LLC Creation Checklist for California

CaliforniaPreviously on the blog, we provided some general information about the formation requirements for various business entities. One of the most commonly utilized entities in California is the limited liability company (LLC). Generally speaking, the steps for forming an LLC in California include the following:

  • Pick a Name for the LLC. Selection of the name is limited by the California Revised Uniform Limited Liability Company Act (RULLCA). See California Corporations Code Section 17701.08. The name must contain the words “limited liability company,” or some permitted abbreviation of those words, i.e., “LLC” or “L.L.C.”

  • File Articles of Organization (Secretary of State Form LLC-1) with the California Secretary of State’s office and pay the associated filing fee. The type of management that is desired, i.e., manager-managed by one or more managers or member managed, is indicated by checking a box on the Articles of Organization, and should be carefully considered.

  • Designate an Agent for service of process. The agent shall be an individual that is a resident of the State of California, such as the company’s lawyer if a resident, or a corporate agent that complies under California law (Corporations Code Sections 17701.13(c), 1505) and whose capacity to act as an agent has not been terminated.

  • File a Statement of Information (Secretary of State Form LLC-12) with the California Secretary of State’s office within 90 days after filing the original Articles of Organization (biennially after that) and pay the associated filing fee.

Although some states have publication requirements for a newly formed LLC, California does not. California also does not legally require a newly formed LLC to prepare and file an LLC Operating Agreement. However, it is highly advisable to have an LLC Operating Agreement prepared (and negotiated if there is more than one member) before making any filings with the Secretary of State.

If you have any questions about forming a limited liability company, consult with an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses.  Contact us at (310) 277-7747 to see how we can help you with your business law needs.

Mergers and Acquisitions News: Staples Plans Merger with Office Depot

HandsPreviously on our blog, we discussed the differences between mergers and acquisitions, as well as the recent increase in merger and acquisition activity. There has been increased activity across different industries to adapt to new market dynamics linked to changes in technology. The newest major merger announcement has come from Staples, the office supply giant. In order to stay competitive with goliath’s like Amazon and Wal-Mart, Staples has announced a plan to purchase Office Depot for $6.3 billion.

Staples and Office Depot have tried to consolidate once before in 1996, but the Federal Trade Commission (FTC) stopped the merger over concerns that it would decrease competition and increase consumer prices.  A lot has changed in office supply market dynamics since then, which is precisely what the two companies will be arguing. Specifically, Staples and Office Depot are taking the position that online competitors and bigger store chains have increased competition and reduced prices for consumers, so a merger will also help them stay competitive. To back this up, Office Depot can show that between 2007 and 2013 its annual revenues fell by 36%.

In 2013, the FTC approved a merger between OfficeMax and Office Depot, which could bode well for a merger between Staples and Office Depot. That said, a merger between Staples and Office Depot would be almost twice as big. The merger between Office Depot and OfficeMax created a new company with combined revenue of $18 billion and over 2,500 stores.  A merger between Staples and Office Depot would create a company with combined revenue of $34 billion and approximately 4,400 stores.

The proposed merger is subject to antitrust regulatory approval, Office Depot shareholders’ approval, and other closing conditions. The deal is predicted to close by the end of 2015, but if it fails Staples will have to pay Office Depot a $250 million termination fee.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, contract, and real property claims. Contact us at (310) 277-7747 to see how we can help you.

U.S. Supreme Court Will Hear Takings Clause Case from California

wine-countryIn January 2015, the United States Supreme Court agreed to hear a property case that originated in California dealing with whether the Fifth Amendment of the United States Constitution protects the seizure of personal property as well as real property.

The case, Horne v. U.S. Department of Agriculture, has already been before the United States Supreme Court before. In 2002 and 2003, the U.S. Department of Agriculture (the “USDA”) forced the Horne family to take almost half of its raisin crop off the market to help keep rising prices down. The Horne family sued, arguing that the USDA’s demand amounted to a taking of personal property for which the Horne family was entitled to compensation, just like a taking of real property would. When the case first came before the United States Supreme Court, the Court agreed to hear the case, but its decision did not address whether the government’s raisin marketing order constituted a “taking” of private property.  Instead the Court ruled on a procedural matter, holding that the San Francisco-based 9th U.S. Circuit Court of Appeals had jurisdiction to consider the takings claim, reversing the 9th Circuit’s finding that the claim had to be heard by the Court of Federal Claims.

The case went back to the 9th Circuit Court of Appeals, which ruled that there was no taking because the Takings Clause rule applies only to real property. The Horne family appealed, and the case will go before the United States Supreme Court once again. Horne v. U.S. Department of Agriculture, 750 F. 3d 1128 (2014).

The Takings Clause prohibits the Federal government from taking real property for public use without just compensation. The Supreme Court’s decision in this case can have major implications for business owners and farmers subject to government market orders.  However, the expansion of 5th Amendment protections to personal property could also set the stage for more federal lawsuits and claims that certain government regulations amount to takings of personal property.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, contract, and real property claims. Contact us at (310) 277-7747 to see how we can help you.

Cardinal Change vs. Abandonment

Previously on the blog, we defined what constitutes a cardinal change in a construction contract. Importantly, California is one of the few states that differentiates between a cardinal change and the related legal theory of  “abandonment.”  It is important for property owners and contractors to understand the difference and the implications of both.

A cardinal change is a change that goes beyond the permitted changes detailed in the contract.  It is usually a request so far outside the scope of the original contract that it frustrates the very purpose of the contract (click here for examples from our previous blog).

“Abandonment” occurs when a property owner is said to have “abandoned” a project or property.  Abandonment can be shown where parties fail to follow change order procedures, when the final product differs substantially from the original contract, and even when there are impermissible cardinal changes.

The legal implications of cardinal changes and abandonment, and specifically the remedies and damages that are available to both, provide that a contractor may recover damages that are a result of excessive, owner-directed changes to a project, beyond what the parties could have reasonably anticipated at the time of contracting.

In fact, in most jurisdictions the two terms are sometimes used interchangeably.  However, according to the California Supreme Court, the two doctrines are “fundamentally different” and the scope of damages available also differ.  This nuanced issue in construction contract law may seem small, but it can have a significant affect on the amount of damages a contractor may recover.

In Amelco Electric v. City of Thousand Oaks, 15 Cal.Rptr.2d 900 (2002), the California Supreme Court held that under an abandonment claim, a contractor is entitled to recover the total cost (less payments received) for work both before and after the contract was abandoned. Under a cardinal change claim, however, the contractor is only entitled to breach of contract damages for the additional work constituting a cardinal change.

If you have any questions about construction contracts, consult with an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you.

Non-Disclosure Agreements: Issues and Variations

Non-disclosure agreements (NDA) can be either a stand-alone contract or a provision of a contract within a larger contractual agreement or transaction or a stand-alone contract that typically requires an individual or entity to (1) refrain from disclosing information, (2) protect the confidentiality of information received, and only (3)  limit the use information for a specified purpose. Businesses use NDAs as an asset protection tool. This is especially true for businesses working with technology and other intellectual property. Previously on the blog we discussed trade secrets, which are some type of information a business wants to keep confidential. One way to ensure the protection of a trade secret is by having parties with knowledge of the trade secret sign an NDA.

It is always best to have a NDA signed before confidential information is disclosed, rather than after. However, it is possible to draft non-disclosure agreements to protect information that was disclosed before the parties actually sign the agreement.

Non-disclosure agreements can be either mutually (reciprocal) or one-way (unilateral). A mutual or reciprocal NDA requires both parties, to keep certain information confidential usually an employer and employee, to keep certain information confidential. This type of NDA is used when both sides are revealing sensitive or proprietary information, such as a manufacturer revealing a new product design to a prototype design company who will use their proprietary methods to create a prototype.  A mutual NDA requires each party to protect the confidential information to the other party.

On the other hand, a one-way or unilateral (one-way) NDA only binds one party, usually such as an employee. This type of NDA is used when only one person party is disclosing sensitive information.

The length term of of non-disclosure agreements are typically specified in the agreement, and will depend on the type of information being protected. If the confidential information has a limited shelf life, it may be sufficient to limit the duration of the confidentiality obligation to a certain number of years or the duration of the parties’ association. If the confidential information may remain confidential indefinitely, then the agreement should also continue indefinitely, or at least as long as the confidential information remains confidential.

If you have questions about non-disclosure agreements, consult an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, contract, and real property claims. Contact us at (310) 277-7747 to see how we can help you.