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Kenneth Allyn Sprang

Kenneth Sprang’s Answers

780 total

  • Can I sue a partner in my LLC?

    I started a web design LLC with another person. I put up 100% of the money and the agreement was that I would put up the money, bring in the clients, and he would do the work since he's a programmer/developer and I'm not. The company is in debt du...

    Kenneth’s Answer

    The first question is whether you have an operating agreement executed by both of you. If so, what percentage of the business does your partner own. Do you have any written agreement?

    In the absence of an agreement, there will be some question as to whether your partner has any interest if in fact he has contributed nothing. You could sue, but that will cost you several thousand dollars at least, and the question is "what would you recover?"

    You might be better served by working out an agreement for your fellow member to withdraw without any consideration (payment). You will have to address the debts and you can ask for him to contribute. However, I think as a practical matter you are better off cutting a deal to get rid of him and then trying to move the company forward, or simply dissolve the company and start again. If he is truly a member the two of you will share responsibility for the debts of the company if the company is dissolved, as assets and liabilities will go to the members.

    Hopefully you have an operating agreement to guide you through this. If not I urge you to be certain you have a well drafted agreement for any company you might start in the future, or get an agreement for this company.

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  • Can I use a famous (unknown source) as a tagline for my business?

    I am wondering if I can use famous quotes with unknown sources like "what gets measured get managed" or "what gets measured get done" as a tagline for my business. If yes, do I have to include the quotation mark?

    Kenneth’s Answer

    The protection given to a quote would be copyright protection, which typically runs for the life of the author plus 70 years. Given that the author is not identified, whether any copyright protection is attributable to the quote would be difficult to discern.

    My quick Google search suggested that the first quote may date from 1883, which suggests it may now be in the public domain. The quotation is often attributed to Peter Drucker who died in 2005., but there is no clear evidence that Drucker originated the phrase.

    A copyright arises when the quotation is reduced by the author to tangible form. If it is just a statement made and not written by the author copyright may be a non-issue.

    Having said all of that, if you use the phrase and add a footnote or other note indicating that the author i is unknown, you will not likely face any scrutiny. There is a concept known as "fair use." If you use this isolated phrase which seems to be well known, it may be deemed fair use of the phrase. I think as an abundance of caution, and as a matter of integrity, you should note that you are borrowing someone else's words, even if you do not know the source.

    Unless the phrase was reduced to writing by the author there is unlikely to be any basis for a claim of infringement. Moreover, registration of the phrase with the U.S., Copyright Office would have to precede any action.

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  • What sort of business corporation is recommended when motto is to open a Cosmetology/Barbering school, in LA County, CA?

    Looking to startup a Cosmetology and Barbering school, in the LA county, in California. I'm would be the owner of the company since I'll be the one funding, but the division of profit is going to be 3-way, amongst myself, an individual who is res...

    Kenneth’s Answer

    The first question is whether to create an LLC or a corporation. You state that you will be the only owner, but that profits will be shared with others who are contributing in various ways. Why not give them a share of the company? You could use an LLC and give each of the others something like 5% or 10% of the company each, so you still have control of the company. Make it manager managed with you as the manager as well. With an LLC you can distribute profits pursuant to a formula that is not necessarily related to ownership. With a corporation, profits must be allocated according to the ownership interest of each shareholder.

    These other persons are contributing "sweat equity" and I think it would be wise to allow them to share in any upside of the equity over time if the school is highly successful. There is little to no downside.

    In short, if you want to distribute profits in a way that does not reflect ownership interests, you need an LLC. If you determine not to give these persons a membership interest, then you and they must determine whether they are independent contractors or employees. That determination is a legal one that must be made with consideration of both IRS and Department of Labor rules, as well as state law.

    My recommendation would still be to give your colleagues some equity interest in the company as well as a share of profits, since they appear to be essential to the busines.

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  • Can I promote my business publicly? Im resident of Florida and I have the H1B1 Visa

    I have the H1B1 visa, same as my husband. We came to the US because of my husband work. I have created a very profitable business here, but since I can't work in Fl because of my Visa, my husband created an LLC under him, so everything I make on m...

    Kenneth’s Answer

    Presumably your current employer facilitated your obtaining your H1B1 visa. Likewise I assume that your husband's employer sponsored his visa. As you noted you cannot work for compensation in the United States outside of the employer who sponsored your visa.

    Although on its face it does not seem rational, even though your business may be profitable and contributing to the economy, you cannot work for it. You could own the company or a part of it, but you could not be employed by it. Of course, you cannot be employed technically by an LLC you own.

    Working ostensibly for your husband's LLC could be problematic. One factor the government considers is whether the employer can fire you. Although in theory your husband could fire you since he owns the company, I think the government will question whether that is true as a practical matter.

    This is really an immigration related question, more than an LLC question. Whether the company is an LLC or a corporation is not the determining factor here.

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  • Is it required for me to register my Delaware C Corporation as a foreign corporation in California?

    If my company needs to register in California as a foreign corporation, when is the right time to register it? Business details: It is an online service (a mobile app) that connects hairstylists with people for free. This service is available...

    Kenneth’s Answer

    I must say that the first question in my mind is why in the world did you create a C corp in Delaware and not use either an LLC or elect S corp status. Generally a C corp is not a wise choice for a company like yours.

    Although there may be some niceties to consider in determining whether your company is doing business in California, I think that the fact that you reside in California and that the services are provided through your activities in California, more likely than not would lead the State to find that you are doing business in California. Registering there is expensive, more expensive than most states, but I think it would be unwise not to do so.

    I regularly set up Delaware companies for clients both in the U.S. and outside the U.S., and if a company owned by my client were active in California I would certainly advise that it register there. Registration is just a cost of doing business in California.

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  • In the absence of an operating agreement for an llc, what is the legal, default distribution of profits/losses?

    Indiana code states "Unless otherwise provided in the operating agreement, profits and losses must be allocated on the basis of the agreed value, as stated in the records of the limited liability company." What records are they referring to? Wha...

    Kenneth’s Answer

    Your circumstances underscore the importance to LLC Members of drafting operating agreements, and the importance of retaining counsel familiar with LLC's in setting them up. Too often issues arise later that could easily have been addressed in the agreement.

    Typically members agree on the percentage of ownership each has in the company. That percentage then informs how profits are reported for tax purposes, since an LLC is taxed like a partnership at least for federal tax purposes. If each member owns an equal share, each member gets an equal percentage of the profits.

    If each member contributed money to the company, the value might be the percentage of the total contributed by each member. Your accountant should be able to guide you in this matter.

    Once you determine the ownership share of each member, I urge you to have a proper operating agreement drafted to address this and other issues that may arise over time.

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  • I am a self employed contractor and i have a client (church) who is now 120 days past due on an $85,000 invoice.

    i am a self employed contractor and i have a client (church) who is now 120 days past due on an $85,000 invoice. when i made the agreement, the invoice was due when the work was completed and then i noticed that they changed the terms on me and ke...

    Kenneth’s Answer

    I urge you to seek out a real estate or construction attorney in Texas. In most states as a contractor you can file a mechanic's lien against the property. Eventually, if need be, you could foreclose upon the property. Alternatively you may be able to sue to recover if need be. Move quickly though as there is usually a short period in which to file any lien. There is enough money involved here that you should not find that legal fees will eat too much into your recovery. Although you need to make the business decision, if you presented this situation in a state in which I practice, I would suggest you pay my hourly rate rather than having the case done on a contingency, at least if you can still file and foreclose upon the lien.

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  • Is a confidential agreement/NDA with a developer overseas enforceable?

    hello I'm based in US. trying to figure out how to keep my trade secrets confidential while working with a content developer in India. I wanna prevent him from contacting my contacts in the US, using my name on his portfolio, etc. I'd apprecia...

    Kenneth’s Answer

    You cannot guarantee enforceability even in the U.S. If someone breaches the NDA typically you must litigate to enforce it. The same would be true in NDA. What you might do is to provide for international arbitration through the AAA or another organization in some neutral location, e.g., the UK. The agreement should shift all costs of litigation to the other party if the NDA is breached. Reach out then to an Indian lawyer to determine whether there is any provision of Indian law which would strengthen enforceability. You certainly want to avoid any arbitration or litigation there, so the question is whether you could effectively litigate and shift costs to the defendant in India, to compel the defendant to arbitrate or the like and to do so in the forum identified in the Agreement. In short, in addition to the protective language of the NDA, you need to build in the best possible mechanism for enforcement in that NDA and there an Indian lawyer or one of the many Indian lawyers who also practice in the U.S. could be helpful.

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  • I need some help to get legal working status for a foreign consultant and co-trainer for my permanent makeup school.

    I need to hire a foreign consultant to work with me on permanent makeup training in the USA. I am holding training for my very successful permanent makeup school. I have found the co-trainer that I want to hire. Her ability and mastery of the w...

    Kenneth’s Answer

    You probably will want to obtain for her a an H1-B visa. That allows her to work for the company sponsoring her and only that company. There is a limit on the number of such visas granted annually, but I suggest you contact the U.S. Citizenship and Immigration Services

    You will ultimately need an immigration lawyer to help. Most of them charge a fixed fee for the work, so you may wish to shop around a bit. Make sure you get someone with experience though. My partner does a lot of H1B work for employers and we had a young associate who really made some serious mistakes, so you should get good guidance through the process. Good luck.

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  • We need help!!! How can we make this go away with the least amount of effort. We cant afford to go to court

    had a start up tax business with 3 partners on Jan 1. 2015. we had a mutual agreement that none of us would take any draws this year as we needed to cover overhead/rent through the remainder of the year. We ended tax season being debt free and eno...

    Kenneth’s Answer

    Distributions from the company can only be made pursuant to its operating agreement or in the absence of an agreement, pursuant to state law. Your fellow member of the LLC had no right to help herself unilaterally. Any distribution to any member would usually require an affirmative vote of all members.

    You could certainly sue her for breach of her duty to the LLC, essentially converting LLC funds for her own benefit. If she has sued you, you should certainly counterclaim for those funds on behalf of the LLC.

    Her breach of contract suit likely has little vitality, in that her own action was arguably a breach. A big factor is whether you have a definitive operating agreement which would address the rights and privileges of members.

    If you are in litigation you will need counsel. I urge you to find a business attorney who litigates. This is not complex litigation but your counsel needs to really understand the ins and outs of LLCs.

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