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Piercing the Corporate Veil of a Limited Liability Company

Posted by on May 2, 2013 in Asset Protection Law, Business Law, Commercial Law, Estate Planning, Uncategorized | Comments Off on Piercing the Corporate Veil of a Limited Liability Company

Commingle Funds and Your Liability Shield May Disappear

Now that you have taken to heart the information provided in the previous post, Does your “LLC” really limit your liability?, don’t jeopardize the shield created between your business and your personal assets. I have often heard the phrase, “As a business owner, it is not ‘if’ you get sued but rather ‘when’ you get sued.” In determining whether a business owner is personally liable for the debts of a n Ohio Limited Liability Company (presuming the business has not been used for criminal or fraudulent purposes), courts evaluate a number of factors, particularly whether the owner’s personal funds have been commingled with the funds of the business. Frankly, if you treat your LLC as your personal piggy bank by using your company’s funds as your own, there is a good chance your personal assets will be exposed to your company’s creditors (e.g., Plaintiffs suing your company).

 

Commingling takes a variety of forms, including but not limited to:

  1. Failing to establish company checking and credit accounts that are separate from your personal accounts;
  2. Utilizing company credit cards or accounts to pay for personal expenses;
  3. Loaning money to or borrowing money from your LLC, WITHOUT DOCUMENTING THE TRANSACTION (for example, record a resolution in the corporate minutes, execute a valid promissory note with fair market rate interest, and ensure that regular payments are made);
  4. Depositing company funds (e.g., checks payable to your company) into your personal account; and
  5. Failing to properly title company property.

While the list set forth above is by no means exhaustive, it does provide an overview of the most common examples of commingling that you should avoid. In addition to risking exposure to personal liability, commingling often results in understating or overstating deductible business expenses, as well as difficulty in creating financial reports and determining the best direction for your company.

Do not succumb to sloppy business practices, and be sure to document, document, and document. In the event that commingling does occur, correct it immediately. Maintaining the separation of owner and business is a critical component to protecting your personal assets. The goal of our business law attorneys is to ensure that your business operates in a manner that protects you personally. If your company is a mess, and you need help cleaning it up, then it is time to sit down and have a quiet conversation with us.

 

– “An ounce of prevention is worth a pound of cure.” Benjamin Franklin

 

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Does your Limited Liability Company really limit your liability?

Posted by on Apr 25, 2013 in Asset Protection Law, Business Law, Commercial Law, Real Estate Law | Comments Off on Does your Limited Liability Company really limit your liability?

Organize your Limited Liability Company to Protect Against Personal Liability

As a business owner, the question is not “if” you will be sued; rather, it is likely “when” you will be sued. To protect against personal liability in Ohio, the Limited Liability Company (“LLC”) has become one of the more popular entities chosen by business owners to operate their respective businesses. The LLC provides the flexibility and ease of creation of a partnership while at the same time establishing a liability shield similar to a traditional corporation.

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Employer: At Will Employment FAQs

Posted by on Nov 16, 2011 in Business Law | 0 comments


What does “at will” employment mean?

A: It means you can keep your employees for however long you want. This means you can fire them for any reason or for no reason at all, so long as it’s not an unlawful or discriminatory reason, such as because of her age, sex, national origin, or disability. Similarly, the employee has the right to quit at any time, with or without notice.

What is constructive discharge?

A: It’s when an employee resigns or quits because an employer has created intolerable working conditions, or basically makes it impossible for the employee to continue to work for the employee. In these cases, an employee may be able to sue for constructive discharge and may even be eligible for unemployment benefits even though she left voluntarily.

Does an employer need to tell employees why they are being fired?

A: As a general rule, no, you don’t have to give employees a reason why they’re being fired. From a practical standpoint, however, you may want to give a reason even in an “at will” situation so the employee understands why there was a termination and what to expect from company for a reference when the employee applies for a job.

What can an employer do about challenging unemployment benefits?

A: As a general rule, an employee is eligible for unemployment compensation if she’s dismissed for any reason other than “for cause.” If an employee leaves voluntarily, the employee is not eligible for unemployment benefits unless she leaves for “good cause”. This is commonly known as “constructive discharge” and can result from various types of misconduct or omissions to act by the employer. The employer doesn’t have the power to deny unemployment benefits, only to protest or challenge an employee’s eligibility for them. The state unemployment office makes the final decision on benefits. Both the employer and the employee have a right to appeal or challenge the agency’s decision if they don’t agree with it, often resulting in a series of administrative hearings. The final appeal of an Employee or Employer is to the Common Please Court.

Is an employee handbook an “employment contract?”

A: As a general rule, no. Employers typically take great care to make sure that employee handbooks do not constitute employment contracts. Employment contracts generally guarantee an employee’s right to work for an employer for a certain period of time unless the employee gives the employer a good reason to fire her, such as stealing from the company or continually not showing up for work. Employee handbooks explain the employer’s various rules and policies and any benefits an employee may be entitled to but generally do not guarantee employment. However, a handbook may be considered a contract under certain circumstances, such as when it contains language that may give an employee a reasonable belief that she has guaranteed employment. For this reason, employee handbooks must be written carefully, so that the rights and policies of the company are presented properly and unintended consequences avoided.

Does an employee have the right to representation by a lawyer during an investigatory interview?

A: Generally, an employee has a right to representation at investigatory interviews. The right to representation, often called “Weingarten rights,” covers all employees with a few exceptions. An investigatory interview is when a supervisor questions an employee about something that may lead to disciplinary action against the employee, such as a suspension or even termination. Stealing from the business or not following company policies are good examples.

An employee’s right to request representation arises when the employee reasonably believes discipline may result from what the employee may say during the employer’s interview. The employer isn’t required to tell employees about their Weingarten rights; it’s up to employees to know their rights and request representation.

Representation can be through a union representative, a coworker, or a lawyer.

What rights does an employer have to investigate something an employee may have done?

A: Employers have the right to conduct investigatory interviews on a wide variety of topics, such as:

  • Theft
  • Accidents
  • Damage to an employer’s property
  • Violation of safety rules
  • Absenteeism
  • Falsification of timecards and records
  • Poor work performance
  • Compliance/noncompliance with an employer’s policies and procedures
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