Your partnership operating agreement is the most important document when it comes to setting up your business partnership for success. A proper partnership agreement should establish several key operating decisions, such as each partner’s contributions to the venture, their voting rights, percentage of ownership, management duties, and share of profits. But the basics of your partnership operating agreement are just as important – your business name, where your office will be located, the actual purpose of your business. These “basics” of establishing your business partnership are often not that basic after all, which is why you should get a business lawyer involved early on in the process.
To start, picking a name for your business partnership sounds simple enough. But before you settle on a name, you must make sure the brand or trademark isn’t already taken. You must also make sure to include the proper legal name of your business as well as any additional trade names or “fictitious names” such as “doing business as” (DBA) names.
For example, the legal name of your limited liability partnership could be “Company ABC, LLP,” but you may also refer to your business as “The ABC Company” in advertising materials and simply “ABC” in internal documentation. These trade names should all be properly registered and associated with your partnership’s legal name.
Missing these critical details could cost you later on – for example, if you have to change the name of your business after months of building your brand. The best approach is to be as thorough as possible from the start so that the foundations of your partnership start off strong.
Where Should You Register Your Partnership’s Main Office?
As you set up your business partnership, you must decide where your business will be registered (with a registered agent) and where you will have your “principal place of business.” Your headquarters does not have to be the same place your agent is registered.
Your principal place of business is the primary location where your partnership conducts the bulk of its business functions. Usually, this is the place where the partnership keeps its business books and records as well as where the partners or senior management report when they go on-site.
However, this may change depending on the nature of your business. For example, you may have one office for board meetings but another location where the company’s operations are actually coordinated and managed.
Your principal place of business does not have to be a “traditional” office. A dentist’s main office could be the location where they see patients. For an auto mechanic, your principal place of business could be the garage where you repair vehicles.
If your principal place of business is in a different state than where you originally registered your partnership, you will have to register and designate a registered agent in both states.
For example, if you registered your partnership in Delaware but your headquarters operates out of Pennsylvania, you will need a registered agent in both states.
Your partnership’s state of registration and principal place of business will determine how you get taxed, whether you have any additional legal requirements to fulfill, and where your partnership could get sued in the case of a legal dispute. A business lawyer can help you determine the best and most strategic configuration for your partnership.
What Is the Length and Purpose of Your Partnership?
How long do you and your partner plan to be in business together? Are you collaborating on a one-shot or long-term venture? Do you plan to sell your company or take it public?
What products or services will you be selling exactly? How do you plan to conduct your day-to-day business? What metrics will you use to calculate your success?
These are all important questions to consider while you’re forming your partnership. And although the answers may seem basic or even self-explanatory, your partnership benefits from laying out the length and purpose of your venture in clear terms from the beginning.
Stating your partnership’s purpose helps keep you on track towards your goals. Not only that, but the terms of your partnership operating agreement will come into play if there’s ever a partnership dispute. For example, if you sense that your business partner is taking your company in an unsanctioned direction, you could show the terms of your partnership agreement as evidence that their actions do not align with your original goals.
What Types of Partners Make up Your Partnership?
Pennsylvania and New Jersey state laws recognize limited partnerships, limited liability partnerships, and general business partnerships. Each of these partnership structures comes with pros and cons for limited and general partners.
What’s the difference between a limited partner and a general partner?Simply put, general partners have a lot more to gain and lose from your partnership. They tend to get the bulk of the profits while also taking on the greatest risk of liability.
If the partnership fails, general partners would be on the hook (personally liable) for paying off the partnership’s debts. In contrast, limited liability partners are only liable for the amount they’ve invested into the partnership. Creditors can go after a general partner’s personal assets to recover their losses but cannot reach the personal assets of a limited partner.
Because general partners have a greater stake in the partnership, they often get the bulk of the venture’s profits as well as managerial control. Limited partners tend to have limited responsibilities and privileges as well as limited liability. In many cases, limited partners act as “silent partners,” especially if their primary contribution is capital investment, not expertise.
Your status as a general versus limited partner will affect your voting rights, decision-making authority, debt liability, and profit share in the partnership.
How Should You Choose Governing Law for a Partnership?
The laws that govern business partnerships vary by state. States have different requirements and processes for filing partnerships and resolving partnership disputes. You can include a “choice of law” or “governing law” provision in your partnership agreement to specify which state’s laws you wish to apply to your partnership in the event of any legal issues.
Why is a governing law provision so important? This allows you to choose a state with laws that benefit your partnership. Your choice of state law also helps make the dispute process more predictable and manageable for your partnership. You’ll know exactly which laws apply to your venture and you won’t have to deal with an unfamiliar state’s laws.
An experienced business attorney can help you structure your partnership in a way that is best geared for success on your terms. Call the Philadelphia area offices of Holmes Business Law now at 215-482-0285 or use our contact form to get your partnership started on the right foot.
If you're doing business in New Jersey, you've got to keep up with changes in the Garden State's employment and labor laws. Many legal changes that get passed during a legislative season go into effect on the first of every year – and 2022 is no different.
Is your New Jersey business ready to comply with legal changes on January 1st, 2022?
The best way to stay on top of changes in state and federal law is to work with a business lawyer who’s got your company’s best interests in mind. Proper and timely compliance with the law allows your business to operate without interruptions, penalties, or fines. Your business attorney can help you anticipate and implement new business policies in order to adapt.
When it comes to complying with new laws, it’s better to get started on the process sooner rather than later. You want to be prepared for legal changes before they come into effect, if possible. This ensures a much smoother transition for you and your employees. Failing to comply with these changes could leave you open to liability and employee lawsuits.
Higher Minimum Wage for New Jersey Employees
Starting January 1st, 2022, New Jersey is raising its minimum wage for most employees to $13 an hour. This is a dollar more than the 2021 minimum wage of $12 per hour and $5.75 more than the federal minimum wage. Your business must be in compliance with the new minimum wage by January 1st or you could face penalties or employee liability.
Some types of business and employees are still exempt from minimum wage laws:
How can you ensure that your business remains competitive and compliant?
The minimum wage in New Jersey will increase by $1 every year until 2024 when it will reach $15 an hour. The state currently has no additional local or city minimum wage laws.
Penalties for Employee Misclassification
Employee misclassification is a major workplace violation that can leave you vulnerable to thousands of dollars in lawsuits and penalties.
Misclassification happens when companies misclassify employees as independent contractors in order to avoid the cost of providing benefits and insurance to those employees. This is an illegal business practice that can get your company in hot water. Not only can you be fined and penalized by the government, but your workers could sue you in court.
In 2021, New Jersey Governor Murphy signed new bills into law that make it easier to identify companies who are misclassifying employees and penalize them for violations.
Call the Philadelphia offices of Holmes Business Law now at 215-482-0285 or schedule a call with our legal team. The sooner you get started on compliance for the new year, the better.
It's critical to keep your business up to date with changing state and federal laws every year. Many laws that get passed in a legislative cycle go into effect on January 1st of the following year – and 2022 brings new laws for both Philadelphia and Pennsylvania businesses.
Is your business prepared for the new year? Have you taken steps towards compliance?
The sooner you get your business operations compliant with new laws, the better.
In fact, you should start the compliance process as soon as you find out about any new legal changes that apply to you. This gives you time to iron out any kinks that come up so that you’re fully in compliance by the time the law goes into effect. By being proactive, you can keep your business operating smoothly without interruptions, fines, or unexpected liabilities.
Your business lawyer can help you stay on top of any relevant developments that affect your operations, especially if you’ve got any employees on your payroll.
Changes to Philadelphia Pre-Employment Marijuana TestingEver since Pennsylvania legalized medical marijuana, the cannabis market and the cannabis legal landscape have been in a state of near-constant change.
Philadelphia Bill No. 200625 affects businesses that carry out marijuana testing. Starting January 1, 2022, businesses can no longer require that prospective employees undergo pre-hiring marijuana testing as a condition of getting a job.
This new law does not apply to employees who must get drug tested because of government regulations, contracts, or grants, as well as law enforcement agents, employees who supervise or care for children, caretakers of medical patients or the elderly, or workers who have the ability to significantly impact the health or safety of other employees or the public.
In addition, the new law does not affect how businesses test current employees. You can continue to test your active employees for cannabis, you just cannot ask new employees to take a marijuana drug test during the interview process before they’re hired.
What’s the reasoning behind this law? Cannabis can be detected in a person’s body for weeks or even months after last using the drug. So if you test an employee before hiring them, there’s no telling how recently they were exposed. This new law protects workers from being unfairly denied opportunities because of actions completely unrelated to their employment.
It’s important to keep ever-changing medical marijuana laws in mind when putting together a drug testing policy for your business. In many states, zero-tolerance drug policies are getting challenged in court by emerging medical marijuana rights, especially if employees show no signs of drug use or impairment during work hours. The last thing you want is to get pulled into an expensive wrongful termination lawsuit because you fired a worker for failing a marijuana test when they’re a medical marijuana user in their personal time outside of work.
Philadelphia’s Fair Workweek LawPhiladelphia's new Fair Workweek law went into effect in April 2020 and the Philadelphia Office of Worker Protections began enforcing predictability pay in June 2021. Employers who aren’t aware of the law could be on the hook for hundreds of dollars owed to their employees.
Philadelphia’s new Fair Workweek law applies to any retail, food service, or hospitality business with more than 30 locations worldwide that employs more than 250 workers anywhere in the world, including all full-time, part-time, and temporary workers.
Under this law, food service, retail, and hospitality workers in Philadelphia must get written “good faith estimate” schedules of how many hours they’ll work in a 90-day period. Employers must give employees their schedules 14 days in advance. If you make any changes to a worker’s hours or shifts more than 24 hours after you’ve given them their schedule, you must pay that worker “predictability pay” for each change.
For example, a worker is entitled to predictability pay if their manager asks them to stay longer on their shift, changes the start time of a shift, or cancels their shift. Workers are allowed to request changes to their own shifts without this penalty. Generally, predictability pay comes out to one hour of pay at your usual rate.
In addition, these businesses must offer any additional hours that become available to current workers before they hire new employees to take on the extra shifts.
Pennsylvania Wage Exemptions for Salaried WorkersEffective September 7, 2021, the Pennsylvania General Assembly made some changes to state rules around executive, administrative, and professional worker minimum wage.
Previously, the law was written in a way that the Pennsylvania state minimum wage for executive, administrative, and professional workers would exceed the federal minimum wage requirements starting in October 2021. Lawmakers removed Pennsylvania’s amendments so that moving forward the minimum wage requirements would match that of federal law.
What does that mean for Pennsylvania businesses that employ executive, administrative, and professional workers? You must continue paying the federal minimum wage for these employees. As of October 2021, that is $684 per week. This rate changes every year.
Paid Sick Leave in Allegheny County, PennsylvaniaIf you run a business in Pittsburgh’s Allegheny County with 26 or more employees, you must give your employees paid sick leave starting September 14, 2021.
Under this ordinance, you must give your employees one hour of paid sick time for every 35 hours that they work within the geographic boundaries of Allegheny County. Your workers must be able to accumulate up to 40 hours of paid sick leave in a calendar year. This is simply a baseline requirement – your company is free to offer a more generous paid sick leave plan.
Each violation of this County Ordinance could be fined up to $100.
To complicate matters, Pittsburgh also enacted the Pittsburgh Paid Sick Days Act in March 2020. The Pittsburgh Paid Sick Days Act has similar requirements to the County Ordinance except the city law applies to companies of all sizes. Businesses with less than 15 employees must offer a year of unpaid sick time accrual before switching to paid sick time. Businesses with 15 or more employees must offer the same amount of sick time as the County Ordinance.
Since these laws are so new, they remain relatively untested in the Pennsylvania court system. A knowledgeable business lawyer can help you comply with changes in the law, avoid penalties and fines, and keep your company running smoothly. Call the Philadelphia offices of Holmes Business Law now at 215-482-0285 to get started on your compliance plan.
The time has come – you’re ready to sell the business you’ve built over the course of years or decades. Every business owner has their own reasons for selling. You may be ready to retire or move to another city. You may simply be looking for a new challenge or venture. Your sales may be down and your business may need new capital or management to continue competing.
Whatever the reason, selling a business involves more than simply putting up a “for sale” sign on the front window. Preparing for a business sale with a winning strategy will net you better-qualified buyers and a significantly more profitable transaction.
With the right steps, you could get the best possible value for your business, one that reflects all the hard work you’ve invested into growing your company.
How Do You Prepare Your Business for Sale?
First, you’ll want to get a business lawyer involved as soon as possible. You should never go into a business purchase transaction without legal representation. A business attorney can help you not just execute the sales agreement, but also position your company in a way that makes it more appealing to potential buyers. The sooner you get started with counsel, the better.
Your reasons for selling your business will play a big role in shaping your business purchase transaction. After all, one of the first questions an informed buyer will ask is why you’re selling. The negotiations will proceed differently if you’re selling because your company is losing revenue versus selling a profitable company from which you’re retiring.
Second, you should determine what would be a successful outcome from the business sale. Is your goal to sell above a certain price, stay on board as a consultant, ensure your company maintains its original vision, or protect the jobs of your employees? Your lawyer can help you establish baselines for success then target those goals in your strategy.
When Should You Sell Your Business?Theoretically, you can sell your business immediately – as soon as you make the decision that you want to sell. But if you sell right away without getting your company’s affairs in order first, you could be leaving a lot of value on the table.
Think about selling a business similar to selling a home. According to a study by the National Association of Realtors, homes that are staged to be attractive to buyers sell faster and for more money than those that are not staged. The same goes for businesses.
By taking the time to prepare your business for sale, you can address and overcome your company’s weaknesses to make it as attractive as possible to prospective buyers. This could take just a few months or more, depending on what types of adjustments are needed. The difference could mean hundreds of thousands or even millions of dollars.
You can also time the sale of your business with other opportunities in your industry. For whatever reason, your industry may be booming – that could be a high-value time to sell. Conversely, if you’re still profiting in an “endangered industry” that’s shrinking in demand or value, you may want to sell sooner rather than later.
Your attorney can help put together an action plan for selling your business that takes into consideration your personal motivations, time limits, and sales goals.
Preparing Your Business for Sale Checklist
Every business is different and yours will benefit from a tailored approach. Your lawyer can help you get through the steps below to set your business sale up for maximum success.
To get your business positioned for its best chance at success, call the Philadelphia offices of Holmes Business Law at 215-482-0285 or use our contact form to get started now.
Buying a business is an exciting time for any entrepreneur.
By purchasing an existing business, you can avoid many of the risks that come with starting a venture fresh from the ground up. The company you plan to acquire may already enjoy brand recognition, a solid customer base, or profitability. You can infuse a growing business with new capital and build upon its proven formula for even greater success.
But you must do your due diligence before you commit to purchasing a business or any business assets. One of the most important parts of a business purchase transaction involves establishing the worth and sales price of the business.
The only way to find out how much a business is worth is to evaluate the financial records and daily operations of the company – ideally, with the help of a trained professional and negotiator.
Despite being a business transaction, emotions can skew the perceived worth and value of a company. You may get excited and emotionally invested when you find a business you really love. Plus, the current owner has probably poured their own time and money into the venture. To them, the company may be worth much more than the number on paper.
The more thorough your due diligence, the stronger your position will be at the negotiation table. The last thing you want is to buy a business without an accurate understanding of its prospects and liabilities. You could end up overpaying or even worse – taking on unknown risks or debts that could sink your investment after the ink has dried on the sale.
How Is a Business Typically Valued?The process of valuing a business isn’t always as objective as you might think.
Even with advanced appraisal formulas, the future is impossible to predict. Your evaluations can certainly get more confident with the more evidence you have. But many aspects of appraising a business are subjective or intangible – for example, determining the value of brand recognition or customer goodwill. You and the seller may disagree on how much these are worth.
Even if there is no “perfect price,” you can use different valuation formulas to get to a reasonable price range that both buyer and seller can agree upon.
You don't want to take any shortcuts when evaluating the worth of a business. You want to make sure you've left no stone unturned so that you don’t encounter any surprises later on.
How Do You Determine the Value of a Business to Buy?When determining the price of a business you want to buy, you can expect to negotiate within a price range with the seller, taking into account the company’s financial health.
The lowest end of the price range would cover the current market value for any of the assets the company still owns, minus its debts. This might be the case if a company is going out of business and liquidating its assets – and you don't plan to continue operating it.
The higher end of the price range would cover any business assets plus expected earnings for the future. If the business you plan to buy has a solid reputation and strong customer base with a high likelihood of increasing revenue and profits, that will affect the purchase price.
But assets and revenue aren’t the only factors to consider in a business purchase transaction.
When you buy a business, you get more than just a company. You could be investing in a personal dream, a lifelong goal, or a new adventure. You want to make sure you get the most of the new venture you’re getting into – and the best way to do that is to have a business lawyer on your side, covering your back and watching out for unexpected curve balls. You want a seasoned negotiator who can get you the best deal possible.
Thinking of buying a business? Get the experts on your side. Call the Philadelphia offices of Holmes Business Law at 215-482-0285 or use our contact form to get started now.
A proper partnership agreement makes your new venture real. But the success of your business partnership depends on several intangible key factors that you must consider from the outset.
Sure, your partnership may look great on paper. But how well do you and your partners actually work together? Do your values align? Can you trust each other?
Starting a partnership? Welcome to the beginning of an exciting new venture! You and your partners have ideas, dreams, and funding – and you’re ready to hit the ground running.
The first steps you take to establish your partnership and create a partnership agreement are absolutely critical in helping you reach your vision. Whenever you go into business with a partner, you want to make sure you’ve got all your legal ducks in a row before the rubber meets the road. The last thing you want is to hit a snag while you’re going full speed ahead.
Just this month, President Joe Biden signed a major executive order limiting the use of non-compete agreements. Executive Order 14036, “Promoting Competition in the American Economy,” encourages the FTC to crack down on the “unfair use” of such agreements.
The executive order helps workers. But what about businesses that rely on non-competes to keep employees from taking their trade secrets to competitors? Half of private-sector businesses use non-compete agreements for at least some of their employees.
Since the COVID-19 pandemic, remote work has become an undeniable reality for much of the U.S. For over a year, millions of offices stood empty. Zoom and videoconferencing replaced in-person meetings. Even interviews became remote.
The world of remote employment is the new frontier for many companies who previously maintained in-person workplaces – with pros and cons.
For many medium-to-small-sized companies, managing the myriad of federal and state compliance regulations is a top challenge. With limited resources, keeping up with the many changes that continue to impact the current business landscape is a daunting task.
Here are five things that every business owner needs to understand when hiring employees.
Sarah E. Holmes is a Philadelphia business attorney and strategist that helps start ups and established businesses looking to expand, protect their assets and increase their profits in an approachable, down-to-earth way. When you're looking for a business lawyer in Philadelphia, the Main Line or New Jersey, we can help.