fellow LLC members in writing. The agreement itself is not filed anywhere. Nevertheless, it is a binding contract with legal ramifications. 

            The operating agreement, while not filed with the state, should be kept with the LLC's permanent documents. The operating agreement is an important binding agreement that outlines the roles and responsibilities of the member(s). It should set forth the framework of how the LLC will be funded, run, organized, and managed. It should include specific and detailed information regarding, for example, the name of the LLC, the registered agent, the address, the date of formation, the terms under which the LLC will operate, the purpose of the LLC, the names of the member(s), and procedures relating to meetings. It should specify who will fund the LLC and make financial decisions for the LLC. It should specify the percentage of member(s) ownership, voting rights and responsibilities, and sharing of profit and losses of the LLC. It may include provisions on how to modify or amend the agreement or make changes to the LLC or deal with dissolution of the LLC. The Maryland statute on operating agreements can be found in the Corporations and Associations Annotated Code, Section 4A-402, and linked here for your convenience: http://www.lexisnexis.com/hottopics/mdcode/.

            Sometimes people ask if an LLC has shares of stock like a corporation. It does not. The members own "LLC interests" or "membership interests." The interests that each member has is set forth in the operating agreement and may also be documented in a certificate of ownership or interest. Even if LLC interests are not documented in a certificate, like a stock share, it is very important to documents when interests are transferred, bought or sold.

            The whole purpose of an operating agreement is to provide a well thought out structure of the LLC in advance of starting it. Much of the work in creating a strong operating agreement is a clear vision for your business and a well thought out way to execute it.

            A well thought out and planned operating agreement can get an LLC off to a strong start, with a clear purpose and a way to achieve it clearly spelled out. This can avoid costly litigation and ill will among members should there be a dispute on how the LLC is run. Planning ahead is both wise and cost effective.

            If you search online you can find a number of sites with "free" or "for a small fee" websites that will provide forms for your operating agreement. Be careful. While these can be a good starting point, if you haven't fully thought out all the angles of setting up and running your LLC, these may not be advisable for you. An experienced business attorney can make sure you have considered all the issues important to your specific LLC and mission, and prepare an operating agreement that covers what you need.

SHOULD I HAVE A LAWYER REVIEW MY COMMERCIAL LEASE AGREEMENT?

            You're an owner leasing commercial rental property or a tenant wishing to lease. You've

agreed on the important lease terms such as square footage, rent, and term. So why should you

spend the time and money to involve a lawyer you ask? On both sides, it's advisable.

            Leases are contracts and commercial leases are usually contracts involving a lot of money

over a long term. Therefore, you want to be sure that the written lease agreement actually

reflects what you agreed upon. The precise wording in these contracts is critical and has

legal ramifications. Lay people may not be aware what the terms mean legally. It's important

before you sign any lease agreement to understand what you are signing, what rights you are

getting and what rights you are giving up.

            You also need to know what liability you may face. In addition, you need to protect

yourself in case problems arise. Many questions can arise after a lease agreement is signed.

These are as varied as the individual deal itself. For example, if something major like the heat or

air conditioning breaks, is the landlord or the tenant responsible for the cost of repair? Another

example could be who is responsible to clean snow from the sidewalks, landlord or tenant?

Other issues may include use of the property, term, rent (there are different types of commercial

rentals, and ways to calculate the rent), subletting, renewal, default, warranties, insolvency,

signage, parking, covenants, restrictions, maintenance and repairs, build outs and property

changes, lease modifications, zoning, insurance and utilities, taxes and assessments, rights with

respect to other tenants, and  other issues particular to your lease. You can see that the list of

issues is long.

            When you've gone through all of the stress of getting to the point where you sign the

lease, you may be just ready to sign the lease. But don't, without carefully reviewing the lease

and your understanding of it with a business attorney. This extra step can make for a sound

deal that meets your needs. A knowledgeable attorney can advise you before you sign if the

lease has potential problems. If so, addressing them in advance is often much easier and cost effective.