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  • 3 Reasons Sole Proprietors Should Avoid DBAs

    3 Reasons Sole Proprietors Should Avoid DBAs

    New York State Business Law Section 130 prohibits anyone from doing business under a name other than his or her own unless an Assumed Name Certificate (more commonly referred to as a DBA) is filed. For example, if John Smith would like to sell seeds under the name “Johnny’s Apple Seeds”, he would have to file a DBA certificate before he could start selling. Sole proprietors, LLCs, and corporations can all use a DBA to conduct business. However, for the purposes of this post, we will focus more on sole proprietors.

    DBA Assumed Name
    Sample DBA (Assumed Name) Certificate

    What information is contained within a DBA?
    In New York, a DBA certificate must contain 1. the name of the business, 2. the address of the business, 3. the name and signature (notarized) of the individual (or partners), and 4. the individual’s (or partners’) personal address. Click left to see a sample certificate.

    What is the cost and where to file a DBA?
    For a sole proprietor filing in a single county, the fee is between $25-35 depending on the county. The fee for filing in Erie County is $35. For corporations filing a DBA certificate with the Secretary of State, the filing fee is $25 plus an additional $25 for each county that the corporation will operate in outside of New York City. If the corporation wishes to operate in a county within New York City, the filing fee is $25 plus an additional $100 for each New York City county(Bronx, Kings, New York, Queens, and Richmond Counties). There are no county fees for LLCs.

    A certificate may be filed either with the Secretary of State or with the Clerk’s Office for the county in which the business will be operating. Now that we know what is needed to file a DBA certificate, we will discuss 3 Reasons Sole Proprietors Should Avoid DBAs.

    3 Reasons Sole Proprietors Should Avoid DBAs:

    #1 – Personal Liability

    Sole proprietors often fail to realize that a DBA certificate does not confer protection from personal liability. Despite doing business under a different name, the proprietor remains personally liable for the debts and conduct of the business. If the proprietor’s business is sued for any reason, whether it be for breach of contract or a personal injury, their house, car, bank account, and other personal property are at risk. This means that the proprietor’s personal assets could be used to satisfy a judgment or claim. Personal liability is by far the greatest danger to sole proprietors using a DBA.

    #2 – No Rights to Business Name

    Filing a DBA certificate does not provide a sole proprietor with exclusive rights to the business name. Even if they have been operating for several years under the DBA name, another business can register their LLC or corporation using that same name, and will be able to conduct business statewide.

    #3 – Geographic Restrictions

    As discussed earlier, sole proprietors utilizing a DBA filed with the county are geographically restricted from doing business outside that county. Having to refile in county after county can be time consuming and expensive. That is why many do not bother to refile. What should be obvious by now is that if a sole proprietor wishes to conduct business under a different name, they are much better off registering as an LLC or corporation. This will provide personal asset protection, confer business name rights, and are free to operate statewide.

    To learn more, or to discuss filing for your own LLC or corporation, please contact us for a free consultation.

    Disclaimer: This blog is made available by Kloss, Stenger & LoTempio for educational purposes only. It is not intended to provide legal advice nor form any attorney client relationship between the reader and Kloss, Stenger & LoTempio. You should always seek professional advice from a licensed attorney for any legal questions you may have.

  • What is a Business Registration Certificate?

    What is a Business Registration Certificate?

    Preparing and filing a business registration certificate is the first step towards starting a business. Each business entity requires a different “certificate”. For this post, we will focus on the two most popular types of business entities in New York, a corporation and a limited liability company (LLC) (What is a LLC?).

    Generally speaking, a business registration certificate is what allows the state to identify and recognize your business as a separate legal entity. Upon the successful completion of the filing process, the state will confer the legal benefits of registration on your business. So what type of information is contained within the certificate?

    Business Registration Certificate – Corporations

    Corporations file a “Certificate of Incorporation” with the Secretary of State. On this certificate, you will need to provide the following:

    1. The name of the corporation,
    2. The purpose of the corporation,
    3. The number of shares of the corporation,
    4. The business address,
    5. The county of the business.

    Business Registration Certificate – LLCs

    LLCs file “Articles of Organization” with the Secretary of State. Despite the name, the information is nearly the same as a Certificate of Incorporation. For the Articles of Organization, you will need to provide the following:

    1. The name of the LLC,
    2. The business address,
    3. The county of the business.

    For both business registration certificates, you will need to provide the name and address of the individual(s) filing the paperwork. The “Incorporator” files on behalf of a corporation. The “Organizer” files on behalf of a LLC.

    Lastly, you will also need to submit the New York State filing fee, which varies by entity and changes periodically. However, filing the certificate and paying the fee are not the only steps to registration. We will cover those additional steps in a future post.

    For more information about the preparation and filing of business registration certificates, including our Flat Fee pricing for business formation, please contact our office for a free consultation.

    Disclaimer: This blog is made available by Kloss, Stenger & LoTempio for educational purposes only. It is not intended to provide legal advice nor form any attorney client relationship between the reader and Kloss, Stenger & LoTempio. You should always seek professional advice from a licensed attorney for any legal questions you may have.

  • Are Verbal Agreements Enforceable?

    Are Verbal Agreements Enforceable?

    “Verbal agreements aren’t worth the paper they’re printed on.”

    – Unknown

    Small business owners and entrepreneurs often rely upon “handshake” or verbal agreements to conduct business. But are those agreements really enforceable? The answer is it depends.

    Technically speaking, verbal agreements are enforceable in New York with certain exceptions as described by the Statute of Frauds. Practically speaking, it is very difficult to enforce such an agreement. For the purposes of this blog post, we are assuming that all of the requisite elements of a contract are present.

    New York General Obligations Law 5-701 (the “Statute of Frauds”) lists the types of agreements that must be in writing. Some examples are:

    1. the sale of an interest in real property,
    2. the sale of goods for $500 or more (under the U.C.C.),
    3. a contract that cannot be performed within one year,
    4. contracts of suretyship (a guarantee)

    These types of contracts must be in writing or they are unenforceable (with some exception).

    So How Do You Enforce a Verbal Agreement?

    Verbal agreements by their nature lack clear written terms. Parties will often dispute what the terms of the agreement actually were. Faded memories and changes in circumstances can cause these disputes. Without some additional proof, a “he said…she said” argument is not likely to be successful.

    The type of evidence you can use to enforce a verbal agreement is varied. You can use emails or text messages to demonstrate the agreed upon terms. Additionally, the parties’ actions in performing the terms of the agreement are very persuasive.

    For example, suppose you enter into a verbal agreement with a builder to build a fancy new showroom for your business. The builder has until the end of the month to complete it. You and the builder shake hands, you let him into your building, and he proceeds to complete your showroom on time. You cannot then refuse to pay him because there was no written agreement.

    The builder, under the terms of the oral agreement, has fully performed. Further, your actions in permitting the builder to fully perform his obligations under the agreement demonstrates the existence of an agreement.

    Which Type of Agreement Offers the Best Protection?

    Regardless of its technical legality, a verbal agreement is difficult (and expensive) to enforce. A written contract is always better at protecting the parties because it clearly and unalterably describes the parties’ intentions and obligations. While it will require some time and effort upfront, a written contract can help to avoid problems later.

    Having an experienced contract attorney prepare your agreement is the best way to protect your interests. For more information, or to have your agreement drafted or reviewed, please contact our office for a free consultation.

    Disclaimer: This blog is made available by Kloss, Stenger & LoTempio for educational purposes only. It is not intended to provide legal advice nor form any attorney client relationship between the reader and Kloss, Stenger & LoTempio. You should always seek professional advice from a licensed attorney for any legal questions you may have.

  • What are the Elements of a Contract?

    What are the Elements of a Contract?

    Many people enter into contracts on a daily basis without realizing that they are in a legally binding agreement. To help the average person understand when they have a valid contract, we have set forth the elements of a contract below.

    There are four elements of a contract, in order to have a valid contract, all four must be present:

    1. Offer

    This is the first step towards a contract. One party makes an offer to perform a service, sell a product, trade, or conduct some other business venture. An offer is valid so long as it is serious (i.e. not said in jest), and has not been revoked by the offeror (i.e. “I hereby withdraw my offer”).

    2.Acceptance

    The party to whom the offer was made must now agree to the terms of the original offer. Any conditional acceptance or inclusion of additional terms is called a counter-offer. A counter-offer is in effect a rejection of the original offer, and it starts the contract formation process all over again. Just like for an offer, an acceptance must also be serious.

    3.Consideration

    Contracts are not binding unless something of value is exchanged. Consideration can be in the form of money, a promise to perform an act or refrain from acting, or it can be for some other item of value. The element of consideration is the whole purpose for entering into a contract. For the element of consideration, both parties must have some obligation under the contract; for example, one party pays and the other party performs.

    4.Capacity

    Each party must reasonably assume that the other party has both the legal right and the ability to fulfill their end of a contract. They must also be able to fully comprehend at the time of agreement what their obligations will be. For example, an intoxicated person (with some exceptions) or a minor (with some exceptions) lack the capacity to enter into an agreement because they do not fully understand the obligations that they are undertaking.

    The elements of a contract set forth above are applicable for both oral and written contracts. However, certain types of contracts are required by law to be in written form.

    Despite the technical legal enforceability of certain oral contracts, for practical purposes, parties should memorialize their contracts in writing. This will help avoid confusion, misunderstanding, and will aid with enforcement in the event of a breach. To determine whether or not your contract needs to be in writing, or if you need to draft a contract, you should consult with a knowledgeable contract attorney.

    Having an experienced contract attorney help prepare your agreement is the best way to protect your interests. For more information, or to have your agreement drafted or reviewed, please contact our office for a free consultation.

    Disclaimer: This blog is made available by Kloss, Stenger & LoTempio for educational purposes only. It is not intended to provide legal advice nor form any attorney client relationship between the reader and Kloss, Stenger & LoTempio. You should always seek professional advice from a licensed attorney for any legal questions you may have.

  • What is a Non Compete Agreement?

    What is a Non Compete Agreement?

    Non Compete or Non Competition Agreements are contracts that contain a restrictive covenant whereby an employee promises to refrain from competing against their employer for some period of time. Such agreements can be beneficial to both the employer and employee. Employers are likely to invest more in the training and development of the employee without fear of the employee leaving to work for a competitor. Employees are also likely to be paid more and receive greater professional skill development.

    However, employees should be very cautious before signing such agreements. Employers often draft the language of the restriction broadly for their own protection. Employers should also tread carefully as Courts will not enforce non compete covenants if they are unconscionable, offend public policy, or otherwise operate as a restraint of trade for the employee.

    A Non Compete Agreement is generally enforceable if it is:

    • Necessary to Protect a Legitimate Business Interest

      Will the employee have access to the employer’s trade secrets, customer lists, or some other form of proprietary information? Would that information be damaging to the employer if used by a rival? The employee must have the ability to harm the business of the employer with the information once the employment ends for it to be necessary.

      • Consider the uniqueness of the employee’s services. The more unique the services, the more likely it is that the covenant will be enforced. If the services are not unique, there is less need for a non compete covenant.
        • Are janitors, gardeners, or day laborers unique in their services? No. They are unlikely to possess company trade secrets through the normal scope of their employment.
        • Are executives, engineers, or software developers unique? Yes. They are likely to have access to company trade secrets and other proprietary information that would be damaging if used by a rival.

    • Reasonable in Scope

      The reasonableness inquiry is where the Court will evaluate the actual terms of the restrictions. They must be no greater than is justifiable to protect the employer. They also cannot impose an undue burden on the employee’s livelihood.

      • Reasonable in time: Does the agreement seek to prohibit the employee from competing forever? If so, the restriction is likely unreasonable absent unique circumstances, and thus unenforceable. So long as the length of time is reasonably related to the length of time that the secret remains valuable, it will likely be enforceable. In most cases, a restriction period of 6 months to 2 years will be upheld as reasonable.
      • Reasonable in distance: Does the employer seek to prohibit the employee from competing within 10, 20, or 30 miles of the employer’s business? Generally, the larger the geographic restriction, the less likely it is to be enforceable.
      • Reasonable in extent of restriction: Does the agreement prohibit the employee from working in his or her trade completely? If so, it is likely an unenforceable restraint of trade. Nonetheless, a temporary restriction from directly competing in a specialized area of the employer’s industry is more likely to be upheld.

    • Supported by Consideration.

      The employee must receive something of value at the time of execution. This is typically money, but may also be equity in the company. The employer should not seek to intimidate or attempt to put undue pressure on the employee to sign. This may lead to the subsequent invalidation of the restrictions, and nullification of the agreement. It is important to note that if the agreement is signed after the employee has been hired, simply continuing the employment does not constitute consideration and another item of value must be provided.

    Before signing a non compete agreement, you should have it reviewed by a knowledgeable contract attorney. For more information, or to have your non compete agreement drafted or reviewed, please contact our office for a free consultation.

    Disclaimer: This blog is made available by Kloss, Stenger & LoTempio for educational purposes only. It is not intended to provide legal advice nor form any attorney client relationship between reader and Kloss, Stenger & LoTempio. You should always seek professional advice from a licensed attorney for any legal questions you may have.

  • What is Arbitration and Mediation?

    What is Arbitration and Mediation?

    To many, arbitration and mediation are synonymous. Both involved the resolution of a dispute with the assistance of a third party. However, there are major legal differences between these tools of alternative dispute resolution. It is important to know those differences before attempting to mediate or arbitrate a dispute.

    MEDIATION

    Mediation is where the parties agree to negotiate with the help of a neutral third party, known as a mediator. The mediator can be chosen by the mutual consent of the parties. While there is usually only a single mediator, on rare occasion a panel of mediators may be used.

    Mediation is non-binding, which means the parties reserve the right to proceed to further ligation or trial if mediation fails.

    Mediation can be advantageous because:

    • It can save the parties money.
    • It can save the parties time.
    • A mediator can help the parties see case issues more clearly.
    • The mediator can offer his or her impartial opinion of the flaws in each parties’ case.
    • A knowledgeable and experienced mediator can often provide his or her opinion on the likelihood of success at trial for a particular party.
    • Each party can discuss privately and confidentially with the mediator their private thoughts regarding settlement, this can allow the mediator to identify a possible solution.

    Mediation can be disadvantageous because:

    • If the matter does not settle, the parties may be forced to go to trial anyway.
    • The parties may be too far apart or too disagreeable to settle.
    • The mediator may not have a good grasp of the facts of the case in order to help bring the parties together.
    • The parties may not be negotiating in good faith with each other.
    • Several mediation sessions may be required before a matter is able to settle.
    • The dispute between the parties may be time sensitive and cannot wait for the parties to reach an agreement.

    If mediation is successful and the parties reach an agreement, that agreement will be reduced to writing (a Release and Settlement Agreement) for the parties to sign. This can be done by the attorneys for each party. If a lawsuit has already been commenced, it will also include a Stipulation of Discontinuance of the lawsuit which must be filed with the Court.

    ARBITRATION

    Like mediation, parties who wish to arbitrate seek out a neutral third party, an arbitrator, to assist with resolving the dispute. The arbitrator can be chosen through the mutual consent of the parties. The arbitrator is typically an individual knowledgeable and experienced in the law. Often times other attorneys or former judges are asked to act as an arbitrator.

    However, unlike mediation, an arbitrator will render a final decision that is almost always binding on the parties. An arbitration proceeding could be considered a mini-trial where each side presents their case to the arbitrator, who will made a final decision. There is no back and forth negotiation in an arbitration proceeding like there is in a mediation.

    Arbitration can be advantageous because:

    • It can save time.
    • It can save money.
    • The proceedings are private unlike trial.
    • The parties must obey the arbitrator’s decision.
    • The parties avoid going to trial.

    Arbitration can be disadvantageous because:

    • Absent corruption, fraud, or misconduct, an arbitrator’s decision generally cannot be appealed.
    • Arbitrators are not bound by the substantive law or rules of evidence, they may do justice as they see fit.
    • If one party has an economic advantage over the other party, that party will not be able to leverage that advantage against the other party through litigation.

    Arbitration and Mediation can be useful alternative dispute resolution tools under the right circumstances. They can save both time and money for the parties when done correctly.

    Before engaging in arbitration and mediation, it is recommended that you consult with a knowledgeable attorney experienced in both forms of alternative dispute resolution. Our experienced attorneys have served both as arbitrators and mediators, as well as attorneys on behalf of clients.

    For more information on arbitration and mediation, please contact our office for a free consultation with an attorney.

  • What is a Limited Liability Company (LLC)?

    What is a Limited Liability Company (LLC)?

    There are many different ways in which a business can be formed. When forming your own business, though, there are four main types to consider, each with their own pros and cons. For this post, we will answer “What is a Limited Liability Company (LLC)?”

    A limited liability company is a hybrid between a corporation and a partnership. It is a popular business model due to its dual nature.

    Advantages of a Limited Liability Company:

    • Low start up costs.
    • The owners generally are immune from personal liability for the conduct of the business, with some rare exceptions (i.e. fraud).
    • The owners’ personal assets are generally protected from claims against the business.
    • Owners can be added or removed easily.
    • Owners can sell equity in the company to raise money.
    • Some states allow the owners flexibility to decide whether they would like business income taxed personally (“pass through taxation”) or on behalf of the business itself (corporate level).
    • A potential tax benefit of the LLC is the ability to use profits and losses of the business to offset other personal income.
    • Forming or Registering an LLC in New York State is very quick and easy with a knowledgeable business attorney.

    Disadvantages of a Limited Liability Company (LLC):

    • There are certain accounting rules that must be followed, such as not commingling business funds and the owner’s personal funds.
    • There are certain rules that owners or managers of the business must follow when signing contracts.
    • The owners and managers must follow the LLC’s operating agreement when conducting business.
    • Unlike a sole proprietorship, many states do charge a filing fee, and a nominal biannual registration fee.
    • Formal organization papers must be filed with the Secretary of State.

    A Limited Liability Company is a great way for entrepreneurs to get their business started. If you are interested in starting a business, check out our Business Formation page or consult with a knowledgeable business attorney to review the rules and requirements that you must follow in order to protect yourself. To speak with one of our business attorneys, please call (716) 853-1111 for a free consultation, or simply leave a comment below!

  • What is a Sole Proprietorship?

    What is a Sole Proprietorship?

    Businesses are omnipresent in American everyday life. When forming your own business, though, there are four main types to consider, each with their own pros and cons. A sole proprietorship, partnership, corporation, and LLC (limited liability company) all have their own unique aspects that may make them helpful or less helpful to you. For this post, we will answer “What is a Sole Proprietorship?”

    Advantages of a Sole Proprietorship:

    A sole proprietorship is a business owned by a singular owner who has complete control over the whole business. This is useful because:

    • There are generally no costs to set up.
    • The finances of the business are kept as the owner’s finances.
    • It is simple to own and operate, as there are no conflicting interests within the business.
    • There is no double taxation for business income (however, the owner must still pay normal sales and employee-related taxes).
    • The proprietorship is legally indistinguishable from the owner, and thus there is generally no paperwork to set up a proprietorship.
    • If a proprietorship becomes too large for an owner to handle, it can be converted into a partnership, corporation, or LLC, while keeping the same name, staff, and funds.

    Disadvantages of a Sole Proprietorship:

    However, there are disadvantages, especially in case of lawsuits. These include:

    • The owner is personally liable for the actions of the business.
    • There is no personal immunity from lawsuits.
    • Personal assets are at risk in the event of an adverse judgement.
    • If there is a business accident, because business funds are indistinguishable from personal funds, an unlimited amount of personal funds are legally attachable to repair damages.
    • The conversion of a sole proprietorship to a corporation or LLC can be a time consuming process as it requires the separation of business funds from personal funds, which requires meticulous accounting of the owner’s finances.
    • It is impossible to sell parts of the business to make money, as there is legally no separate business entity.

    These are just a few things to consider before operating as a sole proprietor. You should consult with a knowledgeable business attorney before starting your business. To speak with one of our business attorneys, please call (716) 853-1111 for a free consultation, or simply leave a comment below!

  • Proud Sponsors of Clarence Academy of Business and Finance

    Proud Sponsors of Clarence Academy of Business and Finance

    The law offices of Kloss, Stenger and LoTempio are proud sponsors of the local Clarence Academy of Business and Finance.

    Congratulations on your recent achievements, we are privileged to be a part of your ongoing success!

  • David Kloss And Justin Kloss Recognized by Superlawyers

    David Kloss And Justin Kloss Recognized by Superlawyers

    Our two attorneys David Kloss and Justin Kloss have been recognized by Superlawyers!

    Super Lawyers is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high-degree of peer recognition and professional achievement.

    David Kloss has been selected to Superlawyers 2017 Top Attorneys and Justin Kloss has been selected to Superlawyers 2017 Rising Star.