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Business Law FAQ

Frequently Asked Questions

Contents

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Trademark dispute relating to 50/50 partnership

What legal right does an individual partner (ie. partner ''A'') in a 50/50 restaurant business partnership (located in Michigan that has existed for over 50 years and continues to thrive) have when the sibling of the other business partner (ie. partner ''B'') opens a similar restaurant businessless than 40 miles away and applies for a trademark that utilizes similar advertising graphics and recipe without notifying business partner ''A''.

Although the trademark is currently listed with the aforementioned sibling of business partner ''B'' the period for contesting it has not yet passed.

Can individual business partner ''A'' act independently or on behalf of the 50/50 business partnership to nullify the sibling from having the trademark (and have one established for the original 50/50 partnership or independently for business partner ''A'') if business partner ''B'' has no interest in doing so.
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20-year agreement 50/50 partners split 3 1/2 years

Partner A began a business, partner B has $ and a small business that brings in maybe 5% of the business. B nickel and dimes company with paid uniforms, books, and for a while paid for employees to work out at a gym. Small company 6 employees. B wants out, suddenly no reason. B told two of the top clients (60 % of the business) to look elsewhere for business. B is putting a squeeze on A by reducing paycheck says they don't have $, and last 2 weeks no paycheck. A made decision to lay off and go back to when they started and put himself back on the floor to work. B offered A $50,000 now and $50,000. in two years with a non-compete which is all A knows and has worked for. A is mid 40's B is mid 30's. with telling top customers to look elsewhere for business, which is not for the good of the company, be a statement that could hurt him if the do split? What can happen in splits like this? Yes, an attorney has been contacted but just looking for more information.
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Major adjustments to balance sheet just before a stock sale

I am selling my 25% stake to the 50% shareholder/president (S-Corp). I tried to get a buy-sell agreement drafted by an attorney years ago but they (president and CEO) wanted no part of it. ''We will be able to work it out'' (a small family business.) It was loosely agreed to 25% of yearend book value plus 25% of YTD net profit. The proposal reduced shareholder equity from $887,000 to $568,000 via 'adjustments' made 3 months after my request for sale. Much was writing off ''obsolete'' inventory. Most of which is not obsolete but just a slow mover (products are in our current catalog). They plan to move product to off-site warehouse, not scrap. The next largest adjustment is due to our largest customer filing bankruptcy the day I left. $88,000 in receivables currently on the books is also being subtracted. There are also many other smaller adjustments (patents, prepaid trade show expense, etc.) Is it normal for these types of adjustments to be made right before a valuation is determined? Similar adjustments were not made before I bought them. The patent infringement by our president occurred before I purchased but was not settled and entered as a $250,000 liability until after I bought it. Should there have been an adjustment then?
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Non-Compete

I have been with company ABC for the last ten years. They once attempted to have all employees sign non-compete forms. Everybody including me refused to do so. They, however, had us sign us receiving the employee handbook. At that time the employee handbook consisted of general rules like vacation and sick leave, insurance, etc but non-compete forms were not included in the handbook at that time. They, however, inserted the non-compete pages into this handbook afterwards (without us knowing about it). The last page of handbook that we signed says that we the employees have 'acknowledge, read and understand that handbook and that these documents govern my employment at ABC Company'. The signatures were on the last page only. Can they legally stop me doing the business of similar nature in the same area? The insertion of non-compete pages that do not have my signatures can, in any way shape or form may legally hurt me. The handbook does not have even page numbers on it. Does Michigan law allow non-compete acts?

I will appreciate a response.
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Misrepresentation of consumer goods sold

In May of 2004, I purchased what I thought was a Vespa ET-4 motor-scooter from a Michigan Vespa dealer. I now live in New York and when I took my Vespa to a NY Vespa service center the mechanic said I had an ET-2 which is a lower-powered vehicle and a lower-priced vehicle 2300 dollars and I paid 4500 dollars! The mechanic determined by his expertise that I did not have an ET-4 the more powerful scooter which I supposedly purchased for its roadability. My scooter would only go 40 MPH and that is why I took it in to be serviced. So, in short, I have paperwork that says I paid for an ET-4 (factory plate says so) and I would up with an ET-2. The dealer I bought it from is spinning me and says they will not do a thing about this misrepresentation! How can I obtain what I paid for without spending a fortune that I do not have?
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Independent Contractor Agreement

I recently signed an Independent Contractor Agreement with a gentleman from Florida. I signed the agreement on Tuesday, 11/1/05. How long do I have to decide if I truly want to be involved in his company or not? Thank you for your help and reply.

A:

There is no "cooling off " period, unless this is a consumer oriented transaction in which case the cancellation period is by statute. If you signed the agreement and sent it to the other person and he accepted the agreement, you are legally bound. For more info., please contact my office at my phone number listed on the lawguru website.

Q:

Trademark dispute relating to 50/50 partnership

What legal right does an individual partner (ie. partner ''A'') in a 50/50 restaurant business partnership (located in Michigan that has existed for over 50 years and continues to thrive) have when the sibling of the other business partner (ie. partner ''B'') opens a similar restaurant businessless than 40 miles away and applies for a trademark that utilizes similar advertising graphics and recipe without notifying business partner ''A''.

Although the trademark is currently listed with the aforementioned sibling of business partner ''B'' the period for contesting it has not yet passed.

Can individual business partner ''A'' act independently or on behalf of the 50/50 business partnership to nullify the sibling from having the trademark (and have one established for the original 50/50 partnership or independently for business partner ''A'') if business partner ''B'' has no interest in doing so.

A:

Your business partner owes a fiduciary duty to you. If he refuses to enforce the intellectual property rights of the business, you could sue him for breach of fiduciary duty. Be mindful, the intellectual property rights belong to your partner individually. has he licensed them to the business? If not, you may have a problem as the business cannot assert rights it does not have and that your partner could just revoke the right to use the intellectual property. For more info., please contact my office at my number listed on the lawguru website.

Q:

20-year agreement 50/50 partners split 3 1/2 years

Partner A began a business, partner B has $ and a small business that brings in maybe 5% of the business. B nickel and dimes company with paid uniforms, books, and for a while paid for employees to work out at a gym. Small company 6 employees. B wants out, suddenly no reason. B told two of the top clients (60 % of the business) to look elsewhere for business. B is putting a squeeze on A by reducing paycheck says they don't have $, and last 2 weeks no paycheck. A made decision to lay off and go back to when they started and put himself back on the floor to work. B offered A $50,000 now and $50,000. in two years with a non-compete which is all A knows and has worked for. A is mid 40's B is mid 30's. with telling top customers to look elsewhere for business, which is not for the good of the company, be a statement that could hurt him if the do split? What can happen in splits like this? Yes, an attorney has been contacted but just looking for more information.

A:

If a settlement cannot be worked out, you will probably need to litigate to dissolve business. If your "partner" made disparaging remarks about the business amd told customers to go elsewhere, that could be construed as a breach of his fiduciary duty to the company. For more info, please contact my office at (248) 985-7135.

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Dissolving Corporation

If a company is dissolved automatically (corporate status)by the state for failure to keep the status of the corporation up to date, is the owner of the business personally responsible for any debts incurred after that date? I've been told that is known as dba-doing business as, which makes them liable for their debts. the business continued to do business for approx. 2 years after this happened.

if this is true would he be liable to be sued to recover any debts or losses?

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There may be personal liability for the owner as the corporation has been dissolved by operation of law. You should reinstate the corporation as soon as possible to help avoid any personal liability. For more info, please contact my office at (248) 985-7135.

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Licenses and permits

If I travel and sell merchandise at fairs, special events, and my store, is there a certain license or permit I need. I will be traveling all over Michigan and other states.

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Depends on the specific jurisdiction. Generally, no permit is required. You would need to be more specific as to the nature of your business and where you are conducting this business. For more info, please contact my office at (248) 985-7135.

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Major adjustments to balance sheet just before a stock sale

I am selling my 25% stake to the 50% shareholder/president (S-Corp). I tried to get a buy-sell agreement drafted by an attorney years ago but they (president and CEO) wanted no part of it. ''We will be able to work it out'' (a small family business.) It was loosely agreed to 25% of yearend book value plus 25% of YTD net profit. The proposal reduced shareholder equity from $887,000 to $568,000 via 'adjustments' made 3 months after my request for sale. Much was writing off ''obsolete'' inventory. Most of which is not obsolete but just a slow mover (products are in our current catalog). They plan to move product to off-site warehouse, not scrap. The next largest adjustment is due to our largest customer filing bankruptcy the day I left. $88,000 in receivables currently on the books is also being subtracted. There are also many other smaller adjustments (patents, prepaid trade show expense, etc.) Is it normal for these types of adjustments to be made right before a valuation is determined? Similar adjustments were not made before I bought them. The patent infringement by our president occurred before I purchased but was not settled and entered as a $250,000 liability until after I bought it. Should there have been an adjustment then?

A:

Book value is book value, and all necessary adjustments must be taken into account to determine an up-to-date true book value. While the bankruptcy loss would be appropriate, the loss for inventory doesn't really sound like a loss - but it's hard to say with the limited information. Patents and prepaids would (or should) credits, and should work to your advantage. The old liability is probably moot, since I assume that you knew about the litigation when you bought into the company.

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Inappropriate Business Write Off's

I work for a small biz. The owner writes off all his personal expenses through the company. They include his children's gas expenses for their cars, utilities, etc. I just want to know if this is appropriate and if not, what are the possible consequences for doing this? Thank you!

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This is matter between your boss, his accountant, and the IRS. Without knowing more, I would say that he can legally only write off expenses related to the business. This will not affect you as an employee. For more info, please contact my office at (248) 985-7135.

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LLC and Liability involving another LLC

I own an LLC and am currently working for another LLC as an independent sales agent. Do I have to announce my LLC to all potential customers or can I assume that the LLC I am working for as an independent agent assumes liability? How should the business cards be worded while working for the other LLC? Should it be my company name _____ LLC representing __ LLC?

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If you are acting as an LLC (Limited Liability Company) you should ALWAYS disclose that you are an LLC if you want the business to be treated as an LLC. Otherwise, you run the risk of having the liability shield stripped away that an LLC provides. Always pay bills with a company check, sign contracts as "member" or "officer" of the company, etc. For more info, please contact my office at (248) 985-7135.

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Employee Agreement

I am in the Electrical Construction industry and I am being accused of violating a confidentiality agreement with my previous employer. I do not remember signing the agreement, but they say I did. I have requested a copy but have not received it yet. The company I am working for now has a lot of the same customer base as the previous, and the issue is with just one of the customers. What are the possible consequences of violating this agreement?

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Well,....lets first see if you actually signed a confidentiality or non competition agreement. If you have, then you need to look at the scope of the agreement. If you cannot get this agreement yourself from your former employer, then perhaps you need the help of an attorney. For more info, please contact my office at (248) 985-7135.

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Employer holding pay checks

I recently resigned my position with a company to further my business career. I have been resigned now for two weeks and my boss has refused to send me my two final checks. Is there anything legal about that, can he just keep the money? I am not the only employee he has done this to either, there are 2 others I know of for sure. If you could please let me know what I can do legally to collect my money that would be great. Also does this sound like something which I may need to hire a lawyer for? Thanks!!

A:

You can file a complaint with the State of Michigan Wage and Hour Division. Withholding your pay is illegal. It may help to have an attorney involved. For more info., please contact my office at (248) 985-7135.

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Partnership Dispute

There are two partners in XYZ incorporation. Partner A got 35 percent share and partner B got 65 percent share in the business. The is no formal partnership agreement written except a 'certificate of shares’ signed by both the partners, issued by a CPA. There is some investment from both the partners. Partner A invested some money to buy some office computers by credit card. B is the only one that holds all the business bank account details and active in the business. Can ‘A’ claims her share in the corporation, with the certificate of share. Legally, do the partners need to have a formal partnership agreement or a certificate of shares is ok to claim their shares in the business. Thank you very much for your time to read this, appreciate the response soon.

A:

I'm unclear, is this a corporation, LLC, or partnership? Regardless, it sounds like you and your "partner" have been cutting corners on the formalities of the business. A corporation requires bylaws, a LLC requires an operating agreement, and both require that an annual meeting be held with elections and minutes be generated. A partnership requires a partnership agreement. If there is confusion between you and your "partner" regarding your rights and responsibilities in the business, it is probably because you have neglected the above mentioned formalities. I suggest you have an attorney review all the business records. If they are being neglected, you should rectify the situation. This matter should be handled immediately before there is a falling out between you and your "partner." For more info, please contact my office at (248) 985-7135.

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Backing out of a contract

How do I back out of a contract if they do not do the job I paid them for? I paid 1/2 up front and they want the rest but they did not do what they said they are going to do. Now they are going to wreck my credit, can they do that. Thank you for your time.

A:

What type of a contract? If "they" failed to perform under the contract as promised, you are released from your promise. Perhaps, you might consider suing for a refund of the 1/2 you already paid. For more info, please contact my office at (248) 985-7135

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Purchase Order Acceptance/Definition

What is the legal definition of a Purchase Order and what is considered to be legal acceptance of a Purchase Order if the P.O. items were shipped and acknowledged as shipped, was invoiced against, yet never signed?

A:

It is not necessary for the Purchase Order to be signed by you. If the goods were received and accepted, there may be a contract or at least a quasi contract binding you. You may be obligated to pay for the goods. For more info, please contact my office at (248) 985-7135.

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''AS-IS'' Bill of Sales

In Michigan, in an Auto Bill Of Sale, how should an ''AS-IS'' warranty read?

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An "'As-is'" warranty" is an oxymoron. There is no express warranty if the sale is "as-is." There may still be implied at law warranties. For more info, please contact my office at (248) 985-7135.

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Special use permit requirements

I am in the process of starting a home-based internet sales business, and I'm being told that I need a special use permit to do so. Is this true? and if so why would I need it if all I'm using for my business, at my home, is my computer?

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It would depend on what the local city/twnship/village ordinance says. If you are required by law to have a permit, and you don't fall into any exception, you should comply. For more info, please contact my office at (248) 985-7135.

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Breach of Contract

How do I go about filing a complaint or taking someone to court who lives in a different state from me for breach of contract?

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There may be a jurisdiction problem. Generally, you must sue a person in the jurisdiction they reside in. You may be able to get jurisdiction locally arguing that the contract was signed here in Michigan. For more info, please contact my office at (248) 985-7135.

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Non-Compete

I have been with company ABC for the last ten years. They once attempted to have all employees sign non-compete forms. Everybody including me refused to do so. They, however, had us sign us receiving the employee handbook. At that time the employee handbook consisted of general rules like vacation and sick leave, insurance, etc but non-compete forms were not included in the handbook at that time. They, however, inserted the non-compete pages into this handbook afterwards (without us knowing about it). The last page of handbook that we signed says that we the employees have 'acknowledge, read and understand that handbook and that these documents govern my employment at ABC Company'. The signatures were on the last page only. Can they legally stop me doing the business of similar nature in the same area? The insertion of non-compete pages that do not have my signatures can, in any way shape or form may legally hurt me. The handbook does not have even page numbers on it. Does Michigan law allow non-compete acts?

I will appreciate a response.

A:

I believe given the facts you have described that you would not be bound by the non-compete clause. That does not guarantee that you will not be sued by your former employer. They may sue just to show others that they intend to enforce the non-compete clause. Even so, I believe you would prevail. For more info, please contact my office at (248) 985-7135.

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What is owed to an employee who ''walks out'' or quits?

Concerning wages and previous hours worked, what is legally owed to an employee in the following two circumstances? (1) walks out on the job before their shift is over is terminated as a result. (2) quits by way of calling their supervisor and making known they no longer work for the company?

We are a small business of 15 employees and recently ran into this situation.

Thanks so much for considering our question. We appreciate your service very much.

A:

I'm not sure what you are asking. Are you asking if that person is entitled to get paid. The answer is "yes," if only for the actual time they worked. Otherwise, any severance is a matter of contract. For more info, please contact my office at (248) 985-7135.

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The Best Way to Pay Taxes

We are business owners in headquartered in Detroit, Michigan with less than 50 employees and offer Corporate Cleaning Services. What business entity would allow us to pay the least amount of taxes a year...LLC, Partnership or Corporation? (Or are we missing the right answer?) We're getting conflicting advice and thought an independent party would help. Thanks so much for your response, have a great day!

A:

There is no pat answer. You need a good accountant who will sit down and evaluate the specific needs of your business. One form may be better than another, BUT it really depends on the ownership, debt, and many other factors. For more info, please contact my office at (248) 985-7135.

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Copyright laws

I have a home-based candle and such business and I've made an item that I would like to put some sort of protection on so that every other crafter out there can not copy what I've made, what steps do I take to make sure that it's really my own creation and that someone else has already made the same item? selling my items has become my sole income and it's very frustrating to arrive at craft fairs and see that others have stolen your idea(I have a website) so it very easy for others to see my items, the product I am asking about I haven't put out there yet. Could you please tell me the legal steps I need to take?

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You would patent the invention with the U.S. patent office if it is patentable. It may not be patentable, but may be copyrightable. You should contact a patent attorney.

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Similar business name dilemma

I am starting a home-based travel agency and need to file for an assumed name. So as not to disclose names I'll use ''Anytown'' for the city. Where I live there is a business by the name of ''Anytown Travel Agency'' they have been in business for 30 years. I would like to file for my name to be ''Anytown Travel & Cruise''. I contacted the county clerk and this name is available as there is no registered name or similar name. Once I start advertising locally I am afraid this other travel agency will become upset. Can they legitimately sue me for using a similar name? Any advice is helpful, thank you.

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They might, anyone can sue anybody for anything. The better question is, will they win a lawsuit? The answer lies in whether your name causes confusion in the public's mind as to which business is which. For more info, please contact my office at (248) 985-7135.

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Counter-Complaint

In a contractual case filed in Circuit Court - Oakland County MI, when Answering the initial Complaint, and doing a counter-complaint, does a Summons issue for the counter-defendant? This is time-sensitive. A quick response would be most appreciated!

A:

No, a summons is unnecessary as the plaintiff who filed has already submitted to the jurisdiction of the court and need not be summoned. For more info, please contact my office at (248) 985-7135.

Q:

Age limitations when starting a business

Hi,

I was wondering if there are any age limitations to start a business in the State of Michigan. I am 17 and I am wanting to register a sole proprietorship or a small corporation for a computer business I hope to start. Is it possible to start either of these without the aid of an adult co-sign? If I have a co-signer, will that mean that my business will belong to them as well?

A:

I believe that the resident agent needs to be an adult (over 18). I don't know of any restrictions regarding ownership. For more info, please contact my office at (248) 985-7135.

Q:

Misrepresentation of consumer goods sold

In May of 2004, I purchased what I thought was a Vespa ET-4 motor-scooter from a Michigan Vespa dealer. I now live in New York and when I took my Vespa to a NY Vespa service center the mechanic said I had an ET-2 which is a lower-powered vehicle and a lower-priced vehicle 2300 dollars and I paid 4500 dollars! The mechanic determined by his expertise that I did not have an ET-4 the more powerful scooter which I supposedly purchased for its roadability. My scooter would only go 40 MPH and that is why I took it in to be serviced. So, in short, I have paperwork that says I paid for an ET-4 (factory plate says so) and I would up with an ET-2. The dealer I bought it from is spinning me and says they will not do a thing about this misrepresentation! How can I obtain what I paid for without spending a fortune that I do not have?

A:

You will probably need to sue the dealer for fraud and violation of the Michigan Consumer protection Act. For more info, please contact my office at (248) 985-7135.