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A Chef’s Work-Life Balance: Closed for Dinner, but Open to Subleasing or Partnering?

Between work and life.

Chefs and their Work-Life Dilemma: Dinner Service vs. Quality of Living

A friend and a client recently shared a Food & Wine article on their social media. It was entitled “Why So Many Top Restaurants Are Closing for Dinner“. The article was about how restaurateurs and chefs were seeking better work-life balance by opting not to provide dinner service. Instead they would focus on higher quality breakfast and lunch and that would be it.

Closed restaurant.

Can a restaurant owner afford not to be open for dinner?

I love food and of course, as a small business attorney, I like finding new spots to eat. Networking, meeting clients for lunch, and yes, sometimes picking up the owner as a client. Shouldn’t chefs and lawyers be friends? I often joke that I would trade services for food. Legalese in exchange for pasta bolognese! So as a fellow small business owner I do get the appeal of setting your own work hours, especially for the tough life of restaurant owners and chefs. The desire to spend quality time with friends and family, but of course there is a catch – is it cost effective?

Throughout the article there are comments about the economic realities of this operational decision:

“Though it seems like these breezy cafés should allow their owners and chefs to live breezier lives, many struggle to earn a decent living. Diners who don’t blink at a $100 dinner for two balk at lunch tabs that are half that. Lower price-points make it tough for even the busiest daytime restaurants to pay the bills.”

“Nicholas Morgenstern, owner of New York City’s vegetable-centric cafe El Rey, has been avoiding dinner service, but says it’s not sustainable.”

You Not Being Open for Dinner Might Create Opportunities

While I read through this article, I constantly wondered are there missed opportunities or creative solutions? My practice resolves around assisting business partners formalize their relationships. I also review commercial leases for food service and retail clients. So my feeling was: wow, no dinner service?! That is a lot downtime and an empty space not being utilized!

The following ideas are not complete solutions to the work-life balance equation. However, they do give restaurateurs and chefs, or any businesses in a commercial lease setting some options to consider. They may not be suitable for every business owner that is chasing that work-life balance.  Further, they do require a lot of planning and communicating. Executing them also requires all the right pieces, but they may be worth considering if you are a chef (or an overworked small business owner) trying to get to that magical work-life balance ratio.

Ways to Make Full Use of a Space, While Not Being There: Sublease or Partnering

So what struck me about this article is that these restaurants all likely have a lease; it is rare for a new restaurant business owns the property and building. Meaning the restaurateur is entitled to the premises which they are leasing. Kind of obvious, yeah? But, if they choose not to open for dinner, then that creates a possible opportunity, as they are not maximizing the use of the leased space. What do I mean?

Retail and restaurant space for lease.

A tenant that leases a space has a lot of control over the space. When to open, when to close.

In a lease situation, the renter has property rights. While, the tenant does not have superior ownership rights with respect to the property owner, they do lease the premises. Obviously, there the space comes with restrictions and requirements, such as insurance, indemnification, specific-use, rent, but as the business tenant can use the space as they see fit  Therefore, by shutting the space down for dinner, that means the space is down to 2/3rds of its total use time, that is breakfast and lunch. Granted operating for dinner has costs and expenses, but as pointed out in the article dinner service can be a huge revenue generator with higher ticket food items and alcohol sales.

So how do you operate in a space when you do not want to be there? Why not consider subleasing or partnering. Have someone else make use of the premises for the evening, while you are having dinner with your loved ones. Of course this is easier said than done. I will run through the differences between the two and some of the issues, but if all parties involved can come to terms either one may be a workable solution for the chef that wants to go home for the night.

Subleasing: Becoming the Landlord to Your Own Tenant

Subleasing is a situation where there is a lease in place and the tenant leases out the space to another tenant below them. The legal relationship would look like this: landlord <– (lease) –> primary tenant <– (sublease) –> subtenant.  The primary tenant acts like a mini-landlord to the subtenant. This would mean that the primary tenant, who only wants to operate for breakfast and lunch would lease out the space for dinner time to another business. Thus the premises are used throughout the day and everyone is happy, right?

Issues with Subleasing: Caught in the Middle

Hold on! It is not that simple. Remember I mentioned there is a lot of planning and communicating? First, is there even a market for another business who wants to sublease the space? Sometimes. Obviously, it depends on your city, but consider that there are food truck owners who may want to test out their food in a restaurant setting and they need a certified kitchen in some cities because of food safety laws. Other times newly-minted chefs want to do pop-ups or pastry chefs would like to focus on doing a dessert bar.  You will have to ask around. Time to use those networking skills of yours!

Second, is the landlord even going to go for this? Depends. Commercial leases almost always have anti-assignment, subleasing, etc … clauses. These provisions make it so that the tenant cannot convey any property rights (such as the act of leasing and using the premises) to another party without the consent of the landlord. It would violate the lease if the tenant did entered into the sublease without the landlord’s approval. So if you did find another party willing to sublease, then you would need to work with your landlord first before formalizing with your subtenant. Sometimes the landlord would make you co-tenants or have the subtenant make a personal guarantee; for them it is all about the risk.

Even if your landlord lets you sublease are you ready to manage your own tenant?

Other issues with commercial leases and subleasing are where is your restaurant located? Often times for malls there are certain operational hours that a business can be open for. If you are intending to sublease for dinner service and that subtenant wants to sale alcohol, they will have to get a liquor license which are often tied to zoning laws. In addition, if the subtenant is going to do a food service that is different than yours, like I mentioned the dessert bar, are there specific-use clauses in the lease? Mall owners tend to want to limit the kind of services depending on size and location as they do not want their businesses to directly compete with each other. Other times large national brands force the mall owner to allow them to be the only type located at the mall.

Finally, you are acting as a landlord to this subtenant. They are a separate business. So that means they have to get their own insurance. Furthermore, as the middle person between your landlord and them, you are responsible to both of them. If your subtenant messes up, say missing rent to you or they burn down the kitchen, then you still will be on the hook to your landlord. On a personal note too, I know with many chefs if it is their kitchen it is their rules. If you are leasing out your kitchen to another how will you tell them to use your equipment and tools? Will you even allow them to? Again, lots of planning and communicating.

Partnering: Two Chef Owners are Better than One

So maybe subleasing is not for you, as you do not want to be a landlord. What about having a partner? Maybe you have an upcoming protégé or work well with someone who want to focus/specializes in dinner, but does not want to manager their own independent business.

Partnering, when you have a business entity, a LLC or a corporation, means having a business partner join in as an equity partner by offering them ownership/membership interest or stocks/shares, respectively.  Especially, with LLCs, members (the owners of the LLC) have a lot of flexibility in designing the partnership arrangement.

Two chefs back-to-back.

Two chefs might mean that the restaurant stays open, that is if they can come to terms of agreement.

Consider that for some doctors’ groups that operate as a partnership they cover each other;  say one doctor wants to go on vacation, well then the others would cover their work thus guaranteeing continual operation and coverage for medical services. Similarly, for the restaurant, one chef partner agrees to provide breakfast and lunch, while the other does dinner. Another option may be it is on an alternating basis, where one chef does breakfast, lunch, and dinner for one week and then it changes to the other partnering chef the next. There are a lot of options to the division of labor.

What about the money? With LLCs, they are flexible in having the “keep what you kill method” via their Operating Agreements. Each member would take a share of the money based on how much they brought in. Partnering lawyers sometimes consider this method when they just want to share in the expenses of the firm, but would like to be responsible for how much they bring in. So for a chef working only during the day, then they would get the money from the sales of breakfast and lunch. So course the chef who opens for dinner gets the profit from the dinner service. Even if they are 50/50 members in the restaurant LLC that does not mean they have to split the profits 50/50. LLCs are flexible business entities. Obviously, for this method to work, you need a good accountability system.

*While a corporation remains a possibility, usually much more goes into such a relationship, such as tax and accounting planning, use of employment agreements, and drafting of specific corporate governance documents.

Issues with Partnering: Are You Ready for Business Divorce?

So again, just opening your business entity and suddenly having a partner is not at all what it is cracked up to be. First, often times when launching a food business many chefs do not have the funds to open their restaurant. They need a financial backer. Whoever is funding them, is either a formal partner already or have a loan to the restaurant. Either way, adding a new person to the mix is something a financial backer may be concerned about.

Second, even if you get the money situation squared away to what is deemed “fair” between the partnering chefs there are still a host of other issues. They may or may not have an equal say in running the business. Even if you are majority partner and they are the junior partner, how long will they keep working with you if you keep overriding all their decisions or input? Can there two chefs use the same kitchen? What about branding? In this scenario, you do not have two separate businesses, but just the one. So personalities, visions, goals, and even styles of may not be aligned. Even if you both have a unified vision, what about consistency and quality? If the breakfast and lunch food items are awesome, but dinner services are subpar, you can only imagine what the Yelp reviews will say …

Partnering is not for everyone and is not someone should do seeking a quick fix for business issues as business divorce is not pretty.

If clients come to me and they want to talk to me about partnering, then my first question to them is: are you ready to be married? Having a  partner means making a lot of decisions together. Decisions where money is involved, how to split it up profits or how much to contribute to pay for expenses. You will be discussing marketing, finance, accounting, and HR issues. So if work ethics and personalities clash, then you will be looking at business divorce. Your pursuit of a work-life balance may turn into a nightmare if nothing is in writing. Business divorces can be costly in terms of time and money. I’ve seen situations where it takes months (years) before former partners even agree to the value of their contributions and the business itself; this says nothing of the payment process of a buyout. Again, planning/communicating is key, then documenting it.

One Last Bite on this Topic

Sometimes going out and networking is best to float ideas and opportunities, especially with a trusted adviser or mentor.

All of this is not to frighten off a chef making the personal decision of limiting their operating hours. However, like the article points out dinner is a revenue generator. So then the question becomes is there another way to maximize the leased space? I’ve offered a sampling of some creative solutions, but yes, subleasing may not be an option with a stringent landlord. For partnering, maybe you are seeking work-life balance to spend more time with your spouse, but you may be getting a business spouse. Can you juggle both?

Consider that closing down for dinner service might be a business opportunity for another who wants a shot at it. While there are no free lunches in these scenarios, try sharing a meal with a trusted adviser or two, or maybe a mentor or peer. It never hurts to ask, especially when your goal is to spend time with loved ones. Cheers and bon appétit!

-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.

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Ryan Responds: “Do I Need to Form a Business (Entity)?”

Ryan Responds trade name vs trademark

Ryan Responds Video on “Do I Need to Form a Business (Entity)?”

One of my New Year resolutions was to finally start doing short informative videos on various aspects of business law. Many social media consultant and other small practice firm friends urged me to do this, as I already do educational seminars for business owners. If you are in Honolulu on January 31st, you can come attend one.

So the “Ryan Responds” videos are meant to be a quick reply to people’s FAQs about business law. They are not specific in-depth advice. So they are not a replacement for consultation time directly with an attorney. Rather they are meant to bite-sized and approachable for people that have general questions.

If You have a Question for Future Ryan Responds Videos …

We launched this on a YouTube channel, as we hope to publish educational videos on other topics in the future. Finally, if there is a short question you want the answer to submit them to admin@hewbordenave.com with the Subject line “Ryan Responds”. Please keep your questions short, general, and related to a business topic. Please do not provide specific details of  your matter or attempt to seek direct and specific legal advice through this format. If you need assistance and legal services, then please schedule a consultation with an attorney in your relevant jurisdiction.

Thanks and Cheers!

RKH

Disclaimer: The content of this video is for general information purposes only. Nothing should be taken as legal advice for an individual cases or situations. The viewing of this video does not create an attorney-client relationship. If you need legal advice, please contact an attorney in your relevant jurisdiction.

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Communicating With Your Business Partners

communicating in contracts

A New Year, A New Business, and A New Of Hope Of Communication

Aloha and Hau’oli Makahiki Hou!

I hope this finds you all well, and I thank you for visiting our legal blog or blawg. How has your first week of 2017? Ready to dive into new projects?  For those of you thinking this is the year or the time to start a business, well then today’s post and the couple of posts that will follow are for you. Specifically for those of you interested in starting a business, especially with business partners who will own the business with you. The overall theme of these posts is about communicating.  The source of this inspiration for the theme? My own partnership with Trejur launched last year my lecturing for a communications class at HPU, and I always get this question: Can my business partner do that?

Part I, Communicating With Your Business Partners

So today’s post is on communicating with your business partners, the one following this post will be on communicating with third-parties outside of the business entity you form with said partners, such as clients, customers, vendors, suppliers, contractors, etc …, and finally, the last post shall be about communicating with the government and various agencies.

Where it All Begins: Communicating, Not the Paperwork

So many of you that know me or have followed me, know that I started out as a solo practice working with small and medium-sized business clients on contracts and compliance work, such as forming limited liability companies. Over the years, as my workload increased I took on other contract attorneys to assist with the workload. Along the way, I met my commercial litigation partner, Trejur P. Bordenave. Trejur and I worked well together, and a lot of it was based on effective communication. This is the foundation that led us to the partnership we have today. In fact, he and I spent a good portion of the early part of 2016 discussing the partnership before formally launching the partnership itself.

Why am I telling you this?

One of the biggest issues I see when clients come to me to form a LLC or a corporation is they just want the documents. Yes, as a business attorney, absolutely I can draft your Operating Agreements or Corporate Resolutions, file your Articles of Incorporation, and/or obtain your Federal Employment Identification Number, and so forth, but typically, when someone like Trejur is called up to represent someone the dispute stems from a breakdown in communication and trust, amongst the business partners. There is not necessarily anything wrong with the paperwork, but the business partners did something, not necessarily maliciously or with intent to deceive, but their expectations about how the business would work, how they would get paid, reimbursed, when that would happen were all at different levels.  Let me use two examples of how this can play out to illustrate.

Example Stories

So these following examples are fictional, but they are issues I have seen before in a wide-variety of starting businesses or in the midst of a business dispute. Again, the point here is to illustrate that good communication is the foundation of a good business relationship, which in turn drives the drafting of the legal documentation.

Example One: Majority Member and Unfair Distributions

Kai and Russell open a new restaurant business. They organize a LLC. The LLC Membership Interest (or Ownership Interest) is divided 60% for Kai and 40% for Russell that is because Kai has contributed more cash and equipment (valued at $60,000.00) into the LLC as his Initial Capital Contribution than Russell. Russell just agrees that he will bring some of his old recipes from a prior business with him and agrees to work for the LLC for the value of his Initial Capital Contribution because they are in a rush to open the restaurant they draw up a generic Operating Agreement that recognizes the 60/40 split and that everything from that, including voting, profit/loss allocation, distributions, etc . . . will be 60/40.

Five months later, after the restaurant has been up and running, Russell quits and wants to terminate the LLC. Why? Well, he feels that Kai treats him more as an employee because he feels he owns the majority of the LLC and that Russell needs to work off $40,000.00 or what Kai believes Russell’s fair share of the contribution should be. Further, due to the majority position Kai takes his cash distributions at the beginning of the month, and gives Russell his distributions at the end of the month and if there is not enough for budgeting purposes states the LLC will just owe him later.

Example Two: Discussing Officer Duties Prior to Incorporating

Lisa and Jessie want to start a solar design and installation business. They intend to incorporate a corporation, which shall issue 1000 shares, where Lisa would own 550 shares and Jessie would have 450 shares. Lisa would like to be President as she has more local connections and is the one who can bring in more clients whereas Jessie will likely do the grunt work. However, Jessie is concerned that Lisa is President and has more shares so as a minority shareholder she fees unprotected. Lisa and Jessie meet and discuss this issue.

They decide that through their Articles of Incorporation, Bylaws, and Resolutions that the corporation shall only have the offices of President, Secretary, and Treasurer and that Jessie shall be both Secretary and Treasurer. Further, that Lisa as President must submit a marketing budget for the next fiscal year to Jessie as Treasurer on the June 20th before Jessie will cut checks from the corporation’s expense account to where she will have sole authority to cut checks from. They also agree that all 1000 shares (unanimous consent) must vote in favor of declaring dividends before money is paid out as such.  Finally, both agree to sign Employee Agreements stipulating to what their compensation, benefits, work hours, etc . . . on top of their rights and obligations as shareholders of the corporation.  Both are satisfied with this arrangement and move forward to incorporate.

So What Happened? What Should You Consider for your Business Partnership?

In my first example, the business partners were in a rush, failed to communicate expectations, and felt that once they had the paperwork everything would resolve itself. But as trite as it may seem, they did not talk about their feelings and by signing an Operating Agreement that just split everything according the Ownership Interest percentage it did not really reflect on how they were going to do business with one another. In the my second example, discussing how Jessie felt about her worries and concerns allowed them to create a process, a mechanism of a check and accountability that they discussed and agreed to.

At this point, I’d like to put in your mind a lot of people think that once the file their Articles of Organization or they come up with the Bylaws these are set in stone. That is not necessarily the case, the owners of the business can always amend them if they are in agreement. Also consider if you and your partners are not sure what the final arrangement will look like, that is you are in an ongoing negotiations, but you have stipulated to some terms or have an inkling about where your arrangement is heading, you can always use a Memorandum of Understanding or Letter of Intent or whatever document applies to stipulate to what has already been discussed or agreed to, and agree to return to the matter at a later time to finalize. Communicate and trust each other, but keep a record of it.

Often times, people do not slow down to consider how they want to structure their decision making processes, their rights and duties to each other, to the business. Their feeling is that making money will resolve all that, but then the issues come up overtime like . . . Why do you get reimbursed for parking when I take the bus? I bring in all the clients and you do all the work, and marketing and networking is work. The recipes I brought with me are the value of the food company so I should get a majority interest. I’m the older brother so I dictate the operations just like the way our father and grandfather did it. And so on and so forth . . . if you thing your dispute is ridiculous with your business partners, I’m pretty sure there are ones even more crazy.

Sit Down and Discuss Expectations

What isn’t crazy is sitting down and discussing what you expect out of the business relationship and what you expect out of your business partners before forming the business entity and doing business. In many ways having a business partner is like getting married it is for better or worst, and business divorces are ugly affairs like regular divorces. Therefore, it is worth the time to sit-down and talk it out, and then if you are wondering can we arrange our business partnership according to what was discussed that’s when you can give me a call and we can work out . . .

What is the difference between a Member-Managed and Managed-Managed LLC? Can I contribute services in exchange for stock ownership? What are the differences in liabilities for a General Partner versus a Limited Partner? Can we have percentages of Ownership Interests that do not match Distributional Interests? What about having two-levels of Ownership Interests? Should we limit the powers and authority of the President?

Mahalo for reading this post. I hope you have a Happy and Fortuitous New Year! See you next time!

-RKH

DISCLAIMER: This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained in this post without seeking the advice of  an attorney in their 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.

For LLC Owners: The Difference Between Allocations and Distributions

“Why do I have to pay taxes on money that did not get distributed?!”

This is a question that many LLC owners (know as “members”) ask me. The confusion (and obviously frustration) of paying out taxes on money that you never received is real, but much of it stems from the lack of understanding that in the realm of LLCs there are “allocations”, which handles how profits and losses are allocated among the members and there are “distributions” the actual distributing of cash or property from the LLC. Many business owners like to conflate the two concepts together, which is not the case, and thus creates their confusion.

I provide an informational sheet for readers to take a look and get the basic understanding of the difference between allocations and distributions (see below).  The tax matter aside, the divvying up of allocations and distributions that is a discussion that business owners should have prior to organizing a LLC and then having an operating agreement drafted for them because of not just the tax issue, but due to the flexibility of LLCs of having allocations and distributions not match ownership interest, and the timing of distributions.

Again, communication is fundamental for business owners and a lot of discussion and pre-planning goes a long way to avoid the deterioration of the relationship because these were not hashed out prior to the formation of the business. As discussed in previous posts, LLC owners starting out would want these agreed upon terms on allocations and distributions reduced to writing, and is usually found in the Operating Agreement.

If you would like to see the information sheet, click here and then look for the downloadable pdf entitled, “For LLC Owners: Difference between Allocation and Distribution”.

Mahalo for stopping by and reading my blawg!

-RKH

Episode I: You May Dispense with the Pleasantries, Not the Formalities . . . Don’t Forget to Sign!

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

So I am going start this post with one of my favorite movie villain’s quote: “You may dispense with the pleasantries, Commander. I am here to put you back on schedule.”

Except instead of building a space station, I am here to help you build your business by recognizing that while you can skip the pleasantries in business, you should NOT ignore the legal formalities.  I realize some of you business owners find your attorney, CPA, compliance officer, and the like as pains in the butt by sometimes being overly cautious, but please understand that these advisors suggest caution because they see how bad it can get when you don’t follow their advice.  So this post and several that will follow shall focus on legal formalities that I have seen business owners fail to follow.  By failing to observing these simple formalities these owners spent great time and expense trying to fix them, and some of them are unfixable.

Sign Your Papers

So today’s post what am I talking about?  Well, for this post I am talking about something so basic.  Namely, don’t forget to sign your agreements.   Before you laugh, consider how many times some asks you to do something so simple, you procrastinate on it to the last minute because you think it is so simple take care of later.  Consider in that in today’s technological world it is easy to text, email, etc . . . so some people feel, why bother signing a piece of paper?  Let me share a story that I see constantly among current and past clients: the unsigned Operating Agreement/Bylaws/Partnership Agreement.

I have had clients who have gotten into disputes with their business partners.  It might be suspicions, poor communications, changed expectations, but in general the relationship is deteriorating and these former allies, now want the other side out of the business or they want their share bought out.

So by the time the distressed business partner comes to me I will ask, “Where is your Operating Agreement?” I will be using a LLC as an example, but this applies to corporations, partnerships, and in general many relationships.  They usually have an Operating Agreement and aside from the host of other problems, such as lack of adequate protection, incorrect names or usage of terms, etc . . . I get to the end of the document and find it is unsigned.

What’s an Operating Agreement?

Before I continue, let me explain something about an Operating Agreement. This document acts as internal document that sets up the rules and procedures among the members (the owners) of a LLC, and may dictate how one becomes a member, sells their ownership interest, and handles voting, profit-sharing, etc . . . Suffice it to say, you should have an Operating Agreement if you have a LLC, regardless if it is member-managed or manager-managed.  It gives you the rules of interaction.  I have even seen problems where clients did not even bother having an Operating Agreement drafted, which is just worst than not even having one unsigned.

The Problem with Unexecuted Paperwork

Anyway, when your Operating Agreement remains unexecuted (unsigned) or any paperwork for that matter, it would indicate to an attorney that the parties had no intent to be bound by the document.  After all, “why didn’t you sign it?” is the question that comes to mind.

Unsigned documents are just paper with pretty words.  In the law we expect you to take an active act to be bound by those pretty words, and that active act is signing the documents.  The signature serves as evidence.  Consider for a moment that is why even in our electronic world, we make you go through hoops to “click”, “check the box”, or “electronically sign”, basically showing that you “read” the terms and by your action you agree to be bound to them.

So getting back to this situation where the parties have a dispute, but have unsigned paperwork the question remains what were the terms of the contract.  It is true in a lawsuit you can prove there was intent to be bound under the agreement by showing that the parties took active steps to be bound by the unsigned document.

However, don’t you think it is easier just to produce a signed document as evidence rather than cobbling together various pieces of evidence to demonstrate that the parties meant to sign it?

With an unsigned Operating Agreement, you may find yourself stuck with the default rules at law to guide your dispute with regard to fellow members in a LLC.  The defaults rule set at law are very broad and offer very little help in resolving a dispute among members.  So if you are going to take time to prepare a proper Operating Agreement that covers all your bases in a LLC relationship, don’t forget to get it signed by your business partners and sign it yourself, that way at least you know what to look at for guidance when problems start.

Stop back and I will talk about some of the problems you may face forgetting to do your Annual Filings or missing a renewal date!  Mahalo for reading!

Business Entity Formation Talk at ING Direct Cafe in Waikiki

Business Entity Formation Talk at ING Direct Cafe in Waikiki

August 1st – I will be holding my Business Entity Formation Talk from 6:00 – 7:00 pm. Come learn the differences between the entities at ING Direct Cafe.

Law and Legal Info in the Brief: Act 141, No Resolutions for LLCs, and the HSBA’s PBN Insert on Regulatory Compliance

Hey everyone, today’s Law in the Brief will be really brief!  I got some other interesting information to share as well.

Act 141:  Relating to Small Claims Court; Monetary Limit increased from $3,500 to $5,000

The Hawaii State Legislature was keen on access to justice issues this past session. The big one was ILAF (which I wrote a Civil Beat article urging passage of the bill) and at this past week’s Hawaii State Bar Convention the two attorneys responsible, Mihoko Ito and Gary Slovin, both with the law firm of Goodsill, Anderson, Quinn and Stifel, were recognized with the Ki’e Ki’e Award for their outstanding pro bono work (congratulations).

Anyway, another law making it easier for people to access justice is Act 141. This bill increased the maximum monetary claim that may be filed in small claims court; the prior maximum was $3,500 and with Act 141 it is now $5,000.

This is great for people seeking redress on a smaller level, but had disputes with a monetary value over $3,500.  If you were above that amount you would have to file a claim in another court, which had much higher filing fees. Right now, Small Claims Court has $35.00, whereas Regular Claims it is a $120.00. The advantage of filing in Small Claims as well is that it is typically simple, informal, and the cases resolved more quickly. Many business owners and landlords/property managers use Small Claims Court to resolve problems with damage to or repossession of stolen business property (i.e. shopping carts) and leased or rental properties.

For more information on Small Claims Court click here.

No Resolutions for LLCs

While at the bar convention last week Friday (9/23) I attended both the Corporations and LLC seminars. After all I had just conducted a talk on Business Entity Formation at Hawaii’s first coworking space, The Box Jelly. So I like to keep myself updated, so I can update clients as well. During my seminar, I discussed the difference in terminology between a LLC and Corporation. I also mentioned how important it is to understand those differences. One of the panelists at the LLC seminar proved the point.

Many of the formalities needed in a Corporation, are not needed in a LLC. One of those unneeded formalities are resolutions. The panelist bemoaned how many local bank personnel keep requesting her to draft resolutions for her client LLCs to authorize a loan. Her response, as would be mine to the bank is:

LLCs DO NOT NEED RESOLUTIONS TO AUTHORIZE ACTIONS.

This is one of the things I covered at my talk.  So if you missed my Business Entity Formations seminar not to worry I will be doing one again probably in a month (so Subscribe to this Blawg to find out when).

In the meantime, do not forget to sign up for my next talk on Social Media and the Law this Wed. (9/28) at The Box Jelly, starting 6:00 p.m. It will be $10 for The Box Jelly members and $15 for non-members. Materials are included.

Go to my Facebook page for info and invite. Also I would be happy to do a legal seminar for a gathering of more than 10 people. Contact me for details.

HSBA’s Pacific Business News Road to Regulatory Compliance Insert

Also at the bar convention Pacific Business News was handing out its current issue of (Vol. 49, No. 30). In it (right after the article on Hawaii’s awesome social media stars Toby Tamaye and Melissa Chang!) is the Hawaii State Bar Association’s insert Path to Regulatory Compliance. In it are several brief articles on new laws affecting Hawaii businesses. I recommend checking it out, especially the one on Protecting Gender Expression or Identity in the Workplace on page 11.

You might find that the author and the topic are familiar if you read this blawg regularly.

See you all Friday for Draw the Law wrapping up those worker privacy issues I have been discussing.

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.