Last week the City and County of Honolulu announced the expansion of the Small Business Relief and Recovery Fund (SBRRF) and has added $75 million to the program. Businesses may qualify for up to $50,000 in reimbursement grants.

Business owners that missed the first round of SBRRF should consider applying this time, and those who applied in the first round can apply for a second time. Wondering if you qualify or when the application opens? See the guidelines below.

Who Qualifies:

  • O‘ahu businesses with $5 million or less in annual revenue
  • Must operate in a commercial space prior to March 2020
  • Farmers and agricultural land or commercial fishing companies may qualify
  • 501(c)(3) or 501(c)(19) nonprofit groups
  • Owner must be Hawai’i resident and business must be located in Honolulu

When to apply:

  • September 21, 2020 – Businesses with annual revenue less than $2 million
  • October 1, 2020 – Businesses with $2 million to $5 million in annual revenue

These grants are a huge help to the businesses that remained closed during the multiple stay-at-home orders. For further information about the Small Business Relief and Recovery Fund visit, OneOahu.org.

Honolulu Plans Re-Opening with Complex 4-Tier System

For Honolulu-based businesses, Mayor Kirk Caldwell announced earlier this week a 4-tier framework for reopening O‘ahu. The tiers are based on the COVID-19 case amounts and positivity rate.

What is reopening in each tier?

  • Tier 1 began today with limited business openings. Some of the businesses opening with restrictions are retail, hair and nail salons, and restaurants. In tier 1 public gatherings of up to five people who are not from the same household is allowed. Keep in mind the exception of restaurants, where parties of only five from the same household are allowed.
  • Tier 2 would allow arcades at 25% capacity, as well as gym and fitness facilities. Personal care services will be allowed.
  • Tier 3 would see many businesses increase from groups of 5 people allowed to 10 people, such as real estate services, restaurants, and commercial attractions.
  • Finally, Tier 4 is still not full capacity and a “return to normal,” but group amounts increase to 25 people for businesses like bowling, tours and skydiving, and restaurants.
  • Unfortunately, bars and night clubs remain closed throughout Tiers 1 – 3, and even for Tier 4 it is TBD.

There is a lot to digest in this tiered-system. It is best to review for your personal, and business choices. To see the full reopening strategy, visit this website.

With many changes in regulations, people may be confused or see potential loopholes/pitfalls. Additionally, business owners have to worry about  noncompliance, and liability to their workers and customers in navigating these tiers.

Do you understand the new reopening 4-tier system? Do you have questions about how it applies to you? Or underlying liability issues?  Let us know by e-mailing us at admin@hewbordenave.com.

Are you considering taking advantage of the President’s Executive Order for payroll tax cut? If so, just understand it defers Social Security taxes till the end of the year. Defer means the deferral amount has to be paid back. So that deferred amount, over 4 months, can create a large tax liability.

For employers, first consider that the deferral is permissive, that you are not required to defer. So business owners should consider continuing to withhold payroll taxes from paychecks as they normally do rather than deferring if the payback is of concern to their employees.

For employees, if you are in a situation where payroll tax withholding is deferred, then it is up you to be accountable by managing your spending, and saving the proper amount to payback the deferred payroll tax. Then for you those of you owners of s-corporations,  that if you are a shareholder-employee, you are also an employee. Therefore, subject to employment taxes and rules.

For general information view this article.

And as always, when it comes to taxes, employee law, HR policies, and structuring agreements consult with your professional advisors.

In last week’s bLAWg: Throwing in the Towel: Legal Issues to Closing Your Business – Part 1, I discussed the duties and obligations of closing a business. If you have recently decided to close your business or are looking for alternative options to closing; the below checklist should provide a basic map of what you need to consider. Remember each business is unique and do not consider the below checklist a substitute for professional advice or as a definitive, exhaustive list.

What steps should I consider to Close my Business?

When closing your business, you want to take time to plan things, and a checklist helps organize that process. In general, the goal is to account for assets and liabilities, and make sure you are using the business assets to pay off its liabilities. You want to eliminate liabilities, prior to dissolving the corporation or terminating the LLC. Consider the following:

  1. If you have advisers, you should talk to them as they can assist or offer advice
    • Attorneys, accountants, Bankers, HR specialists, Financial Advisers, Business Mentors
  2. Sell off your inventory and collect on your accounts receivables – consider during this pandemic you may have to discount or negotiate as cash for others is also tight
    • Finish off your obligations to your clients/customers
  3. Provide notice to the major creditors or those businesses that support your operations;
    • Bank, lenders, suppliers, service providers, and utilities
      • Time your cancellation of credit cards and subscription services
      • Prepare to close your bank accounts
    • Landlord – in this case you may wish to review your commercial lease as these tend to be lengthy conversations depending on the terms
  4. Discuss with your employees and pay them out, and remember payroll deposits
  5. Liquidate everything else possible*
  6. Settle and paying off your debt, as much as possible**
  7. Do Accounting and Recordkeeping
  8. Pay off ALL taxes or prepare what you will need to file for returns
    • For example, in Hawaii, if you sell off all your inventory or certain other assets there is a Bulk Sales Tax Form
  9. Cancel permits and licenses with appropriate government agencies
  10. Consider providing contact information for forwarding purposes related to the closing business so people may contact you if you miss taking care of something
  11. If there is any money or other assets leftover review the internal governance documents (like an Operating Agreement for LLCs) and divvy up accordingly to the business partners – yes, this comes toward the end
    • Overpaying yourself to the detriment of creditors or taxes you owe is again subjugating yourself to personal liability
  12. Dissolve the Corporation or Terminate the LLC – ideally, after this you should be done with your business

What’s with the asterisks? Are there other options?*

Strategically, the decision by a business owner to close just means they are personally done with the business. However, consider just because they do not see value in continuing operations that doesn’t mean there is not value in the business. Consider that you could sell the business or its assets to another. For example, maybe a new restaurant owner wants a deal on kitchen hardware, or the landlord is willing to assign the lease to someone who wants to take over the space. Or consider a budding entrepreneur that sees an opportunity to take an established business and rebrand, so selling off the intellectual property and brand to them.

The bottom line is just closing, selling off assets, and squaring away liabilities, does not have to be the only route. While it is likely the case during COVID-19’s economic downturn that your business will not be as valuable as you want, sometimes you being done with your business does not mean its assets, operations, or brand cannot be of value to another.

What if my Debts and Liabilities are More than My Assets? What about Bankruptcy? **

According to the U.S. Bankruptcy Court in Hawaii, 151 residents and businesses filed for bankruptcy protection in June (up 22%). In July, Hawaii bankruptcies flattened to 140 which is just two fewer than the previous year’s findings. Although, federal and state assistance programs have helped during the shutdown, filings may continue to rise during the next few months and even into the next years as aid slows down and ends.

In instances, where you are truly underwater and the debts and liabilities appear to be insurmountable and/or the creditors are not budging in negotiations where they are demanding the full amount and you cannot pay, then yes, the other option is bankruptcy. If this is something you are considering, then understand that this is an even more significant decision than just closing your business.

Some of the steps to filing for bankruptcy include compiling financial records, credit counseling and filing the petition. Consider working with a bankruptcy attorney to make sure you understand what is required to file for bankruptcy, and feel free to contact us for referrals in the Honolulu area.

Anything Else to Consider?

None of the foregoing comments and lists are exhaustive. Every business, and its business owners are unique and may sometimes have special circumstances. If you have a situation that needs specific legal advice, then consult with an attorney, as soon as possible.

However, if you are still considering your options or want to learn more about the steps to close a business and alternative options, then consider joining our upcoming webinar – Throwing in the Towel: Legal Issues to Consider for Closing Your Business on Thursday, September 3, at 12 pm HST. Register here!

DISCLAIMER: This post provides general information, but does not constitute legal advice in any respect. No reader should act or refrain from acting based on information contained in the post without seeking the advice of an attorney in the relevant jurisdiction. Hew & Bordenave, LLLP expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

Are you a business owner thinking of closing your store, restaurant, or bar? You are not the only one who has thought about it. In fact, many already have.

In Honolulu, walk around any neighborhood whether it is Downtown, Kalihi, Haleiwa, or Mōʻiliʻili and you will see that some businesses are gone. In some cases, for good. Surveys conducted indicate that approximately 900 businesses in Honolulu have closed either permanently or temporarily since the COVID-19 pandemic has started. Additionally, we know that the pandemic is not subsiding prompting the government to step up its regulations. Just recently bars on Oahu have been forced to close for an additional three weeks due to Mayor Caldwell’s Emergency Order 2020-23.

This post is for those thinking that it might be best to get out of the business they are currently in and some of the legal issues they must consider before “throwing in the towel.”  

The decision to close your business is not something to take lightly. While, you may have been one of those people that woke up one day and said, “I’m going to start a business,” while learning how to run the business along the journey. This wisdom and experience should have also taught you that the process of closing a business is not necessarily easy or straightforward. It is a process.

The worst decision to make is running and hiding from responsibility or closing too quickly without wrapping up your duties and obligations.

What are my Duties and Obligations?

If you’ve been running a business for several years, especially one that has some physicality to it, such as a storefront, inventory, or employees that report to you, then you realize all the responsibilities you have. First, you should make a checklist of the relationships that you as the business owner and the business itself has with others. This will help you map out all the people you will need to deal with as you wind down operations and move to closing the business. Especially, if you have an LLC or corporation that exist, then understand that your limited liability protection comes from the fact these entities are separate legal persons from the owners. The entity is on the hook for some of the contractual obligations and duties set at law.

Ask yourself about these relationships and what contractual and/or legal obligations and duties you have to:

  1. Business Owners – who needs to decide to go through with closing the business? Consider business entities that require votes by the partners, members, or shareholders to formally begin the process.
  2. Customers/Clients
  3. Vendors/Suppliers
  4. Landlord
  5. Financial Institutions, Banks, and Credit Card Companies
  6. Utilities and Service Providers
  7. Other Lenders (e.g. friends and family give you a loan?)
  8. Employees and Contractors
  9. Federal, State and County Governments (e.g. your taxes, licenses, and permits)
  10. Outstanding Lawsuits (if your business is currently in a lawsuit you may have to delay your plans of closing the business till this is resolved)
  11. Business Owners (e.g. if you are Managing-Member of an LLC members group, you have certain obligations to them prior to closing the LLC)
  12. Anyone other creditors

Consider that anyone of these may have a cause of action (lawsuit) against you or the business if you do not properly deal with them. Many of them are creditors and in some instances if you don’t pay or do what you are supposed, they will sue you to attempt collect their money. Did you give your customers coupons to use? Did you buy inventory on credit? Is the credit card paid off? How long is left on the term lease? Do you have enough money to cover payroll? And so forth.

The business owner is responsible to figure out how to end these relationships and the outstanding liabilities on them. However, what you should not do is run to dissolve the business entity first just because the liabilities are so big and onerous.

Why is Proper Notice so important?

Too many times I have seen LLC members think it is a good idea to terminate their LLC when they have not notified their creditors. They don’t understand doing the “hard stuff,” that is notifying creditors is really saving them from personal liability. They have a duty to notify creditors that they are closing to limit debt, not terminate the LLC and run and hide. This latter choice creates personal liability – in effect, you are causing the business entity to cease to exist without taking proper steps, thus eliminating the limited liability shield.

Anything Else to Consider?

None of the foregoing comments and lists are exhaustive. Each business, and its owners are unique and may sometimes have special circumstances. If you have a situation that needs specific legal advice, then consult with an attorney, the sooner the better.

However, if you are still considering your options or want to learn more about how to close a business, then consider joining our upcoming webinar – Throwing in the Towel: Legal Issues to Consider for Closing Your Business on Thursday, September 3, at 12 p.m. Register here!

Also, stay tuned for our bLAWg next week, that will cover: (i) a checklist of steps to consider when closing your business; (ii) other options instead of closing your business; and (iii) what to do when the business’s debts and liabilities vastly exceed its assets.

DISCLAIMER: This post provides general information, but does not constitute legal advice in any respect. No reader should act or refrain from acting based on information contained in the post without seeking the advice of an attorney in the relevant jurisdiction. Hew & Bordenave, LLLP expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

Can a business add additional fees and charges to a bill due to COVID-19?

Yes. Consider the additional costs to build barricades, close off every other table, provide enough disinfectant, and sanitizer. Also supplying disposable personal protective equipment (PPE) for employees. Obviously, that costs money.

Additionally, for those of you in the food industry you are already aware of the shortages in supplies. For example, COVID-19 has slowed the U.S. meat production for months due to closures: https://www.wsj.com/articles/coronavirus-to-slow-u-s-meat-production-for-months-ceo-says-11589540400.

What does a restaurant owner do in the face of rising costs, mandatory expenses, and limited customer base? Charge additional fees. Some businesses already have begun charging a COVID-19 fee to help cover these costs and expenses. Specifically, it appears as a line item on receipts. The economic justification is the COVID-19 fee is for the things like the PPE, plastic barricades, and other social distancing requirements placed by government regulation.

If the business is being transparent and disclosing the potential customer or client that additional fees will be charged, then the business can pass along those fees. Obviously, there are caveats to this, such as reasonableness and what is sufficient notice prior to the assessing such a charge. For example, kind of like how restaurants would notify you of automatic gratuity charge for parties over a certain size in their menu or putting a sign at the grocery store entrance to charge for providing a bag.

I understand for consumer-minded people that this is a shock, a deviation from the norm. Going from a couple of months of lockdown to added fees for some basic activities like dental cleaninings and haircuts is a bit much.  However, the overall sentiment is that, yes, a business can assess an additional fees due to COVID-19 social distancing expenses.

Isn’t this gouging?

Not likely. The law in Hawaii, which is Hawaii Revised Statute 127A-30 is specific about when it is prohibited to increase of prices during a state of emergency and similar situations. By the very nature that the economy is reopening, that would indicate the emergency is ending. Specifically, HRS 1270A-30 prohibits “any increase in selling price of any commodity, whether at the retail or wholesale level, in the area that is subject of the proclamation [state of emergency] or the severe weather warning;”

In the case of personal beauty service providers it would be hard to argue that their service is a “commodity.”

Additionally, the law makes clear that “any additional operating expenses incurred by the seller [] because of the emergency or disaster or the severe weather, and which can be documented may be passed on to the consumer.” Again, we have that key term “documented”.  So another out for these fees to documenting the decision in how to apply them. Business owners considering COVID-19 fees would be wise to do planning and accounting of how they are derived. Showing the correlation between the fees assessed and the social distancing requirement expenses may be critical in defending the practice.

Business owners should always be aware of actions that may be perceived by the public as unfair or deceptive. The reason is that consumer protection laws do consider unfair or deceptive acts or practices as unlawful. Therefore, a business owner needs to communicate effectively with potential clients and customers about their COVID-19 fees.

Is there an example of this in other industries?

The COVID-19 pandemic aside, disasters whether natural or man-made have always disrupted supply chains and causing problems for business owners. There are industries where detailing out the contractual relationship in these kinds of situation is the norm. One example is contractors and homeowners for the price of supplies.

Consider, if there is a forest fire that destroys a large supply of lumber. Then the lumber supplies for home building decreases, but demand goes up. So the contractor has to source the wood supplies from others. For business lawyers, we would look to see if this situation is in the contract. Is there an Escalation/Unit Price clause? This clause would be show there was an explicit understanding between the parties. It would indicate if the contractor is entitled to adjust the material price of an item due to an event impacting their bottom line. Like short supply of lumber due to a fire disaster.

Stores, restaurants, beauty services, and dental offices unused to such jumps in operating expenses obviously shock their consumers when they pass COVID-19 fees. Obviously, customers and clients also do not an expect a lengthy written contract that spells it out. Instead they just get the bill for it. The business owner then gets a lot of angry comments.

DISCLAIMER: This post provides general information, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained in the post without seeking the advice of  an attorney in the relevant jurisdiction.  Hew & Bordenave, LLLP expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

Where is the Hawaii economy for reopening? Where can an owner get guidance to reopen?

So here in Hawaii the economy is beginning to reopen. In Honolulu, hair, nail, lash, and in general beauty operators and services were allowed to re-open past Friday. In Maui, most businesses will be allowed to reopen on June 1st, whereas in Hawaii island personal services and restaurants (excluding bars and night clubs). On Kauai, salons and barber shops, retail and mails, and cleaning and construction have been reopened since May 22nd.

In general, what is clear is the Hawaii economy is heading toward reopening, with the likelihood of gyms, bars, night clubs, and large gathering places where intimate contact is involved of remaining closed until government officials can come up with plans and guidelines. This is something determined between the governor and the mayors, as the mayors submit their proposals to the governor for approval. Therefore, the industry re-openings are not uniform between the islands.

The best thing for a Hawaii business owner that needs guidance as they consider reopening is to review the State of Hawaii COVID-19 resources, and then depending what county you are in, review the county orders and guidelines. Further, for many industries their trade groups and associations, provide industry-specific guidelines on dealing with these regulations. Finally, of course professional advisors, such as attorneys and human resource companies are there dealing with the customer/client and employee aspects of reopening.

Is there a place where the local rules and regulations are at?

Yes, the State of Hawaii and the 4 counties have websites going over the various order, mayoral proclamations, and guidelines to assist businesses in their reopening and future plans to reopen the economy. Of course this information constantly changes due to the virus. Further, the government frequently issues clarifications on unclear rules or plans as people and businesses provide feedback.

What are some of the specific requirements a business owner needs to prepare for reopening?

For the business owner that is committed to reopening soon, and especially dealing with direct interactions with clients and customers if you’ve reviewed some of the state and counties’ guidelines, then you know there are a number of changes you will have to make. This is especially true for retail, restaurants and food courts, beauty and personal health services. The following are some of the social distancing requirements a business owner in these industries need be keenly aware about:

  • 6-feet distancing;
  •  Limited occupancy;
  •  Face coverings
  • Providing of hand sanitizer and sanitizing products
  • Regular disinfecting; and
  • of course signage to notify all employees and customers of these requirements.

Again, this is a partial and general list and so a business owner needs to spend some research and review time for their business plan to reopen. One Oahu has a Business Guidance Page: https://www.oneoahu.org/business-guidance

CDC Reopening Guidance for Cleaning and Disinfecting Public Spaces, Workplaces, Businesses Schools, and Homes: https://www.cdc.gov/coronavirus/2019-ncov/community/reopen-guidance.html

DISCLAIMER: This post provides general information, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained in the post without seeking the advice of  an attorney in the relevant jurisdiction.  Hew & Bordenave, LLLP expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

I just wanted to recap my seminar on business partnerships from last week at the Entrepreneurs Sandbox. Entitled All is Fair in Love and War: Navigating Business Partnerships, and playing off of Valentine’s Day, my panel and I discussed the ins and outs of business partnerships. We touched upon of course my focus, business law, as well as estate and financial planning, and marketing issues. I’d like to thank John Roth, esq. of Hawai’i Trust and Estate Counsel, Kai Ohashi, AAMS of Edward Jones, and Thomas Obungen of Slug Media LLC for their participation. Further their insight, knowledge, and personal experiences helping clients in business partnerships proved to be invaluable to the audience. A thorough discussion took place on the issues facing business partners inside and out of their business. Some of the topics included:

  1. Due Diligence of Potential Partner
  2. Choice/Forming Business Entity
  3. Operating Agreements
  4. Restrictive Covenants
  5. Goals & Metrics
  6. Succession Planning
  7. Departing Partners, Death & Disability
  8. Financing a Partnership
  9. Buy-Sell Agreements
  10. Differing Generations of Partners
  11. Partners that Have Competing Marketing/Branding Visions
  12. Communicating Internally and Externally
  13. Change of Business Partners
  14. and many more!

What I Had to Say on Having Business Partners

Attorney Ryan K. Hew enjoying hosting the seminar with a doughnut!
All is fair in love and war, including eating a doughnut while presenting on business partnerships, while the litigation partner is at the office!

Talk it Out

For this recap I am not going over the whole presentation, but instead I would highlight a couple of items. I myself have a business partner, he handles the commercial litigation. So we see a lot of business partnership breakups; it says something when the transaction attorney and commercial litigator both feel the two biggest factors for business divorce:

  1. Lack of communication
  2. Differing Expectations

If you think about it, number 2 is an off-shoot of number 1. If you and your partner have differing goals and fail to talk about those issues, then over time the gap in goals widens. This gap is sometimes too wide to overcome. For example, money issues tend to be the biggest source of complaint. Of course they are, as profit is the nature of what a partnership. If you don’t know what the law defines as a “partnership” check my other post here. Frequently, partners that contribute different amounts of capital have differing exit strategies. Also know that even when the company is making money partners fight. Yes, I’ve seen arguments over profitable businesses because the partners failed to talk about what they would with their success. Distribute? Reinvest?

Then Write it Down

Even if you and your partner have discussed the issues, if you fail to formalize those discussions that is still a lack of communication. The reason being is memories fade, goals change, and in general life happens. What happens is the partners remember conversations differently. Then law firms, like mine, spend countless hours sifting through emails, texts, and images, trying to piece together what could’ve been the agreement. So the next thing to do after discussing and agreeing is writing it down. One of the activities that separates us from other animals is our desire (some more than others) to record things. Mark Kurlansky an author that focuses on interesting history topics, talks about this in his book Paper: Paging Through History.

Not every documentation needs to be a book, but having the formalities is crucial for a healthy business partnership. This is especially true for big ticket items. Consider items such as capital contributions, members’ interest, distributions, profit/loss allocation, and member’ responsibilities and duties. With a professional’s assistance, partners can discuss what they want and then document in a legally, binding enforceable agreement. For LLCs and their members, that is an Operating Agreement. Note: I am mostly sticking to limited liability company (LLC) language just due to the nature of my practice. For partners forming a corporation these items will be discussed, but will have differing terms and restrictions due to the choice of entity.

Operating Agreements & Employment Agreements: Separated or Incorporated

One other thing about why using a professional to assist in drafting your formal agreements is best. The advice on whether to separate or incorporate several relationships and arrangements in one document as opposed to several. The reason I bring this up as an audience member had an excellent question. Their question was:

Should an Operating Agreement contain the members’ employment duties and obligations?

Generally, an Operating Agreement is used to outline the LLC’s financial and functions processes as it relates to the LLC and its members (the owners of the LLC). It acts an internal governance document of the operations with respect to the way the owners interact with each other and the entity as a whole. Yes, in an Operating Agreement duties and obligations can be placed on the members, such as a restrictive covenant for non-competition. However, employment duties and benefits, such as position/title and duties under that position, compensation, vacation may be considered in a separate arrangement, an Employment Agreement. Why?

Consider a partnership were there are multiple members, the membership may elect one of them to be the Manager in a Manager-Managed LLC. Therefore, management authority would reside in the Manager and would be spelled out in the Operating Agreement. However, for their day-to-day tasks, compensation package and benefits, and termination provisions, those may be considered under an Employment Agreement. The reason for this separation is what if the membership wants to “fire” the Manager under the Employment Agreement, but there is an understanding that individual remains a member under the terms of the Operating Agreement. Having one giant document where duties and rights are confused or entangled may be problematic in enforcement or trying to carry out, especially in tense situations. Separation sometimes provides flexibility. Obviously, the trade-off is more documentation.

Last Words: Get it Signed

That was a brief recap of some of the interesting discussions that took place at the seminar. Hopefully, this will prompt you to consider your own business partnerships and what you need to do to improve their health. One last consideration: if you get a formal agreement, then get it signed! There is no point in engaging a professional to draw up a mutually agreed upon contract to then not execute it. It is worst, to then later to get into a dispute over the very subject matter in that formal agreement. Obviously, please speak to your advisers, including an attorney in your relevant jurisdiction. While, it may be costly, consider the costs of miscommunication, then the potentiality of lawsuits due to your business partnership dispute.

I know somber last words, but cheerfully check back for future seminars and similar content.

Thanks for reading!

DISCLAIMER: This post provides general information, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained in the post without seeking the advice of  an attorney in the relevant jurisdiction.  Hew & Bordenave, LLLP expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

Hey everyone, Happy Lunar New Year!

Lunar New Year and New Seminar

Yes, there’s a delay on my traditional post on laws related to the animal of the year. However, check out last year’s How Can I Hunt Boar in Hawaii? or 2018’s Can a Landlord Charge a Tenant Extra for a Dog? In the meantime, I’ve been busy with a number of projects. First, I’ve been putting together another seminar and panel similar to last year’s Non-Profit November: Formation & Compliance. For this February, it is All is Fair In Love and War: Navigating Business Partnerships.

This seminar will be on dealing with business partnerships, such as formation issues, estate planning and finance, and in general what it is like having a business partner. Joining me will be a panel of subject matter experts. John Roth of Hawaiʻi Trust and Estate Counsel, Kai Ohashi of Edward Jones, and Thomas Obungen of Slug Media LLC. If you are in Honolulu the day before Valentine’s Day, February 13th, 11:30 AM – 1:30 PM HST, then come to Kakaʻako’s Entrepreneur Sandbox. For more information and to buy tickets for this seminar go to Eventbrite.

Web Search Autocomplete Questions Video

So that’s one project. The other project is my staff and social media consulting friends and clients all have been urging me to do more video content. So the staff came up with this fun project.

In the video below, I answer questions to a web search’s autocomplete function. If you’ve ever started typing into an internet search bar, then there are suggestions on what the most common web searches for the word or phrase. In this case, to plug the seminar my, the staff gave me the following web search autocomplete questions:

  1. how are business partnerships |
    • how are business partnerships formed
    • what are business partnerships
    • how business partnerships work
    • how do business partnerships work
  2. why are business partnerships |
    • why are business partnerships important
    • what are business partnerships
    • why business partnerships fail
    • why business partnerships don’t work
    • why do business partnerships fail

For my answers watch the video:

HRS Definition of “Partnership”

By the way, in the video you see me try and quote what the Hawaii Revised Statutes (HRS) definition of the word “partnership.” Well, here is the specific definition in the law:

“Partnership” means an association of two or more persons to carry on as co-owners a business for profit formed under section 425-109, a predecessor law, or comparable law of another jurisdiction.

HRS §425-101

Obviously, that is the legal definition of partnership, but as you may know (or maybe not, thus the seminar and video) is business people use the term “partnership” very loosely as opposed to the legalese. For instance, someone may say, ” My partner in my LLC.” Technically, “members” is the term for a multi-member limited liability company, that is the owners of the LLC. However, the person would be indicating “partner” as their business partner within the LLC. This is just one example how legal definitions differ from everyday use of words and terms. This post, the seminar, and the video is concentrated dealing with the many issues associated with business partnerships, including definition/use, forming them, and of course, when an attorney is involved, fighting in them!

Thanks for watching and reading. Until next time!

DISCLAIMER: This post provides general information, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained in the post without seeking the advice of  an attorney in the relevant jurisdiction.  Hew & Bordenave, LLLP expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

Your Personal Resolutions vs. Corporate Resolutions

So we are midway through January 2019 as of this post. How are your New Year’s Resolutions coming along? Are you preparing for your 2018 tax returns? Government shutdown or no the IRS will still be collecting taxes, so that’s always a struggle. In particular keeping your accounting and records in order to help yourself or your accountant.  So working on your taxes and helping out your accountant, whether you own a business or not, may be a personal resolution.

If you are responsible for a corporation’s records you probably want to make it a personal goal to make it the corporation’s goals to be prepared and organized for corporate meetings and docs.

For businesses though, another issue they may struggle in trying to do better each year is in their record keeping. Particularly, a problem acute to corporations, is documenting a corporate board’s decision-making process. Sometimes for corporate compliance concerns documenting the board’s decisions is crucial. It might be what is at issue in an IRS audit or an investigation by a licensing/permitting government agency.

From following the Articles of Incorporation, By-laws, calling meetings, setting agendas, sending notice, etc … there is a lot of keep track of for corporate formalities. One of the important documents in the corporate governance and record keeping process is the corporate resolution.

Understanding Corporate Resolutions

Corporate resolutions should be stored with other records like minutes.

Good record keeping, including documenting resolutions is key for corporate governance and compliance.

So what is a corporate resolution exactly? Corporations are legal persons. While, they are not living, breathing people like you and me they are persons under the law. They can own property, sue others, and be sued themselves. However, in order to do something, that is take action, corporation’s have boards that make decisions. In that way, corporate resolutions are like personal resolutions. Where you are resolved to accomplish something, like eat better or exercise more, a corporation is resolved to take out a loan or buy a piece of property.

For more information on corporate resolutions download and read the following One-Sheet. It is meant to answer the basic questions of corporate resolutions: ONE-SHEET: WHAT ARE CORPORATE RESOLUTIONS?

Many corporations spend a lot of money on their corporate formalities and governance items, such as:

  1. Proper notice and running of meetings;
  2. Timely annual filings and tax returns;
  3. Well-draft resolutions and minutes; and
  4. Documenting decision-making processes.

With so many stakeholders interested in corporate actions, such as shareholders, directors, officers, executives, IRS agents, licensing boards, regulators, environmentalists, and social activists corporate resolutions are just one of the many records that need to be maintained.

Resolutions Used in Other Organizations

Other organizations also use resolutions.

A variety of organizations and associations also use resolutions. They just do not call theirs “corporate resolutions”.

Finally, realize that for-profit corporations’ boards are not the only boards that should be documenting their actions and decision-making. That is resolutions are not only for them. Consider these situations:

  1. legislative bodies, their committees, and boards/agencies showing how they met and discussed the passing of laws or changing of regulations;
  2. nonprofit boards should avoid self-dealing, conflicts of interests, and the like as certain actions may be perceived abusing their charitable and tax exemption status for 501(c)(3) corporations, thus answering inquiries by the IRS and state regulators;
  3. homeowners’ and condo association boards where the decision to implement house rules, policies, and/or improvements could be challenged by owners or by injured parties for liability purposes; and
  4. yes, even LLCs and partnerships may use resolutions, they just do not call them “corporate resolutions”.

Resolutions in general are just a document of an action to be taken. Whether they pass or not a corporate board is something else. Corporate resolutions is just one of the tools in the corporate governance and compliance process. So anyone forming a corporation, serving as an officer/director, or becoming a shareholder should familiarize themselves with corporate records.  If your new to proper corporate governance and drafting of resolutions, then you may want to consider a lawyer’s help.

Finally, for your personal resolutions good luck!

-RKH

DISCLAIMER: This post provides general information, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained in the post without seeking the advice of  an attorney in the relevant jurisdiction.  Hew & Bordenave, LLLP expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

Thank you to all our veterans! Happy Veterans Day!

Support for Veterans Through Business Ownership

Happy Veterans Day and thank you to all the people who have enlisted to serve our country. I thank all veterans, but this post is mainly for highlighting those resources available to vets for small business ownership. As it is a topic that I care about and my personal sentiment is if you as a vet have taken the sacrifice in defending our country, then we can sacrifice some time to educate and help the transition to successful civilian life.

One path can be owning your own business.  I find that here in Hawaii, so many military personnel consider settling down in the islands after they are done with their military service. Then the question turns into opening a business due to the opportunities of being a contractor.  However, unfortunately business law tends to be abstract and also given the way the islands tends to do business and regulation that adds to their complexity. So hopefully if you, as a vet (or their spouse) are reading this, you find it helpful as a start.

Getting ready to become a business owner as a Veteran means educating yourself on aspects of small business ownership life. Fortunately, there are a lot of resources.

What a Vet Should Learn Prior to Starting a Business

In the past have had the fortune of conducting one of my favorite seminars as a part of the Boots 2 Business (B2B) program. More on that down below. Specifically, entity formation, but as an attorney I would stress understanding more than just choosing between LLC or corporation. If opening a business as a vet consider the following:

  1. forming a business entity;
  2. differences between LLCs and corporations;
  3. structuring and governing the entity you choose;
  4. tax and accounting issues;
  5. basics of contract law;
  6. understand local and state regulations;
  7. applying to be a government contractor;
  8. if you have a service-related disability, then understanding the program requirements for the Service-Disabled Veteran-Owned Small Business Program;
  9. moving your business and/or operating in multiple states; and
  10. if you are going to have a partner, then really understanding what a business partnership entails.

This is not an exhaustive list, but what I’ve come across in terms of frequently asked questions or issues. There are many other aspects such, as operational, marketing, human resource, and financial concerns for business ownership. In terms of where to get that education the B2B program is an educational and training program offered by the U.S. Small Business Administration (SBA). It is put out under the Department of Defense’s (DOD) Transition Assistance Program (TAP) and basically gives a survey course of business ownership. Note that it is open not only to Veterans, but also Active Duty Service members, and their spouses. Definitely worth a check out if you are considering opening a business an eligible.

Other Resources

In addition to the US SBA’s main website, if you are in Hawaii, then consider the following:

  • The SBA local office
  • The Veteran’s Business Outreach Center of the Pacific (VBOC)– The VBOC is a program of the University of Hawaiʻi at Hilo and funded partly by the SBA. It is committed to assisting veteran entrepreneurs by providing access to advisers on business and strategic planning, marketing, financial decisions, and starting, running, and exiting a small business.
  • Hawai’i Small Business Development Center (SBDC)– The SBDC is also funded in part through the SBA, but also by the State of Hawaii. The SBDC provides advice, research, and training for business owners.
  • SCORE Hawaii– is an organization dedicated to helping small businesses via education and mentorship. So they offer a varieties of educational activities, such as low-cost workshops or access to *mentoring.

*Note: whenever counseling with a new potential business owner client, I always tell them the biggest thing you can do for yourself is finding a good mentor.

Final Words

Sometimes closing down isn’t permanent. Sometimes you need a change of plan to reopen. The main goal is having a plan to execute.

Usually, military people transitioning to civilian life or vets have saved enough come to me when starting a new business. I would say that energy and enthusiasm is always enjoyable to work with, but as any small business owner can tell you there are other stresses. The stress of making it work. Stress of work-life balance. The stress of moving out of state. Sadness of closing down.

Just remember that there are all these resources not only to help start the business, but helping you move through your life of owning a business. For an attorney’s part, we do help with the formation, but also advising strategic decisions, which may or may not be tied to the business. One particular situation I see is military families starting a business here and then moving back to their home state. The question is what to do with the Hawaii-based business. This one-sheet should answer some preliminary questions, but as always you probably want to speak directly to an attorney for planning. Why? There is no one size fits all plan for every type of business owner. However, gaining key advice helps with strategic planning and I feel that veterans know the value of having a plan.

Finally, I would like to extend a big mahalo to all of the veterans (and to the family members that support them) for your dedication and service to your country. Thank you.

– RKH

DISCLAIMER: This post provides general information, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained in the post without seeking the advice of  an attorney in the relevant jurisdiction.  Hew & Bordenave, LLLP expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.