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Pillars of Strength: Formatting a corporate signature to protect the “corporate veil.”

Author By Christopher P. FinneyPosted on

Two other posts (here and here) address techniques useful in protecting personal assets from the creditors of a corporate entity (I.e., limited liability company or corporation).  This post addresses specifically how to sign documents to aid in that effort to avoid “piercing the corporate veil.”

The key is to sign documents not in your personal name, but in the name of the corporation, to avoid essentially personally signing for or guaranteeing corporate debt.  In other words, Courts are going to ask “who is a party to this contract?” and how you sign will be indicative of your intention of who is standing behind the contractual obligation.

Thus, the proper way to sign all documents for the corporation is with a corporate (not individual) signature as follows:

XYZ, LLC,

an  Ohio limited liability company

By:____/signature/___________________

Its: ____/title or signer/_______________

 

Read below two related topics:

Pillars of Strength: Three tips for protecting your personal assets when forming and operating a company

Author By Christopher P. FinneyPosted on

When clients approach us for business formation, one of their concerns is protecting their personal assets from a business misfortune, either simple financial failure or a catastrophic situation creating an unexpected liability.

We tell clients, first, that no undertaking is made without some degree of risk.  In shorthand, we say “if you want to avoid all potential liability, don’t get out of bed in the morning.”

But with that as background, it is possible to carefully limit  the exposure one is undertaking with full consideration given to three essential layers of protection:

  1. Engage in good practices.  Despite popular lore, most legal liability arises from either from contractual undertakings — i.e., voluntarily entering into an oral or written agreement — or negligence, i.e, failing to follow the expected standard of care in some function, whether driving a car or manufacturing a product.  As to contracts, be careful what you agree to.  As to negligence claims, if your touchstone is proper hiring, proper training, proper operation and proper supervision, and that you maintain your equipment and real estate in good condition and repair, your risks should be minimal.
  2. Buy appropriate insurance.  Then, consult with your insurance agent and purchase insurance appropriate to insure the risks that you undertake and that are inherent in your operations.
  3. Properly operate under a corporate entity.  Finally, a corporate form, properly created and respected, shields your personal assets from contractual and tort claims.  Read more here about respecting the corporate entity.

Read below two related topics:

Please contact us to learn more about how to protect your assets when forming and operating a business.

Pillars of Strength: Effectively using your corporate form for limited liability protection

Author By Christopher P. FinneyPosted on

Our clients form and do business in the name of corporations and limited liability companies for a variety of reasons, but one primary motivation is to achieve the benefits of limited liability protection that the entity offers.

Optimally, limited liability protection means that the exposure of the investor/owner in a corporate entity is limited to his capital contributions and personal loans to the company, and that his personal assets beyond those are not exposed to voluntary and involuntary liabilities, which are addressed immediately below.

  • Voluntary liabilities are just like they sound — those undertaken willingly: e.g., a real estate lease, a contract to buy equipment, a bank line of credit, and a professional services contracts. Primarily they arise from contractual relationships.
  • Involuntary liabilities are not typically contractual, but are tort and statutory liability such as industrial accidents, employment discrimination claims, and regulatory enforcement actions.

For both types of liabilities, a member of a limited liability company or shareholder of a corporation can cause (intentionally or unintentionally), the “corporate veil” to be pierced.

This entry explores ways to protect that “corporate veil” of limited liability protection, but before we get there, one more introductory comment is appropriate.  Frequently clients tell me something to the effect of: “Oh, why bother with a corporation, the Courts will bypass that anyway and come after my personal assets.”

As a broad principle, this simply is not true.  Ohio Courts and courts throughout the nation have been pretty vigilant in protecting the corporate veil of owners of corporations and limited liability companies.  The protection is powerful, and very difficult to penetrate.

So, forming and properly respecting a corporate form is an important “Pillar of Strength” of your investment strategy for your business.  Here are a few tips to assure that the “corporate veil” is protected of your business entity:

  1. Read here the proper way to sign every contract your company signs to assure respect of the corporate entity.
  2. Carefully consider any request to sign a personal guarantee, as this will indeed give rise to full personal liability.
  3. Every contract your company signs should clearly be in the name of the company (not your name personally) and use the corporate form of signature (see #1, above).
  4. On your printed materials (letterhead, business cards, brochures) note your company name as “XYZ, Inc., an Ohio corporation.” This is to assure for both voluntary and involuntary liabilities you have properly identified to everyone with whom they are dealing.
  5. Do not use the corporate checking account as a piggy bank for your personal finances.  Take money out only as regular pay checks or corporate distributions.  So, don’t pay personal expenses from the account (such as a dry cleaning bill), or put non-corporate income into the account.  This “no-no” is a key element of the “alter ego” analysis in which Courts will engage when a Plaintiff undertakes the difficult task of piercing a corporate veil.
  6. For corporations, have annual meetings and other meetings required by the corporate documents, an d maintain corporate minutes of those meetings and approvals of significant corporate contracts and occurrences.  The Ohio limited liability company statute dispenses with this requirement for LLCs.

Read below two related topics:

Please contact us to learn more about how to protect your assets when forming and operating a business.

 

How can Chapter 13 Bankruptcy help me keep my home?

Author By Finney Law FirmPosted on

One of the most common questions people ask when considering filing for bankruptcy is whether or not they can keep their house. This makes sense as a house is often the most valuable asset you own and the place you live and raise your family. Many people fall behind on their payments due to an unexpected income reduction due to a job loss or illness. Later, they find a new job and/or their financial situation changes and they need a way to catch up their house payments to stop the bank from foreclosing against their property. Chapter 13 Bankruptcy offers homeowners a way to protect their homes and stop foreclosure lawsuits in their tracks.

When you file Chapter 13 Bankruptcy you receive the protection of the automatic stay. The automatic stops any creditor’s attempts to begin, continue, or complete a foreclosure lawsuit in state court. The automatic stay goes into place immediately after you file and will stop a court ordered sheriff’s sale from proceeding. The automatic stay allows you to breathe easier knowing that your house will not be lost on the courthouse steps.

Chapter 13 offers many benefits that allow you use your income to repay some or all of your debt. You may also have the benefit of paying your unsecured creditors back a reduced amount that is based on your income. Your bankruptcy attorney will propose a Chapter 13 Plan that allows you to pay back your past-due mortgage payments and penalties over the course of 36 to 60 months depending on your income. You are still responsible for making your standard monthly mortgage payment in addition to your new additional Plan payment, but your back payments are spread out over the course of the Plan to make them affordable.

Chapter 13 can be beneficial for you if you have a 2nd mortgage that is not secured against your property because your house is worth less than the balance of your first mortgage. An example is if your 1st mortgage is $100,000 and you have a 2nd mortgage or home equity line of credit for $20,000, and your house is only worth $85,000, you may be able to ‘strip’ off the 2nd mortgage and only pay back a percentage of the amount owed on the 2nd mortgage. At the end of your Chapter 13 your 2nd mortgage is eliminated and you will only owe the balance on your 1st mortgage. Please consult your bankruptcy attorney to see if you would qualify.

If you successfully complete your Chapter 13 by making all of your plan payments, you debt will be discharged and your mortgage payments will be deemed current. From this time on you can continue to make your normal monthly payments until your mortgage is paid off. You will also have your other eligible debts discharged as well. Chapter 13 is a great vehicle for eligible homeowners to use to save their homes and reduce their debt. Contact Finney Law Firm today for a free consultation to see if Chapter 13 bankruptcy is the right option for you.

Estate “Tax” Planning

Author By Isaac T. HeintzPosted on

Unless a couple has assets in excess of five million dollars, estate taxes are no longer a concern for Ohio residents.  This is because Ohio has done away with its estate tax, and the Federal estate tax exemption is now over five million dollars.  For such couples, the new estate “tax” planning is income tax planning.  The income tax planning includes allocating assets between the couple to take advantage of the step up of basis on each of the individuals passing in order to minimize any capital gains taxes due.

Landlords may be liable for safety of tenants’ guests

Author By Bradley M. GibsonPosted on

Chapter 5321 of the Ohio Revised Code, known as the Landlord-Tenant Act, governs the rights and duties of landlords and tenants in Ohio.  Among other things, the Act requires Landlords to maintain rental properties in a fit and habitable condition, and to keep all common areas of the premises in a safe and sanitary condition.  Recently, in Mann v. Northgate Investors, LLC, the Ohio Supreme Court was asked to determine whether these duties extend not only to tenants, but also to tenants’ guests.

Lauren Mann filed the lawsuit after suffering injuries at Northgate’s apartment building. Mann had been visiting a friend who was a tenant in Northgate’s building. She left her friend’s apartment around 11:00 p.m., and descended two flights of stairs in the dark because there were no functioning lights in the stairway.  When she reached the ground floor, Mann stumbled into a glass panel adjacent to the exit doors, thereby injuring herself.

In her lawsuit, Mann alleged that Northgate negligently failed to maintain adequate lighting for safe ingress and egress into the premises in violation its duties under R.C. 5321.04(A)(3).  The trial court, however, granted summary judgment for Northgate, finding that the Landlord-Tenant Act was intended to establish duties between landlords and tenants, not their guests.  The trial court determined that because Mann was classified as a “business invitee,” Northgate only owed her a duty of ordinary care. The trial court further held that the darkness on the stairs was open and obvious, and that the duty of ordinary care is negated when the hazard posed to the invitee is open and obvious.

Ohio’s 10th District Court of Appeals reversed the trial court. Unlike the trial court, the 10th District determined that guests are entitled to protection under the Landlord-Tenant Act. The 10th District further held that the Landlord’s violation of its duty to keep the common areas safe constitutes negligence per se, meaning that the open and obvious doctrine did not apply to negate the landlord’s duties.

The Ohio Supreme Court agreed to hear the case because the 10th District’s opinion conflicted with the Ninth District’s decision in Shumaker v. Park Lane Manor of Akron, Inc. The Ohio Supreme Court issued its decision on February 12, 2014, in which it held that “a landlord owes to a tenant’s guest the same duty that the landlord owes a tenant.” Therefore, the Court found that Northgate owed a duty to Mann under R.C. 5321.04(A)(3) to keep the common areas of the premises in a safe and sanitary condition. The Court further held that a landlord’s violation of this statutory duty constitutes negligence per se and obviates the open- and- obvious- danger doctrine.

This case should serve as reminder to landlords of their duties under the Landlord-Tenant Act. Landlords who fail to comply with their statutory duties risk facing lawsuits not only from their tenants, but to guests who are properly on the premises. The Finney Law Firm has extensive experience in both residential and commercial leasing disputes. Please contact our office if you have any questions about current or prospective leasing arrangements.

Will Ohio’s Supreme Court reliberalize Ohio’s Open Meetings Act?

Author By Finney Law FirmPosted on

Once considered a model for open and accountable government, Ohio’s Open Meetings Act (R.C. § 121.22, et seq.) was intended to be “liberally construed to require public officials to take official action and to conduct all deliberations upon official business only in open meetings unless the subject matter is specifically excepted by law.”

What appears to be pretty straightforward language, telling the courts to read the statute in favor of open government, the courts have slowly whittled away at what had been a model law.

But there is hope. Adam Stewart v. Board of Education of Lockland School District challenges a school board’s decision to hold an employee disciplinary hearing in executive session (non-public), even though the employee himself demanded a public hearing. The trial court and court of appeals relied on a 1980 Ohio Supreme Court case that interpreted the law to allow the School Board to hold a non-public hearing despite the employee’s demand.  So where is the hope? The Ohio Supreme Court has agreed to hear the appeal of the decision in the Stewart case. Stewart will have the opportunity to ask the Court to revisit its 1980 decision and re-liberalize Ohio’s Open Meeting Act.

Rental registration and inspection program in Mt. Healthy defeated

Author By Christopher P. FinneyPosted on

The Finney Law Firm was contacted early this year by a group of landlords owning single family homes in the City of Mt. Healthy.

The City had begun a mandatory rental registration and inspection program for single family homes.  While the City fathers invariably thought the intrusive and expensive program was a good idea, as a matter of law it imposed a scheme of warrantless searches in violation of the 4th Amendment to the United States Constitution.

Finney Law Firm filed suit in early April.  Within days, the City of Mt. Healthy announced it was suspending enforcement of the Ordinance and within weeks Council met and formally repealed the offending Ordinance.

Our clients remain concerned with the constitutionality of the replacement legislation, and will continue to pursue that through conclusion, but we are pleased our public interest litigators addressed this unconstitutional action so quickly and decisively.

We are growing to meet your needs

Author By Christopher P. FinneyPosted on

Like your business, the Finney law Firm has a business plan — to grow our services to meet your needs both in volume of service delivery as well as breadth of practice areas.

In March, Chris Ragonisi — an experienced labor and employment attorney — agreed to become “of counsel” to our firm to serve this area of need for our clients.

In April, Brad Gibson, a gifted commercial and public interest litigator signed on as a litigation associate.

Finally, to accommodExpansionate this growth, we had to add two new offices and a wing for more paralegals.  The build-out has begun!

We are excited to bring these professionals along to meet our clients’ needs.

And, we have more announcements coming soon!

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