The Jordan McNair Safe and Fair Play Act and Maryland Student-Athlete NIL Rules

In this generation of young adults, anyone can become Internet famous, and almost anyone can make money off of it, except for student-athletes.  This summer, Maryland enacted the Jordan McNair Safe and Fair Play Act, which aims to protect student-athletes from harm to their physical and financial wellbeing.  One of its provisions, which will go into effect in 2023, will allow student-athletes to commercialize their NIL.  Under the new NIL rules, student-athletes will be able to create their own businesses, endorse products, operate training clinics and camps, and sell autographs.  The business deals must not extend beyond the student-athlete’s graduation date, and they must not depend on the student-athlete achieving a certain level of athletic performance.  Student-athletes stand to realize considerable financial gain under the new NIL rules, since many of them have millions of fans on social media who would happily buy products endorsed by their favorite college athletes.

Anyone who is establishing a business entity should do so with the help of a business law attorney.  This is especially true for student-athletes, most of whom are in their early 20s, if not younger.  If you have seen the ESPN documentary series about professional athletes who quickly lost their fortune because of fraudulent or risky endorsement deals, you will know how important it is to work with a lawyer who is on your side.  It isn’t fair for universities to profit from student-athletes’ NIL at the student-athletes’ expense, but it also isn’t fair for unscrupulous business partners to walk away with all the money from endorsement deals, either.

Let Us Help You Today

The law has just acknowledged that college sports are big business, and if you are a businessperson, you should work with a Washington DC business lawyer.  Contact Tobin O’Connor Concino P.C. for help today.

Resource:

baltimoresun.com/sports/college/bs-sp-ncaa-nil-rights-college-athletes-maryland-20210701-bzvorxtqojh6bj4zdl2ktgsqnm-story.html

The Lamentations of the Subway Franchisees

For many fast-food chain restaurants, the COVID-19 pandemic brought booming business.  While mall food courts and business district eateries sat empty for the better part of a year, long lines of cars snaked around the parking lots of anywhere that a drive-thru would dispense burgers, chicken, or other comfort foods for an affordable price.  When was the last time you saw a Subway restaurant with a drive-thru?  Before the pandemic, Subway was one of the most lucrative restaurant franchises on the market, despite that its franchisees paid the parent company eight percent in royalties, considerably higher than the royalties charged by most other franchisors.  The pandemic has not been easy on Subway franchisees, as many of them depend on a business lunch crowd or on travelers and commuters; what family stuffs their faces with Subway sandwiches while bingeing Netflix?

The pandemic is not the biggest reason that the fortunes of Subway franchisees has declined since the company hit peak revenue in 2015.  The bigger problem is differences of opinion between franchisees and Subway corporate.  For example, franchisees complain that the five-dollar footlong sandwich promotion is financially unsustainable, yet corporate has refused the requests of many franchisees who wished to stop offering the promotion.  Likewise, franchisees have expressed concern about the safety of the machines used to make cheese melts, a relatively new menu item, and about the legal liability involved if an employee gets injured by one of the machines, but Subway has not been receptive to franchisees’ concerns.  Worst of all, Subway has tried to increase royalties, offering franchisees a Scylla and Charybdis set of alternative conditions if they refuse to pay the higher rate.

Contact Us Today for Help

If you are considering opening a restaurant franchise for the first time, a Washington DC business law attorney can help you anticipate and resolve potential problems with the franchise agreement.  Contact Tobin O’Connor Concino P.C. for help.

Resource:

thetakeout.com/subway-wants-25-percent-more-payment-from-franchisees-1846982858

What Does Void Mean?

Contracts that are void mean they cannot be enforced by either party. Essentially, it’s a contract that is no longer able to be used, and the courts will look at it like there was never a contract to begin with. One issue that can lead to a contract being void is the subject matter of the contract being illegal in the particular state or throughout the country. Depending on the terms, and what aspect was illegal, one or both parties could be facing criminal charges.

What Does Voidable Mean?

With a voidable contract, one party can be bound by the contract terms while the other party has the right to change their mind. In other words, they can cancel the contract whenever they want. Another situation that could render a contract voidable is mutual mistake or when important material is missing from the contract.

An example of a voidable contract is one involving a minor. Minors can enter into contracts, but they can also decide to breach the terms without legal repercussions. There are other parties who cannot enter into a legally binding contract either, including someone who lacks the mental capacity or is intoxicated or on drugs at the time the contract was drafted.

Main Differences Between Void and Voidable

With a void contract, it’s invalid from the very start. It doesn’t require one party to back out or challenge its validity. In this case, neither party can enforce a void contract since it’s viewed as though the contract never existed. With a voidable contract, it doesn’t become invalid until one party asserts a legal reason for canceling or revoking it. This means without one party raising a legal objection, the contract would remain valid.

Contracts that are no longer enforceable become void. If one party uses a tactic like fraud or coercion, the contract will become voidable as well. With a void contract, the contract can’t become valid just by both parties agreeing, as you can’t commit to doing something illegal. Voidable contracts can be made valid if the party who isn’t bound agrees to give up their rights to rescission.

Examples of void contracts could include prostitution or gambling. If someone enters into a contract and is suffering from a serious illness or was mentally incompetent, it would be void because the party lacked legal capacity to enter into a contract.

Contact a Washington DC Business Law Attorney

If you need assistance with drafting a legally enforceable contract or need to know whether an existing one might be void or voidable, you need to speak with a Washington DC business law attorney as soon as possible. Contact Tobin O’Connor Concino P.C. at 202-362-5900 to schedule an initial consultation.

https://www.tobinoconnor.com/why-you-should-never-breach-your-district-of-columbia-contract/

If you are having issues with an existing business contract or you feel the other side is in breach, contact a knowledgeable Washington DC business lawyer who can advise you on your legal options first. In the meantime, here’s a look at some of the reasons you don’t want to breach a contract. 

It Could Ruin Your Business Reputation

Especially if you are a small business owner, breaching a contract could tarnish your reputation in the local business community. It could also hurt your image as an individual as well. You don’t want to develop a reputation as a business (or person) that others want to avoid because they decide to breach their contract when something doesn’t go exactly right.

Could Lead to Litigation

One of the most obvious risks with breaching a contract deals with the potential for litigation. If you breach the contract because you now aren’t happy with some of the contract’s terms, you could be facing litigation from the other side who pursues a breach of contract claim against you.

Takes Away from Your Business

If you are busy dealing with a breach of contract claim, that’s time taken away from your business. You are not only distracted while at your business, you will need to take off a lot of time for various court appearances and hearings, including depositions and possibly a mediation or arbitration hearing.

Added Legal Costs

If you breach a contract and need someone to defend you, you could be expending a lot in legal fees and costs trying to defend your business. If you went to an attorney beforehand, you might’ve been able to renegotiate the contract terms or figure out your legal options before facing costly defense costs.

You Could Be Paying Additional Damages

In addition to paying compensatory damages for a breach of contract, you could be paying consequential damages as well. The award is designed to put the non-breaching party back in the position they would’ve been in had the breach not occurred.

Defending a Breach of Contract Claim

If you do need legal assistance because you are being presented with a breach of contract claim, there are some defenses available depending on the circumstances. You may be able to argue that the contract is not enforceable because it’s very unbalanced and clearly favors the side with the most bargaining power. This leads to some small businesses being taken advantage of.

To find out more about other defenses to a breach of contract, contact the Washington DC business law attorneys at Tobin O’Connor Concino P.C. at 202-362-5900 today to schedule a consultation.

https://www.tobinoconnor.com/pros-and-cons-of-starting-an-llc/

If you have questions on forming an LLC or another business entity, it’s important to speak with a District of Columbia business law attorney who can assist you with choosing the right business structure for your particular situation.

Pros of Forming an LLC

There are a number of pros with an LLC, which is why it’s such a popular business structure. One of the main benefits is the fact that an LLC offers some limited liability protection. This means members are not personally liable for the actions of the business, and personal assets are not at risk from the creditors of the LLC.

Another benefit with LLCs is the pass-through federal tax benefits. Unless an LLC decides otherwise, an LLC will be treated as a pass-through entity, which means profits are distributed to members without being taxed on a federal level. Members are required to pay federal taxes on their personal income tax returns.

LLCs offer flexibility in the management structure side of things as well. You have the option to have all members involved in the day-to-day business operations. Or, you can choose a manager, or managers, to run the business. Managers can be members themselves, or they can be hired from the outside. For people who aren’t well-versed in running a business, hiring outside managers can often be easier.

Cons of an LLC

Every business structure has its potential negatives, and LLCs are no exception. One of the biggest concerns is the fact that limited liability protection is just that — limited. If a judge rules that the LLC is not protected, it’s known as piercing the corporate veil. This can happen if you don’t separate personal transactions from business transactions for example.

If your LLC decides to be taxed as a partnership, it means the government will consider the members to be self-employed. You will be responsible for paying your Medicare and Social Security taxes, which are known as self-employment taxes.

Depending on where you plan to do business, some states require the LLC to be dissolved if a member dies, leaves the business, or goes bankrupt. The remaining members will be responsible for any remaining financial and legal obligations before the business is terminated.

If you are hoping to raise capital from investors, an LLC might not be the right option. Because there is not a strict business structure and because of the pass-through taxation, some investors may be hesitant about investing in an LLC.

Retaining a Washington DC Business Lawyer

If you need assistance with setting up a business entity, it’s recommended you speak with a District of Columbia business law attorney first. At Tobin O’Connor Concino P.C. in Washington DC, we help small businesses determine what type of business entity is best for your particular situation and business goals. Contact our office today to schedule a consultation.

https://www.tobinoconnor.com/what-does-piercing-the-corporate-veil-mean/

LLCs and corporations are both treated as separate legal entities from the individual people who formed them. Small LLCs and closely held corporations are the ones who are most likely to have their veils pierced. This means the company’s creditors can pursue the owners’ personal assets, including bank accounts, homes, investments, and more. Courts will not hold innocent people personally liable — only those individuals who are responsible for the LLC’s or corporation’s fraudulent or wrongful actions.

Reasons Courts Will Pierce the Corporate Veil

There are several reasons a court may order to pierce the corporate veil. These include:

• The company acted in a fraudulent or wrongful manner. For example, maybe an owner made business deals he or she knew the company couldn’t pay, recklessly borrowed money and then lost it, or acted in another dishonest or reckless way. The court may find there was financial fraud and therefore the limited liability protections shouldn’t apply.
• There was no real separation between a business and its owners. If a business’s owners do not keep a formal legal separation between the company and their own personal affairs, the courts may find the LLC or corporation is not really a true legal entity. They may view it as an alter ego of the owner. An example is when a business owner pays their own personal bills from the company’s bank accounts. Or they failed to follow the legal formalities set forth for corporations and LLCs. Or, maybe an LLC or corporation makes important decisions but fails to include them on the record in meeting minutes. These could lead the court to determine the owner is not entitled to the normal liability protections that a corporate business structure would be entitled to.
• If a business’s creditors are left with an unpaid court judgment or unpaid bills, and the above factors apply, a court will try to correct any unfairness and pierce the corporate veil.

What Factors Do Courts Look at When Deciding to Pierce the Corporate Veil?

Courts will start by looking at whether the LLC or corporation failed to follow required corporate formalities as required or engaged in fraudulent behavior. They will look to see if the business was inadequately capitalized, which means the corporation never had enough operating funds, which means the business was never really a separate entity that could operate on its own.

Contact a Business Law Attorney in Washington DC

If you want to ensure your LLC or corporation is not at risk for piercing the corporate veil, you need to speak with a knowledgeable Washington DC business law attorney. Contact our skilled team at Tobin O’Connor Concino P.C. at 202-362-5900 to schedule a consultation.

https://www.tobinoconnor.com/reasons-you-need-an-operating-agreement-for-your-llc/

Not every worker in your business may receive the same protections and benefits under applicable labor laws. There is a loose classification of workers into either exempt or nonexempt classes. Nonexempt employees enjoy the greatest protection under labor laws, while an exempt person, like an independent contractor, would be afforded the least amount of protection.

When an employer misclassifies someone as exempt, which could be an independent contractor or someone on salary, this strips them of benefits they are due. By reviewing your classifications, you can ensure you are not depriving someone of benefits and protections owed.

Independent Contractors

Some employers try to avoid paying benefits by classifying someone as an independent contractor. Classifying someone as an independent contractor or paying them via a 1099 does not automatically qualify them as such. The courts and the IRS use various tests for determining who is truly an independent contractor. For the IRS, some categories include financial control, behavioral control, and the relationship type.

The more control you have as the employer, the more likely it is that the IRS will see the person as an employee. The economic realities test examines whether the worker is economically dependent on the employer for continued employment to determine if there is an employment relationship. The Fair Labors Standards Act, which governs overtime and minimum wage, relies on the economic realities test.

Salary versus Hourly Employees

Another common misclassification deals with salaried employees. Whether or not an employee is exempt from overtime depends on the employee’s activities, not how they are paid. If you misclassify someone as a salaried employee, you may owe them back wages and overtime. Determining who is a salaried employee is fairly complex in Washington, D.C. as there are local and federal provisions that protect some categories of employees while exempting others.

Minimum Wage in Washington DC

As of July 2018, the current minimum wage in the District of Columbia is $13.25 an hour. This applies to all workers, no matter the size of the company. Under the new law, there will be a progressive increase to $15 an hour that is effective on July 1, 2020. It will keep increasing each year thereafter in proportion to the Consumer Price Index increase.

Tipped employees are subject to a different minimum wage. This year, the wage increased from $3.33 to $3.89 per hour. If the employee’s tips when added to the base minimum wage do not meet the required full minimum wage, you must make up the difference.

If you are paying your employees based on the lower federal minimum wage standard or not meeting your tipped employee’s gap, you could find yourself at risk for a lawsuit.

Washington DC Business Attorney

If you have questions on classifying employees, it’s important to speak with a Washington DC labor and employment lawyer. Contact Tobin O’Connor Concino P.C. at 202-362-5900 to schedule a consultation.

Resource:

does.dc.gov/service/office-wage-hour-compliance

People form LLCs because they are relatively easy and inexpensive to set up. However, if you don’t do any additional business planning, you run the risk that your LLC won’t function exactly like you imagined. Taking the extra step to draft a comprehensive operating agreement can prevent some potential internal disputes and save on litigation expenses.

Sets Forth Operating Guidelines

You can include a variety of management and operational details in your operating agreement. Do you want a manager-managed LLC or a member-managed one? How will voting rights work? What is the process if someone wants out of the LLC or wants to bring someone new in? Some of these are topics that can give rise to member disputes, so spelling them out ahead of time can reduce the potential for conflict.

Being able to plan ahead to reduce disputes, unexpected events, and misunderstandings is one of the main reasons to have an operating agreement. As time goes on, members may decide they want to take the business in a different direction and that goes against everything the company was founded to do. You can address a variety of issues in your operating agreement.

Helps Create Separation of the LLC from its Owners

An operating agreement can bring added formality to your LLC and help create even more separation between it and the members. This is important to ensure you are not held personally liable for the LLC’s debts and liabilities. All your business operations, finances, and activities must be separate from your personal accounts and owner activities. Having a signed agreement can set forth specific rules and operating practices that keep the LLC a separate legal entity with no question of co-mingling funds, etc.

Operating Agreements Can Address Uncomfortable Situations

No one wants to think about their own mortality, but what happens in the event a member dies? Or what happens if two members are married and suddenly divorce? These events can have a significant impact on your LLC and how things move forward. These are not necessarily easy topics to tackle, so addressing them ahead of time in an operating agreement can remove the personal and emotional elements from these business situations. In addition, it can protect the LLC if you are operating in a state that might suddenly make the estranged spouse a member. An operating agreement can protect you from suddenly having a new member that you do not want in your business.

Operating Agreements for Single Member LLCs

You might assume that if you’re a single-member LLC, you don’t need an operating agreement. You should still have one that addresses how things work if you bring in another member. It can also detail what will happen in the event you pass away or become permanently disabled. This decreases the burden for your loved ones who have to figure out how to handle things going forward.

Consulting a Washington DC Business Attorney

If you need assistance with your LLC and drafting an operating agreement, you need to speak with a knowledgeable Washington DC business litigation attorney. The team at Tobin O’Connor Concino P.C. have experience in all types of business organizations, including LLCs. Contact our office at 202-362-5900 to schedule a consultation.

Wrong Business Organization

Some small business owners set up the wrong business type for their needs, and their business may fail or become entangled in legal battles.  The legal battles could lead to you having to file for bankruptcy or incurring personal liability. Without establishing the appropriate legal rights, you could lose everything. This is why it’s important to explore whether a corporation, limited liability company, sole proprietorship, or partnership is the right business organization type for you.

Intellectual Property

There are a number of different issues that can arise around intellectual property. It can start with infringing on someone else’s trademark, copyright, or patent. You could face litigation if you use someone else’s trademark which is not a great way to get your business off the ground. In addition, if you don’t take the proper steps to protect your own intellectual property, you run the risk of a bigger company taking your ideas and filing first.

There is something also called a “patent troll.” These are people who troll small businesses looking for the use of products that are from a patent. They file lawsuits for compensation knowing the business will likely settle and pay something rather than proceed with a costly lawsuit. Your attorney can quickly determine whether it is a simple issue or something that is worth defending in litigation.

Litigation Costs

Don’t assume that potential litigation in a small business is limited to business disputes with vendors or other businesses. You could have an employee who makes a claim, or a customer/client that files a lawsuit. If you can afford to have a lawyer on retainer, it will help keep your overall legal costs down, as a skilled business lawyer can help resolve business disputes early on rather than you trying to figure things out while racking up expenses.

Competition

Small business competition can be fierce. This is likely to occur in your local neighborhood. You may run into issues with a competing business who tries to make trouble for you or turn you in for potential violations of local city ordinances. Check zoning rules to make sure everything is proper and by the book, so you can minimize the potential for someone else trying to derail your startup. In addition, all your employee hires should be legal, i.e., not underage or ineligible to work in the US, so you don’t’ give the competition another avenue to try and shut down your business.

Inadequate Liability Coverage

Being underinsured can be an expensive mistake for small business owners. You should always look to purchase higher limits than the required minimums, as you could have a host of potential situations where you need a good liability policy. If your business sees clients or customers, you are also at risk for a premises liability claim.

Retaining a Washington DC Small Business Attorney

If you have a small business or are in the process of starting one, it’s the ideal time to speak with a skilled small business attorney. Contact the team at Tobin O’Connor Concino P.C. at 202-362-5900 to schedule an initial consultation.

It’s important to properly prepare when starting a new partnership. You should also speak with a skilled Washington DC business dispute attorney to make sure you have a well-drafted partnership agreement in place. This is one of your best defenses in a partnership dispute.

Common Types of Partnership Disputes

Here are some of the more common disputes that arise in business partnerships:

• Breach of Contract: Breach of contract is probably one of the most common disputes in a partnership. You can have verbal and written agreements between partners, which is why having an expert draft your partnership agreement is so important.
• Misuse of Trade Secrets: Many businesses rely on confidential information that helps them gain an edge over their competitors. This can include proprietary information on technology, formulas, processes, etc. If one person uses this information without permission or uses it after they leave, it is misuse of trade secrets.
• Breach of Fiduciary Duty: Partners rely on each other keeping their commitment to further the business and put the business’ needs first. If one partner breaches their fiduciary duty, it will bring about a dispute.
• Failure to Distribute Work Loads in a Fair Manner: Partnerships vary as some may have silent partners who only contribute funds, while others have all partners involved in the day-to-day operations. A failure to fairly divide the workload could cause a dispute between partners.
• Disputes Regarding How to Use Resources: Conflicts can arise over the use of financial resources. Maybe one partner wants to purchase new equipment for the business and the other partners don’t feel it’s necessary.
• Failure to Define Authority: You need to have a clear understanding of who has authority and for what. A failure to define who is in charge of what will almost always open the door for a number of disputes as your business grows.

There are countless other types of disputes that can arise which require some legal research. For instance, there could be a dispute on who can be held liable for product liability claims or for reimbursing a customer’s damages due to injury.

What to Do When a Partnership Dispute Arises?

Once a dispute arises, it’s important to contact an experienced business litigation attorney as soon as possible. An attorney can review partnership documentation and determine if you have anything in place for dispute resolution and what your options are. Your attorney can also help you identify different methods available for dispute resolution. Alternative dispute resolution (ADR) can include options like arbitration or mediation.

Retaining a Washington DC Business Litigation Attorney

Partnership disputes often involve complex legal issues and may lead to a lawsuit. Contact the office of Tobin O’Connor Concino P.C. at 202-362-5900 to schedule a consultation.