Michael A. Luongo Joins our Doylestown Law Office

High Swartz LLP is pleased to announce the addition of Michael A. Luongo, Esq. to the firm's Doylestown Law office. He will add his diverse skillset to the firm's business litigation, personal injury, criminal defense, and municipal practices. Michael joins High Swartz after practicing for 4 and a half years in the litigation department at a prominent law firm in Blue Bell, PA.

"I'm excited to be part of the litigation team at High Swartz. Their reputation in the Bucks and Montgomery region is well-respected and I look forward to contributing right away," states Michael.

Prior to his time there as a business litigator and criminal defense attorney, Michael served as an Assistant District Attorney in the Philadelphia District Attorney’s Office. Mr. Luongo litigated multiple high-profile criminal cases, including hundreds of bench trials and jury trials. He was the designated vertical prosecutor handling all press cases, non-fatal shootings and gunpoint robberies. He also conducted hearings for motions to suppress, bail, quash, discovery, reconsider, and consolidate prior bad acts. It was Michael's trial and prosecution acumen that garnered his promotion to Northeast Philadelphia's top prosecutor position.

Michael utilizes his strong business background in his work as a small and medium-sized business litigator in the Philadelphia region. He plans to also assist the firm's municipal group, consisting of attorneys who counsel multiple first and second class townships in the region as solicitors.

"What really stood out to me was the opportunity to work with High Swartz's municipal team. I look forward to gleaning from the many years of Southeastern Pennsylvania representation experience the group possesses," Mr. Luongo said.

While in law school at Rutgers of Camden, Michael served Philadelphia County's Court of Common Pleas judge the Honorable Rose Mare Defino-Nastasi as a summer law clerk. He earned a Master's of Business Administration from LaSalle University and also a Bachelor's of Science from Lehigh University. Michael also studied International Business during his time at Villanova University's Post Grad Program and worked at a marketing firm during his law school days.

Shari Gelfont Williams Joins the Firm's Family Law Practice

High Swartz is pleased to announce the addition of attorney Shari Gelfont Williams to the firm's family law practice. After working as a solo practitioner at her own firm in Huntingdon Valley, Shari will join our Doylestown office and serve both Bucks and Montgomery Counties.

Already established in the Philadelphia region as a strong family advocate, Ms. Williams will also assist the firm in criminal matters, PFA hearings, and other litigation. Furthermore, she will assist High Swartz's estate planning and business practices in drafting and litigation matters.

Pro bono work is extremely important to Shari, noted by her recognition by the Bucks County Bar Association for performing well in excess of her commitment. In 2018, she was deservedly awarded the Pennsylvania Bar Association’s Bucks County Pro Bono Award and the Bucks County Bar Association’s Arthur B. Walsh, Jr. Pro Bono Publico Award.

Ms. Williams advanced her legal experience at several stops along the east coast including Florida and North Carolina. In Charlotte, Shari managed an integral domestic violence legal representation project with United Family Services. Shari coordinated over 80% of the victims in obtaining permanent restraining orders. Most often these were cases that Legal Aid was unable to assist.

In Florida, Ms. Williams served as Assistant Attorney General while representing the Department of Children and Families and the Department of Revenue. Her work included modifying and enforcing child support and paternity actions before hearing officers and Circuit Court Judges.

While obtaining her paralegal certification at Penn State University, Shari obtained her Juris Doctor while attending Whittier College School of Law in Los Angeles. Shari states she is excited to join High Swartz and continue the tradition of excellent representation and assistance that the firm is well known for.

Choosing a Business Structure

Starting your own business can be rewarding and energizing. And yes, it can be a bit stressful. You have numerous essential decisions to make during the critical start-up phase. One of the most significant decisions is choosing a business structure.

It’s best to seek counsel from an accountant, business counselor, and business lawyer when deciding. Your business structure impacts day-to-day operations, taxes, personal liabilities, how you raise money, and more. So when choosing a business structure, do so wisely.

Factors That Determine Your Business Structure

You can choose several options when setting up your business, including a sole proprietorship, partnership, Limited Liability Company (LLC), or corporation.

The one you select depends on several factors:

  • Flexibility: Determine your expectations for business growth and ensure your structure provides ample flexibility to accommodate that growth. Generally, an LLC offers the most flexibility for growth potential.
  • Liability: You’ll need to examine the risks and your potential personal liability. You’ll also need to consider insurance, credit, and assets. For example, corporations offer the most significant liability protection.
  • Taxes: Sole proprietors, partnership owners, and S corporations classify income as personal income, while a C corporation separates business income from personal. Your structure impacts tax burdens because business income is taxed differently than personal income.
  • Operating Costs: Keeping updated records and paperwork can be costly, so you will also want to factor in these expenses. Sole proprietorships are usually the business type requiring the least amount of time and money invested in recordkeeping.
  • Fundraising: Your structure dictates how you raise funds. For example, sole proprietorships typically can’t offer stock, whereas corporations can.
  • Control: A sole proprietorship is typically the best route if you want complete control over the business. However, you also assume total liability for potential lawsuits, taxes, and losses.

If you need more information and guidance on the factors impacting choosing your business structure, talk to a business formation attorney in our Bucks County or Montgomery County law offices.

After Choosing Your Business Structure, Can You Change It?

The answer is yes. Actually, it happens quite often. For example, many businesses change from a simple structure like a sole proprietorship or partnership to a more complex structure like an LLC or corporation.

A business structure change can happen for any number of reasons:

  1. Personal Liability: As businesses grow, so do the risks. Consequently, the owner of a sole proprietorship may want to remove their liability by moving to an LLC or corporation.
  2. Taxes: Generally, tax considerations are the prime motivator for a business structure change. For example, the IRS views businesses as partnerships or corporations. The latter pays taxes on profits before distributing those profits to shareholders. However, the former is a pass-through entity where profits and losses go through the individual partners and require reporting on tax returns.
  3. Attracting Investors: Venture capitalists and angel investors prefer investing in C Corporations for tax purposes. In addition, a more formal structure like a corporation or LLC establishes the business arrangement upfront and what the options are.
  4. More Employees: As your employee numbers increase, liabilities attached to them do as well. So moving from a sole proprietorship to an LLC or C Corporation protects you.
  5. Financing: Many banks want to see a more formal business structure before providing funding.

Changing your business structure differs based on your initial business setup. For example, moving from a sole proprietorship to an LLC, partnership, or corporation requires registration with the state where you conduct business.

You’ll want to create an LLC operating agreement when moving to an LLC. Moving to a corporation requires selecting officers, a board of directors, and shareholder agreements.

You’ll want to involve a business lawyer to help you sort through the details and ensure you manage all the requirements for the business structure change.

What are the Types of Business Structures?

How to form your business legally is controlled by the law of the state where you create your business. Your decision must consider liability, taxation, and recordkeeping.

The most common forms of business structures are:

  • Sole Proprietorships
  • Partnerships
  • Limited Liability Companies (LLC)
  • Corporations

So, let’s take a closer look at which to select when choosing a business structure.

Sole Proprietorship

Generally, this option is the most simple and most common. With a sole proprietorship, your business is unincorporated and run entirely by one person – you as the owner. Although this structure entitles you to all the profits, you are also individually responsible for all debts and liabilities.

You obtain the necessary licenses and permits for your business when operating as a sole proprietorship. However, they vary by state and industry. Also, if you operate under a business name, you may legally have to file for a fictitious name.

In many states, such as Pennsylvania, registering a fictitious name does not protect the name or give you any right to block others from registering the same fictitious name. Instead, it serves only as a notice to the public that you are trading under that name. In addition, you must file with the IRS for an Employer Identification Number (EIN) if you hire employees.

Because you are the sole owner, your business entity is not taxed. Instead, you report the income and losses on Schedule C to Form 1040.

Partnerships

A business is legally structured as a partnership when two or more people share ownership. As a result, each partner contributes to aspects of the company, and both share liability and income.

In choosing this business structure, developing a legal partnership agreement is essential to document how you will make future decisions. In addition, the contract should include terms for dissolving the partnership if necessary. Although a legal agreement is not mandatory, it’s strongly encouraged since operating a business without one is risky.

If you choose a partnership structure, you can form a general partnership. Consequently, everything is divided equally among the partners. On the contrary, a limited partnership allows a partner to have limited responsibility.

You can register partnerships with the state with an established business name and all licenses and permits. The business must also register with the IRS and file an “annual information return” to report its income and losses.

The company itself does not pay income tax. Instead, profits and losses are “passed through” to the partners.

Limited Liability Companies

An LLC, or Limited Liability Company, is a legally recognized business structure combining corporate and partnership aspects.

To form an LLC, you must first choose a name that complies with state rules. The next step is filing articles of organization with your state’s business filing office, typically with the Secretary of State. These are generally short and simple documents that take only a few minutes to fill out.

After filing with the state, it’s imperative to work with a business lawyer to create an LLC Operating Agreement that sets legal rules for the ownership and operation of the company.

Finally, make sure to obtain all licenses and permits required. Also, some states may ask you to publish notice that you intend to form an LLC in a local publication.

Corporations

Becoming a legally recognized corporation is more complex. First, states determine the formation of corporations. In addition, corporations pay corporate income tax at the federal and state levels.

Certain small corporations can elect Subchapter S status and be taxed like a partnership, avoiding corporate taxes. In that case, profits flow to the shareholders as ordinary income.

In a corporation, the business becomes a corporate entity, and the corporation is taxed and held legally liable for all business responsibilities.

The business first needs to choose a corporate name not used by another corporation or limited liability company and prepare and file articles of incorporation to become a corporation in the Commonwealth of Pennsylvania.

Pennsylvania corporations also need an agent for service of process in the state that agrees to accept legal papers on the corporation’s behalf. However, a corporation with a Pennsylvania address need not have a separate agent to service the process.

To complete the legal requirements of forming a corporation, you must publish legal advertising, create corporate bylaws and hold an organizational, board of directors-style meeting.

You can learn more by reviewing A Guide to Business Registration in Pennsylvania.

Which Business Structure Do I Choose?

This answer depends on your business, current ownership structure, and goals. You should assess your individual needs and choose the proper business structure.

It’s best to talk with business experts and a business lawyer near you to guide your selection. They can also ensure you complete any required paperwork and file it appropriately.

U.S. News cited our law firm as a “Best Law Firm.” So, you can depend on our attorneys to provide the best advice, particularly as a Pennsylvania Business. Our firm can also support you with various legal services, including business litigation, intellectual property, restrictive covenants, and workers’ compensation.

The information above is general: we recommend you consult an attorney regarding your circumstances. This information does not represent legal advice or a substitute for legal representation.

 

 

How Will Divorce Affect My Business?

Divorce and business. For the owner, running the company can be never-ending and all-consuming. In many cases, the commitment and passion for it can contribute to strains in your personal life, leading to a struggling marriage and divorce. Consult with a divorce attorney if you own a business and are facing a divorce proceeding.

Will I Lose My Business in a Divorce?  

When a person facing divorce owns a business or is a co-owner, the question arises whether the divorce will force the company's liquidation. In most cases, the simple answer is "no."

However, courts will consider your business marital property valued as part of the financial analysis in the divorce.

Marital property is all income and assets acquired by either spouse during the marriage. It includes savings, real estate, stocks, bonds, debts, and business ventures. Marital property also covers compensation generated from the business in savings. Plus, courts divide any investments and retirement savings through the date of separation equitably.

The owner's spouse's income determines future child and spousal support.

Beware: With a business value based on excess earnings, you can argue the non-owner spouse cannot double-dip. For example, if the non-owner receives the value of the extra earnings as equitable distribution, you should remove them from the income available for support. A good business divorce attorney should be alert to this potential concern.

What is Marital Property as it Relates to Divorce and Business?

Since business and divorce focus on marital property and its distribution, let's take a closer look at what constitutes marital property.

If you formed your business during the marriage, it's marital property. That holds even if your spouse doesn't own any portion of your business. So, your spouse shares an ownership interest and has a claim against your company.

Even if the business is your property, your spouse may have a claim against increases in the company's value during the marriage. Generally, it's best to talk with a business divorce attorney to get a business valuation.

When determining whether or not your business is marital property or an individual asset, these factors come into play:

  • When you formed the business
  • Amount of time between business formation and your marriage
  • The success of the business before and after your marriage
  • Your spouse's involvement in business formation
  • Your spouse's contribution to business operations or growth
  • Changes in business valuation over time

Nine states view marital property as community property. As a result, they award each spouse a 50/50 split.

In other states, Pennsylvania included, courts use equitable distribution to determine what each spouse receives. You can learn about it here. So, again, you'll likely need a business valuation to support divorce proceedings.

Four Exceptions to Marital Property

As mentioned above, a variety of factors determine marital property. However, there are four exceptions:

  1. Gifts, Bequests, and Inheritances

    Any gifts, bequest, or inheritance one party receives from a third party, kept in a separate title, are not considered marital assets and are valued as of receipt. However, the increase in value is considered marital property.

  2. Property Acquired Pre-Marriage

    Marital property doesn't cover assets owned before the marriage kept in a separate title. Again, however, the increase in value during the marriage is.

  3. Property Acquired Post-Separation

    Any asset acquired after separation with non-marital funds is not marital property.

  4. Property Protected by a Prenuptial Agreement

    A well-drafted prenuptial agreement protects all assets acquired before and sometimes during a marriage. So, you'll want to consult with a family lawyer near you.

The business requires a valuation following a divorce filing when identified as a marital asset or with some marital component. The non-owner spouse has the right to know if it is marketable, if the business has significant assets, and if it successfully generates excess income for the owner.

In some circumstances, however, a business succeeds almost entirely upon the personal goodwill of the owner. As a result, it may have modest value to distribute. In most cases, the courts want the business to survive the divorce as an asset of the owner spouse, primarily where the family has been relying on the company to produce income.

Determining the Business Standard of Value in Divorce Cases

Often, a divorcing couple disagrees about the company's value, leading to a business appraiser defining the standard of value before proceeding with an appraisal. The standard of value presents a set of hypothetical conditions to determine the value.

There are three primary approaches to determining that valuation:

  1. Assets: In this approach, assets minus liabilities equals value. Assets include physical assets like inventory, equipment, and real estate. Intangible assets cover intellectual property, accounts receivables, etc.
  2. Market Value: Similar to a real estate valuation, appraisers value the business based on comparable companies sold.
  3. Income: The most common valuation method uses business history and various formulas to predict cash flows and profits for a business.

It's important to note that these standards may generate significantly different values. If you have a simple business model, it may be easier to determine a fair value. However, other cases require the services of a business appraiser.

Make sure you talk with your business divorce attorney for guidance on what comprises a particular standard of value. They can review past cases within a jurisdiction to uncover disallowed procedures or determinations. And that could benefit you greatly.

Other Considerations Involving a Divorce and Your Business

Typically, courts seek to limit damage to the business. So, they often accommodate a buyout over time of the non-owner's economic interest in the company rather than trigger financial hardship for the business owner.

If your spouse works in the business and isn't an owner, you should be wary of them actively hurting the company. For example, a spouse who calls customers or comes to the office and misbehaves may be at fault for trying to retaliate against you for personal reasons.

These actions could hurt the business asset's value and the source of future income. If you employ your spouse and they engage in this behavior, termination is an option.

Protecting Your Business from a Divorce

Although it isn't something you want to consider, 50 percent of marriages end in divorce. So, you should take steps to protect your business to survive a divorce. It's best to talk with an attorney near you to consider your options.

Here are some steps you can take:

  1. Marital Agreement

    An agreement, whether pre- or post-nuptial, allows you to designate your business or future companies as separate from the marriage. Although courts sometimes fail to uphold marital contracts, they protect your business in the event of a divorce.

  2. Buy-Sell Agreement

    This agreement controls when owners can sell their interest, who can buy their interest, and the price paid. It comes into play when an owner retires, goes bankrupt, becomes disabled, gets divorced, or dies. In short, a buy-sell agreement is a sort of prenuptial agreement.

  3. Shareholder Agreement

    A shareholder agreement can define guidelines in the event of a divorce. For example, it can determine the mechanisms for valuing each spouse's interest in the company, assign business ownership with a divorce, and restrict ownership transfer.

  4. Business Structure

    In conjunction with a shareholder agreement, structuring the business as a partnership or limited liability company (LLC) can protect you from a divorce and your business.

  5. Employment

    Don't allow your spouse to work for or with you. As a married couple, it may seem like a good idea. But, it can lead to issues during a divorce.

  6. Trust

    In a trust, it owns the business, so your business doesn't count as a marital asset.

Another critical protection is remembering to pay yourself a salary versus investing cash flow into the business. Doing so prevents your spouse from claiming you deprived them of monies during the marriage.

Talk with a Business Divorce Attorney

The end of a marriage is stressful enough, but the fear of potentially losing one's livelihood at the same time can be frightening. Plus, there's the toll divorce litigation can play in allowing you to keep up the same pace of work.

Talk to a business divorce attorney immediately if you're facing a divorce. They can help counsel you on your best options to maintain your business with minimal damage. Apart from divorce lawyers, our law firm can support you with real estate concerns and marital agreements. We have law offices in Bucks County and Montgomery County, PA.

The information above is general: we recommend you consult an attorney regarding your circumstances. You should not consider this information as legal advice or a substitute for legal representation.

 

 

What is an LLC Operating Agreement?

An operating agreement is essential if you're forming a limited liability corporation (LLC). An LLC operating agreement, also referred to as an LLC agreement, establishes the business' financial and managerial duties, including rules, regulations, and provisions. In short, it governs the internal operations of the company.

As an LLC, the operating agreement addresses various issues typically governed by the law that enables LLCs in the jurisdiction of formation. In addition, these laws include provisions that protect members from personal liability for the business's debts.

Only California, Delaware, Maine, Missouri, and New York require an LLC agreement. Even though Pennsylvania has no requirements, if you're forming an LLC in the Commonwealth, it remains a worthwhile consideration during business formation.

It's best to talk with a business lawyer near you to ensure you create a sound operating agreement.

Basic Provisions of an LLC Agreement

At the very least, an LLC agreement should cover some essential elements:

  1. The name of the LLC, including the address.
  2. A statement of intent indicating the agreement is by state laws.
  3. The business purpose, including its nature.
  4. The term generally shows that the business will continue until terminated or dissolved.
  5. Treatment of taxes
  6. How new members acquire a business interest

Other Items Covered by an LLC Operating Agreement

An LLC operating agreement is generally brief, ranging from five to 25 pages. But it presses owners and members to agree on financial and operational arrangements.

The main goal of the operating agreement is to name members of the LLC and their percentage of ownership. Apart from that, most LLC operating agreements cover six critical sections:

  1. Ownership: Who owns the business, and what is their percentage of ownership?
  2. Management and voting: Does each member have a single vote, or is voting based on the percentage of ownership?
  3. Capital contributions of members: Is ownership based on the capital contributions of the members?
  4. Membership: What happens if a member elects to leave the LLC?
  5. Distributions: How will the organization share profits and losses? For example, if a member owns 25% of the business, will they receive 25% of the profits and losses?
  6. Dissolution: What happens if your business dissolves? Who is responsible for liabilities, and how will assets get dispersed?

Although these areas represent primary considerations, your agreement can cover additional areas such as business decision-making, selling interests, right of refusal, dispute resolution, meetings and meeting protocols, and more. Many also consider forming an LLC for an investment property portfolio. 

Why is an Operating Agreement Important?

At the very least, an LLC agreement provides proof of ownership for banks and investors.

More importantly, they help prevent future conflicts and disagreements about significant business decisions because the contract covers terms around most major functions and opportunities.

That's critical. For example, even if you feel you've already come to verbal agreements with co-owning members, misunderstanding may arise as years pass or complications occur. By having terms outlined upfront, you eliminate future conflict.

An LLC operating agreement also protects your company's status as a limited liability structure. Otherwise, your LLC might resemble a sole proprietorship or partnership. And that opens the door to personal liabilities for members.

Overriding State Rules for LLC Operation

Moreover, your state's default rules for how an LLC operates apply without an operating agreement. For example, every state has laws on LCC management, admitting new members, dissolution, and other aspects of governance.

Unfortunately, those rules focus on applying the least common denominator, leading to unwanted results. For instance, your state may, upon your death, default your business to a spouse or child.

However, if you want someone else to assume responsibility for your company following your death, your operating agreement needs to state that. You can override Pennsylvania's default rules by having an LLC operating agreement.

Do I Need a Business Lawyer to Draft the Agreement?

Thanks to the internet, free templates are available to draft an LLC operating agreement. Indeed, here's a resource for creating a PA operating agreement. But remember that the LLC agreement governs your company and its members, so it requires careful consideration.

At the very least, if you want to draft your agreement, take the time to run it by a business lawyer for potential issues. Or better still, have an experienced business lawyer draft a contract for your review. And make sure that the lawyer is familiar with Pennsylvania law.

Need Some Help Drafting an Agreement?

Ultimately, you should construct an LLC agreement to the needs of each unique business. Agreements should comply with the laws of the state where the company operates.

If you're forming an LLC or are already operating a company and need help drafting an LLC operating agreement, get in touch with our local law offices in Bucks County, PA, Montgomery County, PA, and Camden County, NJ.

Our business lawyers can support you with business formation and operating agreement creation. Our law firm can also help you with various other legal concerns, including workers' compensation, employment law, and real estate.

U.S. News recognizes High Swartz on the"Best Law Firm" List and cites 14 of our attorneys on the "Best Lawyers List."

For more information, contact Joel D. Rosen at (610) 275-0700. Visit his attorney profile here.

The information above is general: we recommend you consult an attorney regarding your circumstances. This information does not represent legal advice or a substitute for legal representation.

 

Brianna Teicher Joins the Firm as Business Law Clerk

The firm is pleased to announce the addition of Montgomery County Law Clerk Brianna Teicher to its Norristown law office.

A recent graduate of Drexel University’s Kline School of Law, Brianna Teicher will support the firm’s business practice by researching and drafting legal documents. Brie has the fortunate opportunity to gain valuable legal experience, even before taking her bar exam this summer.

“Having the opportunity to join an established and respected law firm like High Swartz will give me important experience and insight. And working with and learning from talented business attorneys like Don Petrille, Joel Rosen, and Rich Sokorai is something many recent law grads could only hope for.”

Brie Teicher

Brianna grew up in Glen Rock, a small town in Bergen County New Jersey, about an hour’s drive from New York City. After graduating high school, she attended the University of Florida for her business undergrad. Brianna was born in Florida, so she was lucky enough to take advantage of in-state tuition for college. For law school, she was interested in coming back up the east coast and settling in Philadelphia.

What attracted Brianna to High Swartz was its close-knit culture and synergy. “It really feels like everyone is on the same team”, says Brie. With her business concentration at law school, Brianna hopes to be an asset to the firm’s practice area.

Brie is passionate about social justice and civil rights, and believes that every person has the right to a fair and just life. She looks forward to contributing to the meaningful non-profit work High Swartz is doing in the community. In her self-proclaimed “extremely minimal” free time, Briana likes to cook, paint, and assist with pro bono legal work at Episcopal Legal Aid. She currently lives in Philadelphia with her cat, Jimmy.

Small Business Legal Issues

 

Common Small Business Legal Issues

Small businesses face many challenges, especially in an economic climate ravaged by the pandemic—many closed shops in the last two years. Issues small businesses face today include financing, cash flow, management, credit access, and more. Many of those issues will involve the legal system. So let's look at some of the most common small business legal issues that require support from business lawyers.

Before doing so, it's worth pointing out how vital small businesses are to the economy. First, the U.S. Small Business Administration (SBA) defines a small business as an organization with fewer than 500 employees. However, most small businesses employ fewer than 100 people. For example, 88.1% of small businesses employ fewer than 20 people.

Small Businesses Help Drive the Economy

As the saying goes, they may be small, but they're mighty. These businesses, numbering some 32.5 million organizations, employ 47.3% of the American workforce. Not too long ago, that number was closer to 52%.

In addition, since 2000, small businesses have driven 65.1% of net new job creation. Plus, they create 1.5 million jobs annually on average.

Unfortunately, 20% of small businesses fail in the first year. Moreover, nearly 50% fail within the first five years of operation, mainly due to a lack of market demand.

The Threat of Legal Action

A study by the SBA found that up to 53% of small businesses deal with lawsuits annually. Still another study presented that 43% of small businesses faced the threat of being sued. As a result, for small business owners, it's essential to have expert legal representation from a business lawyer near you.

On top of that, those lawsuits are expensive. According to the SBA, litigation costs range from a low of $3,000 to a high of $150,000. As a result, as many as 95% of lawsuits get settled before trial. For many business owners, it's less painful to reach an agreement than face litigation costs and attorney fees.
Breach of contract (31.4%) represents the most common lawsuit filed. So, if you own a business, make sure you have a paper trail supporting your negotiations. Even more important, make sure a qualified business lawyer executes that paperwork.

Interestingly, depending on the size of your organization, you're more likely to face specific kinds of legal issues requiring the support of attorneys or business lawyers near you. Here's what a study by Kingston University on The Legal Needs of Small Business found:

Chart detailing Kingston University's findings on The Legal Needs of Small Business

Impacts of Legal Issues on Your Small Business

In the wake of legal actions, small businesses endure many outcomes, none good. Yet, many business owners view hiring a local lawyer as a last resort, with many owners electing to handle things themselves. Looking at the outcomes, it's likely they would have faced better results working with business lawyers.

Among those outcomes:

  • Loss of income (25.6%)
  • Loss of customer (9.2%)
  • Additional costs (8.8%)
  • Inability to complete work scheduled (8.7%)
  • Damage to reputation (8%)
  • Damage to a relationship with another business (7.4%)
  • Failure to take on new work (5.2%)

Not surprisingly, some issues resulted in a change of ownership or company structure.

6 Common Small Business Legal Issues

So let's get to it. What types of legal concerns should you expect if you're running a small business? Although contracts and taxes comprise more than half of small business legal issues, you'll encounter more. So, make sure you have a good business lawyer on speed dial.

1. Business Formation

It all starts here. Business formation significantly impacts your liabilities and profitability. Each business structure – LLC, S Corp, Partnership, or Corporation – has benefits and drawbacks. How you form your business determines your liability, tax payments, and other details for running your business.

For example, as a sole proprietor, you and your business are one. So if your company gets sued, your assets are at risk.

Sure, you can form your business using a website. But at this critical step, it pays to work with a business attorney to get the job done right. After all, you're forming your business and want to get off on the right foot. Moreover, if you do your homework, that business lawyer likely becomes your trusted advisor as you advance your business and avoid legal issues for your small business down the road.

2. Licensing

Do you know the government restrictions for licensing? If you're like most people, probably not. Costs and requirements vary based on location (a good reason to have a lawyer versed in PA laws). Plus, regulations cover stipulations for each business type. Therefore, they vary based on size, type, and business location. Moreover, they're impacted by the goods or services you provide.

However, if you fail to license your business correctly, you'll likely face some hefty fines or fees. Worse still, your business could be closed. That's why it's wise to avoid licensing concerns by consulting with a business lawyer.

3. Contracts

Contracts drive business. And there's a good reason you often hear the phrase; get it in writing. Unfortunately, too many small business owners rely on ambiguous contracts or, worse still, no contract. More than 37% of legal issues arise from contract issues.

Relying on self-serve internet contracts doesn't adequately cover potential loopholes. A business lawyer can draft contracts for your small business that keep you out of hot water and avoid legal issues.

You must tailor every contract to the condition and requirements of the agreement. Moreover, they need to be ironclad. That holds whether you're executing a real estate agreement, employee contract, or franchise agreement.

So, work with a contract or business lawyer to review any contract, draft original contracts, or address contract disputes. Never, and we mean never, enter into a contract with another party sans a legally-binding agreement, preferably drafted by an attorney or lawyer.

4. Taxes

If you're going to own and operate a business, you will pay taxes, both federal and state. But know this – tax laws get complicated. And they present an ongoing potential legal issue for any small business. So you need to retain the services of an accounting professional or tax attorney to avoid issues. They can help address what taxes you're required to pay, when to file, how to make payments, and more.

5. Employee Issues

Where to start? Employee issues present significant risks for small businesses. For instance, many companies fail to acquire appropriate documentation from employees. Still, others don't take the time to draft good handbooks and policies for employees.

Those policies prove helpful for disciplinary, overtime disputes, and termination issues. But, again, a business lawyer ensures you'll have the appropriate documentation.

In Pennsylvania, small business owners need to be concerned about Wage Payment and Collection Laws (WPCL). Otherwise, they could face liabilities leading to litigation, as PA has one of the strongest laws in the country.

For small businesses facing stiff competition or having proprietary knowledge, non-solicitation agreements are critical. For example, you need to ensure employees face the consequences of moving to another company and handing out customer lists. Or for starting their own business and using your knowledge to do so.

Talk to an employment lawyer about the ins and outs of your small business to make sure you are covered with rock-solid employee agreements that avoid legal issues.

You even face concerns about employee misclassification. For instance, classifying someone as an independent contractor may cause backlash from the Federal Department of Labor.

We haven't even mentioned legal concerns surrounding discrimination or harassment. Remote workforces bring additional challenges to these areas. Employment lawyers or business lawyers have the expertise to address them accordingly.

Again, you can elect to handle these above concerns yourself or by downloading internet documents. But you owe it to yourself and the well-being of your business to consult and work with a nearby business lawyer from a reputable law firm that understands PA laws.

6. Intellectual Property

It would help if you protected your IP, lest another party steals your name or copies your intellectual property. However, independent of safeguarding your property, you need to ensure you don't overstep IP law and accidentally infringe on a trademark by failing to conduct thorough research. A trademark or business lawyer has access to appropriate resources to handle searches and ensure you avoid legal ramifications.

We touched on how employees might pilfer proprietary knowledge and give it to a competitor. And that raises this point – too many small businesses fail to take care of their intellectual property covering copyrights, patents, and trademarks.

Ready to Hire a Business Lawyer?

Starting your own business is risky to start. Remember, 50% of startups go out of business within five years. In addition, circumstances outside your control make it even more challenging, like a pandemic. So why add more risks to your venture by not hiring an experienced business lawyer to support your company?

Our law firm serves clients in Pennsylvania, New Jersey, and the mid-Atlantic region. Our attorneys and lawyers have experience in numerous areas critical to running a successful business – employment law, IP law, workers' compensation, franchise law, and more. And if you ever need it, we're also experienced litigators.

Don't make a critical mistake launching your business. Hire a business lawyer. There's no better way to ensure your company gets off to the right start to avoid small business legal issues.

17 High Swartz Attorneys Named Main Line Today Top Lawyers for 2021

We are pleased to announce that 17 attorneys have been included in the 2021 Main Line Today Top Lawyers Around the Main Line and Western Suburbs List.

Main Line Today is a Southeastern Pennsylvania regional magazine focusing on the communities of the western suburbs of Philadelphia and surrounding Counties. The Best Lawyers of Chester County, Delaware County and Montgomery County are nominated through peer balloting then vetted through Main Line Today's editorial process.

2021 sees the addition of 3 High Swartz attorneys to the Top Lawyers list. New attorneys include family lawyers Chelsey A. Christiansen and Michael B. Prasad for Divorce and Family Law and Stephen M. Zaffuto for Real Estate Law. Congratulations to all winners!

Below is the full list of High Swartz Top Lawyers from Main Line Today in 2021.

  • Joel D. Rosen - Business Law
  • Kevin Cornish - Civil Litigation
  • Mark Fischer - Civil Litigation
  • Melissa Boyd - Divorce & Family
  • Mary Doherty - Divorce & Family
  • Elizabeth Early - Divorce & Family
  • Chelsey Christiansen - Divorce & Family
  • Michael Prasad - Divorce & Family
  • Thomas Rees - Employment Law
  • James B. Shrimp - Employment Law
  • David Brooman - Municipal Law
  • Gilbert High - Municipal Law
  • William Kerr - Municipal Law
  • Richard Sokorai - Personal Injury
  • Arn Heller - Real Estate Law
  • Stephen Zaffuto - Real Estate Law
  • Thomas Panzer - Workers’ Compensation

If you're looking for lawyers near you in Norristown, Doylestown, and the Greater Philadelphia area, get in touch with our law office. Our attorneys and lawyers are some of the best you'll find to handle all your legal concerns.

Should I form an LLC for an Investment Property?

So you want to invest in real estate, possibly buying one or more investment properties, but are not certain if you should buy them in your own name, as husband and wife or through some form of legal entity. The decisions you make now regarding the purchasing of the real estate could save you time and money in the future. That's why is pays to speak with a real estate attorney near you.

Should I buy rental properties in my own name or as a corporation?

There are various forms of entity to choose from, sole proprietorship, general partnership, limited partnership, limited liability company (real estate LLC) or corporation (C-corp or S-corp). Initially, it is best not to own investment real estate in your own name or a general partnership. In both cases, the individual owner and each general partner will be personally liable for debts/liabilities arising out of the real estate holding.

It is also preferable, in Pennsylvania, not to hold title in the name of a corporation as selling it triggers additional tax liability and the need for tax clearance certificates, which can delay closing on the sale.

LP or LLC? Which entity is best to purchase a rental property?

Eliminating individual ownership and general partnership essentially leaves you with either an LLC or a limited partnership. An LLC is cheaper and easier to set up and provides the same level of liability protection as a limited partnership as well as the same pass-through tax benefits to the members of the LLC.

A limited partnership requires the creation of a general partner, typically a corporate entity or limited liability company, which remains liable for the debts and liabilities of the limited partnership. The limited partners are shielded from liability. But that necessitates the creation of a limited partnership and a general partner. A limited liability company does the same work, with half the effort.

A real estate attorney can help you decide which is best for you.

Can I transfer the rental property title to the entity after it’s been purchased?

As a preliminary matter, whatever decision you make regarding the title to the property, make your final decision before buying the property. You don’t want to buy it as an individual and then after acquiring it transfer it to an entity you create. Such a scenario can create a double payment of real estate transfer tax, which can be significant depending on where you live. Thirty-eight states, including Pennsylvania, have taxes that are paid for transferring title to real estate.

In Pennsylvania, if you buy property in your own name (and pay the transfer tax on that acquisition) and then transfer it to a company you set up to hold title to the real estate, you have to pay transfer tax a second time. To avoid that, simply choose a form of ownership and stick to it. Check out our past articles on county-specific real estate transfer tax for Philadelphia and Montgomery County, PA.

In summary, many real estate companies take the form of real estate LLC for the reasons noted above. If you need assistance in forming an LLC for an investment property, talk to one of our real estate attorneys. Our law firm serves Bucks and Montgomery counties. Call today: 610.275.0700.

High Swartz Attorney Don Petrille Joins Auditor General-Elect DeFoor’s PA Transition Team

High Swartz business attorney Don Petrille has been invited to serve on PA Auditor General-elect Tim DeFoor’s transition team. Mr. Petrille will be serving on the Legal Review segment of the team which will examine the status and scope of pending litigation and the extent of the auditor general’s authority. The team will also determine a legal strategy for the office, review existing legal staff, and pending human resource issues.

“I’m anxious to apply my knowledge of state, county and municipal governments to the legal issues faced by the auditor general’s office during a time of transition. Intergovernmental relations, between governmental branches, and within our state’s political subdivisions are significant issues. My combination of courtroom and business experience will serve the team well”, stated Mr. Petrille.

The auditor general’s transition team consists of five segments which will examine audits, performance audits, legal review, communications & government relations, and personnel & administrative operations. Mr. DeFoor is the former Dauphin County Controller who will succeed the current auditor general, Eugene DePasquale, who is term limited. Auditor general-elect DeFoor is the first person of color elected to a statewide row office.

As a Doylestown attorney, Mr. Petrille represents businesses through all phases of their development, starting with initial organization, through the operational stage, eventually ending with sale, merger, acquisition or dissolution. Don also advises clients on methods of wealth preservation, business succession planning, and purchase, sale, financing, leasing and improvement of real estate.

Before returning to full-time legal practice with High Swartz in 2020, Petrille served as the President of the Pennsylvania State Association of Elected County Officials, and the President of the Registers of Wills and Clerks of the Orphans’ Court Association of Pennsylvania. He served in county government as Register of Wills for eight years.