Business

You are sitting in your office on the busiest day of the year, and just when you think nothing else could go wrong, a person walks in and utters the fateful words “You’ve been served”, while handing you a stack of papers.   Your business is a party to a New York civil litigation lawsuit. Your business has  just been sued.  What is the best course of action you can take, and how can you protect yourself as well as your business?

Who?

Read the papers that are given to you to find out the party that is suing you and the type of civil litigation you are involved in.  Is it a corporation, a partnership, or an individual?  Are they a customer or a supplier of your business? Who is the lawyer representing the party that is suing you?  This information will help your attorney obtain a more favorable result for you by researching the other party and its counsel. (Do they settle often?  Are they a big company?  What are their financial resources?  Do they have a reputation to maintain and therefore may want to settle quickly?).

What?

What exactly are you being sued about?  Is it a breach of contract claim? Is it a non-payment claim, or a non-performance claim?  Those are many reasons why a business may be sued.

When?

In Civil Litigation, timing is critical in a lawsuit.  Responses must be filed within a set period, which in New York is  usually within 30 days.  While an extension can be granted, don’t wait until the last minute to contact your attorney.  It takes time to prepare an appropriate answer to the papers.  If you do not respond in a timely fashion, you will be considered in default, and a judgment may be taken against you.  This means you may lose the case without the opportunity to provide a defense.

Also, don’t assume you are judgment proof, because judgments can be collected from future earnings as well as assets.  In addition, do not assume that your insurance covers everything, although it may be wise to notify your insurance carrier as well as your attorney.

Where?

What court are you being sued in?   What county?  State or Federal Court? You may be sued in a state far away if, for instance, you have done business in that state.  In that case, your New York attorney will have to obtain local counsel for your small business in the other state, and this takes time.

Why?

Why did the party resort to a lawsuit?  Is it something you can fix by having your attorney talk to the other side and negotiate a settlement?  Is there a running animosity between your company and the other party, in which case settlement will be difficult?  Do you need to file a counterclaim against the other party?

How?

Immediately notify and supply the civil litigation  lawsuit papers to your attorney.  Make sure you retain a photocopy for yourself.  Inform your attorney of all the facts relevant to the case.  Your attorney will decide what is important and what is not.
Organize your documents pertaining to the case so that you can minimize the time the attorney must spend going through them.  This will save your attorney ’s time, and therefore save you legal fees.  Do not talk to the other party’s attorney.  He works for the other party, just as your attorney works for you.  Let your attorney do this for you.  In addition, remember that in law, just as in any profession or business, there are rules and procedures  your attorney knows and you may not.  To stay out of trouble, leave the legal work to your attorney.

A trial can take several weeks in New York, including preparation time.  Therefore, it may be in your best interest in certain cases to settle.  However, be realistic in your settlement expectations.

Conclusion

Having an ongoing attorney-client relationship will help protect you in the event of a civil litigation lawsuit.  The more your attorney knows about your business, the better the attorney will be able to help you.  In addition, discussing business options and problems with your attorney ahead of time could help prevent a lawsuit from ever starting.  Either way, it will save you money in the long run.

CALL TODAY FOR A CONSULTATION AT 212-233-0666

 

[contact-form-7 id=”694″ title=”Contact form 1″]

 

 

As an independent contractor, there is no employer-employee relationship with the person or company that you are doing business with.  The independent contract is a consultant who performs specific duties that the consultant is capable of performing.

At the start of the relationship, it is absolutely vital to have an independent contract agreement (also known as a consulting agreement) drafted to protect both parties.  The consequences of failing to establish a consultant as an independent contractor can have dire tax consequences.

In your independent contractor agreement, it is important to establish that the consultant performing the services is is not under the control of the employer.  In addition, the employer may not directly supervise the consultant.

When it comes time to draft an independent contractor agreement, you should focus on the fee for services rendered and provide a complete description of the services that are to be provided.

You have been negotiating for months with a supplier.  A competitor becomes aware of your negotiations and derails the deal.  Can you recover for your damages?  Under the Tort of Inteference with a Business Opportunity you may.

Generally, the types of opportunities that can be subject to such a claim include:

  • Sale or Purchase of a Business
  • Sale or Purchase of Property
  • Employment Opportunities
  • Sale of Goods
  • Construction Contracts
  • Professional Relationships

In order to prove the tort of Interference with a Business Opportunity, you must show:

  • That there is an opportunity in existence that is definate and specific in scope and capable of being acted upon
  • The other party had knowledge of the opportunity
  • The other party with intent intefered with the opportunity
  • They actually caused damage to your interests
  • Actual Damages

More Reading:

One of the problems that you may encounter when buying a business in New York is understanding how to structure the purchase.  Basically, there are two ways that you can buy a company:

  1. Asset Purchase;
  2. Stock Purchase.

In most cases, you will be better off purchasing the assets. There are three big benefits to buying the assets and not purchasing the stock:

  • Tax benefits. With an asset purchase, you can give different purchase prices among the various pieces of the company.  For example, certain equipment can be deducted immediately so you may want to assign a greater price for those assets.
  • You can choose not to acquire liabilities of the business you wish to buy. Perhaps the company failed to pay a supplier for goods it ordered two years ago.  The statute of limitations on a breach of contract lawsuit is six years, so you could be hit with a lawsuit four years after buying the company.
  • You don’t have to buy every asset of the corporation. It could be in you best interest to buy only the profitable portions of the company.

Sometimes you are not given the choice of how a business sale could be structured.  Many business that are for sale require purchase of stock only for a variety of reasons. For example, the seller may believe that there are tax advantages for selling all the stock.  If you have to buy corporate stock, it is imperative to conduct a thorough investigation of the corporation’s books and other financial dealings.  You can insert warranties and indemnification clauses in the stock purchase agreement. You may also be able to purchase insurance.

\"\"Deciding partner compensation when starting up a company is critical.  Without a fair and just written compensation  provision in a partnership agreement, the business can implode.  Here are 4 things you should think about when deciding how partners should be compensated:

  1. When will profits be divided? Will it be once a year, at the end of the year or will partners be able to draw their profits at some earlier point?
  2. Should a partner receive a additional salary? In the case where one person may work more hours than the other partners, it is advisable to either pay an additional salary or provide a larger portion of the profits.
  3. Should profits and losses be shared equally?
  4. Should a certain percentage of the profits be re-invested in the company? For example, it may be important to retain some of the profits to provide a bonus to keep a key employee.

It is vital that you and your partners how decide profits should be shared as early as possible.  A lawyer can help you focus on what is important and select solutions. But ultimately, it is up to you to decide how profits are allocated.

\"Reblog

The attachment of property is a strong weapon when used properly in New York. A businessman who is having financial problems decides not to pay for goods that he purchased.  If your company is the creditor, it could take years before he will have to pay. At that time, the funds could be depleted.  One key provisional remedy that a creditor can seek is to obtain an attachment.  Here, the creditor can obtain an attachment on the bank account and the businessman would not be able to use the money. Even though the plaintiff is not able to use or obtain the funds, the businessman will not have the luxury of time and would be more motivated to settle.

Attachment of property can have devastating effects on the businessman.  Attachments can be ordered by the court ex parte, meaning that the businessman will have no notice.  This could cause checks to bounce and drastically alter the ability for a small company to conduct business.

In order to obtain an order of attachment, the creditor would have to show, as per CPLR 6201(a): 1. that \”there is a cause of action\” and that the plaintiff will probably succeed on the merits; 2. that at least one of the grounds of attachment found in the law exists;  and 3. that the amont asked for in the lawsuit exceeds any counterclaims that the creditor has knowledge of.

If an order is granted, it is directed to the sherriff, not the defendant. Some orders are granted without notice to the businessman.

If you have a question about provisional remedies such as attachment of property in New York, act now and contact the Law Office of Frederic R. Abramson at 212-233-0666. Feel free to keep up to date on all New York Business Law issues by visiting my blog.

\"Reblog

\"\"New Yorker\’s are a mobile bunch. Especially New York business owners. Business open and close every day.  It is risky to believe that your co-owners will still be with you five years down the line. It is likely that there will come a time when of your co-owners will want to sell his shares or interests in the company to someone else.  One of the most common ways that a small business can get disrupted is when an owner desires to sell or transfer his interests in a company. So, what should you do?  You should create in advance a method for the owners to review and block any that is not in the best interests of the company.  Here are some things you should think about:

  1. Right of First Refusal. This is the most common provision in a buy-sell agreement. The owner who wishes to sell his interests first offers it to his co-owners before anyone else.
  2. Decide the Price of the Ownership Interests in Advance. Often the price will be set at the price a proposed outside buyer has bid.  I do not recommend this option because a fraudulent offer is possible. Another method is to set a pre-determined price at the time a buy-sell agreement is drafted.  Another option is to set a high down payment price which would show good faith.
  3. Make clear the effect of any sale on Minority Owners. Often a right of first refusal provision may freeze out a minority owner from selling his interests.  As a result, it may be important to include a \”Right to a Forced Sale\” clause.
  4. Decide who can buy the interest. Should the company have the right to purchase shares or the individual owners?
  5. Should an owner be able to give away his interest? Often owners wish to grant their interests in a company to a trust for estate planning reasons. This could be problematic because technically the trust would own the shares of the business. Often these issues are addressed when drafting a buy sell agreement.
  6. No Transfer Restrictions. Refusing to transfer any ownership interest is another possibility. This can limited in a few different ways, such a no transfers to certain persons and no transfers without written consent of the other owners.

You should decide in advance what to do if an owner of a business wants to transfer its interests through a buy sell agreement to avoid unnecessary problems and potential litigation.

\"Reblog

If you are planning to sell or buy the assets of a corporation, before you go to your lawyers office you should provide the answers to the  following questions:

  • Names and addresses of everyone involved in the sale
  • All assets and property that will be in part of the sale
  • What monies are being paid?
  • What are the debts and liabilities of the company?
  • Will the consideration be paid in installments or a lump sum?
  • When will payment be due?
  • Have all due diligence documents been obtained?  For example, have you inspected the books, property or business records?
  • Agree on a closing date
  • Are there any warranties?
  • Any intellectual property, such as the use of the company name be transferred?
  • Who pays any potential taxes?
  • Are there any employee agreements?
  • Are there any leases?
  • What happens if one party defaults?
\"Reblog

Centuries ago, there was no fixed time start a lawsuit.  The Statute of Limitations was enacted to protect defendants against defending old lawsuits after a reasonable time has passed.  The law has specific provisions that prescribe how long a plaintiff has before starting a lawsuit. If you fail to commence your lawsuit within the statute of limitations, your case is generally dismissed.

As a general rule, it is wise to begin a lawsuit within at least six to eight months before the statute of limitations expires. The reason for this is because the law is often quirky.  For example the law requires the plaintiff to serve the defendant.  By allotting a six-eight month window  before the statute of limitations expires, it would be possible to re-serve the defendant.

The specific time periods regarding the statue of limitations can be found in the New York Civil Practice Law and Procedure Article 2.

If you have a question of how the statute of limitations impacts your case, contact my law office by phone at 212-233-0666 or via email at fabramson@abramsonlegal.com

\"Reblog

Without regard with their title, officers of the corporation should transact all business and execute all contracts in the name of the company.  The officer should have his or her title next to or under their signature.

Why is this important? Because if the company defaults on the underlying transaction, the officer may be held personally responsible for any loss if the other party can demonstrate that it reasonably belived that the officer was doing business on the officers\’ behalf.

Google+