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Recap: Horrors of Business Ownership Part I

Horror Stories of Owning a Business and How to Deal with Them

The seminar focused on stressful situations encountered by business owners and how to deal with them.

Horror Stories of Business Ownership: Recap of Seminar

How is the beginning of your November 2017 going? Are you scared there are only 2 months left till the end of the year? Well, speaking of frights, I did a seminar with the Better Business Bureau of Hawaii (BBB) this past Monday celebrating Hallloween. We told spooky stories, well sort of. We discussed the horrors of business ownership. Specifically, I talked about these broader topics:

  1. structure of entity – failing to plan properly;
  2. disputes with business partners and managers;
  3. government regulations – the revoking of permits and licenses; and
  4. intellectual property infringement.

Lisa Nakao,Director of Operations of the BBB, discussed the resources the BBB offers and how to deal with reviews and complaints by customers hosted on the BBB’s website (I will cover some of this in a Part II to this post). If you could not make it to this seminar do not worry. I will continue presenting seminars aimed at educating business owners about the legal issues. So be sure to check back and follow us.

Some of the Horrors of Owning a Business – Highlights

I’d like to take this time to discuss some highlights of the seminar. While, I will not cover everything from the seminar, as you will  just have to come to the next one, this post will touch upon a couple of issues. Particularly the ones that gave good discussion or attendees asked a lot of questions.

1. Managerial Authority in a LLC: Friends, Family Members, and/or Relatives of Friends as Your Manager

I’ve discussed in the past of business partner disputes, but this following scenario is derived on a similar theme. Consider the situation where many small and medium-sized business owners rely on family or friends to help run their business, including relatives of friends. This tight-knit network can be a boon or a misfortune. Especially, here in Hawaii where people tend to rely on local connections the trust and reliance can run high and sometimes too quickly. Specifically, I refer to hiring someone as a manager of your LLC or corporation and giving them access to the company’s bank account and credit cards. Then the business owner discovers the person they thought they could trust is gone the business account is empty and the credit cards are over extended. Worst yet, there is no written management agreement.

Don't lose your business account.

Be careful of giving your manager too much access to your finances.

Is there Nothing that Can be Done? 

While, legally there is a lot to do, such as suing them or attempting to report them to the police for theft – the reality is proof and evidence issues. Many times business owners in this situation rely on a handshake, only talk to their manager on the phone, and their emails and texts refer to managerial duties/obligations obliquely. There is no writing of the contract. Further, consider even if you have a good case, you have to find them and force them to give back the money, which by the time you get the the lawsuit filed, served, and litigated, they’ve probably spent it.

So again, this is an urging to slow it down and think methodically. I get it. Small business owners are trying to get help and tread water. However, consider the following ideas:

  1. conduct due diligence – find out more about them before you hire them;
  2. limit their access to the business bank account and credit cards – you do not need to give them unfettered access;
  3. if you cannot do a full-blown management agreement, then at least tackle the main terms in some of memorandum, letter, or lengthy email;
  4. as to point 3 make sure you get their signature, acknowledgment, and confirmation!

While, those things will not always save you, the point is getting you into the habit of preparing, doing your research, and record keeping when you finally decide to take an action that may be risky.

2. Shutting Down Business Operations Due to Lost of License or Permit

So I told a story during the seminar of a business owner who relied on their accountant to do the business entity’s Annual Filings with the State of Hawaii’s Department of Commerce Affairs (DCCA). Only problem with that was the accountant was not actually doing the filings; it was not a part of their services. So the DCCA administratively terminated the corporation’s existence. So leaving the account and taxation issues aside, the main focus of this section I want to focus on is government licensing and permitting. See LLCs and corporations are legal persons. They may not be a living, breathing individual like you and me, but they are persons under the law. So often time government licenses and permits, for example liquor licenses, issues to the business entity itself and not the individual owners of the business.

So when the DCCA administratively terminated this corporation the business owner also lost their government license. In this instance, they could not operate the business because it would be illegal to operate without a license. So they had to shutter their business and form a new corporation, then reapply for a completely new government license.

Did they Really have to Close Their Business?

Yes, unfortunately in this case they did. However, sometimes the government fails to follow proper procedure when revoking or suspending a business owner’s license or permit. If the government does not follow its own rules and regulations there may be opportunity to stop the government’s action. However, it depends on the type of permit or license being revoked and the applicable laws and regulations surrounding it.  In this instance, the business owner could have saved themselves by routinely checking the DCCA and communicating with their accountant. Finally, catching the administrative termination of their original corporation earlier could’ve resulted in a successful petition to reinstate it.

You should know the filings you need to make with the government and calendar them into your schedule. Further, consider an annual business checkup to assist you in navigating your business’s compliance requirements. If you are interested in an initial consult to begin the process of an annual business checkup contact us today!

Be vigilant in your compliance.

Keep your business compliant or you may be forced to shut it down by the government.

There will be a Part II to this post; it will focus on the BBB Reports and Complaints and resources/information they shared. So check back!

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 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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Can You Own a Monkey in Hawaii?

Happy Lunar New Year! It is the year of the Fire Monkey! Supposedly, fortune tellers say it is an ear of market volatility, so it is best to make contingency plans and not monkey around! However, enough punning, this post is about owning a monkey in Hawaii.

*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.  Further, no tax advice is given in this post, and you are urged to seek a tax attorney, accountant, and/or tax professional to help you with your tax and accounting needs. 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.

Happy Lunar New Year!

I hope it shall be a prosperous one for you! To celebrate that this is the year of the Fire Monkey, I decided to do a fun post,  as I am born in the year of the monkey (I am sure you can now guess my age, haha). So for this post, I thought a fun question to answer is one that that comes up and now and then among pet-loving friends: “Can I own a monkey, here in Hawaii?”

The answer is: yes, but . . . 

Hawaii Department of Agriculture and Importation of Animals

As you probably could guess this is a regulated area. So it is not as easy as in you can fly in any monkey you want, then take it home, especially given that Hawaii laws are aimed at preserving nature and preventing invasive species.  Obviously, monkeys are non-native species to the island, so you are you going to have to import one and play by the rules. So none of that “see no evil, hear no evil, speak no evil” shenanigans with the government agents.

To begin with, the importation of non-domestic animals is under the jurisdiction of the Hawaii Department of Agriculture. See HRS 150A-6.2.  Some animals are banned outright, while others are allowable by permit. Monkey importation is allowable by permit but has an extra step. That step being bonding.

I had to use this image for this post. It is a monkey in a suit at a desk with paperwork. I know what people think of attorneys. Further, I think it was apt for this post. Lastly, I paid licensing fees for the image and had to make use of it (don't worry one post I will devote to licensing fees for you graphic designers, photographers, etc . . . but enjoy and laugh! I had to use this image for this post. It is a monkey in a suit at a desk with paperwork. I know what people think of attorneys. Further, I think it was apt for this post. Lastly, I paid licensing fees for the image and had to make use of it (don’t worry one post I will devote to licensing fees for you graphic designers, photographers, etc . . . however, enjoy and laugh!

 

Hawaii Administrative Rules Chapter 4-71 and Bonding

We turn to the Department of Agriculture’s Administrative Rules, in particular, Chapter 4-71, as the objective of these rules are to implement HRS Chapter 150A. See HAR 4-71-1.  So what do the specific rules say about monkeys?

If we go to HAR 4-71-6.5, we see that we would need a permit, but more specifically we see in Section (a)(3) that certain animals need the securing of a bond, as specified in 4-71-7.  Scurrying down to HAR 4-71-7(1) it indicates that an applicant (for the permit) shall secure the appropriate bond for:

Monkeys, apes, baboons, chimpanzees, gibbons, lemurs, pottos, wallabies, and any other animal that the board or chairperson may require to be bonded as a condition for importation or possession;

Bonding Procedure and Conditions for Bonding

So how do you get a bond, and are there specific requirements? Well, the Administrative Rules continue from 4-71-7 to 4-71-8, Bonding Procedure and 4-71-9, Conditions for Bonding.  In these two sections, you will see much of the specifics you would need to fulfill to get a bond, which would go with the permit, which would, in turn, allow you to own a monkey.

Of course, even if you meet these requirements, and successfully import and own a monkey, you have to realize you have to comply with all the bond conditions. Failure to do so would mean the Department could seize it, as given their power under HAR 4-7-10.  Interestingly enough, if your monkey were to escape it is your responsibility to recapture it, and you have a week to do so, or else the Department will use its resources to recapture. Additionally, they can sell, ship, donate, or destroy it.  See HAR 4-71-10.

So yes, you can own a monkey here in Hawaii, but it is not a process of monkey see, monkey do like with dogs or cats, but a Department of Agriculture procedure of permitting and bonding.

Mahalo for reading!

-RKH

 

Draw the Law: Location Issues, Part III, Zoning

Zoning

Hi everyone, on the last post I briefly touched upon using your home as the location of your business.  Today’s post will focus on zoning and all the complexities that brings to setting up your business.

Similar, to how neighborhood associations or condo groups want a certain look, so they enforce covenants against members the government also wants to shape and control how the land is used.  This is accomplished through zoning laws.

All land in Hawaii (except for federal land) is one of four categories: (1) conservation; (2) agricultural; (3) rural; and (4) urban).  The four designation were created by the State Land Use Commission.   The Zoning Code lists what are the permitted uses within each zone.  It also lists the required setbacks, height limits, parking areas for commercial developments, and other such types of requirements.

Every zone has a list of what is a “permitted” use without need of further approvals. It’s the reason you see gas stations and strip malls where you do, and away from your houses.

In general, when looking at a location you want to make sure your business will be able to meet the requirements.  If you are set-up shop in one area and violate the zoning requirements it could be very costly and be so severe as to drive you out of business.  In addition to the land use, construction of buildings need plan approvals from the Planning Department as well as the building itself needs a building permit, which ensures that the building is for the permitted use and has proper set backs.

In some occasions you can get a variance to allow for some type of use not allowed in the zone, such as the shape of the lot allows you a different setback.  It is also possible to get a Land Use Approval for others kinds of use.  However, in general to get a variance or Land Use Approval it can be a long process.

For more information on the matter (for Oahu) visit the City and County of Honolulu’s Department of Planning and Permitting page.  In addition, when dealing with zoning laws it is best to seek an attorney and other land use professionals to help best explain the complex system.

Licensing and Permitting

Before I end out this Draw the Law, I’d like to make brief mention with licensing and permitting, which dovetails nicely with zoning.  I already made mention of building permits above, but suppose you say you start your business and you have structures you want to alter or demolish.  You will need a building permit for such actions.  There is even a sign permit if you want to install, construct, alter or move any sign on the property!

Certain businesses also require a license to be operational for business.  The best example of this is the liquor license.  A bar cannot operate even though it meets all the other zoning requirement without a liquor license.  For example, let’s say it is the right-sized building for bar operation on a lot in Waikiki or Downtown that allows bars, but the owner fails to obtain the proper liquor license to sell drinks.  He would not be able to open his bar and sell drinks until he gets approval from the Liquor Commission via a license.

Therefore, the need of having all your ducks lined up when opening certain businesses is paramount.  It takes a lot of time, paperwork, review, and discussion with the government.

As always if you like this post or any of my other series please Subscribe to this blawg to receive updates to your e-mail.  In addition, follow me on Twitter @Rkhewesq and Like Me on Facebook under Ryan K. Hew.  If you need to contact me directly, please e-mail me at Ryankhew@hawaiiesquire.com.

See you on the next Draw the Law!

*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.