Skip to main content
Roger P Glovsky

Roger Glovsky’s Answers

26 total

  • Do I have to hire a lawyer to start an LLC? If not is it wise to go about it with little legal experience?

    I am looking into selling my woodworking items on e-commerce websites + it's own website sometime down the line.

    Roger’s Answer

    Forming a single-member LLC is quite simple in Colorado, and quite inexpensive. Although protection from claims may be limited, the LLC may still be a good way to start. If protections from claims is important, a two-member entity could be formed by adding a spouse as a member.

    An S corp may have some tax advantages, but is a bit more complicated to set up properly. The LLC can elect to be treated as an S-Corp for tax purposes or the LLC can be converted to an S Corp down the road. If the risk of claims is minimal, the LLC is a good way to start. Just forming a separate entity adds credibility. Both customers and vendors will take you more seriously.

    See question 
  • What is the most cost efficient way to get term sheets for venture capital investment reviewed by lawyers?

    What is the most cost efficient way to get term sheets for venture capital investment reviewed by lawyers?

    Roger’s Answer

    Cost is an important consideration when starting a business. You can keep costs down by selecting an experienced attorney who knows how to successfully negotiate venture deals (without over-lawyering or playing up to the VC). Although most lawyers prefer hourly billing, there are attorneys who will work on a fixed fee basis, even for negotiating term sheets.

    If the attorney is willing to do it for free, be sure you are comfortable with their long term billing practices. One advantage of paying for the initial legal work that you get to see how the attorney works, and whether the bills are reasonable before accruing a huge amount.

    More important than the fees are the relationships. You are just starting to build a relationship with your investor. You want to build confidence by selecting an attorney who facilitates the deal. Also, you want to build a relationship with an attorney you trust, one who adds value, and provide the expertise and perspective you need to complete the transactions successfully, and ideally become a key member of your outside team of advisers.

    See question 
  • Do I need a lawyer

    I was given keys to move a friend's car and when I went to move it, I hit a tree. I signed a paper saying I will pay her back a certain amount of money for damages but I later found out that she received a large sum of money for the accident and I...

    Roger’s Answer

    Whether the signed paper is enforceable may depend on contract law. The basic elements for creating a valid contract are: (1) mutual assent, (2) consideration, (3) capacity, and (4) legality (see explanation https://www.law.cornell.edu/wex/contract). If any of those elements are lacking, the signed paper may not hold up in court.

    In this case, the issue may be whether there was adequate "consideration" for signing the paper. What was the incentive for agreeing to pay damages? Was there a waiver of claims? Was there some other benefit received in exchange for the signature?

    Even if the signed paper is invalid, the friend may still have a claim for damages. However, it would appear unfair if she were to benefit twice by collecting both from the driver and the insurance company. Would the insurance company have paid the claim if they knew that the driver had agreed to reimburse damages? What does the insurance policy say? Did the friend mislead the insurance company in filing the claim?

    It is possible that the friend is entitled to both if the insurance money did not adequately cover all the damages. One would need to know how much the repairs would cost and how much the insurance company paid? And, of course, was the driver responsible in the first place? Was the signed paper a valid contract?

    This may sound like a lot of questions, which they are. These are the questions that a lawyer might ask in trying to find a simple answer. Although the friend may not file a law suit in civil court, they could bring a complaint in small claims court. If it goes to that, having answers to some, if not all, of the questions above would help to prepare a good defense.

    See question 
  • CUSTOMER DEMANDS REFUND ON DAMAGED FURNITURE

    I'm in Boston. My customer in California wants a refund on furniture shipped to them which was damaged in shipping. I offered to fix it locally but they refused. 1. Can I be brought into a small claims court in California? The purchase is $18...

    Roger’s Answer

    I will leave it to the litigators to comment as tow whether a Massachusetts company can be compelled to appear in small claims court in California. With regards to your obligations to provide a refund or accept returns that have been mishandled by the customer, a good place to start is your terms and conditions of sale. Did you have a customer agreement with terms of sale?

    If you have a customer agreement, does it say who is responsible for risk of loss during shipment? If not were the goods insured? If there was no agreement, the risk of loss may be determined by the breaching party or the agreed upon delivery location (see https://en.wikipedia.org/wiki/Risk_of_loss).

    If the damage occurred prior to shipping, then under Article 2 of the Uniform Commercial Code (adopted by almost all states) would include a warranty of merchantability, which requires that the goods reasonably conform to an ordinary buyer's expectations. The warranty of merchantability is implied, unless the customer agreement expressly disclaims that the goods are sold "as is" or "with all faults."

    The biggest is issue is whether you have to appear in California. That is a jurisdictional issue that may relate to whether you are doing business there. As stated above, I defer to the litigators to comment.

    See question 
  • How do I get my business owner to speak to me.

    I bought into a company as an angel investor 18 months ago. I invested 15,000 as my initial investment. We had it set up to where I get paid 100% before he gets anything and then we split it 50/50. I got my first disbursement in august for 7,500.0...

    Roger’s Answer

    Unfortunately, when the business manager stops taking calls that could mean you are not the only one standing in line to be paid. There may be creditors as well, who have priority. Rather than deal with the issues, some people just stop taking calls or responding.

    Although I agree with the comments from my esteemed colleagues, you may want to consider taking a different approach. You often catch more flies with honey than vinegar. If the company is having money problems, perhaps there is a way you can help.

    Companies have financial problems for lots of reasons, but most often it is simply cash flow. It takes more money to keep the business going (or growing) than funds available. Perhaps if you wrote a note offering to talk through the business issues or develop a new business strategy, that might open the lines of communication.

    As an investor, you certainly can enforce your rights (assuming you get a copy of the contract), but the process may cost more in legal fees and time than you will get as a return. I wouldn't write off your investment yet. You may be able to preserve your claim just by continuing to send letters, and perhaps the company will be more profitable later on.

    These situations tend to be difficult to handle alone. Do seek out legal counsel if you want to preserve your legal rights.

    See question 
  • Looking to open second business under corporation with some limiting factors

    I currently own a S-Corp sports bar/restaurant. There is one investor in my current company. I am looking to open a second location under an "umbrella" corporation which will contain my current business as well as the new business. I am curious as...

    Roger’s Answer

    Structuring business entities is often driven by tax considerations. As the previous attorney mentioned, forming another entity as the "parent" or "umbrella" would disqualify the current corporation as an S Corp and automatically convert it to a C corp, which could cause tax problems.

    One advantage of the S Corp is that it avoids the "double tax" on the sale of the business because it is a pass-through entity. It also helps by putting a cap on distributions subject to self-employment taxes. However, there are some downsides to the S corp in that you can only have one class of stock and you cannot have another corporation or LLC as a parent entity.

    The bigger issue here may be the fiduciary duty owed to the investor, and any potential conflicts of interest. An investor may claim that using assets of the current business to fund a second business is a conflict of interest and violates your fiduciary duty as an officer, director and majority shareholder (assuming those are your roles). One way to address that issue would be to have a "disinterested" majority of the board and/or shareholders approve the transactions.

    There is also the question of non-competition or business opportunity. Are there any existing contracts or charter documents that would prohibit shareholders (or officers/directors) of the current business from starting a second business or require that the opportunity first be offered to the current business? In that case, the current investor may have a say in whether or how the second business is formed.

    With regards to leveraging equity, banks may request that your shares be pledged as collateral or, more likely, request a guaranty by the current company of the obligations of the second company. This raises issues of fiduciary duty and conflicts of interest mentioned above. It may also create problems down the road. When one business guarantees a loan to the other business, it could delay or prevent a sale of the first business by requiring that the guaranty be released or loan paid off. Inter-company transactions also require additional attention to administration, documentation, and record keeping to avoid co-mingling funds that affect limited liability protection and cause potential tax issues.

    Congratulations on creating your first successful business. As you move to the second business, it is helpful to build an "outside team" that includes a business lawyer, an accountant/tax adviser, and a banker. The outside team does not have to be expensive and should pay dividends by avoiding potential "landmines". The best teams are typically created by having strong relationships that are developed over time.

    See question 
  • Should I request a NDA from people that I am seeking advise?

    I currently hold a patent for a product that I have invented. I am seeking advise from various people regarding marketing, tooling, etc I have requested assistance from someone at SCORE and someone within the lawn & garden industry for advise. The...

    Roger’s Answer

    Assuming the patent has been issued, the patent would only cover the patent claims and other other confidential information. If that patent has not yet issued, check with you patent counsel before making any disclosures relating to the patent.

    For other information relating to your business, this is a fairly common problem for startups. VCs and advisers often say they don't sign NDAs (even if they do). What I recommend to clients is that they consider using "progressive disclosure", which means sharing only the information you need to share when you need to share it.

    Also, as to what information you should share, consider putting it in three different buckets:

    1. Information that you would put on your website;
    2. Your most valuable information or "secret sauce"; and
    3. Other information that is confidential and may provide a competitive advantage.

    With regards to item #1, this information is what you need to tell the world about your products and services so they will buy from you or do business with you. This is whatever information you would put on your website. It is not confidential and you should not worry about protecting it. You have to tell people something in order to get them interested.

    With regards to item #2, this is your secret sauce. Think about the recipe for Coca Cola. That information is never shared outside the company and I would guess that even within the company very few if any people know the whole formula. Identify the information that is most critical to your business or technology and share it with no one except your inner circle.

    Everything else, referred to in item #3 is information that should be shared only under NDA. If they won't sign an NDA, don't share it. You can talk around it without actually disclosing it. For example, "my top 3 biggest customers are all Fortune 500 companies". You have disclosed some information about your customers without actually disclosing who your customers are.

    The long and the short of it is don't treat all confidential information the same. And consider a strategy using progressive disclosure so that when you get to a point that you need to have an NDA signed that person will have enough information to know why the NDA is important before the disclosure. And use an NDA that is tailored to fit the situation, not just some off-the-shelf random NDA downloaded somewhere off the Internet.

    See question 
  • In a S-corp, if my partner does not pay me, and I am stuck paying their tax liability for profits, what is the penalty?

    I filed a lawsuit and cannot stop them from doing this. Is this criminal? I am paid nothing, yet pay their taxes. They also are not paying out all the income end of year. Is this civil, criminal, etc. what is the penalty?

    Roger’s Answer

    This is a common problem for an "outside" shareholder in an S Corp. They own shares of the company, the company is making profits, but no distribution is made to the shareholders to cover the tax obligations. Ideally, there would be a shareholder agreement that the corporation would distribute cash necessary to cover the taxes. If there is no such agreement, then the shareholder would have to pay the taxes out of their own pocket.

    In these situations, a lawyer can often help by negotiating an agreement with the S corp or other shareholders. If there are no transfer restrictions on the shares, the outside shareholder might transfer the shares to a disqualifying organization to terminate the election or gift the shares to a non-profit charity and claim a charitable deduction. Either strategy should be reviewed with a business lawyer and tax adviser before taking any action.

    See question 
  • What kind of attorney so that the 3rd person does not sue us later ?

    3 of us were informally working on a software idea in our free time. Of late one of them is not cooperating well and 2 of would like to split. Proposal is for each to walk away with respective code bases and evolve it but promise not to use the ot...

    Roger’s Answer

    I agree a business lawyer who works with software start-ups and understands intellectual property rights. Any time collaborators informally share ideas or work product, there are potential claims. Often, the best approach is to have all three persons sign an agreement clarifying how the code would be separated and any restrictions on use of the code or a waiver of any rights or claims.

    If the third person is unwilling to sign off, then there could be residual claims. In that case it is important to work with an attorney who can help identify the affected IP, review prior understandings with respect to ownership, and propose strategies for separating or otherwise going forward.

    See question 
  • I dissolved my MA Corporation 12-31-2013. I have been getting a bill to my Corp apparently for unpaid Corp Excise tax for 2013.

    If I do not pay , as the corp does not exist, what can happen to me personally?

    Roger’s Answer

    I called the MA DOR (617-887-6367) with the following questions:

    Q: Who has an obligation to pay the excise tax after a corporation is dissolved?
    A: It is the responsibility of corporation and not the individual

    Q: What happens if it is not paid?
    A: We send notices for 7 to 10 years, then write it off

    Q: What else should I know?
    A: If the corporation needs a certificate of good standing [Added e.g. for sale of business], then the excise tax would first have to be paid.

    The above is a candid response from the MA DOR call service; it is not from a lawyer. I'm not a tax lawyer, but theoretically, the DOR may have a claim on the assets upon dissolution. However, from a practical perspective, they indicated that they would not pursue the individuals and would stop sending notices after 10 years.

    See question