Posts from: April 2018

Choice of Business Entity (Part 1)

Congratulations, you have decided to start a new business.  You are going to become an “entrepreneur”, a business owner.  You have put together your business plan, located potential business premises, talked with your advisors, and are ready to get started.

You have talked with an attorney and an accountant and they have advised you to form a “business entity”.  Now you have to decide which one is right for you.  So, what are your choices?  Following are just a few options:

Sole Proprietorship.  You could own and operate the business and not form a separate entity.  This is generally the “simplest” legal way of owning and operating a business.  Other than obtaining the required business licenses, all you need to do is to put an “open for business” sign up and you are ready to go.  The business is owned by only one individual and “dies” when the owner either stops doing business or dies.  The individual owner has unlimited liability for all obligations of the business.

Partnership.  If you have decided to go into business with other owners, you could form a partnership.  There are two kinds of partnerships:  general partnerships and limited partnerships.

In a general partnership, you and your partners will have unlimited liability for acts and obligations of the business, including those incurred by any of the partners in the business.  If you have no agreement, the partnership will be governed solely by the laws regarding partnerships in your state.  Without an agreement, if one partner dies or withdraws, the partnership terminates.

In a limited partnership, there must be at least one general partner who manages the affairs of the partnership and who will be liable for all the acts and obligations of the partnership.  The “limited partners” may not participate in the management of the partnership and are treated as investors.  They will not generally be liable for the acts and obligations of the partnership.  The partnership must file a Certificate of Limited Partnership in the state in which it wishes to organize.

In proprietorships and general partnerships, there can be serious legal consequences to the individual(s) who operate the business.  As pointed out, a sole proprietor, while “King” of the business, has unlimited liability for the obligations of the business.  General partners are entitled to their share of the business income, but also have unlimited liability.  Limited partners may not participate in management, but have limited liability.

So, what can a business owner do to limit his or her liability?

[To be continued, in Part 2, where we will discuss Corporations and LLCs, two of the more preferred ways of operating a business in order to minimize personal liability].

If you are starting a business and have any questions, please contact:

Morris R. Saunders at:

312-368-0100 or msaunders@lgattorneys.com.

Are Your Business E-Mail Messages Legally Compliant?

Overview:

You may have heard of The Can-Spam Act (“Can-Spam”), but if your business engages in email marketing, you must understand the requirements and put processes in place for compliance.  Can-Spam is a federal law that establishes requirements for all outbound commercial messages, regardless of whether they are B to B (business to business) or B to C (business to customer) messages.  The Act also provides recipients the right to have you discontinue your emails to them, which is referred to as an “opt-out” provision.   Finally, it instills high penalties for non-compliance.

Requirements:

The main requirements of Can-Spam are as follows:

  1. Header or subject line information must NOT be misleading.
  2. The subject line must be an accurate descriptor of the content of the message.
  3. Clear and Conspicuous identification that the message is an ad.
  4. Recipients must be provided your address.
  5. You must include an Opt-Out mechanism to avoid future messages.
  6. Opt-out requests must be honored promptly (i.e. within 10 business days).
  7. If you hire another company to handle your e-mail marketing, you are responsible for their compliance with Can-Spam.

Penalties for Non-Compliance:

Each separate email message that does not comply with Can-Spam may be the subject of up to $40,000 or more in penalties, and multiple people may be responsible for violations.  Therefore, both the company whose product or service is being advertised and the marketing company who originated the message may be legally responsible for violations.  In addition to the requirements of Can-Spam, commercial email messages must comply with other laws as well.  For example, if the content is deceptive or misleading information about a product, then the sender may be in violation of the FTC Act and/or other state laws regarding false and deceptive business practices.  Further, impersonation or the unauthorized use of the sender’s computer or system or other such acts are subject to criminal penalties.

Not all commercial messages require compliance with Can-Spam.  Only those messages whose primary purpose is commercial in nature.   For instance, emails to customers concerning their order, or other already agreed-to transaction with your company will avoid the necessity to comply with Can-Spam as they are viewed as relationship or transactional messages.  However, oftentimes a business will send a message that combines elements of transactional or relationship content with commercial content.  At that time, it is important to consult with an attorney for guidance as to whether such a message must comply with Can-Spam or if the message would not fall under the purview of Can-Spam.

If you have any further questions or wish to inquire about our fixed-fee advertising clearance services, please contact:

Natalie A. Remien at:

(312) 368-0100 or nremien@lgattorneys.com.

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