Articles posted by rosten
Non-Compete Agreements Banned by FTC
In the old days, you might see a small business owner requiring a low level employee, even an administrative assistant, sign a non-compete. Those days are thankfully gone as certain states have moved in to balance the equation by banning non-compete agreements and protecting employees. The Federal Trade Commission (FTC) issued a final rule to ban non-competes nationwide. The Rule was scheduled to go into effect before a federal court placed a temporary hold on the rule. If the rule eventually is allowed to go into effect, that will mean that entering, attempting to enter, enforcing, or attempting to enforce, and representing that an employee is subject to a non-compete agreement, will be prohibited. And in any event, employers nationwide should consider the rule when preparing employment contracts b...
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Sale of Small Businesses: Asset vs. Stock Purchases
This article summarizes the two main structures in purchasing a small business: asset purchases and stock purchases. Each has its advantages and disadvantages. Spoiler alert: in general the buyer favors an asset purchase, and the seller favors a stock purchase. The structure of purchasing a business is a major point of negotiation. Which road you travel will affect other critical issues such as the purchase price and timing of the transaction. Although the structure can be changed, the parties should consider and address the structure of a sale of a small business at the time that they negotiate a letter of intent. For most purchasers of small businesses, asset purchases are more advantageous. They provide greater safety in terms of liability and have tax benefits that stock purchases do not. There...
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Corporate Transparency Act: Every Small Business Owner Needs to Read This
The Corporate Transparency Act (CTA) went into effect on January 1, 2024. Over 30 million small businesses will be required to file beneficial ownership information with the U.S. government’s Financial Crimes Enforcement Network (FinCEN). This article highlights which companies are the reporting companies required to disclose beneficial ownership information; what information needs to be disclosed; and who qualifies as a beneficial owner. The article describes the stringent penalties that may be imposed on small business owners who fail to comply with the CTA....
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Rosten Interviewed on Latte with a Lawyer
Keith Rosten is a partner at a law firm in Washington, D.C. He was recently interviewed on an episode of Latte with a Lawyer, a podcast featuring stories of attorneys and their strategies and tactics for making an impact in their profession. During the podcast, Rosten discusses his perspective on working with startups and other small and medium-sized businesses through the various business development cycles. ...
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Lease Agreements for Small Businesses
When you are starting your small business, you may be working out of our home, which is all too common in the post-pandemic era. As your business grows, you may need a physical location either because you are a retail business, or because you need a central place for employees to gather, or possibly simply because you like working in an office. For many small businesses, the lease is an important lever of success for the business. The rent will be a major part of the company’s expenses. The selection of the space and the negotiations for a lease may determine the success or failure of the business. This article highlights some of the major issues that will be the subject of negotiation for a commercial lease between a landlord and a tenant....
Read moreNDAs: Who Do They Protect?
If you have started your business, you have no doubt been confronted with the ubiquitous non-disclosure agreements. These agreements are not all created equal and you should review the NDA carefully and consult your small business lawyer to understand what they protect and what they don’t. NDAs or sometimes known as confidentiality agreements can arise in numerous contexts. Maybe you are trying to keep an employee from disclosing proprietary information about your small business. Maybe you are creating a custom software solution for your customer, who doesn’t want to share any of its information without an NDA. Or possibly you are in the process of selling your small business to a competitor or large company, and you think that the NDA will provide a modicum of assurance that your precious list ...
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Improper Influence in Academic Research: False Claims Act
There have been a rash of news stories on various constraints under which U.S. universities and other research institutions must labor to cooperate with foreign institutions and academics. This is a hot issue because the life blood of many U.S. institutions is cooperation with foreign institutions. The U.S. government has been keenly concerned about this cooperation because of the specter of espionage and intellectual property theft. Institutions of higher learning have countered that overzealous government oversight impedes academic freedom. Given this heightened scrutiny, researchers, colleges and universities need to understand the constraints that are imposed in cooperating with foreign institutions and researchers. There are three major laws today that are in the toolkit of prosecutors who are ...
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Nonprofit Law Developments in Excess Benefit Transactions
Taxes for excess benefit transactions are to deter insiders otherwise known as disqualified persons from using a nonprofit for unreasonable compensation. Recent tax court cases underscore that apart from those named in the law as disqualified persons who were obvious targets—such as directors and certain officers, members of their families, and certain affiliated entities—there may be others who qualify as “disqualified persons.” The question whether an individual is a disqualified person generally “depends upon all relevant facts and circumstances.” The same guidance that goes for nonprofits goes for every legal entity: keep the entity separate. It may be obvious, but you should not use the nonprofit’s funds to buy groceries for the officers or directors or other insiders. You shoul...
Read moreNonprofit Law Developments in Private Inurement
This article discusses recent developments in nonprofit law in private inurement and private benefits. Private inurement issues typically arise in connection with an IRS proceeding seeking to revoke the tax-exempt status of the organization. The IRS will not tolerate even a little private inurement. In short, insiders may not unjustly enrich themselves at the organization’s expense. The other side of the tax-exempt requirement is in the purpose of the organization. Under the private benefit doctrine, an organization is not operated for an exempt purpose unless it serves a public rather than private interest. The IRS recognizes that private benefits to third parties may incidentally arise from the nonprofit’s activities consistent with its proper purpose. Any transaction will result in some benef...
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Employers Stop! Non-Compete Agreements Prohibited
Employers have become increasingly emboldened to stick it to their employees. Employees with little negotiating leverage or without legal counsel have been saddled with some egregious restrictions. Courts over the years have thrown out the most unreasonable restrictions, creating various tests whether to enforce the agreement. But the employee would need the resources to fight back in court. The District of Columbia has recently banned non-compete agreements, which is the trend throughout the country. If you have employees who reside or work in states that have banned non-competes, then you have precious few alternatives except to eliminate non-competes from your employment agreements with those protected employees. In the District of Columbia, that means eliminating non-compete provisions not only ...
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