Corporate & Tax | General Counsel Law.

Employment Law Update: Supreme Court Says Arbitration Requirements in Employment Agreements are Enforceable

A recent U.S. Supreme Court case, Epic Systems Corporation v. Lewis upheld employers’ use of class-action waivers in arbitration agreements. No. 16-285, 2018 WL 2292444, at *1 (U.S. May 21, 2018). Based on this ruling, employees that have signed such agreements are no longer able to join together to sue employers and instead must use arbitration to individually resolve any issues. This decision will likely make it harder for employees to sue employers now that collective bargaining is off the table. Class actions offered employees a chance to seek damages from employers when individual lawsuits were too costly, potential damages were too low, or when employees feared retaliation if they sued employers individually.

Epic Systems Corp. consolidated three separate cases involving three different employers: Epic Systems, Ernst & Young, and Murphy Oil. In each of these cases, an employer and employee entered into a contract providing for individualized arbitration proceedings to resolve employment disputes between the parties. However, each employee later sought to litigate Fair Labor Standards Act and related state law claims through class or collective actions in federal court.

The Arbitration Act requires courts to enforce agreements to arbitrate, including the terms of arbitration agreed to by the parties. The Arbitration Act also includes a savings clause, which allows courts to refuse to enforce arbitration agreements “upon such grounds as exist at law or in equity for the revocation of any contract.” The employees here argued that the savings clause applied to the waivers prohibiting class actions, creating a “ground” upon which the court may refuse to enforce the arbitration agreements. The employees relied on the National Labor Relations Board’s interpretation that the National Labor Relations Act overrides the Arbitration Act. However, the court found that the savings clause was not applicable to the employees’ arbitration agreements.

The Supreme Court noted where two acts discuss the same issue “Congress will specifically address preexisting law before suspending the law’s normal operations in a later statute.” The court stressed that “the absence of any specific statutory discussion of arbitration or class actions is an important and telling clue that Congress has not displaced the Arbitration Act.” The court summed up by stating: “Congress has instructed that arbitration agreements like those before us must be enforced as written. While Congress is of course always free to amend this judgment, we see nothing suggesting it did so in the NLRA.”

The court’s finding that collective bargaining law does not supersede the federal law that established the arbitration process and that the class-action waivers in employment contracts are valid, may lead more employers to include such provisions in their employment agreements. Employers are likely to see the court’s decision as a big win, while employees may second-guess decisions to initiate actions against employers, knowing arbitration is the only option.

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Whether you’re an employer or employee wondering how this decision might affect you, attorneys at General Counsel PC can help. Our attorneys are specialized in labor and employment law and have experience working with business owners and individuals across Virginia, specifically in Fairfax County, Arlington, Loudoun County, and Prince William. Call General Counsel PC at 703-556-0411 today to see how we can help you.

What Should I Consider During a Business Divorce?

Business relationships fail for many different reasons: business partners may have long-term disagreements, a change in leadership, or simply a desire to go in different directions. Even successful businesses may have to deal with business divorce issues if business partners decide that the benefits of continuing their business relationship are outweighed by the costs accompanying their continued co-ownership of the business. Breakups are never easy, and business relationships are no different, but there are some things business owners can do to help prepare themselves for the eventual divorce.

Plan Ahead – Have a Written Agreement at Formation

Even if business partners don’t ultimately decide to part ways, some type of conflict is almost inevitable. For this reason, it is important to plan ahead and have some type of operating agreement or corporate shareholders agreement in place at the start of the business relationship to help guide the resolution of conflicts later on. A well-drafted agreement at the time of business formation can help to prevent a deadlock from occurring over disagreements about how to end the relationship.

Important provisions to consider including in these formation agreements include buy-sell agreements, provisions to forestall squeeze-outs, triggers for dividends, and non-compete agreements. A buy-sell agreement requires the company or remaining majority owners to purchase the minority’s stock in the case of agreed upon events. To ensure that a deadlock isn’t reached, an agreement can include a “shotgun” provision, requiring a mandatory sale in the case of disagreement and deadlock. While this ensures that the business isn’t left in limbo while business partners disagree, it also means that in the case of a disagreement over how to part ways, neither party is able to retain the business. Another option is including a provision that gives all shareholders the right to offer a specific price per share for the other shareholder’s shares. The other shareholder then has the option of accepting the offer or buying the offering shareholder’s shares at the agreed-upon price.

What Are My Options During a Business Divorce?

Many business disputes arise when there is a deadlock between the owners and the owners’ inability to agree results in the business being unable to make business decisions. There are a few different ways to deal with such deadlocks and a resulting business divorce. One option is to appoint a provisional director which serves on a corporation’s board of directors until a deadlock is broken. Another option is a buyout, where majority owners purchase minority owner’s remaining stock. Business owners can also consider complete dissolution of the company, selling all of the company’s assets and parting ways. Additionally, business partners may want to use mediation to allow a neutral third party to help resolve business disputes. If none of these alternatives are able to generate a resolution, parties can seek legal remedies in court, but that option is often costly, time-consuming, and not usually preferable.

Remember Your Fiduciary Duties

Even if it’s certain that a business will soon be dissolved, business owners must use caution to ensure they do not take any actions against the company in bad faith. Until the time when a dissolution is official, business owners may owe a fiduciary duty to the company, as well as to each other. If one co-owner plans on leaving the business to start his own competing business, he may be in violation of non-competition or non-solicitation agreements. The specific duties owed to the company and other business owners vary depending on the type of business entity involved.

For example, under the Virginia Uniform Partnership Act, partners owe the partnership and other partners a duty of loyalty and care. Under the Virginia Code, partners also must act in accordance with the obligation of good faith and fair dealing. These duties do not end until the partnership has dissolved, so partners must refrain from competing with the partnership and other partners before the dissolution is complete.

Additionally, business owners using company resources for their new businesses or asking clients to leave the business and instead go to the new business may face liability for tortious interference with contract expectancy, civil and statutory conspiracy, as well as other claims. A claim for statutory business conspiracy under the Virginia Code may be made if another owner suffers injury to his “reputation, trade, business or profession.” A claim for tortious interference with contract expectancy may be successful if a co-owner intentionally interferes with a business relationship or contract expectancy of the company’s and the interference results in a breach or termination of the relationship or expectancy.

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Disengaging from a business relationship is a complicated matter. Having to decide what the best course of action is and not knowing what you can and can’t do just adds to an already stressful and difficult situation. Seeking help from experienced professionals who can help guide you throughout the process will help lessen the burden and make the process run more smoothly. Our attorneys are specialized in business law and have experience working with business owners across Virginia, specifically in Fairfax County, Arlington, Loudoun County, and Prince William County. Call General Counsel P.C. at 703-556-0411 today to see how we can help you.

Public Policy Exception to At-Will Employment Doctrine in Virginia

In Virginia, employment relationships are presumed to be “at will,” which means that the employment term extends for an indefinite period and may be terminated by either party for any reason, or no reason at all, upon reasonable notice. Virginia courts “have strenuously adhered” to the presumption of at-will employment. See Nguyen v.CNA Corp., 44 F.3d 234, 237-38 (4th Cir. 1995). Virginia courts have relied on an underlying theory that stresses the freedom of contract: “An employee is ordinarily at liberty to leave his employment for any reason or for no reason, upon giving reasonable notice, without incurring liability to his employer.” Miller v. SEVAMP, Inc., 362 S.E.2d 915, 917 (Va. 1987).

Virginia courts have found an exception to the at-will employment relationship if the termination violates a well-defined public policy of the state or violates Virginia statutory authority. Statutes expressing a public policy sufficient to form the basis of a wrongful discharge claim fall into two categories: (1) a statute explicitly stating that it expresses a public policy; and (2) statutes that do not explicitly state a public policy, but rather are “designed to protect property rights, personal freedoms, health, safety or welfare of the people in general.” Lockhart v. Commonwealth Educ. Sys. Corp., 247 Va. 98, 104, 439 S.E.2d 328, 331 (1994).

In Bowman v. State Bank of Keysville, 229 Va. 534, 331 S.E.2d 797 (1985), the Virginia Supreme Court first recognized a narrow public policy exception to the employment at-will doctrine, and held that the plaintiffs’ employer was liable for wrongful discharge after it had terminated plaintiffs in violation of public policy. There, the plaintiffs were stockholders in the bank corporation that employed them and they were terminated for refusing to vote their stock in accordance with the demands of management. The court reasoned that the employees’ termination violated the public policy expressed in Virginia securities law, which allows stockholders the right to vote their shares free from duress and intimidation by corporate management.

Recently, the Supreme Court of Virginia reaffirmed that the public policy exception is a narrow one in Francis v. National Accrediting Commission of Career Arts & Sciences, Inc. 293 Va. 167, 175, 796 S.E.2d 188, 192 (2017). In Francis, the plaintiff was an at-will employee who claimed a co-worker confronted her, yelled obscenities, and threatened bodily harm. The plaintiff filed a petition for and received a preliminary protective order (PPO) against the co-worker. A few days later, the company terminated the plaintiff because she “did not fit the vision of the organization.” The plaintiff filed suit against her employer, claiming wrongful termination under Bowman, arguing that she was discharged in violation of public policy embodied in Virginia’s protective order statutes. The plaintiff argued that her exercise of her statutory rights in obtaining a PPO was a motivating factor in her termination. The court ultimately held that the plaintiff failed to state a claim for wrongful termination under Bowman. The court reiterated that “while virtually every statute expresses a public policy of some sort, we continue … to hold that termination of an employee in violation of the policy underlying any one statute does not automatically give rise to a common law cause of action for wrongful discharge.”

The court explained that the Bowman public policy exception is only recognized in 3 scenarios: (1) when an employer violated a policy enabling the exercise of an employee’s statutorily created right; (2) when the public policy violated by the employer was explicitly expressed in the statute and the employee was clearly a member of that class of persons directly entitled to the protection enunciated by the public policy; and (3) when the discharge was based on the employee’s refusal to engage in a criminal act.

To make a successful claim under the first scenario, the court must first determine “what right was conferred on an employee by statute, and then whether the employer’s termination of employment violated the public policy underlying that right.” In order for the Francis plaintiff to be successful under this theory, she would have to argue that her termination violated the public policy underlying the rights conferred to her in the protected order statutes. However, the public policy of the protective order statutes is to protect the health and safety of the petitioner and his family. For the public policy exception to apply, the plaintiff must show that her termination violated that stated public policy of protection of health and safety, which she did not. Rather, the plaintiff argued that she was terminated because of her exercise of her statutory rights in obtaining a PPO, but the protective order statute does not include a public policy of protecting the exercise of the right to seek a protective order. Since the public policy exception does not recognize “a generalized cause of action for the tort of retaliatory discharge,” the plaintiff did not make a successful claim under Bowman.

The court’s decision in Francis showed an unwillingness to expand the scope of the public policy exception to Virginia’s at will-employment rule. This is likely encouraging for Virginia employers. However, wrongful discharge matters can still be complicated, and employers should continue to be mindful of applicable public policies when making termination decisions for at-will employees.

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Whether you are an employer or employee involved in a potential wrongful discharge matter, attorneys at General Counsel PC can provide you with the knowledge and assistance necessary protect your rights. Our attorneys are specialized in labor and employment law and have experience working with employees and employers across Virginia, specifically in Fairfax County, Arlington, Loudoun County, and Prince William. Call General Counsel PC at 703-556-0411 today to see how we can help you.

Unlawful Retaliation: How to reduce our exposure and protect our employees?

It is imperative for employers to be aware of the law on unlawful retaliation and its implications on their business practices and workplace. Title VII of the Civil Rights Act of 1964 declares it unlawful for an employer to discriminate against an employee because he/she opposed any unlawful employment practice or made any charge, testified or participated in an investigation of an unlawful practice. Moreover, such unlawful conduct need not require evidence of wrongdoing. An employer can be responsible for retaliation and accused of wrongdoing even if there was no discrimination, sexual harassment or other unlawful conduct. It is important that employers understand that it is never too late to implement change in their workplace. There is no time like the present to institute new practices or reorganize the way certain things are done.

In the past few years, employees have been protected under this unlawful retaliation law and it has been applied to the following situations:

Where an employee has complained about their employer’s treatment towards another individual under a different federal statute (Cracker Barrel case)
In an employer’s internal investigation, where an employee raised an issue when being asked questions by the investigator (Crawford case)

The types of claims that are brought under this law vary significantly. Therefore, it is vital that employers familiarize themselves with the suggested practices to be put in place at their workplace and the potential consequences of their failure to do so. Further, these practices are there to encourage employers to exercise heightened vigilance and promote a healthier and more productive work environment. The reality is that many employers are not mindful of the consequences that such a failure can have. It is helpful to understand what the most common mistakes are so that you, as an employer, can be aware and implement practices to avoid them.

Overall, employers should be documenting performance issues at the time that they arise. This facilitates a more efficient and prompt process for addressing the issue with the employee who raised it. This can be done in the form of reviews or other mechanisms that the employer feels are best to address a specific concern. Often times, employers are not aware of the resources that are available to them which include the Equal Employment Opportunity Commission. Such resources should be consulted if employers are uncertain about the protocol for a specific situation or even just to ensure that they are in compliance with employment laws.

At the bare minimum, employers must make sure that they have a policy implemented that prohibits unlawful retaliation (a non-retaliation policy). They should also consider engaging in and providing training on what that policy means and how it should apply in their workplace. “Claim-specific training and counseling” is a great way to do just that. Ironically, to reduce exposure, employers really just need to exercise common sense. For example, employers must never forget that “relying on instinct is not a good method for ensuring compliance” or that “ignorance of the law is no defense, it compounds liability”. Do not ignore or isolate complaints. Do not rule out some restructuring and reorganization that may be required. Pay close attention to subsequent employment actions. Think before you act and make sure a given action that you wish to take is not related to any complaint filed.

Even though this is all extremely simple and easy to employ in your workplace employers consistently make mistakes. Some of the most common mistakes that may expose the employer to liability or having a grievance filed against them include:

Failure to train managers on compliance with the basic requirements of employment laws
Failure to file a timely first party report of injury or illness of an employee
Basic documentation disasters (ex. no documentation showing the basis for an employee’s termination, padded performance reviews, mean-spirited memos, sloppy documentation that is imprecise, etc.)
Failure to follow your companies policies without good reason
Failure to investigate and conclusively confirm the factual basis for a termination

So what does this mean moving forward? Employers really need to ensure that the practices they implement in their workplace comply with the law and that they represent the positive values and moral integrity of the employer. Yes, it is that simple. Be careful and ensure that you develop your workplace based on the principles compassion and calmness and the desire to foster the commitment to the company’s core philosophy and values.

Personal Liability for Corporate Obligations – How to Avoid Piercing the Corporate Veil

When individuals form business entities, generally they choose entities that allow them to limit their personal liability, leaving only the entities’ assets vulnerable to lawsuits. For corporations and Limited Liability Companies (LLC), the business entities are separate from the corporate officers and shareholders (or LLC members), and these individuals are typically not liable for the entities’ debts. However, there are instances where individuals may be liable for corporate debts, even if the corporation, and not the individual, is the target of a lawsuit.

The recently decided case, Virginia Electric & Power Co. v. Peters, highlights the importance of taking steps to avoid the possibility of piercing the corporate veil and the resulting personal liability. In Virginia Electric & Power, Dominion Virginia Power (“Dominion”) sued Bransen Energy Inc. (“Bransen”) and obtained a $24.5 million judgment against Bransen. However, Dominion wasn’t able to collect on the judgment and brought another action to pierce Bransen’s corporate veil and impose liability on Michael Peters (“Peters”), Bransen’s owner and sole shareholder.

Peters was Bransen’s president, owner, and sole shareholder and used more than $2.66 million of Bransen’s funds for his personal benefit. Additionally, after Peters knew Bransen had breached its contract with Dominion, he and his family “used Bransen as a personal checking account,” writing checks from the account without any business connection to the company. Peters also created new companies and funded them with Bransen’s funds, even though the new companies had no connection to Bransen. The court found that Peters “used the corporate structure to avoid liability to Dominion by making corporate decisions that benefits him and not his corporation” and that Peters may be personally liable for Bransen’s debt to Dominion.

When trying to pierce the corporate veil, courts have personal jurisdiction over individuals if the individual is the “alter ego” of the corporation. When deciding whether an individual is an “alter ego” of the corporation, the court must determine whether the individual exercised “undue dominion and control over the corporation,” such that “the corporation was a device or sham used to disguise wrongs, obscure fraud, or conceal crime.” Perpetual Real Estate Servs., Inc. v. Michaelson Properties, Inc., 974 F.2d 545, 548 (4th Cir. 1992). When determining whether this undue dominion and control existed, the court may consider whether the individual observed corporate formalities, kept corporate records, paid dividends and whether there were officers and directors. Essentially, the court must determine whether the individual misused the corporate identity to disguise assets.

Once the corporate veil is pierced, a business owner may be personally liable for debts of the corporation. The possibility of piercing the corporate veil is a particular concern for closely held businesses. Business owners should understand the concept of piercing the corporate veil to minimize their own risk by structuring and operating their business entities in an appropriate manner. Below are a few practical tips for business owners to utilize to create the best possibility of avoiding personal liability:

Observe Corporate Formalities – If your business has a board of directors (or managers) hold regular meetings and document and keep the minutes of those meetings. Additionally, business owners should have governing documents for their entities, such as operating agreements and bylaws.
Keep Separate Records and Bank Accounts – It is important that business owners treat the entities as truly separate, especially when it comes to the entities’ assets. Don’t commingle funds or borrow from the company to pay personal expenses. Contribute all business profits into and pay all business expenses from the entity’s bank account and keep business financial records separate from personal financial records.
Operate at Arms-Length – When engaging in transactions that may appear inappropriate to unrelated parties, take care to follow proper protocol. For example, if you plan to contribute personal assets to the entity as a capital contribution, document the transfer. If you own multiple entities that provide services to the other, have contracts in place governing those relationships. When in doubt about whether a transaction is appropriate, err on the side of caution.

A court’s decision to pierce the corporate veil is decided on a case-by-case basis and generally results from a combination of factors with an added element of injustice. Unfortunately, there is no guarantee that a business owner will avoid personal liability for business debts, but there are ways to conduct your business now to put yourself in the best position later, in the event a legal situation arises. The most important thing to remember when conducting a business is to maintain and document the level of separation between entity and owner and always treat the entity as distinct.

Call General Counsel PC Today

Attorneys at General Counsel PC are specialized in business law and have experience working with business owners across Virginia, specifically in Fairfax County, Arlington, Loudoun County, and Prince William. If you’re currently facing a legal issue that’s putting your business at risk or you’re looking for legal advice on the strength of your business protections, General Counsel PC has the expertise you need. For more information about how you can ensure your business is protected, call General Counsel PC at 703-556-0411 today.

Impact of 2018 Tax Changes on Taxation of Employment-Related Settlement Payments

Passage of the Tax Cuts and Jobs Act (the “Tax Act”) has greatly altered the individual and business tax landscape. A significant change under the Tax Act is the income tax treatment for employers and employees that are parties to employment-related settlements. (For more information on how the Tax Act affected the taxation of employment-related settlement payments, see Taxation of Employment-Related Settlement Payments). The language of the provisions included in the new tax law leave some uncertainty about how the law will apply in practice. The IRS will likely issue guidance to clarify some of this ambiguity, but until then, employers and employees must take extra care when engaging in settlement negotiations to understand the plain text of the statute and it’s potential implications.

Confidentiality v. Deductibility

Confidentiality in sexual harassment cases will now be more expensive for employers since they will not be able to deduct any payments related to the matter if nondisclosure provisions are included in the settlement agreement. This deduction elimination essentially leaves employers to choose between deducting payments made or retaining confidentiality of the settlement. Since virtually all settlement agreements involving claims of sexual harassment or sexual abuse contain nondisclosure provisions, employers are going to have to think hard about what they value more – money or reputation. This change will likely alter the dynamic of settlement negotiations moving forward, but how that will actually play out remains unclear.

If employers choose to move forward without nondisclosure provisions included in the settlement agreements, they may not be willing to settle for as much as they would if the agreement would remain confidential. Additionally, in cases where the employee would like the matter to remain confidential, employers may leverage this to settle for lesser amounts. On the other hand, if plaintiffs are subject to additional tax liability due to the non-deductibility of attorney’s fees paid by the employer, plaintiffs may want to increase settlement amounts to account for this additional tax, which will make settlements more costly. These opposing considerations stand to make settlement negotiations more difficult. Additionally, now that confidentiality may be essentially off the table for employers not willing to lose the deduction, these employers may be less likely to settle all together and would rather take a chance and go to trial.

Scope of the Statute

With the broad language used in the relevant Tax Act provisions, there remains a question about what specific payments the statute disallows deductions for. The statute doesn’t define “settlement or payment related to sexual harassment or sexual abuse.” The statute makes clear that it applies to the settlement payment itself, as well as attorney’s fees, but what about other related fees? Does the statute also disallow deductions for fees paid to experts or investigators assisting with the case? If a plaintiff brings a sexual harassment claim in addition to other discrimination claims, can a portion of the settlement be allocated to the sexual harassment claim to allow for a deduction for the remaining portion? Does the statute apply to false or unfounded claims of sexual harassment or sexual abuse as well? These questions will be left open until the IRS clarifies the statute.

It is also unclear how the IRS will treat payments made in accordance with confidential agreements that broadly waive claims, including sexual harassment. If the IRS views such a payment as “related to sexual harassment,” the payment will not be deductible. Until the IRS clarifies this question, employers should consider including a provision in settlement agreements stating that there was no claim of sexual harassment or sexual abuse and that the payments are not related to such claims, to ensure the payments remain deductible.

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Moving forward, it will be important to keep up to date on any additional guidance issued by the IRS on questions noted above, as well as other uncertainties that arise. Both employers and employees will need to consider these new legal and financial issues when engaging in settlement negotiations involving sexual harassment or sexual abuse.

With so many unanswered questions surrounding settlement agreements, it’s important to speak with an experienced attorney before entering into settlement negotiations with an employee or employer. Attorneys at General Counsel PC are experienced in employment law and are informed of any additional guidance given on these new tax laws. Our attorneys have helped businesses and individuals across Virginia, specifically in Fairfax County, Arlington, Loudoun County, and Prince William. Call General Counsel PC at 703-556-0411 today to see how we can help you get the best outcome for your legal claims.

Taxation of Employment-Related Settlement Payments

Claims Involving Sexual Harassment or Sexual Abuse

Under the old tax law, employers could deduct the ordinary and necessary expenses incurred in carrying out a trade or business, which generally included legal settlement payments or other payments made to a plaintiff, such as a plaintiff’s attorneys fees, and other legal fees the employer incurred in the course of its defense.

However, under the new tax law, settlement agreements may be more expensive for both employers and employees. Now, under Internal Revenue Code Section 162(q), employers are not entitled to deduct “any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement” or “attorney’s fees related to such a settlement or payment.” This provision seems to also apply to legal fees paid by the employee. There is some uncertainty regarding whether or not “attorney’s fees related to such a settlement or payment” refers to claims of sexual harassment in general, or only to settlements or payments for such claims when a nondisclosure agreement is included. The IRS will likely issue guidance clarifying this ambiguity, but until then employers and employees need to be aware of the possible tax issues.

The Tax Act also eliminated miscellaneous itemized deductions, which was often a way for taxpayers to deduct legal fees that didn’t qualify for an above the line deduction. This elimination further limits the deductibility of legal fees.

Payments Made to the Government or Governmental Entities

Additionally, the Tax Act amends Code section 162(f). The previous version of this provision denied deductions for amounts actually paid to the government or government entities, unless the payment was established as restitution or amounts required to come into compliance with a law that was violated. These amounts were only nondeductible if paid directly to the government, but were deductible if paid directly to a plaintiff. Under the updated version, deductions are denied for any amount paid or incurred to or at the direction of a government or governmental entity in relation to the violation of any law or investigation of such violation. The section doesn’t apply to private claims, but applies to claims brought by the Equal Employment Opportunity Commission. With this change, payments that represent a fine or penalty, whether paid to the government, a government entity, or to a plaintiff, are not deductible. Therefore, treble or punitive damages are no longer deductible, but damages to come into compliance with a law or restitution damages, such as lost wages or recovery for pain and suffering, are still deductible. However, for these restitution or compliance damages to be deductible, the court order or settlement agreement laying out the damages must specifically identify the damages as restitution or damages paid to come into compliance with a violated law. Therefore, parties to settlement discussions will have to take extra care to ensure that the final settlement agreement includes any necessary language to allow the payments to be deductible.

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With so many unanswered questions surrounding settlement agreements, it’s important to speak with an experienced attorney before entering into settlement negotiations with an employee or employer. Attorneys at General Counsel PC are experienced in employment law and are staying informed of any additional guidance given on these new tax laws. Our attorneys have helped businesses and individuals across Virginia, specifically in Fairfax County, Arlington, Loudoun County, and Prince William. Call General Counsel PC at 703-556-0411 today to see how we can help you get the best outcome for your legal claims.

Starting Your Own Business

Watch this brief video about things to consider before starting a business.

Starting a business is a lot of work and takes a serious level of commitment. Before you commit to such a huge endeavor, make sure you do your research. What do you need to do to start a business? What are the requirements of starting a business? How do you get started? Below are some of the most important things you should consider before you actually start your own business.

Passion and Planning – One of the most important things to consider when starting your own business is to make sure your business involves something you enjoy doing everyday. When you start your own business, you give up your job working 40 hours a day for someone else, to work 80 hours a day for yourself. There is a lot of stress that can come with owning your own business, and you should make sure it will be worth it by choosing a practice area that you enjoy. Then, draft a 3-5 year business plan. This plan will guide you strategically and become an offering document to raise capital when speaking to investors or friends and family, or trying to get a loan from the bank.
Choice of Entity – Here, you should start with the end in mind. Why are you starting a business? What are you going to do with it? How are you eventually going to exit and perhaps sell it? These types of questions will dictate which type of entity is right for you. The entity you choose will affect many important aspects of your business, such as taxes, paperwork required, the liability of the owners, and many other legal issues. You may know you want your business to have partners or go public, or that you want to seek capital from institutions. For each of these things, there is a specific type of entity you need to form. Additionally, if you’re planning on ending your business at some point or passing it on to your family, how you structure business agreements during business formation are important.
Filing Requirements – Once you figure out what type of entity is the right fit for your business, you need to make sure you get your business properly registered. Depending on the type of business and entity you choose, you may need certain licenses, tax information, and governing documents for your business. For example, to create an LLC in Virginia, you must file Articles of Organization with the Virginia SCC, as well as appoint a registered agent for service of process. Virginia does not require business owners to create operating agreements, but an operating agreement is a very important document for all business owners to have to help establish basic rules about how your business will operate, as well as to guide your business in the event certain situations arise. If your business involves selling goods in Virginia or having employees, you also have to register with the Department of Taxes.
Business Relationships – It’s important to consider the people that you’ll deal with on a regular basis once you start your own business, including customers, suppliers, vendors, and employees. Each type of business relationship requires a specific type of agreement to allow you to function effectively and profitably with them as well as to protect your business from long-term risk as your business grows.
Other Considerations – The issues discussed above are just the tip of the iceberg for things that future business owners need to consider before getting their businesses started. There are many other things that need to be considered, such as picking a name and making sure it’s legally available for your business, choosing a location that’s in line with the zoning regulations, and getting insurance. First time business owners may not even realize all of the things that need to be figured out before a business can actually be started, which is why it’s important to do your research and talk to someone who knows what needs to happen to make sure things run smoothly while you work to get your business set up and then keep it running just as smoothly.

Starting a business is a big step, with lots of complicated decisions that have long-term consequences. When you’re considering starting a business it is often a good idea to speak to someone who is knowledgeable about operating a business and is also an attorney who knows business law to help you make sure things are in order and consider aspects you may not have thought of. Our attorneys are specialized in business law and have experience working with business owners across Virginia, specifically in Fairfax County, Arlington, Loudoun County, and Prince William. Call General Counsel PC at 703-556-0411 today to learn more about how we can help you structure your business for long-term success.

What To Do When Accused of Breach of Contract

If you’ve received a notice of breach of contract sometimes called a demand letter, it means someone believes you’re not living up to your end of a bargain. A breach of contract occurs when one party to a contract doesn’t fulfill any term of a contract, without a lawful excuse. Contract breaches can be troublesome for both small businesses and individuals. Receiving a notice of breach of contract opens up a legal battle that can be stressful, time-consuming, and costly.

Types of Breaches

Breach of contract disputes are very common because they can impact so many different aspects of businesses and there are multiple types of breaches. A breach can be minor or major depending on how crucial the provision that was breached was to the contract as a whole. A breach may also be anticipatory, which means that a party may not actually have breached a contract yet, but acts in such a way as to make the other party believe he intends to breach the contract. The defenses and remedies available for a breach of contract dispute depend on the type of breach that has occurred.

Common examples of breach of contract include a failure to provide goods or services on time or in full, non-payment for goods or services, providing defective goods or services, or breach of warranties of a contract.

How to Respond to a Demand Letter

The best course of action after receiving a notice of breach of contract, or a demand letter, is to contact an experienced attorney knowledgeable about contract disputes. Contract disputes can be complex and attempting to tackle such an endeavor on your own could result in serious negative results. Instead, seek out an attorney who knows the law, knows the local court rules, and knows the best way to respond to such letters to allow for the highest possibility of success.

It’s best to contact an attorney as soon as possible to ensure no deadlines are missed and to figure out what needs to be done right from the beginning. An attorney will need to review the contract itself, as well as other documentation and correspondence with the other parties. It’s important to provide as much truthful information as possible to ensure that the attorney is working with all of the facts when determining the best legal strategy.

Call General Counsel PC Today

If you have been accused of breach of contract and live or work in the Fairfax, Loudoun, Arlington, Prince William, or anywhere in Virginia, attorneys at General Counsel PC can provide you with the knowledge and assistance necessary to determine the next steps in preserving your legal rights. Our attorneys are specialized in labor and employment law, business law, and litigation and have the experience necessary to help you through these legal hurdles. Knowing your rights and options can help ease some of the burden of dealing with breach of contract disputes. Call General Counsel PC at 703-436-9838 today to see how we can help you.

What To Do If Your Business Has Been Sued

Regardless of the success of a business, business owners run the risk of being sued. Litigation and lawsuits can be stressful, costly, and time-consuming. However, there are steps business owners can take to help better protect their businesses and put them in the best position to navigate these legal hurdles.

Most Importantly, Do I Need a Lawyer?

Yes! Would you let someone who knows nothing about selling houses sell your home? Probably not, so why leave your business in the hands of someone not knowledgeable about business law? Business owners have worked too hard to get their businesses where they are to put those businesses in jeopardy by choosing to not seek out expert advice if they are sued. The costs of hiring an attorney may make some business owners hesitant, but the costs of the lawsuit could be even more severe in the event the business loses the lawsuit. Additionally, for a business entity to even assert its legal rights in court, it must be represented by a licensed attorney.

If a business owner does choose to hire an attorney to assist in a lawsuit, it’s important to make sure that the attorney selected has experience in the relevant area of law, as well as at the relevant court. For example, if you’re a business owner with a business in Fairfax, Virginia, it’s important to choose an attorney well versed in areas such as employment law who have experience litigating issues in Fairfax County Circuit Court or the Eastern District of Virginia. General Counsel PC has experience in these locations, as well as in Loudoun County, Arlington, Prince William, and most of the Commonwealth of Virginia.

Know Your Law Suit Deadlines

Missing a deadline can have serious negative consequences for a business owner, possibly causing a business owner to lose a lawsuit even with a winnable defense. It’s important to seek out an attorney as soon as possible so they are able to evaluate the situation and determine all applicable deadlines early on so valuable time is not missed. Trying to piece together different laws, statues, and local court rules can be tricky, and it’s best to have the assistance of someone already knowledgeable in those rules to ensure nothing important is overlooked.

Time is of the Essence

In addition to assessing applicable deadlines, contacting an attorney as soon as possible has other benefits. When you hire an attorney, you establish attorney-client privilege, which will help protect any internal investigations being done. However, once this privilege has been established, be sure to avoid discussing the lawsuit with anyone other than your attorney or you risk breaking the privilege. Additionally, once hired, an attorney is able to begin preparing for a lawsuit, including placing a “litigation hold” on information relevant to the matter. This hold prevents other parties from destroying pertinent documents, which may make the difference in favor of your business.

Know Your Options

Just because your business is sued, doesn’t mean you don’t have any options. A knowledgeable attorney will be able to help figure out what options are available. It may be possible for a case to be dismissed or resolved outside of court through a settlement or mediation. One of these options would significantly cut down on the costs as well as the time it takes to resolve the matter.

Call General Counsel PC Today

If your business has been served in a lawsuit, attorneys at General Counsel PC can provide you with the knowledge and assistance necessary to determine the next steps in preserving your legal rights and defending your business. Our attorneys are specialized in labor and employment law, business law, and litigation and have the experience necessary to help you through these legal hurdles. Call General Counsel PC at 703-436-9838 today to see how we can help you help your business.