California Business Law Blog: Law Office of Jonas M. Grant PC

California FTB LLC Fee Refunds and Case Updates

2009-07-10T16:58:00.000-07:00

Claims are due this summer for certain claims for refunds of LLC fees (above the $800 per year minimum franchise tax) paid to the California Franchise Tax Board (FTB) for tax years prior to January 1, 2007, for LLCs that had operations in multiple states. This is related to several lawsuits contending the LLC fee is unconstutional, two of which have been resolved, in favor of the limited liability company-taxpayers (Ventas Finance I, LLC v. Franchise Tax Board and Northwest Energetic Services, LLC v. Franchise Tax Board). In Ventas, the court found that Revenue & Taxation Code Section 17942 was unconstitutional as applied to an LLC which derived revenues from inside and outside of California, without apportioning the fee to account for in-state versus out-of-state source revenues. In Northwest, the court of appeals found unconstitutional California's LLC fee as applied to an LLC that registered with the state but never did any business in California (preumably, it had intended to, but circumstances changes, or it hadn't yet got around to doing business here).

The third case, Bakersfield Mall, LLC v. Franchise Tax Board, challenges the right of the FTB to levy the LLC fee on LLC's that do business entirely in California. Those with potential claims should review this notice and speak with their accountant about filing an appropriate and timely claim, or filing a protective claim:

FTB Notice 2009-04 dated 5/22/2009

Michael Jackson's Estate and Estate Planning (press item)

2009-07-06T17:00:00.000-07:00

Recently quoted in the press on Michael Jackson's estate, will/trust, and creditor and child custody issues:

Though Michael Jackson’s body isn't in the ground yet, speculation is running rampant as to what will happen to his financial assets. Many suspect that legions of those only tangentially connected to the pop star are already sharpening their knives for their shares of the possible profits.

"There are a lot of dark characters that are going to try to make a buck out of this because Michael Jackson, unfortunately, is such a polarizing figure and his name is greater than any individual’s name on earth," said Aphrodite Jones, author of "The Michael Jackson Conspiracy."

"That being the case, everyone and anyone during his life tried to make money any way they could, and I don’t think that will end because of his death," Jones explains. "You think about Elvis Presley and all of the people who have made livings as impersonators and the Graceland tours, etc. — that’s nothing compared to what we’re going to see here."

As far as legal entitlements, Jackson's assets are undercut by the $400 million in debt that the pop star left behind.

Jonas M. Grant, an entertainment lawyer in Burbank, Calif., explains. "In general, creditors get the first crack at the contents of a deceased’s estate," he said.

Entertainment lawyer Jonas M. Grant says the mother of two of Jackson's children, Debbie Rowe, will likely get custody of those children and their inheritance. "[She] will benefit financially indirectly even if she is not named as a direct beneficiary of his estate, which she also may well be."

Vultures set to profit off of Jackson’s death: Skeptics say those who exploited him in life ready to strike again, Heidi Patalano, Metro International, June 29, 2009

Update: When quoted for the above news article, I didn't have the benefit of reviewing Michael Jackson's purported last will, which can be seen below, and is a pour-over will, essentially directing that all of his property not already titled to the "Michael Jackson Family Trust" be added to that trust, for distribution to the beneficiaries named in that trust:

Michael Jackson's Will - full screen (new window)

Los Angeles Business Tax Amnesty Program Announced

2009-06-07T11:40:00.000-07:00

The City of Los Angeles agency responsible for the administration and collection of business taxes, the Office of Finance, has announced a tax amnesty program. Non-compliant businesses will still have to pay the base tax and interest due, but an automatic waiver of the usual penalty will apply (without the amnesty program, penalty waivers can be requested, but they are discretionary with the Office of Finance):

Tax Penalty Amnesty Program
Chapter II, Article 1.12, Sections 21.12.1 - 21.12.7 of the Los Angeles Municipal Code provide for the development and implementation of a Tax Penalty Amesty Program. This program, beginning May 1, 2009 and ending July 31, 2009, allows taxpayers to avoid tax penalties imposed on any taxes as a result of nonreporting, underreporting, underpayment, or nonpayment of certain taxes. Tax Penalty Amnesty is applicable to (1) Business Taxes; (2) Telephone, Electricity, and Gas Users Taxes; (3) Commercial Tenants Occupancy Taxes; (4) Transient Occupancy Taxes; and (5) Parking Occupancy Taxes.

To participate in the program, taxpayers must file an application for tax penalty amnesty during the specified dates and comply with two conditions:

1.File completed tax statements or returns for all periods and taxes for which the taxpayer has not previously filed a tax statement or return and/or file completed amended tax statements or returns for all periods for which the taxpayer underreported the taxes due; and
2.Pay in full all principal, interest, and any applicable fees (excluding penalty fees) due.
The Tax Penalty Amnesty Program is an opportunity to pay delinquent City taxes and avoid up to forty (40%) in penalties. To take advantage of the amnesty program, please visit one of our offices or call the L.A. Tax Amnesty Hotline at (213) 978-1555 weekdays from 8:00 am to 5:00 pm.

More information and applications forms available here: http://www.lacity.org/finance/amnesty/index.html

Indiana Secretary of State Corporate Minutes Mailings

2009-05-28T14:28:00.000-07:00

From Indiana Secretary of State Todd Rokita. California may want to follow suit (although California's laws may be drafted differently than Indiana's, and it is not clear if these defendants are also behind some of the California mailings.

COMPLAINT FILED IN BUSINESS MAIL SCAM

May 21, 2009- An out-of-state operation sending deceptive solicitations to Indiana businesses for the last several months would face fines of over $1.5 million and be barred from doing business in Indiana if the state prevails in a lawsuit filed last week in Marion County court.

The complaint against Aaron V. Williams of Las Vegas, Lisa Diane Brown of California and several companies affiliated with the two was filed by Attorney General Greg Zoeller in Marion County Superior Court alleging several violations of the Deceptive Commercial Solicitation Act. The action comes after a multi-state investigation by the office of Indiana Secretary of State Todd Rokita which tracked the activities of a business operated by Williams and Brown known as "Indiana Corporate Compliance."

Indiana businesses have reported receiving letters from Indiana Corporate Compliance that appear to come from an official government source - specifically the Business Services Division of the Indiana Secretary of State's office. The letter solicits annual fees of $125 to $150 that it claims will be used for the record keeping and processing of the company's annual minutes. It also instructs businesses to respond by citing fictitious state law and including a "return by" date. The return addresses on the letters are rented mailboxes at UPS stores in Indianapolis, including one within steps of the Indiana Statehouse.

"The actions of these out-of-state scam artists to bilk Indiana businesses are deceptive, despicable, and likely criminal," said Secretary Rokita. "I will do everything I can to stand up for Indiana businesses and shield them from financial attack. I thank Attorney General Zoeller and his team for helping bring legal action."

Secretary Rokita has issued warnings through the media, sent e-mails to Indiana businesses and posted warnings on his Web page to ignore the letter. Still, businesses report falling victim to the scam and have sent money in response to the letter. No business has reported receiving any services from Indiana Corporate Compliance. Secretary Rokita's office continues to investigate and is developing a criminal case against Williams and Brown.

State law requires periodic business entity reporting, but with fees of only $30 every two years for for-profit entities and $10 every year for non-profit organizations. Businesses operating in Indiana can now securely perform this reporting online through the INBiz portal found on the Secretary of State's Web page, www.sos.in.gov/business.

If you believe you fell victim to this solicitation, please contact the Business Services Division Help Line at (317) 232-6576. Businesses wishing to check the validity of any mailing from Indiana's Business Services Division or any division of the Office of the Indiana Secretary of State should also call this number.

See also: California Corporate Compliance Minutes

SBA Announces No-Interest Loans for Struggling Businesses

2009-05-20T18:18:00.000-07:00

PRESS OFFICE/LOS ANGELES

Release Date: May 18, 2009 Contact: David J. Hall (202) 205-6697
Release Number: 09-30 Internet Address: http://www.sba.gov/news

SBA Launches New 100-Percent Guarantee ARC Loan Program to Help Struggling Businesses

WASHINGTON – Small businesses suffering financial hardship as a result of the slow economy may be eligible to receive temporary relief to keep their doors open and get their cash flow back on track through to a new loan program announced today by SBA Administrator Karen G. Mills.

Beginning on June 15, SBA will start guaranteeing America’s Recovery Capital (ARC) loans. ARC loans are deferred-payment loans of up to $35,000 available to established, viable, for-profit small businesses that need short-term help to make their principal and interest payments on existing qualifying debt. ARC loans are interest-free to the borrower, 100 percent guaranteed by the SBA, and have no SBA fees associated with them.

“These ARC loans can provide the critical capital and support many small businesses need to make it through these tough economic times,” said Administrator Mills. “Together with other provisions of the Recovery Act, ARC loans will free up capital and put more money in the hands of small business owners when they need it the most. This will help viable small businesses continue to grow and thrive and create new jobs in communities across the country.”

“It’s my firm belief that we will soon see better days ahead with these Recovery Act tools including this highly anticipated deferred-payment loan that can now aid small business owners confronting these dynamic conditions,” said Alberto G. Alvarado, Los Angeles SBA District Director.

As part of the Recovery Act, the ARC program was created as a no-interest, deferred payment loan to help small businesses that have a history of good performance, but as a result of the tough economy, are struggling to make debt payments.

ARC loans will be disbursed within a period of up to six months and will provide funds to be used for payments of principal and interest for existing, qualifying small business debt including mortgages, term and revolving lines of credit, capital leases, credit card obligations and notes payable to vendors, suppliers and utilities. Repayment will not begin until 12 months after the final disbursement. Borrowers don’t have to pay interest on ARC loans. After the 12-month deferral period, borrowers will pay back the loan principal over a period of five years.

ARC loans will be made by commercial lenders, not SBA directly. For more information on ARC loans, visit www.sba.gov

http://www.sba.gov/idc/groups/public/documents/sba_homepage/news_release_09-30.pdf

Study Names "Most Free" States; California Ranks Poorly

2009-05-18T14:10:00.000-07:00

A recent George Mason University study ranked the 50 U.S. states on a freedom scale, attempting to turn the various economic, social, and personal freedoms available in each state into a number, allowing comparison and ranking.

According to the researchers, the "freest" states are New Hampshire, Colorado, and South Dakota: "All three states feature low taxes and government spending and middling levels of regulation and paternalism."

On the other end of their spectrum, "New York is the least free by a considerable margin, followed by New Jersey, Rhode Island, California and Maryland."

A color-coded freedm-ranked map of the states is available here.

Blog Post Cited in Orange County Register Article on Annual Minutes Mailings

2009-04-09T23:58:00.000-07:00

This blog's most popular entry, posted in January 2007 but updated continually since, concerning misleading corporate and LLC annual minutes mailings was recently cited in a small business advice column in the Orange County Register:

Old scam reappears in O.C.:

Burbank attorney Jonas Grant gives a good explanation of the law on his California Business Law Blog, based on problems his clients reported to him in 2007. The post has gotten dozens of comments from people who received these solicitations, some from other states.

(One even accuses Grant of sending the letters, thus the red-letter disclaimer at the top of his post. Talk about shooting the messenger.)

By Jan Norman, March 29, 2009

California Sales Tax Rate Increase

2009-04-09T12:48:00.000-07:00

Effective April 1, 2009, but unfortunately not an April Fool's Day joke is a 1% rate increase to California's sales tax, for a new total of 8.25%. In addition, certain cities and localities may add an additional surcharge of up to 2.0%, for a grand total not to exceed 10.25%, among the highest sales tax rates in the nation. Los Angeles County's rate is now 9.25%.

More detailed information is provided in this notice issued by California's sales tax authority, the Board of Equalization (CA "BOE").

See also:

California Legislature Plans to Increase Taxes Amid Recession

Free Legal Forms Online

2009-04-08T20:14:00.000-07:00

Adams Drafting, a blawg of interest primarily to business attorneys, has an interesting post and following discussion regarding the use, misuse, and dangers of free legal forms found on the Internet or elsewhere: With Free Online Forms, You Get What You Pay For. Excerpts:

The problem isn’t a shortage of free legal forms online. Instead, it’s that there’s available online for free a vast and ever-growing supply of contract models, most of them crappy, and separating what’s OK, in terms of language and substance, from what’s not OK is a gruesome task....

I see the problem as being not that the documents are inherently incorrect in themselves - I’m sure the good sites produce very sound documents - but that they are drafted in the abstract. If a person pulls a document from any standard database - whether one of these sites or their own firm’s standards - it will be blind luck if it actually works for the agreement they are trying to draft for without amendment. Then there seem to be three options:

(i) The document as just used as-is - the document is unlikely to fit the deal.
(ii) A non-lawyer makes some changes. The problem here is the risk of unintended legal consequences of a change.
(iii) A lawyer reviews it. Clearly the issue here is cost.

I suppose people just need to balance those factors, but for any deal worth anything significant, it is likely to be worth having a lawyer have a look, at which point it is more cost-effective for them to use their own standards.

New Twitter account - Follow us

2009-03-20T20:49:00.000-07:00

The Law Office of Jonas M. Grant, P.C. is now on Twitter - which means you can "follow" us by signing up as one of our followers here, and receive occasional updates, including notification of new blog posts here - typically about four per month - and you can of course stop "following" at any time.

Our Twitter page can be found here:

Twitter: Law Office of Jonas M. Grant, P.C.

For those who prefer, there is also a free subscription available for the Atom feed for this blog.

See also:

Nigerian Email Scam Targets Lawyers & Their Client Trust Accounts

2009-03-05T15:41:00.000-08:00

Law.com reports that a new variation of the standard so-called Nigerian, 419, or advance fee email scam has been targeting lawyers. Phony clients allegedly seeking to collect funds from stateside customers contact a U.S. attorney seeking collections assistance. As soon as the attorney has accepted the representation, the customer immediately agrees to pay (how often does that happen!?), often in two partial payments to be timed one right after another. The check then received will usually be a forged cashier's check, payable to the attorney, and from which the attorney is told to deduct his fee (which the client may not be too concerned about the amount of, another red flag).

The author suggests that attorneys avoid becoming victims by:

Researching clients using Google and other sources before accepting the matter
Contacting any attorney or other party that has supposedly referred the matter to the lawyer
Accepting overseas, especially Chinese, clients only if their story makes logical sense and upon the payment of a retainer
Responding to any initial inquiries not known to be fraudulent, but which are suspected to be, making sure to point out clearly that an advance deposit against fees/costs is always required
Taking any suspected fraudulent check to the issuing bank for analysis - they will often be able to identify small details that make the forgery obvious
If a large payment is received upon behalf of a "client", even if by a cashier's check, holding the funds at least two weeks for clearance before disbursing the funds

A typical solicitation looks like this, and may even track this language precisely:

Dear ,

Request for Legal assistance

This is an official request for legal representation on behalf of XXX Co.Ltd.
We are a textile company with principal business in garment manufacturing and trading.
We are presently incapacitated due to international legal boundaries to exert pressure on our delinquent customers and we request for your services accordingly. We got your contact information from the Online Lawyers Directory as a result of our search for a reliable firm or individual to provide legal services as requested.
After a careful review of your profile as well as your qualification and experience, we are of the opinion that you are capable and qualified to provide the legal services as requested.
On behalf of XXX Co.Ltd, Please accept my sincerest appreciation in advance for your willingness to render your services as we look forward to your prompt response to our request.

Thank you.

Another example:

Attention Counsel,
XXX CO., LTD. is a manufacturing company with its head office in Japan, and branches all over Asia continent. The management of XXX CO., LTD. requires your legal representation for our North American delinquent customers. We are looking for a reputable attorney to represent us in North America in order for us to recover monies due to our organization by overseas customers, and as well follow up with these accounts. In order to achieve these objectives a good and reputable law firm will be required to handle this service.
We understand that a proper Attorney client agreement must be entered into by both parties.
Your consideration of our request is highly anticipated, and we look forward to your prompt response.
Yours Truly,

XXX

June 2009 update: The State Bar of California has issued a fraud alert to California attorneys on this topic:

STATE BAR ISSUES FRAUD ALERT TO CALIFORNIA ATTORNEYS

MEDIA CONTACT: Diane Curtis 415-538-2028 diane.curtis@calbar.ca.gov

San Francisco, May 29, 2009 —

The State Bar of California today issued a warning to attorneys to beware of international Internet scams purporting to hire U.S. lawyers to collect large debts.

Despite efforts to publicize the scams over the last year, Bank of America Vice President Blossom Dunng said attorneys continue to be targeted. In four separate cases since the start of the year, Bank of America attorney customers lost hundreds of thousands of dollars from counterfeit checks.

"As bank officials say, 'Know who you're doing business with,'" said State Bar President Holly Fujie. "If you deposit a check for $500,000, you had better have a clear idea where that money is coming from."

The scammers often use the names of real companies to gain credibility and use e-mail addresses that seem to have a connection to the companies. The State Bar itself has received such bogus solicitations:

"This is an official requisition for your legal consultation services on behalf of _________," one e-mail sent to the bar said. "We are presently incapacitated due to international legal boundaries to exert pressure on our delinquent customers in USA and we request your services accordingly."

"We got your contact information from the state of USA lawyers Directory as a result of our search for a reliable firm or individual to provide legal services as requested. After a careful review of your profile as well as your qualification and experience, we are of the opinion that your [sic] are capable and qualified to provide the legal services as requested."

If an attorney responds, the process begins and at some point the attorney receives a legitimate-looking check - sometimes even what appears to be a cashier's check - for the supposed debt. The attorney is asked to subtract his retainer and then send a check for the rest to the client.

In 2006, one attorney had a $2 million loss. This year, Dunng said, checks from the attorneys to the phantom clients range from $75,000 to half a million dollars.

Dunng, treasury services manager who handles all 8,800 Bank of America Client Trust Accounts, said the customer, not the bank, is responsible because it is common practice for the bank to make deposited funds immediately available to good bank customers.

"Attorneys should be the last people to fall for these scams," said Fujie. "Be careful!"

Scott Wilson, FBI special agent in Cleveland, says scams change so quickly that it's very difficult to keep up with them. Still, law firms that have been victimized or contacted as part of what looks like a fraud scheme should report the incidents. If a law firm has lost money in a fraud scheme, contact the local FBI office, says Wilson. If firms or lawyers have not lost money but believe they have been targeted by scammers, they should make a report to the Internet Crime Complaint Center at www.ic3.gov.

To view a story in the California Bar Journal about attorney victims of Internet scams, go to www.calbar.ca.gov, and check the California Bar Journal archives for July 2008.

Founded in 1927 by the state legislature, the State Bar of California is an administrative arm of the California Supreme Court, serving the public and seeking to improve the justice system for more than 80 years. All lawyers practicing law in California must be members of the State Bar. By May 2009, membership reached more than 222,000.

Obama Moves to Raise Estate Tax

2009-02-26T14:05:00.000-08:00

President Barack Obama has announced his intention to increase the estate tax:

President-elect Barack Obama and congressional leaders plan to move soon to block the estate tax from disappearing in 2010, suggesting the levy might outlive the "Death Tax Repeal" movement that has tried mightily to kill it.

The Democratic stance on the estate tax contrasts with Mr. Obama's reluctance to press forward with his campaign pledge to raise income-tax rates on top earners, which he worries could have an adverse economic impact during a recession.

But Democrats are determined to act quickly to prevent the estate tax's scheduled repeal. Elimination of the levy on big inheritances was approved by Congress under President George W. Bush in 2001, with rollbacks phased in slowly and its full elimination slated to take effect next year.

The Senate Finance Committee will move within weeks on legislation to reverse that law, and Mr. Obama is expected to detail his estate-tax preservation proposal in his budget next month, congressional tax writers said.

Under the Obama plan detailed during the campaign, the estate tax would be locked in permanently at the rate and exemption levels that took effect this year. That would exempt estates of $3.5 million -- $7 million for couples -- from any taxation. The value of estates above that would be taxed at 45%. If the tax were returned to Clinton-era levels, it would exclude $1 million from taxation with the rest taxed at 55%....

Obama Plans to Keep Estate Tax, Wall Street Journal Online, January 12, 2009

See also:

Barack Obama, Democrat for President, On Estate Taxes

Hilton Hotels Leaves Beverly Hills, California To Lower Its Cost of Doing Business

2009-02-04T19:23:00.001-08:00

Hilton Hotels Corp., which last month announced it was leaving Beverly Hills, said Wednesday it had chosen Fairfax County, [Virginia], as its new corporate home.

Hilton, which wants to lower its cost of doing business .... [intends to] create more than 300 full-time jobs in Fairfax County within the next 36 months.

Hilton Selects D.C. Suburb for New Home, Los Angeles Business Journal, February 4, 2009

See also: California Scheming and Some Californians Flee State for Greener Pastures

Clients: Please complete our Client Satisfaction Survey

2009-02-04T19:19:00.000-08:00

Current and former clients - please provide feedback to us via our client satisfaction survey at any time, no invitation needed.

"If you're pleased with our services, please tell a friend, a business colleague, or the world (via Insider Pages, MerchantCircle, Yelp, or LinkedIn); if you're not, please tell us!"

Study Finds Settling Lawsuits Often More Cost Effective Than Litigating Them Through Trial

2009-01-30T19:15:00.000-08:00

A 2008 study by the Journal of Empirical Legal Studies, as reported last year in a New York Times article, Study Finds Settling Is Better Than Going to Trial, found that -

.... most of the plaintiffs who decided to pass up a settlement offer and went to trial ended up getting less money than if they had taken that offer.

"The lesson for plaintiffs is, in the vast majority of cases, they are perceiving the defendant’s offer to be half a loaf when in fact it is an entire loaf or more," said Randall L. Kiser, a co-author of the study and principal analyst at DecisionSet, a consulting firm that advises clients on litigation decisions.

Defendants made the wrong decision by proceeding to trial far less often, in 24 percent of cases, according to the study; plaintiffs were wrong in 61 percent of cases. In just 15 percent of cases, both sides were right to go to trial — meaning that the defendant paid less than the plaintiff had wanted but the plaintiff got more than the defendant had offered.

The vast majority of cases do settle — from 80 to 92 percent by some estimates, Mr. Kiser said — and there is no way to know whether either side in those cases could have done better at trial. But the findings, based on a study of 2,054 cases that went to trial from 2002 to 2005, raise provocative questions about how lawyers and clients make decisions, the quality of legal advice and lawyers' motives....

Some Californians Flee State for Greener Pastures

2009-01-12T18:04:00.000-08:00

Go East, young man? Californians look for the exit, Associated Press, January 12, 2009:

The number of people leaving California for another state outstripped the number moving in from another state during the year ending on July 1, 2008. California lost a net total of 144,000 people during that period — more than any other state, according to census estimates. That is about equal to the population of Syracuse, N.Y.

The state with the next-highest net loss through migration between states was New York, which lost just over 126,000 residents.

California's loss is extremely small in a state of 38 million. And, in fact, the state's population continues to increase overall because of births and immigration, legal and illegal. But it is the fourth consecutive year that more residents decamped from California for other states than arrived here from within the U.S.

A losing streak that long hasn't happened in California since the recession of the early 1990s, when departures outstripped arrivals from other states by 362,000 in 1994 alone.

In part because of the boom in population in other Western states, California could lose a congressional seat for the first time in its history.

Why are so many looking for an exit?

Among other things: California's unemployment rate hit 8.4 percent in November, the third-highest in the nation, and it is expected to get worse. A record 236,000 foreclosures are projected for 2008, more than the prior nine years combined, according to research firm MDA DataQuick. Personal income was about flat last year.

With state government facing a $41.6 billion budget hole over 18 months, residents are bracing for higher taxes, cuts in education and postponed tax rebates....

March 2009 update:

Related: Corporate oil booms in low-tax Switzerland, Reuters, March 12, 2009 ("[A] wave of energy companies has in the last few months announced plans to move to Switzerland -- mainly for its appeal as a low-tax corporate domicile that looks relatively likely to stay out of reach of Barack Obama's tax-seeking administration.")

California Secretary of State and FTB To Introduce LLC Suspension Program in 2009

2009-01-01T19:57:00.001-08:00

Happy new year. And with the new year comes changes to various state and federal laws. Among others:

The new cell phone law prohibits text messaging or reading or writing emails while driving.

Covered employers will be affected by changes to the federal Family and Medical Leave Act (FMLA) and should have their employee manuals reviewed and revised accordingly. A new workplace poster is available here: 2009 FMLA poster

The definition of a disability under the Americans with Disability Act (ADA) has been broadened.

The time limits for filing a discrimination claim under the Civil Rights Act of 1964 and the Age Discrimination in Employment Act were extended.

In 2009, the California Franchise Tax Board (FTB) and Secretary of State (SOS) will be allowed to suspend limited liability companies (LLCs) that do not comply with various FTB and SOS filing and tax payment requirements. The FTB and SOS already do this for corporations, but up until now, the law had prohibited them from doing so with LLCs. This changes makes proper business entity maintenance, already crucial for ensuring maximum tax and limited liability advantages, all the more important. LLCs that are not being used should be dissolved while still in active status.

See also: 2009, Time To Incorporate?

818 Area Code Overlay with 747 Area Code Begins in 2009

2008-12-26T07:00:00.000-08:00

The California Public Utilities Commission (CPUC) has forecasted that the 818 area code (San Fernando Valley, California) will run out of telephone numbers in the third quarter of 2009 and has therefore announced an overlay with new area code 747; that is, as is the case with the old 310 and new 424 area codes, both area codes will exist in a single geographic area, with most new telephone numbers assigned receiving the new 747 area code.

Because an 818 and a 747 telephone number may therefore be in the same house or office building, ten-digit dialing (dialing the area code plus the number) will become mandatory in the 818 area code, effective April 18, 2009. The advantage of an overlay rather than a split is that any person or business with an 818 number will be able to keep that number, and no decision has to be made as to what geographic are retains the 818 area code and what area must adapt the new area code. Public hearings showed the public favored the overlay solution.

Cities in area code 818 include Agoura, Agoura Hills, Arleta, Calabasas, Canoga Park, Chatsworth, Encino, Glendale, Granada Hills, Hidden Hills, La Cañada Flintridge, Lake View Terrace, Mission Hills, North Hills, North Hollywood, Northridge, Pacoima, Panorama City, Reseda, San Fernando, Sherman Oaks, Studio City, Sunland, Sun Valley, Sylmar, Tarzana, Toluca Lake, Topanga, Tujunga, Universal City, Valley Village, Van Nuys, West Hills, Westlake Village, Winnetka, Woodland Hills, and of course "Media Capital of the World" Burbank.

More information: CPUC 818 Area Code Change Information

California Scheming: What One-Party Rule Is Doing To Once-Golden State

2008-12-24T00:17:00.000-08:00

California Scheming: What One-Party Rule Is Doing To Once-Golden State, Investor's Business Daily editorial, December 22, 2008:

.... As the financial crisis in California gets worse, it's pretty clear the real problem isn't the budget at all, but a political system that has resulted in a dysfunctional one-party state. ....

A reasonable response from a mature group of individuals might be to cut spending — especially since polls show that most Californians don't believe their taxes should be raised. Instead, they've chosen to thumb their noses at the people's will. It shows the danger of what is in effect California's one-party rule. .... Frustrated with their inability to raise taxes, Democrats got creative: They decided they could declare outright hikes in taxes to be "fee increases." This would let them pass a massive $9.3 billion in tax hikes without consulting Republicans in the legislature, in direct violation of state law. ....

California is already the most costly place in America to do business, according to the Milken Institute's business cost index. Its business costs in 2006 were 23% higher than the average for the rest of the states, and well above those of its neighboring states.

Worse, energy costs are already 35% higher than the national average. With California's costly new CO2 mandates about to kick in, the economy could well grind to a halt.

Such business mainstays as Intel, Exxel Outdoors, Toyota and Tesla have already left California. Intel is a particularly alarming example: The world leader in chip technology started in Silicon Valley but no longer makes anything in California.

Since 2001, according to the California Manufacturers and Technology Association, the state has lost 440,000 high-wage jobs. Today, the state's jobless rate of 8.4% is third-highest in the nation.

Even Hollywood feels the pinch. In 2003, 66% of Hollywood's feature films were made in-state; today, it's down to 31%. Increasingly, Hollywood is a state of mind — not a place to do business.

Things are so bad that, just last week, 25 business groups wrote an open letter to the state's legislature begging it to think about the role businesses play in the economy.

We wish them luck. Unfortunately, instead of aggressively addressing these competitiveness problems, California's Democrats think they can simply tax their way back to prosperity. They can't.

California's tax base is so narrow — 1% of the population pay 50% of income taxes — that you can't "tax the rich" and get more revenue, a long-held Democratic fantasy. California individuals today bear the sixth-highest tax burden in the nation. Raising taxes won't do anything but drive off productive workers and kill the economy.

It's already happening. Tired with having their voices ignored and faced with soaring taxes, high housing costs and state fiscal chaos, Californians are leaving in droves. They're voting with their feet.

Last year, 135,173 more people left California than moved in, the fourth straight year of net out-migration. As the Los Angeles Times accurately noted, "the trend remains significant because such declines usually occur when working Californians decide better opportunities lie elsewhere."

Members of California's one-party ruling class better start listening to their businesses and productive, overburdened taxpayers, or pretty soon they won't have an economy to fund their government. ....

California Legislature Plans To Increase Taxes Amid Recession

2008-12-22T00:19:00.000-08:00

State Democrats Plan To Increase Taxes, Los Angeles Times, December 17, 2008:

Democratic legislative leaders are planning to use a series of complex legal maneuvers to raise Californians' gas, sales and income taxes over the objection of Republican lawmakers, who have been able to block such proposals in the past.

Under the Democrats' plan, sales taxes would increase by three-fourths of a cent. Gas taxes would go up by 13.5 cents per gallon. And a surcharge of 2.5% would be added to income taxes.

More coverage: California Democrats Devise Plan To Hike Taxes:
By structuring them as fees, they would skirt GOP opponents and raise $9.3 billion; A court fight looms, Los Angeles Times, Decemeber 18, 2008.

See also:

Study: Los Angeles, Santa Monica Among 10 Most Expensive Places to Do Business in United States

2009 California Employer Payroll Tax Rates

2009 California Employer Payroll Tax Rates

2008-12-17T17:01:00.000-08:00

The base payroll tax rates for 2009 for California employers have been announced by the Employment Development Department (EDD), and are as follows:

Unemployment Insurance (UI): 3.4% of the first $7,000 of wages per employee, per year (however, an emergency surcharge is also in effect);

Employment Training Fund (ETT): 0.1% of the first $7,000 of wages per employee, per year;

State Disability Insurance (SDI): 1.1% of the first $90,669 of wages per employee, per year (up from $86,698, and up from 0.8% in 2008 and 0.6% in 2007)

Established employers may have a higher or lower UI rate, based on various factors. An emergency UI fund surcharge is in effect for the year.

If you are an employer or prospective employer unsure whether your current or prospective worker is properly classified as an employee or an independent contractor, you should hire an employment law attorney to advise you (I offer these services). Improper classification can lead to costly penalties and interest, as well as the assessment of back taxes.

Additionally, there are a host of legal hoops to jump through - which usually aren't, exposing employers to liability - when hiring a California employee (or an independent contractor). In either case, the relationship should generally be documented in a custom-drafted written employment or independent contractor agreement.

This article, written by a former director of EDD, is a few years old, but provides some general advice for employers on keeping their UI rates as low as possible.

Study: Los Angeles, Santa Monica Among 10 Most Expensive Places to Do Business in United States

2008-12-15T20:21:00.000-08:00

And predicted to get worse. Westlake Village rated most business friendly in Los Angeles County. The Daily News reports:

The city of Los Angeles will finish 2008 in familiar company: Among the 10 most expensive places in the country to do business, according to a study released today.

Santa Monica is also on the list compiled by the 14th annual Kosmont-Rose Institute Cost of Doing Business Survey released by the Rose Institute of State & Local Government at Claremont McKenna College.

Los Angeles' placement on the list has remained steady, but at least it hasn't gotten any worse in the past year, according to Larry Kosmont, the survey's founder and president and chief executive officer of Kosmont Companies.

"Cities that charge the highest license fees such as Los Angeles, Philadelphia, and Cincinnati are often those that have a history of uneven relations with the business community," Kosmont said.

But Robert "Bud" Ovrom, Los Angeles' deputy mayor of economic development and housing, said the city is making progress.

For example, next year the city starts the final phase of a five-year plan to reduce the business tax by 15 percent. The final installment, a 3.9 percent reduction, kicks in Jan. 1.

"When I'm talking to companies I almost never hear about business taxes. I don't even hear much about workers' comp," Ovrom said.

"Everything I hear today is (about) the quality of the work force, schools, traffic and affordable housing." ....

On the contrary, the author's clients are more concerned with the high costs of state business taxes,* local business taxes, regulation, and workers' comp. Perhaps Ovrom's conversations are primarily with larger companies...? The article continues:

Los Angeles is challenging for businesses because of its fee and tax structure, it said. And while California cities are more competitive than in the past few years, costs for businesses remain high.

It also noted that Los Angeles County continues to be one of the nation's most expensive places for business and 10 of its cities are among the 50 most costly. The Bay Area is pricey, too.

The situation will worsen next year, Kosmont said, as voter-approved tax and fee increases kick in.

"What is happening in California is the cities are going to the ballot box and winning tax increases," Kosmont said. "Some of these cities were Los Angeles County cities. That makes a bad climate even worse."

Kosmont said that California and many of its cities have been expensive for a long time, but some have tried to compensate with aggressive economic development and redevelopment programs.

But now all are struggling with the state's budget deficit, which is the largest in its history.

The survey compares 402 cities nationwide based on the array of taxes and fees each imposes. They include sales, utility, income, property, and business taxes....

It noted that the highest-cost cities, such as Santa Monica and Oakland, cluster around the aging urban cores, while newer bedroom communities in the outer suburbs charge developers for their growth and pass on the savings to businesses to stimulate their economies.

For example, Kosmont said the least costly city in the county is Westlake Village.

"It has no business tax, no utility tax and very low property taxes.

So it is one of the bargains," Kosmont said.

That's by design, said City Manager Raymond B. Taylor.

"We have strived to be one of the most business-friendly cities in California since our inception in 1981," Taylor said.

About 8,800 people live in the city that abuts the Ventura County line. But there are 850 businesses in the village that generate 11,000 jobs.

"The city recognizes the value and the role that businesses play in terms of job development and the vibrancy of the community," Taylor said.

* A domestic corporation in Utah costs a minimum of $100 in annual franchise tax payable to the state for the privilege of doing business as a corporation in the state; in California, $800, among the highest cost in the nation.

See also:

California Legislature Plans To Increase Taxes

2009 California Employer Payroll Tax Rates

Proper (Business Attorney Assisted) Set Up and Maintenance Crucial to Limited Liability Protection of Corporations and LLCs

2008-12-11T15:21:00.000-08:00

Couldn't agree more with this excerpt from today's article by fellow Southern California WealthCounsel attorney Alexis Martin Neely:

You'll recall from last week, that I said the purpose of your business entity is to limit your liability as a business owner. This is to encourage business owners to take risks that they would not take if they had unlimited personal liability.

Here's the thing though, the shield is only intact if certain formalities are maintained, such as proper filings with the State, annual meetings of the shareholders (for corporations), and separation of all financial activities between you and the entity.

Far too often, I've come across business owners who used an incorporation service, a shoddy lawyer, or a CPA to incorporate their business and when I asked these business owners where their operating agreements, bylaws, annual meeting minutes and state filings were kept, they couldn't tell me.

Why is that? Because they didn't realize that merely filing articles of incorporation with the State does not provide liability protection.
Your corporate entity must be established correctly from the beginning with governing documents and then maintained on a yearly basis.

If you don't do that, you may come to find out too late that your business entity doesn't provide the protection you thought it did.

So, make sure that once you decide what kind of an entity to use, you set it up right and then maintain that entity.

While I'm open to a pleasant surprise one day, thusfar I have yet to review one corporation or limited liability company that was properly set up and maintained by a do-it-yourselfer (including those who used online incorporation services, paralegals, CPAs, non-business attorneys).

Holiday Parties: How Businesses Can Avoid Sexual Harassment Lawsuits

2008-12-05T15:47:00.000-08:00

Guest Post by Jessica Hawthorne

As holiday decorations start to go up around the office and everyone is full of seasonal cheer, many businesses may find that work parties, along with a more relaxed environment, can lead to sexual harassment claims.

Much too often – especially if the event is off-site and the alcohol flows freely – the office holiday party becomes a breeding ground for this sort of behavior. It seems that some employees can get the impression that professional behavior isn’t necessary at the festivities.

But that’s not the case. If it’s a work-sponsored event, workplace etiquette applies. And unfortunately for employers, liability can be the unexpected Christmas delivery if things aren’t handled properly.

Every year, claims and lawsuits over sexual harassment problems cost companies millions of dollars. In 2007, for example, the Equal Employment Opportunity Commission received nearly 25,000 sex-discrimination complaints and fined businesses more than $135 million for violating these workplace protections, the highest level since 2002.

But businesses can protect employees against legal turmoil by taking simple steps to prevent harassment from occurring at the office holiday party – or anywhere else:

Advise employees of all relevant policies, such as harassment, dress code and appropriate workplace behavior.
Make sure all supervisors have received sexual harassment training.
Make sure everyone knows how to report unwanted or unwelcome behavior.
Remind all employees that the company's sexual harassment policies will be in full force and effect during the event.

Despite training and preparation, sexual harassment claims could arise, so employers should also be aware of how to mitigate the situation. It’s important to act swiftly if there are any complaints to determine what happened and how best to deal with the claim. That way, you will have done your harassment prevention due diligence if any legal situation arises later.

The best way to accomplish this – and follow California law – is to conduct proactive employee training and awareness against all forms of harassment.

All organizations, and that includes businesses, government agencies and non-profits, with 50 or more employees are required to train all supervisory personnel in sexual harassment prevention. Employers must prove that all of these employees take an interactive, two-hour harassment prevention course within six months of hire and every two years thereafter.

So keep in mind that while sexual harassment prevention is relevant all year round, now is a good time to give your office a refresher course. Your business should enjoy this festive time of year by keeping employees aware and preventing sexual harassment before it starts.

Jessica Hawthorne is an employment attorney the California Chamber of Commerce. More information on sexual harassment prevention training and many other workplace issues can be found at www.CalBizCentral.com.

Layoffs Can Lead to Unlawful Termination Claims

2008-09-22T16:35:00.000-07:00

Down Economy: Layoffs Can Lead to Unlawful Termination Claims
What Businesses Need to Know to Protect Against These Lawsuits

By Jessica Hawthorne, Special to California Business Law Blog

By any measure, it’s a pretty rough economy out there and inevitably, there have been and will continue to be layoffs – a process that’s an emotional and complicated procedure, and no less so than during tough economic times.

So what do employers need to know to protect themselves from wrongful termination lawsuits before they are forced to lay off members of their workforce?

The truth is that no one procedure guarantees businesses freedom from exposure to wrongful discharge liability or, even in the absence of liability, prevention of the filing of a wrongful termination action by an employee. But there are a number of things that can be done to mitigate potential issues:

• Businesses should have all new employees sign agreements at the very beginning of employment that protects their status as an at-will employee.
• Standardize termination procedures in a way that maximizes company protection from wrongful termination suits, and ensures that the procedures are consistently applied.
• Train supervisors thoroughly in the area of protecting the at-will nature of employment and to follow all company policies especially related to terminations and layoffs.
• If your company is considering a layoff, be sure to establish objective, nondiscriminatory criteria for selecting the employees to layoff.
• If termination of an employee becomes necessary: do not make the employee's situation so miserable that he or she resigns just to get away.

If an employee feels singled out during a layoff or was unaware of performance issues before being terminated, they may also file a suit for wrongful discharge in violation of an express state or federal government public policy.

Further, be careful and consult with legal counsel before laying off employees with actual or perceived disabilities, those who have just returned from a protective leave of absence, and even those who have reported inappropriate activity such as harassment or safety violations. These employees may have or believe they have more rights than other employees. And angry employees or ones who feel wronged are more likely to sue.

In addition, the federal Worker Adjustment and Retraining Notification (WARN) Act and comparable state law require businesses to provide written notice to employees before laying off a significant portion of their workforce.

Unfortunately, there are literally layers of laws that deal with layoffs and terminations, which can make navigating this area of employment law a potential minefield. But if employers act in good faith, make their policies clear and offer ample notification of pending action, the likelihood of a wrongful termination lawsuit succeeding is minimal.

Jessica Hawthorne is an employment attorney the California Chamber of Commerce. More information on terminating employment and many other workplace issues can be found at www.HRCalifornia.com.