Author Archives: Jeronimo Valdez

  • Mr. Valdez obtained a unanimous defense jury verdict in the United States District Court for the Northern District of Texas for business clients in a lawsuit involving extremely difficult to defendant FLSA claims. The Plaintiff filed suit against Mr. Valdez’s clients alleging that she worked 8 hours of overtime per week for a period of 5 years.  Mr. Valdez’s clients did not, at the time, have a payroll system in place, and they could not prove (via documentation) that the Plaintiff did not work any overtime. Plaintiff alleged that, under the Fair Labor Standards Act, the employer has an obligation to maintain accurate employment records.  If the employer does not, then the employee only has to prove, by a preponderance, that the employee worked overtime.  The Plaintiff employee can then submit her version of the hours worked, but is not required to prove the number of hours with certainty.   In this case, the Plaintiff was seeking over 5 years of overtime, plus liquidated damages for alleged “willfulness,” along with attorneys fees and costs. And because Plaintiffs are entitled to recover attorneys fees and costs if they recover, the client was exposed to a potential 6-figure judgment against them.  As a small business, this was essentially “bet the company” litigation.  Understanding that risk, defendants made several settlement offers–including the day before trial–that were rejected.  After a week-long federal jury trial, Mr. Valdez was able to convince the jury that the Plaintiff never worked a single hour of overtime.  After deliberating for 30 minutes, the jury came back with a unanimous defense verdict and zero damages.
  • Mr. Valdez obtained a large 7-figure, lump-sum cash settlement against a large dental service organization (a “DSO”) and the DSO’s nearly 1000-lawyer law firm. Mr. Valdez’s client was a highly-respected Arizona dentist who was recruited by the DSO to to implement the Dr.’s highly successful operation in Texas and open a chain of pediatric dental offices.  During the negotiation of the parties’ extremely complicated 40-year agreement, the 900+ lawyer firm represented the DSO while also providing services to the Dentist–including setting up the Dentist’s company (which would ultimately be the signatory to the contract between the DSO and Dentist). After a few years of their highly-profitable business enterprise, the DSO became increasingly dissatisfied with the Doctor’s refusal to put profits over patient care.  As a result, the DSO began implementing strategies to essentially “squeeze out” Mr. Valdez’s client.  The DSO (and the very lawyers who drafted the agreement between the parties) filed a lawsuit against the Dentist alleging numerous breaches of contract and asking a Harris County District Court (via declaratory judgment) to terminate the parties’ 40-year contract.  Mr. Valdez vigorously defended the Houston lawsuit (which pitted Mr. Valdez against multiple law firms inside and outside of Texas).  After months of heated litigation, the DSO ultimately dropped the Houston-based lawsuit.  Immediately thereafter, Mr. Valdez filed suit in Dallas County asserting affirmative claims against the DSO and the DSO’s law firm, seeking damages exceeding $10 Million (based on retained experts’ opinions).  Mr. Valdez went on to obtain a temporary restraining order against the DSO preventing them from from attempting to “shut down” the Dentist’s multiple dental offices.  Not surprisingly, the DSO reasserted its previous claims against the Dentist, and the DSO sought damages exceeding $4 Million.  After several months of extremely heated and contentious litigation (and over 4 separate mediations), the Defendants settled and agreed to pay a 7-figure all cash payment.
  • Mr. Valdez obtained extremely rare death-penalty sanctions against defendants in a very complicated and contentious business divorce lawsuit involving two former business partners.  The Death Penalty sanctions were issued months after Mr. Valdez had already obtained a temporary restraining order and a temporary injunction against defendants–despite the fact that there were no non-compete agreements in place.  During cross examination of defendant during the preliminary injunction hearing, Defendant ultimately admitted that he was lying about several different issues related to his unfair competition.  Although Mr. Valdez’s client did not have a noncompete agreeement with his partner, the Court issued an injunction against Defendants partially as a result of Defendants’ being caught (and admitting to) lying during cross examination.  Defendants later violated the Court’s injunction, and during a motion for sanctions, Defendant was caught lying to the Court yet again during cross examination about the violation of the Court’s orders.  As a result, the Court issued death penalty sanctions on a damages model that exceeds several million dollars.  The case is currently on mandamus with the Texas Supreme Court. 
  • Mr. Valdez represented plaintiff mechanical sub-contractor in lawsuit against major general contractor for breach of contract associated with extremely technical engineering failures that occured during construction of a commercial building.  Defendant general contractor failed and refused to pay Plaintiff for work performed claiming that mechanical subcontractor miscalculated elevations resulting in extensive additinoal costs.  Defendants attempted to use experts to prove that Plaintiff miscalculated grading associated with running piping over the distance of several hundred feet.  Moreover, Defendant enforced a very one-sided arbitration clause to remove the case from the district court in hopes of obtaining a more favorable forum.  After removing to arbitration, Defendants asserted counterclaims seeking to recover a very large sum of money allegedly resulting from Plaintiff’s purported faulty work.  After a four day arbitration, Mr. Valdez convinced the arbitrator to award Plaintiff the full amount of damages it sought.  The arbitrator also awarded Plaintiff’s significant attorneys fees (in an amount that was nearly as much as the original claim), thereby nearly doubling the amount of the final judgment.  
  • Mr. Valdez obtained a very favorable settlement (and later a unanimous defense verdict in the same case) for a client who was injured after being rear-ended by a local attorney.  In the months leading up to trial, the local attorney’s insurance company settled with Mr. Valdez’s client and paid the client for the damages that the client client suffered.  Shockingly, however, the attorney-driver alleged that she did not agree to settle the case (despite her insurance company having already paid for her negligence), and the attorney turned around and asserted claims AGAINST Mr. Valdez’s client for purported injuries that attorney-driver suffered as a result of rear ending Mr. Valdez’s client.  Although the attorney-driver’s insurance company paid for the attorney-driver’s negligence, the attorney-driver refused to accept responsibility, and she actually took her claims to trial.  And since Mr. Valdez’s client was a single parent who could not take time off from work, Mr. Valdez actually tried the case without his client being present.  Not surprisingly, the attorney-driver showed up with three lawyers from her firm to try the lawsuit.  After a 3-day jury trial, the jury returned a unanimous defense verdict awarding the Plaintiff lawyer absolutely nothing. 
  • Mr. Valdez represented, pro bono, a local church in a commercial dispute involving a general contractor’s breach of contract.  After severe weather caused significant damages to this small local church, their insurance company agreed to pay for repairs and sent the church a check for over $100,000.  The church, in good, faith, hired one of its parishioners (who was a general contractor) to complete the repairs on the church.  The church paid the contractor up front, and after only half of the repairs were made, the contractor simply “walked off the job.”  The church could not afford to retain a commercial litigator, so Mr. Valdez agreed to do the work pro bono.  The church sued the contractor, who not surprisingly, refused to pay and hired a well known construction firm to defend him.  After a 1-day bench trial, the court rendered a judgment against the contractor on all of Mr. Valdez’s client’s claims.   
  • Mr. Valdez represented client in a very contentious two-week jury trial involving claims for breach of contract, breach of fiduciary duties, and breach of non-compete covenants.  This case was essentially a business divorce between Mr. Valdez’s client and his client’s former partner.  The plaintiff was a doctor who partnered with the client and opened a sleep study laboratory.  Mr. Valdez’s client was the sales person, and the one in charge of “bringing in the business.”  After the doctor refused to adhere to the partners’ agreement (by refusing to pay the client commissions and partner distributions), Mr. Valdez’s client quit and opened his own sleep lab.  The doctor filed suit against Mr. Valdez’s client (along with the client’s new partner) seeking millions in alleged lost profits.  The case was litigated for years and involved countless motions for sanctions for alleged discovery abuses before actually getting to trial.  After a two week jury trial, the jury returned a unanimous defense verdict in favor of Mr. Valdez’s clients. 
  • Mr. Valdez represented a plaintiff against his insurance company seeking to obtain coverage on a real estate deal gone bad.  Mr. Valdez’s client had initially borrowed funds from a “hard money lender” in order to finance significant repairs/upgrades to his commercial property.  Pursuant to that agreement, the client executed a promissory note with the lender and began making monthly payments to the lender’s “servicing company.”  Six months later, the client refinanced his loan with a mainstream lender, and he paid off the promissory note, pursuant to the note’s instructions, to the “hard money lender’s” servicing company.  The client obtained free and clear title to his property–all of which went through a mainstream title company with all of the appropriate title insurance.  A few months later, the hard money lender sued the client–and its servicing company–alleging that it had never received payment.  Ultimately, the lender’s servicing company embezzled the funds, and never made full payment to the lender.   Mr. Valdez tendered his client’s defense to the title insurance company, which had already undertaken the defense of the new mainstream lender.  The title insurance company refused to defend Mr. Valdez’s client.  Nonetheless, Mr. Valdez successfully defended against the Plaintiffs claims, and Mr. Valdez secured a favorable defense verdict for his client.  More importantly, Mr. Valdez sued the title insurance company for reimbursement of all costs and attorneys fees associated with his client’s defense.  The insurance company refused to pay his client’s fees alleging that “attorneys fees as damages” could not be recovered.  Mr. Valdez took the case to trial, and after a two-day bench trial, the judge ordered the insurance company to pay all of Mr. Valdez’s client’s outstanding fees and costs associated with the underlying litigation. 
  • Mr. Valdez represented an individual in a multiparty jury trial involving a business dispute that resulted in a unanimous defense verdict for Mr. Valdez’s client, and a $3.5 million award for his side.  Case involved the purchase and sale of a surveying business.  Two Defendants (one of whom was Mr. Valdez’s Client) purchased a surveying business for $1.4M.  Defendants paid $700,000 in cash, up front.  Mr. Valdez’s client executed a promissory note for the remaining $700,000, which included a personal guarantee.   Defendants soon realized that the surveying company was not what the sellers represented it to be.  Defendants, therefore, refused to pay the remaining $700,000 after realizing that they had been duped into buying a worthless business.  The sellers sued Mr. Valdez’s client for payment of the $700,000 remaining balance on the promissory note.   The jury returned a unanimous verdict for Mr. Valdez’s client.  The Jury concluded that sellers had fraudulently induced Mr. Valdez’s client into personally guaranteeing the remaining balance.  They also found that the Sellers had breached the representations and warranties in the sale agreement, and they awarded the purchasers $2.4M.  The final judgment exceeded $3.5 after court costs and attorneys fees were added.
  • Mr. Valdez settled a hard-fought case against a large North-Texas city.  That case involved the drowning death of two teenagers when they were swept away in a flood.  After intensive discovery and investigation, Mr. Valdez’s trial team discovered that there were numerous similar drowning deaths in the same location due to a lack of adequate warning signs.  Mr. Valdez’s team litigated the case for several years, and the case made its way all the way up to the Texas Supreme Court, which ruled in favor of Mr. Valdez’s trial team.  The case ultimately settled for a confidential amount.   As part of the settlement, (1) the City condemned a significant amount of property (worth millions) near the flood plain to keep this from happening again, and (2) they installed over 2,000 “flood warning” signs throughout the City.
  • One day arbitration resulting in an award of $172,875.  Mr. Valdez represented a plaintiff employee against her former employer for wrongful termination.  Mr. Valdez’s client was an older Hispanic lady who signed a 3-year employment contract with the Defendant Employer.  Although she had a three year contract, she was fired after only 3 months.  Defendant refused to honor her employment agreement offerered “nuisance value” in response to Plaintiff’s demand.  The six-figure arbitration award ended up costing them much more.

Picking the best entity for your business should be fairly simple.  Unfortunately, some business gurus offer advice on this subject that is more confusing than helpful.

Maybe you’ve seen one of those fancy charts that promises to sort it all out for you.  The chart may  list seven or eight types of business entities.  Then, for each type of entity, the fancy chart gives you 20 or 30 legal and tax characteristics.  Although the charts can be helpful, most of the time they simply cause information overload.  Below is a simplified explanation that may aid you in your decision.

The Most Common Business Entities

First of all—probably 99% of small and mid-sized businesses operate as one of five basic business entities:

  • Sole Proprietorship (the “DBA”)
  • General Partnership
  • Limited Partnership
  • Limited Liability Company
  • Corporation

But how do you choose from among the “Big Five”?  Your choice becomes much simpler if you focus on liability and tax issues.  Obviously, you should seek advice from an experienced lawyer and your CPA, but the key concepts are easy to grasp.

Sole Proprietorships (DBA) and General Partnerships

We can generally group sole proprietorships and general partnerships together because they share important liability and tax characteristics.  Let’s begin with legal liability.

As a sole proprietor, you are personally liable for all business debts and any legal judgments rendered against your business. Similarly, in a general partnership, each partner is personally liable for all monetary obligations.  In fact, in terms of asset protection, general partnerships can be even worse than sole proprietorships.  What if one of your partners assaults and/or wrongfully terminates an employee who then sues the partnership?  If that employee sues and wins a $100,000 verdict, each partner, including those who had no knowledge or participation, may be personally responsible for paying the full $100,000.  To satisfy the six-figure verdict, the fired employee can go after your personal assets as well as partnership assets.  Your personal assets, your personal bank accounts, and (in some instances) your homes and cars are all at risk.  By doing business through a corporation or limited liability company (LLC), you can greatly reduce this risk.

As far as taxes are concerned, neither sole proprietorships nor general partnerships offer much flexibility.  The profits from the business are reported on your personal tax return if you’re a sole proprietor.  And with a partnership, you report your share of the partnership profits on your own tax return.  In each case, you have “pass-through” taxation (which means that you won’t be “double-taxed”), but you are not able to control certain aspects such as allocations and distribution of profits and losses.  In addition, there are often expensive “self-employment” taxes associated with sole proprietorships and general partnerships.

Some businesses—especially certain small start-up businesses—don’t mind being exposed to unlimited personal liability, nor do they mind having limited tax flexibility.  In some circumstances, the business may feel that they can reduce liability risks with insurance, and they don’t care about having to pay taxes on every cent of the business’s income.  But for the vast majority of businesses, the liability protections and tax benefits provided by the entities described below are invaluable.

Limited Liability Companies (“LLC”) and Corporations

It is easy to pair LLCs with corporations since they share important liability and tax characteristics.

For liability purposes, the law treats LLCs and Corporations as legal entities that are separate and apart from their owners.  In an LLC, an owner is called a member. In a corporation, an owner is called a shareholder.  For the most part, an owner stands to lose only what he or she has invested in the business.  Except where a personal guarantee is involved, an owner normally isn’t liable for the debts of an LLC or Corporation.  This means a creditor or judgment-holder can’t seize an owner’s personal assets.

Let’s return to the earlier example, but with an important variation.  Suppose you and your partners form an LLC rather than a partnership.  This time, if the employee wins a $100,000 verdict, you generally won’t be personally liable for paying the money (assuming you weren’t the one that committed the act).  Be aware, however, that an LLC or Corporation doesn’t give you a 100% safety net.  You can still face personal liability if you’re the person who intentionally causes harm to someone—such as sexual harassment or intentionally injuring a customer.  That’s also true if you personally guarantee a business obligation like a bank loan.

On the tax side, by forming either an LLC or a corporation, you gain tax flexibility.  You can choose to have pass-through taxation for your business like a sole proprietorship or general partnership. On the other hand, you can decide to have the business taxed as a separate entity.  Because an LLC or a Corporation may be in a lower tax bracket than you individually, you may prefer this separate taxation if you’re going to leave profits in the business.  Ask your CPA for details.

If you create an LLC and take no tax action, the profits will be passed through to the owners.  To have the business itself taxed, you must file an election form with the IRS.  With a corporation, a different rule applies.  The corporation will be taxed unless you file a form declaring S Corporation status.  Once you file that form, corporate profits will be passed through to the owners who will pay income tax on those profits.  Once again, it is prudent to ask your CPA for details.

Limited Partnerships (“LP”)

Although LPs are used far less frequently than LLCs and Corporations, a brief description of the entity is merited.  A LP is an association of one or more general partners together with one or more limited partners to conduct business for profit as co-owners.  The most important feature of a LP is that the limited partner enjoys limited liability as long as he or she does not participate in the control of the partnership business.  The general partners of the LP are the ones responsible for the obligations of the LP.  Most of the time, a Corporation or LLC is formed to serve as the general partner of the LP in order to provide the same type of liability protections and tax benefits described above.

Making Your Choice

So which entity is right for you?  In most cases, the LLC has a slight edge.  It usually involves less paperwork than a Corporation to set up, and it’s generally easer to maintain.  The LLC also gives you maximum flexibility in how you structure your business.  For example, you don’t need a board of directors or traditional corporate officers like a president and secretary—although you can have them if you choose.

In a few situations, however, the Corporation may have an edge over the LLC.  This might be the case if you have outside investors who would like to have corporate stock certificates to show for their investments.  Or if you’re planning to offer ownership options to employees, the availability of corporate stock certificates may make the process easier.

If you’re already set up as an LLC or a Corporation, it probably doesn’t make much sense to change.  Most of the time there is no legal or tax reason to switch to the other format.  If, however, you’re just starting out or you’ve already formed a sole proprietorship or general partnership, now is a good time to think about whether to become an LLC or corporation.

Not Having Good Written Agreements

All of your important business agreements need to be in writing.  Oral agreements are very difficult to enforce, and they often leave you with no recourse for compensation or legal action.  Make sure your contracts are well thought out, drafted in your favor, and give you flexibility and protection.

Unclear Expectations and Rules for Employees

It’s important to set clear expectations and rules for your employees. Make sure they acknowledge they are “at will” employees, which means they can quit or be terminated at any time without exposing your business to liability. It’s also important to inform your employees that discrimination, sexual harassment and other illegal acts will not be tolerated.

Not Keeping Proper Corporate Records

Improper record keeping can cause problems with the IRS, hamper your ability to raise equity capital, and could result in personal liability. And yet, small businesses are notorious for failing to keep the records required for limited liability protection.  Failure to document meetings of the Board of Directors and shareholders, failure to record stock issuances, and failure to document stock transfers are common infractions of the guidelines that protect the status of corporations.

Ignorance of the Law

Just because laws are numerous and complex doesn’t mean your business can ignore them. Learning a little about the following basic areas of the law can keep you out of legal hot water:

  • Basic contractual rules
  • How to protect your ideas and inventions (copyright, patent, trade secrets)
  • Major employer-employee laws
  • Securities laws affecting how you can raise capital for your business
  • Governmental regulation of your industry.

Not Clearly Documenting Partners’ Rights and Responsibilities

Founding shareholders or partners should have an agreement that answers at least the following questions:

  • How much time and effort is each person expected to contribute?
  • How much capital will each person contribute?
  • What happens if the business needs more capital?
  • What happens if one person leaves the business?
  • What happens if one person dies?
  • Will the stock or partnership interest be bought back from the estate of the deceased or from the person leaving the business?

Starting the Business as a General Partnership Instead of a Limited Liability Entity

Under many states’ laws, the partners are jointly liable for the debts and obligations in general partnerships. If the business encounters a problem, all of your investment in the business—as well as all of your personal assets—is at risk. There are other legal options that avoid liability—corporations, LLCs and limited partnerships, for example.

Getting Involved in Litigation

Litigation fees can be astronomical, and they can quickly drain management time and resources. Consider alternative means of dispute resolution, such as mediation or arbitration. Or, if a reasonable settlement offer is available, think seriously about taking it instead of spending more time in litigation.

Ignoring Intellectual Property Issues

Even low-technology companies have intellectual property issues that may be important for the future success of the business.  For example, do you require your employees and consultants to sign Confidentiality and Invention Assignment Agreements?  Have you registered for a trademark for an important company logo or product?  Do you put copyright notices on your written information? Are your trade secrets adequately protected?

Not Getting an Experienced Attorney

Every growing business faces issues that require the services of an experienced attorney. Issues such as stock-option plans, employee negotiations, state and federal tax rates and intellectual property rights all require a business lawyer experienced in representing start-up and emerging companies. And though such attorneys charge more than generalists do, the money you spend on experience will save you time, aggravation and money in the long run.

In previous posts, I gave you insight on the best way to initiate a claim for injuries incurred in a car accident. Read on to discover how a lawyer negotiates compensation for your injuries and what happens once a settlement is reached.

Letter of Demand

As we previously discussed, patiently waiting to know the permanent effects of your injuries is essential in maximizing the compensation you will receive. After collecting all the information about your injuries, your lawyer will write a demand letter to start negotiating a settlement with the insurance company. This letter explains:

  • Why the other person is responsible for your injuries
  • The extent of your injuries and how you’re likely to be affected by them in the future
  • What type of medical treatment you’ve had and need to have in the future and how much it will cost
  • Current and future income losses
  • Any other damages you’ve suffered as a result of the accident

The settlement package sent to the adjuster includes all the documentation you’ve given your lawyer to support your claim. This letter demands a specific sum of money to settle your claim. You and your lawyer already have an idea of how much your claim is worth. The amount demanded may be much higher than that because it allows room to negotiate downward as talks with the insurance company continue.

It may take a month or two for the insurance company to respond to your lawyer’s initial demand letter. Insurance companies have many layers of management. They will all be involved in responding and approving things. Negotiations will likely move very slowly, as your lawyer and the adjuster talk back and forth.

The adjuster will probably make an offer to settle your claim for far less than the amount you requested in your demand letter. Your lawyer then suggests an amount lower than your original demand but higher than the adjuster’s offer. This process continues until your lawyer and the adjuster hit on a settlement everyone can live with.

Settlement

Your lawyer and the insurance adjuster have come to an agreement on how much you’ll be paid. When you receive the settlement check, you have to sign a written document saying you won’t seek any more money from the company for your claim. This is called a release. Your lawyer can help you read through this release and answer any questions you may have about what the release covers.

Your lawyer takes her attorney’s fees first out of the settlement money. Then she deducts your case’s expenses. What’s left is your payment. You should expect your lawyer to give you a detailed accounting of any costs deducted from your payment. Your lawyer should answer any questions you may have about how the fee was calculated.

The large majority of insurance claims are settled at the adjuster level. If your lawyer and the insurance adjuster are unable to settle your case, however, it will be necessary to take it to trial.

I previously covered what to do immediately after being involved in an auto accident, but what route should you take when you’ve been injured? Here, we let you in on what you should know and do to ensure you are fairly compensated for your injuries.

Who is Responsible?

When you’re injured due to someone’s negligence, that person is responsible. This usually means you will have to deal with that person’s insurance company. When the person is not insured or doesn’t have enough insurance to pay you, your insurance company may pay some or all of your damages ¾ if you have the appropriate coverage. Once your insurance company is involved, you’ll likely deal with its insurance adjuster, the person who decides what your claim is worth.

Dealing with an insurance adjuster can be frustrating and complicated. Plus, you must never forget this: The insurance adjuster is trained to pay you the least amount possible to increase the insurance company’s profits.

It’s important that you receive the most money for your claim, and that is why it’s a good idea to hire a lawyer to help you negotiate with the insurance company.

Provide Proof for Your Claim

Your lawyer will initiate your case by informing the adjuster that you have been injured and will be filing a claim. Your lawyer will have to investigate the facts of your injury. Having copies of the following items can help your lawyer expedite the process:

  • Police report
  • Traffic tickets given to the other person
  • Photos of the accident scene
  • Witnesses’ names, addresses, phone numbers and reports of what they saw
  • Medical records and bills
  • Photos of your injuries
  • Wage stubs proving how much you made at the time of the accident and how much work time you missed due to your injury
  • Any other papers/proof of how your injury has negatively affected your life

You should expect your lawyer to hold off on initiating serious negotiation with the insurance company until your injuries stabilize and reveal what the permanent effects are. This can take months or even years. Don’t pressure your lawyer into negotiating too soon with the insurance company; it’s a mistake to settle your claim before you know the full extent of your injuries.

 

Bright lights flashing. Loud voices. Information exchanges. Even a simple car accident can turn into a major headache, as it often involves dealing with injuries, insurance companies, lawyers, and other parties who remember events differently. Whether you’re the offender or the innocent party, there are certain steps one should always take immediately after an accident.

Here are 10 things to do after a car accident:

 

  1. Make sure everyone is OK. Before concerning yourself with vehicle damage and exchanging insurance information, make sure that all parties in the accident are OK. Always call the police.
  2. Do not apologize. Yes, politeness is an admirable trait, but in this situation, a simple “I’m sorry, I wasn’t paying attention,” can be seen as an admission of liability.
  3. Start talking. To witnesses, that is. Get all the relevant contact information of any bystanders that may have seen the accident.
  4. Call your insurance company. Report the incident to your insurance company, even if you are completely at fault. Also, keep track of the time and money spent pursuing your claim.
  5. Take pictures. Having proof of the damage to the car will help for insurance purposes and serve as evidence, if there is a dispute down the line. Always keep a disposable camera in your glove compartment for these situations.
  6. Take notes. Taking pictures and detailing the accident and the nature of your injuries as soon as possible can serve to expedite the process.
  7. Get a property damage figure from your insurance company. This valuation will serve as the amount you can recover or to replace your car. If you are not happy with the figure from your insurance company, seek outside quotes.
  8. Be careful who you talk to. If the other party’s insurance company contacts you, your best response is to contact your insurance company or attorney. Why? Because they are better equipped to handle the situation.
  9. Don’t automatically accept the first estimate or offer you get. Jumping the gun on the settlement can be a costly mistake.
  10. Get an attorney. If there is a dispute with your insurance company, or the seemingly simple car accident suddenly turns complicated, seeking legal counsel is your best bet.

Jeronimo Valdez is an experienced business trial lawyer and Founder & Managing Partner of Valdez│Washington LLP, where he represents clients throughout the country in a broad range of matters including life-altering personal injury, complex contract disputes, non-compete litigation, complex business torts, and other business-related problems. He has successfully tried numerous cases to verdict, recently winning a week-long jury trial in a business dispute resulting in a unanimous defense verdict for his client and a multi-million dollar award for his side. As a result of his many successes, he has been selected by Texas Monthly Magazine as a Texas Super Lawyer “Rising Star,” which is a designation reserved for the top up-and-coming Texas attorneys who are 40 or younger (less than 2.5% of Texas Lawyers are selected). He was also selected by the National Trial Lawyers Association as one of the top 40 lawyers in Texas.  Additionally, Jeronimo has served as General Counsel of an international company and currently serves as outside general counsel to leading businesses and local chambers of commerce and was awarded the Greater Dallas Hispanic Chamber’s prestigious 2010 Quality & Excellence in Entrepreneurship Award.

Almost everyone has heard the phrase “Get it In Writing”!  The reason for that is simple: If the parties fail to document their agreement in writing, there is always room for future disagreements.  And more often than not, failing to draft good written agreements leads to serious (and often expensive) disputes.  Nowhere is the need for written contracts more important than in your business.  One of the most common mistakes that a business owner can make is not having good written agreements.  Think about it – your landlord isn’t going to rent you a space in their building without requiring you to sign a lease, correct?  You can’t buy a car at a reputable dealership without signing a contract.  Obviously, the list goes on and on.  So why would you do business without requiring signed contracts from your purchasers, vendors, and/or business partners?  Below are some guidelines to consider when deciding if and when a contract is necessary.

External Agreements:  Dealing with folks outside of your own business.

All of your important business agreements need to be in writing.  Oral agreements are very difficult to enforce, and they often leave you with no recourse for compensation or legal action if the other side fails to keep their end of the bargain.  Many times the failure is not intentional, but rather, is due to each party’s fading memory of what they actually agreed to.  A good contract can avoid that situation entirely.  While many small sales and/or purchases don’t require a contract, larger deals should always be put in writing.  The size of the deal obviously varies from situation to situation.  But if it the agreement is important to you, for whatever reason (whether its money or principle), put it in writing.  Make sure your contracts are well thought out, drafted in your favor, and give you flexibility and protection.  If the other side breaches the contract

Internal Agreements: Not Clearly Documenting Partners’ Rights and Responsibilities

Founding shareholders or partners should have an agreement that answers at least the following questions:

  • How much time and effort is each person expected to contribute?
  • How much capital will each person contribute?
  • What happens if the business needs more capital?
  • What happens if one person leaves the business?
  • What happens if one person dies?
  • Will the stock or partnership interest be bought back from the estate of the deceased or from the person leaving the business?

Obviously there is no single, “one size fits all” contract for every situation.  It is important to seek the advice of an experienced business attorney to help guide you through your particular situation and draft a solid contract that fits your needs.  Investing a small amount up front often saves considerable time and money in the long run.

In previous posts, I explained the different types of entities available to individuals who want to start (or improve) their businesses.  As explained before, probably 99% of small and mid-sized businesses operate as one of five basic business entities:

  • Sole Proprietorship
  • General Partnership
  • Limited Partnership
  • Limited Liability Company
  • Corporation (an “Inc.”)

Today, we will compare two of those common business entities.

The Sole Proprietorships Versus The Limited Liability Company

As a sole proprietor (also known as a “DBA”), you are personally liable for all monetary obligations that you incur, including things such as business debts and/or legal judgments against your business.  For example, if you breach a business contract or fail to repay a business loan, your personal assets are at risk—regardless of whether the contract/loan was related to your business.  In addition, if an employee happens to win a judgment against the business for things such as wrongful termination, etc., the employee’s lawyer can go after your personal assets, which includes personal property such as bank accounts, and (in some instances) your homes and/or cars.  Some businesses—especially some that are just starting out—don’t mind being exposed to unlimited personal liability.  But for the vast majority of businesses, the liability protections provided by a Limited Liability Company (“LLC”) are invaluable.

By doing business through a properly formed LLC, you can greatly reduce the above-described risks.  For liability purposes, the law treats an LLC as separate and distinct entity from the owners.  In an LLC, an owner is called a member. For the most part, an owner may only lose what he or she invested in the LLC.  Except where a personal guarantee is involved, an owner normally isn’t liable for the contracts and/or loans made to the LLC.  This means a creditor or judgment-holder can’t seize an owner’s personal assets. So let’s return to the earlier example, but with an important variation.  Suppose you form an LLC rather than simply registering your sole proprietorship as a “DBA.”  This time, if the employee wins a $100,000 verdict, you generally won’t be personally liable for paying the money (assuming you weren’t the one that committed the act). Be aware, however, an LLC doesn’t give you a 100% safety net.  You can still face personal liability if you’re the person who intentionally causes harm to someone—such as sexual harassment or intentionally injuring a customer.  That’s also true if you personally guarantee a business obligation like a bank loan.

Making Your Choice

In most cases, the LLC has a huge advantage over a simple sole proprietorship “DBA.”  An LLC is fairly simple to form, and it gives you maximum flexibility in how you structure your business while offering important personal liability protection.  If you’re already set up as an LLC, it is probably best to stick with it. If, however, you’re just starting out or you’ve already formed a sole proprietorship or general partnership, now is a good time to think about whether to convert to an LLC.

What exactly is a DBA?

The term “DBA” is simply an abbreviation for Doing Business As.  A DBA is technically nothing more than a document filed with a county or state government agency that informs the general public two important things: 1) the exact name of the business, and (2) the identity of the business’s owners.  At the county level, it’s referred to as a DBA, but at the state level, it’s referred to as an Assumed Name Certificate.

When is a DBA needed?

There are a number of times when a business is required to file a DBA or an Assumed Name Certificate.   For example, if you are a sole proprietor (or partnership) and don’t want to operate under your personal name, you’ll have to file a DBA in each county where you do business.   By the same token, if you have formed a business entity (i.e., a corporation or an LLC) but you want to do business using a different name, you’ll have to file an Assumed Name Certificate with the Texas Secretary of State.

How do you do it?

Filing the DBA or the Assumed Name Certificate is pretty easy.  The county clerk’s office provides a simple DBA form that the business owner completes files with the county clerk’s office.  Registering you’re Assumed Name Certificate with the State is just as easy.  The form (Form 503) can be downloaded at http://www.sos.state.tx.us/ and mailed to the State Office.

Where can I get more information?

Dallas County: http://www.dallascounty.org/department/countyclerk/countyclerk.php

Texas Secretary of State: http://www.sos.state.tx.us/

A final Note on Liability Protection:

It’s important to note that “registering” a DBA is not the same as forming an LLC or a Corporation.  The DBA provides absolutely no liability protection for the business.  On the contrary, the DBA registration is intended to protect the public from the business, rather than protecting the business from the public.  You should seek the advice of a qualified attorney to help ensure that you and your business have adequate liability protections.

 

Jeronimo Valdez is an experienced business trial lawyer and Founder & Managing Partner of Valdez│Washington LLP, where he represents clients throughout the country in a broad range of matters including life-altering personal injury, complex contract disputes, non-compete litigation, complex business torts, and other business-related problems. He has successfully tried numerous cases to verdict, recently winning a week-long jury trial in a business dispute resulting in a unanimous defense verdict for his client and a multi-million dollar award for his side. As a result of his many successes, he has been selected by Texas Monthly Magazine as a Texas Super Lawyer “Rising Star,” which is a designation reserved for the top up-and-coming Texas attorneys who are 40 or younger (less than 2.5% of Texas Lawyers are selected). He was also selected by the National Trial Lawyers Association as one of the top 40 lawyers in Texas.  Additionally, Jeronimo has served as General Counsel of an international company and currently serves as outside general counsel to leading businesses and local chambers of commerce and was awarded the Greater Dallas Hispanic Chamber’s prestigious 2010 Quality & Excellence in Entrepreneurship Award.