Business legal services in Silicon Valley

Steps to Purchase a Business in California

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Are you thinking about buying a business in California? While purchasing an existing business can be exciting, it can also come with complications. If you already own a business and are looking for a new acquisition, you might have a clear idea of the type of business you want to buy. However, if you are just starting out, you should seek advice about choosing the best business in which to invest. You will also want to consider due diligence, and all the steps you will need to take to ensure that you do not end up buying a business that will cause significant problems in the long run. By working with an experienced business law attorney throughout the process, you can feel secure in knowing that you have legal representation to help minimize the risks and to guide you through the business buying process.

When you are considering a business purchase or acquisition, you should consider the following steps.

1. Decide on a Business You Want to Buy

Once you know you want to invest in a new business, the process of identifying the best company can be complicated. For anyone who is seeking to acquire a second (or third, or fourth) company, the process might be a bit easier—you already know your own strengths as a business owner, and you know the industries in which you feel comfortable doing business. If you are new to the business world, you should work with a lawyer who can help you to determine the types of industries that meet your needs, and the specific businesses that you may be interested in purchasing given your previous experience and industry knowledge.

2. Consider Your Financing Options

Most business purchasers need to secure financing to buy a business. Whether you have been involved in a specific industry for years or you are just starting out, your business law attorney can help you to determine the type and amount of financing you might be able to access.

3. Draft an Agreement to Buy the Business

Once you know the business you want to purchase and have a good sense of your financing options, you will work with your lawyer to draft a purchase agreement. The purchase agreement does not bind you to the purchase if there are significant legal issues—uncovering any financial or legal problems with the business can result in the purchase agreement being voided. How will you determine whether there are any major issues that need to be resolved? That is what the next step is for: due diligence.

4. Do Your Due Diligence

According to Score.org and the U.S. Small Business Administration (SBA), doing due diligence is how you will learn about any potential legal or financial problems with the business you want to buy. In performing due diligence, you can ask for a wide variety of materials related to the business, including financial documents, contracts, business equipment, assets, trade secrets, and other intellectual property. This step is also when you will make difficult inquiries about current legal obligations, and any potential legal obligations in the future. Before you buy a business, you need to have clarity about liens, judgments, licenses, permits, zoning issues, debts, and any pending lawsuits.

Your business lawyer will play an important role in the due diligence process and can help you to assess the types of risks you are facing in buying the business. Attorney Lynnette Ariathurai can determine whether the risks and liabilities linked to the business are acceptable and can clarify your options for minimizing future risks if you move forward with the purchase.

5. Closing

If you decide to move forward with the business purchase, you will work with your business lawyer to take all necessary legal steps prior to the closing, at which point you will review and sign the purchase agreement, along with any financial documents.

Contact a Business Lawyer When Buying a Business

Do you have questions about buying a business, or do you need representation for a specific business purchase? Our law firm can assist you from start to finish when it comes to purchasing a business in California. Contact attorney Lynnette Ariathurai today to get started.  We support businesses legal needs in the East Bay area including Fremont, Newark, Hayward, Milpitas, and Union City.

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Business legal services in Silicon Valley

Attorney for Buying a Business

Lynnette Ariathurai, Bay Area Business Attorney

If you are considering a purchase of an existing business, it is important to work with an attorney for buying a business. Purchasing a business can be a complex process, and many legal issues can arise in the process of looking for a business to buy, securing financing for the purchase, and getting the business running again. If you are in the market for a business, you should know that an experienced Fremont business lawyer can provide you with the services you need. As you consider your options for buying a business, the following are issues and concerns that you should consider.

Looking for a Business to Buy: Selection and Marketplace

Seeking out a business to buy can be a complicated process in and of itself. How do you select the type of business to buy? Generally speaking, you should seek out businesses that have ties to your own professional work and expertise. If you do not have experience in a particular industry, buying a business in that field can be much more difficult than buying a business in a field with which you have some familiarity.

Once you decide on the type of business you should be selecting, it will be time to locate the business that you want to purchase. You should work with a lawyer to understand the marketplace and your options for selecting an appropriate business.

Due Diligence Prior to Purchasing a Business

Prior to buying, you should develop a due diligence checklist that includes a variety of tasks you will need to complete with assistance from an experienced business law attorney.

You will also need to secure financing for the purchase. In order to secure financing, you will need to provide a significant amount of information to the lender about the business, which you will gather in the process of conducting due diligence. An article in Reuters discusses key elements of due diligence. Generally speaking, due diligence should include the following for most types of business purchases:

  • Researching the business’s financial information, including any existing liens, debts, tax returns, expenses, profit margins, and inventory;
  • Gather information about the structure of the business and the business formation of the company, which will provide you with information about the business’s bylaws or articles of incorporation, shareholders or investors, and compliance filings;
  • Determine the business’s assets, including commercial real estate, equipment, furniture, and products;
  • Learn about existing employee and customer data, including any existing disputes or litigation;
  • Review existing business contracts, including employment contracts, restrictive covenants, mortgages, leases, stock purchase agreements, and existing agreements with suppliers or vendors;
  • Determine whether there are any existing legal issues or disputes involving the business; and
  • Investigate existing intellectual property, such as existing trademarks or service marks.

Guidance on Liability and Minimization of Risk

If you or your company is considering purchasing a business, it is imperative that you carefully assess all of the potential risks. The absolute last thing you want to deal with is an unanticipated issue that could expose you to legal liability. Among other things, these debts could include employee wages, contractual obligations, loans, state or federal taxes, commercial leases, and other financial responsibilities.

Hiring a Knowledgeable Business Attorney is Important

Given extensive experience practicing business law, your attorney will review all relevant purchase documents, offer guidance on liability, and help you minimize the risks. It may be important to send a bulk sale notice to all affected creditors, including state and federal tax authorities. By doing so, you will notify creditors that assets are being transferred and impose a time limit for them to bring any claim. A well-drafted asset purchase agreement will help to ensure that your company is not subject to unknown liabilities.

With a full understanding of the risks as presented by your business attorney, you and your business partners can better protect your financial interests. In some cases, it may be advisable to buy the company’s individual assets instead of the entire business. In other cases, purchasing an ownership stake in the company may be the best path forward. There are additional ways to obtain protection in a purchase, such as temporarily holding back a portion of the purchase price, including comprehensive indemnification provisions, and obtaining insurance.

Business Law Matters After Your Purchase

Depending upon the type of business you bought, it may be necessary to change the business structure, and you may need legal assistance with business formation questions. New businesses, and new business owners, will also need to draft enforceable contracts for employees, vendors, suppliers, and other parties. Business contracts can be complex, and you should always work with an experienced business lawyer who can ensure that your contracts are likely to be enforceable in the event of a dispute.

The attorney you hire for buying a business can also assist with other outstanding legal items that are likely to arise in the early stages of buying a business.

Contact a Business Lawyer in Fremont

Buying a business can be a complex endeavor, but an experienced California business and corporate attorney can assist you. At The Law Office of Lynnette Ariathurai, we serve clients in Fremont, Hayward, Union City, Milpitas, and Newark, California. Contact attorney Lynnette Ariathurai today for assistance with buying a business.

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Business legal services in Silicon Valley

Hiring Employees vs. Independent Contractors

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When you are hiring new people to work for your business, it is essential to have clarification about whether you are hiring employees or independent contractors. The distinction between employees and independent contractors is important for your own business purposes, as well as for the worker. As you may know, employees have certain rights that independent contractors do not have, and accordingly, Bay Area employers have certain obligations to employees that they do not have to independent contractors.

There is a new law in California that clarifies the test an employer should use for determining whether a worker is an employee or independent contractor. You should seek advice from our Fremont area business law attorney to determine what you must do to comply with the law concerning employees and independent contractors.

California’s ABC Test

Assembly Bill 5 (AB 5) took effect on January 1, 2020. The new law replaces the common law test for determining whether a worker is an independent contractor or an employee. Under the new law, you must classify workers as employees—and not as independent contractors—unless your worker meets all the following conditions of the ABC test:

  • A: The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  • B: The person performs the work that is outside the usual course of the hiring entity’s business; and
  • C: The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

To be clear, your workers will be considered employees unless you can prove, based on the elements of the ABC test above, that they should be classified as independent contractors.

Business Exemptions for the ABC Test

Some businesses are exempt and do not need to take the test. In total, there are seven categories of exemptions. Determining whether your business meets the exemption requirements can be complicated. One important note is that if your business is determined exempt from this ABC test, it would then fall under the previous case law for determining whether a person is an employee or independent contractor. Our firm can help you to determine whether you fall under one of the exemptions and, either way, we may be able to provide advice on restructuring your business if it is possible.

Contact a Fremont Business Law Attorney

When you are hiring new workers for your business, you must have clarification about each worker’s classification. The new “ABC test” in California for determining a worker’s classification as an independent contractor or employee can be confusing, but an experienced business law attorney can help you. Contact the law office of Lynnette Ariathurai online or call our firm at 510-794-9290. We serve businesses throughout Fremont, Newark, Hayward, East Bay, Milpitas, Union City, San Leandro, Gilroy, San Jose, and Santa Clara, CA.

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Business legal services in Silicon Valley

Two Things to Consider When Starting a Software Company

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Starting a software company is an exciting enterprise. Tech folklore is full of stories of people building billion-dollar companies from ideas that were generated in their parents’ garage. The stakes are high. Successful ideas have made some people very rich. Poorly executed ideas have left other people in debt with unsurmountable financial losses.

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Why Select an LLC as a Business Entity?

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Choosing the best legal structure for your business requires knowledge of your line of work and an understanding of local, state, and federal laws. Tax laws are constantly changing and the need for capital is always present, so it is crucial for business owners to evaluate which business structure offers the advantages that will save them money and help them grow. Limited liability corporations (LLC), are one of the most popular business forms for a variety of reasons including:

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Selecting the Right Business Entity When Starting a Business

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One of the most important choices you will make when starting a business is selecting a type of legal structure for your company. This decision impacts how much you pay in taxes, the amount of paperwork your business is required to complete, your personal liability, and your ability to raise money to expand or grow.

There are three primary factors that will guide the type of business entity you choose — liability, taxation, and record-keeping. Choosing the correct business entity should be a thoughtful decision. Weigh the pros and cons of each and explore how such an entity can help your business launch, expand, and grow. Business entities are not written in stone and you may change yours as circumstances dictate. 

The four most common business entities and what distinguishes them follow:

  • A sole proprietorship offers complete managerial control to the owner. As the owner you are also personally liable for all the financial obligations of your business. Of all the business entities, a sole proprietorship is the riskiest, placing your business and personal wealth in play when the business cannot pay its financial obligations.
  • A partnership is a business of two or more people who agree to share in the profits and losses of a business. Like sole proprietorships, each partner is personally liable for all the financial obligations of the business, jointly and separately.
  • A corporation is a legal entity that is separate and apart from the owners who created it. The corporation can make a profit, is taxed, and can be held legally liable for its actions. The owner’s liability for the financial obligations of the corporation are limited to the value of the shares the owners have in the corporation. Corporations are the most expensive business entity to form and maintain and have extensive record-keeping requirements.
  • A limited liability company (LLC), is a hybrid of a corporation and partnership business entity. Owners are only liable for their “shares” in the LLC and profits and losses are passed through to the owners individually without taxation of the business entity itself.

Set Up your Business, Register, and Comply with Record-Keeping Requirements

You should seek expert advice from a business attorney when considering the pros and cons of various business entities, the registration requirements in your locality, and the ongoing record-keeping requirements your business must follow at its formation and beyond.

If you are an aspiring business owner or entrepreneur, we can help you turn your ideas into actions and select the right business entity for your new business. Our experienced business attorneys can partner with you to build a lasting relationship that is mutually beneficial. Contact us today for an initial consultation. Located in Fremont, CA, we serve Newark, Hayward, East Bay, Milpitas, Union City, San Leandro, Gilroy, San Jose and Santa Clara. We look forward to putting our legal experience to work for you.

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Business legal services in Silicon Valley

Attorney for Internet-Based Business

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The beauty of the Internet is that it creates online experiences that connect people worldwide to solutions or products that your company offers. And an Internet-based business can get off the ground without the big budget and deep pockets needed to launch a brick and mortar storefront. Digital storefronts are fast and nimble, and you can launch them relatively quickly without a huge investment in infrastructure for business operations.

An important partner for your Internet-based business is an experienced and competent business attorney to handle the legal affairs of your company or provide advice as it launches, grows, and expands to new products, services, markets, or business acquisitions.

Below are some best practices surrounding the topic of what new Internet-based businesses should look for when hiring a lawyer:

  • Look for an attorney you can trust. A competent, responsive, and experienced attorney in the area of Internet-based business is a great place to start. People skills, such as trust, congeniality, and relatability, are important and often overlooked considerations.
  • Don’t wait for a problem to hire a lawyer. Just because start-up costs for an Internet-based business are low relative to bricks and mortar launches does not mean that your start-up does not need a lawyer. Lawyers are invaluable for any transactions involving the government, interactions with customers, suppliers, users, employees, and the public. Specific tasks that lawyers help start-ups accomplish include:
  • Incorporation and forming a business entity
  • Hiring employees
  • Negotiating contracts with customers and suppliers, including establishing terms of service for websites and license agreements for software
  • Raising capital
  • Obtaining copyrights, patents, and trademarks

What if your legal budget is small, which priorities should you focus on?

There are certain legal tasks that must be addressed early in the development of your Internet-based business. Proper business formation, including selecting an LLC or corporation to protect you from business liability, should happen before your launch. Establishing ownership and equity rights of the company when there are multiple founders, along with their corresponding responsibilities, are the second most important tasks to resolve, early in the life of your startup.

Sort out your taxes, and determine which ones need to be paid concurrently with the posting of your income, such as sales and use taxes, as well as understanding the tax consequences of business forms. Lastly, Internet-based businesses are intellectual property. Make sure that your idea, and any software developed to run your business is legally protected and owned by the company, especially if you use independent contractors to develop software or apps.

Experience Handling Business Formations

If you are an aspiring business owner or entrepreneur seeking an attorney for starting and building an Internet-based business, we can help you turn your ideas into actions. Our Fremont business attorneys can partner with you to build a lasting relationship that is mutually beneficial. Contact us today for an initial legal consultation in Fremont, CA as well as Newark, Hayward, East Bay, Milpitas, Union City, San Leandro, Gilroy, San Jose, and Santa Clara. We look forward to putting our legal experience to work for you.

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Why Use a Fictitious Business Name?

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Choosing a unique business name is one of the most important decisions a business owner makes when establishing a new enterprise. Your business name is the foundation of your brand. It provides an identifying mark that tells your customers who you are and what type of product or service you offer. A poorly chosen business name may bring negative attention from the marketplace and has the power to kill your venture before it properly takes off.

When a business would like to operate with a name that is different than the name used to form the business, then a fictitious name is required.

A fictitious name is an excellent way of setting up a boundary between you and your business venture. Fictitious business or trade names are known as a “DBA,” which means “doing business as”.  In addition, you may manage many “DBA’s” under the same original legal entity for different businesses you may manage.

Details about Setting up a California DBA

  • A DBA must be filed under a unique name and your selection should be researched in the local county clerk’s office or recorder’s office
  • Certain words cannot be part of your DBA, such as “incorporated”, “LLC”, “corporation” and others
  • A sole proprietor may not need a DBA if they intend to use their surname in the business name
  • DBA statements must be published in a local newspaper within 30 days of filing for your DBA

Advantages of Operating Under a DBA

  • Low up-front costs. A DBA requires low upfront costs.  You can register a trade name with the Division of Corporations and your business can open its doors for a nominal fee with few compliance requirements (besides business entity and state registration, as required).
  • Quick market entry. A DBA allows companies to rapidly maximize business potential by locking down a name and branding without the fear of another market entrant claiming it.

Where to Get Help

If you want to operate your company under a fictitious business name you must register with the appropriate county and state authorities. A California business lawyer can help you file and register a DBA or trade name. It is important that you understand what liability protection is available to you when establishing a DBA.  To receive personal protection of your assets, your company will need to file and register a corporation.

If you are a business owner in the East Bay Area including Fremont, CA near Newark, Hayward, East Bay Milpitas, Union City, San Leandro, Gilroy, San Jose or Santa Clara, seeking legal guidance on how to establish a trade or fictitious names, look no further than a California business lawyer who can provide legal advice and counsel.

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Business legal services in Silicon Valley

Business Websites Need to be ADA Accessible

Websites Need to be ADA Accessible

A web presence is necessary in today’s business world for companies large and small. In this article, we not a recent federal decision in the Second Circuit is a reminder that restaurants, and other businesses that may interface with the public, have additional responsibilities under the places of public accommodation provisions of the American with Disabilities Act (ADA).

In this New York case, a blind woman, Cheryl Thurston, who relies on a screen reader to interact with websites was unable to read the menu on a restaurant’s website using her screen reader. She was unable to do so because the restaurant’s website was not designed to permit access using a screen reader. Ms. Thurston sued the restaurant for violations of Title III of the Civil Rights Act of 1964 (Title III) and the ADA.

United States federal law requires public accommodations to be accessible to all people, including the blind, and prohibits discrimination on the basis of “race, color, religion, or national origin.” The definition of public accommodation within the Title III of the Civil Rights Act of 1964 includes “any inn, hotel, motel, or other establishment which provides lodging to transient guests.” The other establishment provision referenced here includes restaurants.

The trial court granted summary judgment in favor of the woman, finding that the restaurant’s website fell within the category of “services …privileges, advantages, or accommodations of” a restaurant, which is a place of public accommodation under the ADA. In short Ms. Thurston proved that the restaurant’s website was inaccessible to blind users. The court issued an injunction mandating the restaurant complies with the current version of the Web Content Accessibility Guidelines (WCAG) published by the World Wide Web Consortium, a non-governmental international agency that sets the standards for the worldwide web.

The restaurant appealed the decision. The court of appeals affirmed the lower court’s decision holding that the trial court properly found that Title III of the ADA applied to the restaurant’s website. However, like the trial court, the court of appeals declined to declare that the restaurant was in violation of the ADA for not previously having implemented the standard. The restaurant is required to comply with WCAG 2.0 guidelines to make its website accessible to disabled people.

Why the Thurston Decision Matters

The decision in the Thurston case will have far reaching effects on many businesses, not just restaurants. In the past, to maintain a lawsuit alleging a violation of the ADA, a business patron would have needed to physically go to the business and be able to describe in the complaint what he or she “saw” that made the business non-compliant with the ADA. Now, all a business patron needs to do is try to engage with your business’ website.

Key Takeaways for Your Business’ Website Regarding ADA Accessibility

Businesses with websites should immediately investigate whether their websites are ADA compliant. Check with your website designer, webmaster, or advertising agency for guidance on how to comply with the WCAG guidelines to make your website ADA compliant.

Unfortunately, prior to implementing this change to your website, your business may get hit with a lawsuit or receive a threatening letter from an attorney about a lawsuit. Small businesses often wind up paying $5,000 or more to make the claim go away, which could increase your compliance costs substantially.

If you own a business in the East Bay Area including Fremont, CA near Newark, Hayward, Milpitas, Union City, San Leandro, Gilroy, San Jose or Santa Clara and you are seeking legal guidance on how to make your website ADA compliant or need counsel to represent your business threatened with a lawsuit for ADA non-compliance, get legal advice from a California business lawyer today.

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Business legal services in Silicon Valley

Why Might a Business Incorporate in Delaware Instead of California?

Classified Board of Directors

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Many of the largest public companies in the world are incorporated in Delaware. California business owners ask me whether they should incorporate in Delaware when choosing a state of incorporation for a business about to go public. This post will examine some of the key differences between incorporation and corporate governance laws in California and Delaware.

Under Delaware law, corporations are permitted to have a classified board of directors, with each class having a term of longer than one year. Whereas, a non-public California corporation requires annual election of its board of directors.

Cumulative Voting for Directors

Delaware law permits cumulative voting for directors, so long as this provision is included in the company’s certificate of incorporation and/or its bylaws. California law is more expansive with respect to cumulative voting. By default, cumulative voting is available to shareholder elections of directors and it need not be specified in the articles of incorporation or bylaws. Cumulative voting is considered a statutory right for shareholders of non-publicly traded corporations, unless specifically excluded in the company’s articles of incorporation and/or its bylaws.

The Right of Stockholders to Call Special Meetings of Stockholders

Stockholders are only permitted to call special meetings if the company’s certificate of incorporation or bylaws authorizes it under Delaware law. In California, on the other hand, not only may a special meeting of shareholders be called by the holders of 10% or more of the voting stock of the corporation, but this right may not be waived by the shareholders in the company’s certificate of incorporation or bylaws.

Insulation of Directors

California permits unlimited monetary liability for directors upon a finding of breach of fiduciary duty. Delaware law provides a complete shield to directors from monetary liability for breach of fiduciary duty except in circumstances in which a stockholder can demonstrate a breach of the duty of loyalty, a failure to act in good faith, intentional misconduct, or a knowing violation of law, among other violations.

Predictability Surrounding Corporate Outcomes

In Delaware, both the legislature and the courts work in concert to act quickly and effectively to meet changing business needs. Corporation law in Delaware is one of the most extensive and well-defined bodies of corporate law in the United States. The Delaware Court of Chancery is renowned for its sole focus on business and corporate law, no backlog, and a knowledgeable bench in resolving complex corporate issues. 

If you are starting a business in California, or own an existing business in the East Bay Area including Fremont, Newark, Hayward, East Bay Milpitas, Union City, San Leandro, Gilroy, San Jose, or Santa Clara and you are seeking to explore incorporating in California or Delaware, you will need to ensure that the right steps are taken for incorporation. Seek legal advice and counsel from a knowledgeable California business lawyer today, call us at 510-794-9290.

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The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. Contacting us does not create an attorney-client relationship.