Category: Business Law

Like any other type of business structure, a limited liability company (LLC) can face internal disputes among its members. It is important to know your options when there is conflict within an LLC. The long-term health and viability of the business depend on being able to resolve disagreements.

A South Carolina business attorney can provide guidance when resolving LLC member disputes in South Carolina and help you take steps to avoid disputes in the future. 

Resolving LLC Member Disputes

Often, there is no actual dispute; rather, there is a misunderstanding. One member might have misinterpreted what another member did or believed rumors without verifying the facts. The first step in resolving disputes among members of an LLC is to sit down with all the involved parties and identify the issue in dispute. This simple stuff step could save everyone a great deal of grief and prevent the situation from escalating.

Another common scenario is that an LLC member did something out of ignorance rather than malice. Very few people actually read the contracts they sign. An LLC member might not realize that the LLC operating agreement prohibits certain conduct. Explaining the rights and duties of LLC members might help the offending member to realize what they did was wrong, and give them an opportunity to correct their actions.

If those two approaches are not effective, you might try to resolve the conflict through alternative dispute resolution, like mediation or arbitration. You will want to check the LLC operating agreement for the rules about dispute resolution. One of the worst things to do is immediately file a lawsuit. Litigation is adversarial and confrontational, and will likely damage if not destroy business relationships. 

Sources of Conflict Among Members of an LLC

If the LLC has a managing member, the other members might suspect that the managing member overstepped their authority, improperly appropriated assets of the company, received an unfair amount of compensation, or breached their fiduciary duty in some other manner. The same accusations could be leveled by one member against another member. 

Also, perceived or actual conflicts of interest can lead to disputes between members of an LLC. For example, a member might enter into a contract for the LLC to purchase materials from another company without disclosing that member’s financial interest in that supply company.

Preventing Future LLC Member Conflicts

Make sure that the LLC operating agreement covers all essential issues, so that all members know their rights and obligations. An LLC member should not have to guess about whether conduct is allowed or prohibited.

Hold a meeting of the LLC members to discuss any gaps you discovered in the operating agreement. Get their input on the terms they would like to have in the contract. With the permission of the LLC, draft an amended operating agreement and have all members sign the document. Hold a meeting with all members to discuss the terms of the operating agreement and make sure they understand what is expected of them. 

If your LLC experiences conflicts among its members, you could seek the guidance of a South Carolina business attorney. Get in touch with our office today for a consultation.

You formed your business to succeed. Your goal is to grow your company and expand your business to increase revenue. However, listening to unfounded business myths could cause your business to fail. Instead, work with a South Carolina business lawyer to ensure your company is on track to meet your goals for growth and success.

Five Business Myths That Could Keep Your Business from Succeeding

A business owner may receive a lot of advice when starting a new company. You may receive advice about how to grow or expand your company. Some of that advice is grounded in harmful myths that could hurt your business. Five common business myths to watch out for include:

1. Being a Business Owner Gives Me More Time for Myself

Starting a business is hard work. You may find that you work harder for yourself than you worked for any employer. Even when you are not working, you are likely thinking about work. Be prepared to invest a lot of your time getting your business off the ground. However, do not expect your hours to decrease in the first few years. Choose something you are passionate about so that you do not burn out as you build your business. 

2. Marketing is Not Worth the Cost

Marketing is a necessity. Investing in an online marketing strategy is crucial for new businesses. More consumers locate companies online. Furthermore, consumers search for companies that offer services virtually. Your company cannot effectively compete with other companies if you rely solely on networking and word-of-mouth to attract new customers. 

3. Entrepreneurs Should Always Trust Their Instincts

There is nothing wrong with following your instincts. However, successful business owners seek professional advice about matters they do not fully understand how to navigate. Successful business owners understand they need guidance in matters related to taxes, advertising, bookkeeping, regulations, contracts, and employee relations. Failing to seek advice from professionals can result in massive headaches for your company. In some cases, it could result in costly and time-consuming “fixes.” 

4. You Can Get Contracts and Document Free Online

Yes, you can find business documents, contracts, and other forms online free of charge. However, many of these “free” business forms are created by non-lawyers. Even the business forms created by lawyers may not comply with South Carolina laws. It is best to have a business lawyer in South Carolina draft your company’s contracts and business forms. Your attorney ensures that your business forms comply with all state laws and contain language protecting your company from liability. 

5. You Do Not Need a Business Lawyer to Incorporate Your Business 

Again, you can find the forms to incorporate your company online. However, deciding on the business structure for your company is one of the most important steps you take when you create a new business. Your business structure impacts taxes, ownership, revenues, and liability. A business lawyer advises you of the pros and cons of each business structure. Based on your needs and goals, an attorney recommends the best structure for your company and handles all matters to establish your legal business entity. 

Contact Our South Carolina Business Lawyer for More Information

Having the correct information and sound legal advice is crucial to operate a successful business. If you have questions regarding business matters, contact our South Carolina business lawyer. We handle all matters related to your business, including business formation, litigation, and contracts.

If you plan to do business in South Carolina, there are many statutes that regulate how you can set up your business and how you get to run your business. We do not generally think of our state as an overreaching government, but still, there are quite a few laws that South Carolina small business owners should know.

It can be quite challenging to keep up with the new regulations that come out every year on top of all the existing rules. A South Carolina business attorney can help you form your business structure and provide guidance on how you can stay in compliance with relevant regulations.

Antitrust Laws

When you go into business, your goal is likely to become as successful as possible. Federal statutes and South Carolina’s antitrust laws, however, try to play some limits on business success. 

If you do too well in the eyes of the government, antitrust laws might try to prevent you from getting what the government sees as an unfair advantage in the marketplace. What you might see as being the leader in your field, our state might view as a lack of competition between businesses.

Forming a Business in South Carolina

South Carolina law allows for a wide variety of business structures. You could have a sole proprietorship, a partnership, a corporation, or a limited liability corporation (LLC). Within some of these categories, there are multiple options. You could set up a C corporation, an S corporation, a general partnership, a limited liability partnership, or other entities.

Some business entities require you to name the company and register the name under which you will be doing business. Depending on your business structure, you might need to: 

• Select and identify a registered agent for service of process
• File articles of incorporation 
• Register to do business in the state of South Carolina if you are a foreign LLC.

Our state usually does not require operating agreements, but creating one can be a smart business practice. Depending on whether you sell goods and collect sales tax, you might have to register with the South Carolina Department of revenue. Also, you might need state and local business licenses.

Deceptive Trade Practices

South Carolina tries to protect consumers from what the state considers to be deceptive or unfair practices used to sell goods or services. Building and running a company can be a cutthroat business. Companies in South Carolina need to balance competitiveness with honest trade practices. If a business steps over the line, our state’s deceptive trade practices laws could impose punishments. 

Statute of Limitations

Our state limits the amount of time people have to file lawsuits against others. Different types of lawsuits have different lengths of deadlines, called statutes of limitations. You will want to be familiar with these deadlines because they can be both a sword and shield.

If a person or another company files a lawsuit against you and it is past the statute of limitations, you could file a motion to dismiss the lawsuit. If you want to take legal action against someone, you will need to file your case before the deadline expires. 

A South Carolina business attorney can advise you on South Carolina laws that apply to small businesses. Get in touch with our office today for legal assistance, we offer a free consultation.

Starting a business in South Carolina can be an incredibly challenging process, and in many cases, you need to attract outside investment to secure needed capital. After all, until you have significant revenue being generated, your business will be entirely fueled by your cash reserves. 

One of the most popular ways to secure additional capital is an investment by an angel investor. Angel investors look for companies in their early stages and invest in what they believe is going to be a very successful business. Before you schedule an appointment with an experienced South Carolina business attorney to get the ball rolling, here is what they look for in a business structure.

There are many different types of business structures that can be leveraged to begin business enterprises, with some being more attractive to investors than others. The four basic and most common types of structures are sole proprietorships, LLCs, S corporations, and C corporations.

Sole Proprietorships

Sole proprietorships are the simplest and often the cheapest way to structure a business. The downside is that it leaves the owner or the proprietor open to legal liabilities in many situations. Angel investors will not invest in sole proprietorships. 

LLC

LLCs are a structure that provides the business with some tax benefits, as well as the limited scope of liability that a corporation offers. LLCs also create challenges with paying the members wages, and with investor taxation in some circumstances. LLCs are not ideal for angel investing, and they are often not even considered by the investor.

S Corporation

S corporations are able to have several owners, even a corporate owner, and offer some tax benefits over C corporations. The downside is that company ownership is limited, making sustained growth a challenge. 

Since angel investors often want ownership or equity in the business, this structure isn’t ideal, though it is possible. Investors will often want to be assured of a C corporation transition at a later date. The pass-through tax advantages can be a double-edged sword, as well. 

C Corporation

C corporations are incredibly flexible regarding who can hold stock and the rights of the stockholders, as well as being able to offer different types of stock such as common and preferred. This is also the only possible structure allowed for businesses that will operate in the biotech, life sciences, or pharma spaces.

C corporations are subject to double taxation, however, in the sense that the business will pay taxes, and the stockholders will also pay taxes on corporate distributions. For attracting angel investors, creating a C corporation is the only viable route. 

What Else Do Angel Investors Look For?

If you have decided to work with your attorney on incorporating a C corporation, make sure you take into account some of the other factors that will help draw in angel investors. Factors that include:

• Potential for revenue and ultimately, profit
• A sound exit strategy
• Solid management team
• Personal commitments of the business founders

Experienced Professionals Can Help Your Business Start Off Right

Contact us today if you would like more information or have any questions about incorporation.

The corporate charter is the same thing as the articles of incorporation. South Carolina requires the incorporator of a corporation to file specific documents with the Secretary of State to become a valid corporation in our state.

A South Carolina business attorney can draft your incorporation documents, including your corporate charter. Let’s answer the question, “What is the corporate charter?” in more detail.

What Does a Corporate Charter in South Carolina Have to Contains?

Section 33-2-102 of the South Carolina Code says that articles of incorporation (also called a corporate charter) must include all of these things:

• The name of the corporation. The name must comply with the rules in Section 33-4-101
• How many shares the corporation is authorized to issue of each class of shares that it can issue
• The name of the corporation’s initial registered agent at the corporation’s initial registered office, and the address of that office
• The name, address, and signature of each incorporator
• A certificate that the incorporators have complied with all the requirements of Section 22-3-102 of the South Carolina Code. A licensed South Carolina lawyer must sign the certificate

It is always a smart idea to work with an attorney when setting up a corporation.

Are There Other Things That the Articles of Incorporation in South Carolina Can Include?

Yes. Section 33-2-102 allows these additional items to be on the corporate charter:

• The names and addresses of the initial directors of the corporation
• The purpose for which the corporation is formed
• The methods by which the corporation plans to manage its business and regulate its affairs
• The powers and limitations of the corporation, its board of directors, and shareholders
• The par value of the corporation’s authorized shares or classes of shares
• The terms and conditions under which shareholders might have personal liability for the debts of the corporation

All of these items must be consistent with the law, or not inconsistent with the law. 

Do I Have to File Any Other Paperwork with the Corporate Charter?

Yes, you must file the initial annual report with the articles of incorporation.  Section 12-20-40 lays out the requirements of the initial annual report. 

What Else Do I Need to Know About Articles of Incorporation in South Carolina? 

You are allowed to include other matters in your corporate charter if your bylaws permit or require those items, and those things are enumerated in Chapters 1 through 20 of South Carolina’s Title 33 – Corporations, Partnerships, and Associations. Also, unless you request a later effective date, your corporation will come into existence on the day that the articles of incorporation get filed with the South Carolina Secretary of State.

Can I Amend My Corporation’s Corporate Charter or Bylaws?

Yes, as long as you comply with the requirements of Chapter 10 – Amendment of Article of Incorporation and Bylaws of Title 33 – Corporations, Partnerships, and Associations. In addition to following the proper procedure for adopting amendments to the articles of incorporation by the incorporators, directors, and shareholders, the corporation must file the articles of amendment with the Secretary of State.

A South Carolina business attorney can provide guidance, draft required documents, and advise you on compliance issues. Get in touch with our office today.

It will depend on the language of the contract about severability and the clause itself whether the court will void the entire contract, edit the agreement, or merely strike the offending clause if one portion of a contract is unlawful. Sometimes a party will insert an illegal term into a contract to “bluff” the other party into accepting the term.

A party might place an illegal clause into a contract to sabotage the document. A South Carolina business attorney can talk to you and offer guidance in your situation.

What Is Severability?

The term severability refers to a situation in which one part of a contract is improper, and the court strikes that portion of the agreement but keeps the rest of the document. Many contracts contain a severability clause as the standard language. With frequent changes in the law, a perfectly legal contract term could become illegal with little if any notice.

How Important Is the Unlawful Term?

Let’s say that a company had a contract to supply computer chips to a corporation in another country. The agreement was legal when they negotiated and signed the document. Down the road, Congress makes it illegal to sell those chips to businesses in that country. Merely severing clauses from the contract will not be sufficient. The contract now has an illegal purpose and will be void.

Does it Matter Who Wrote the Contract?

One party might insert clauses into a contract, knowing that the terms are unlawful. For example, a large corporation has employment contracts that require the employee to waive the right to worker’s compensation benefits if they get hurt on the job. The employee had no bargaining power, and the employer refused to remove the illegal term.

When the employer finds someone equally qualified who will work for a lower salary, the boss tries to void the contract with the original employee on the grounds of the illegal term. The courts are unlikely to let the employer benefit from its act of writing a contract with unlawful language. Instead, the court might construe the agreement in favor of the non-drafting party; in other words, the party who did not write the contract, the initial employee. 

The Judge’s Options

When faced with unlawful language in a contract, the judge generally has three options:

• Sever or strike the unlawful clause from the contract and enforce the rest of the agreement 
• Edit the illegal or unenforceable term to something legal and reasonable, or 
• Void the entire agreement.

The facts of each situation will determine which option the judge chooses. By way of example, if the judge finds that the terms of a non-compete clause in an employment agreement are unreasonable, the judge could “line through” that language, removing the improper limitations on the employee. Another option is that the judge could rewrite that portion of the contract to something reasonable and enforceable. Also, the judge could decide to void the entire agreement.

A South Carolina business attorney can review your business agreements and draft documents for your company. Call our office today to schedule a consultation

All of your hard work and investment in your South Carolina business could get lost in an instant if you do not have the right insurance coverage. The kinds of insurance you should carry will depend on several different factors, like your industry and the risks your business faces.

South Carolina business attorneys can talk to you and help you create a risk management plan that includes business insurance. Here are some types of insurance that South Carolina businesses can need:

Business Owner’s Policy (BOP) Coverage

A Business Owner’s Policy (BOP) is a single policy that provides business liability and business property insurance all in one. Liability can cover your company if someone gets hurt on your premises, by one of your products, or from another covered cause. The business property coverage protects you in the event of theft, a fire, or other types of property damage or loss. 

The language in your policy will determine the amount of coverage, the types of benefits, and the covered perils. The policy will also control matters like the limitations and exclusions, or non-covered items or situations.

Business Income Insurance

Companies all over America experience a sudden loss of business income as a result of the COVID-19 pandemic. We learned that no business is entirely immune to regional, national, or global crises. Companies whose products were still in demand had to deal with production, supply, and distribution challenges that many had never faced before.

Business income insurance can provide a safety net for your company. As long as the cause of the loss of business income is covered by the policy, this coverage can replace income, up to the limits of the insurance. This type of insurance can make the difference between a temporary pause in business operations and going out of business forever.

Workers’ Compensation Insurance

If you regularly employ at least four full-time or part-time workers, South Carolina law requires you to carry workers’ compensation coverage. The benefits that this insurance can pay include medical care, lost wages, and disability to employees who get hurt or develop an illness because of their line of work.

Some employers are exempt from maintaining workers’ compensation insurance. You do not have to carry this type of coverage if:

• The total paid to your employees during the previous year was less than $3,000, no matter how many people worked for you during that year.
• Your business is a railroad or railway express company.
• Your employees are agricultural workers.

These are but a few examples of companies that are exempt from the requirement of carrying workers’ compensation insurance.

Data Breach Insurance

Every size and type of business is vulnerable to hackers. You can buy coverage that can help with the cost of liability, legal fees, identity theft protection services, and even public relations expenses. Some cyber liability and data breach insurers can help you navigate through the mitigation process when you experience data loss, theft, or a breach

You might need additional types of insurance, like motor vehicle liability coverage, depending on the covered perils of your existing policies. A South Carolina business attorney can help you evaluate your business insurance needs.

You should incorporate your company in a state where you do business and where the advantages of incorporating in that state outweigh any disadvantages. If you have a start-up venture, you will likely find South Carolina to be friendly toward businesses. A South Carolina business attorney can provide guidance on where you should incorporate your business.

Why Many Corporations Register in South Carolina

You are in business to make a profit. Even non-profits have to make enough money to keep the lights on and pay their other bills. In a state with high income and property taxes on corporations, you will have less of your hard-earned profits to take home.

South Carolina does not levy taxes on corporations for your inventory. Also, our state has no wholesale tax, unitary tax on your profits in other states or countries, or property tax on corporations. There is no local income tax on these business entities. South Carolina has a business-friendly corporate income tax code.

Benefits for S Corporations and LLCs in South Carolina

Corporate status is not the best structure for every business. If you own an S corporation, South Carolina offers these incentives:

• You can change the ownership of the S corporation without having to stop the operations of the business by buying, selling, or gifting the stock.
• If one of the stockholders dies, the S corporation can continue operations because these business entities have a “life” that is independent of its stockholders.

On the other hand, limited liability corporations (LLCs) can enjoy these bonuses in our state:

• You will not have to take or maintain formal papers like minutes or resolutions, so running your business is less onerous. Corporations still have to follow those formalities, but not LLCs.
• Your local area in South Carolina might offer property tax abatement, textile revitalization credits, or other tax exemptions.
• Our state’s many programs for the favorable tax treatment of LLCs include such options as tax credits for corporate headquarters, research and development, investments, jobs, and other incentives.

Depending on your company’s industry, you might be eligible for additional incentive programs when you incorporate your business in South Carolina. 

A Low Cost of Doing Business

Sometimes, one of the best ways to boost your bottom line is to decrease your expenses. Many areas within our state have cost of living numbers that are below the national average, so you and your workers will be able to live better than you could elsewhere, and the expenses to run your business will be lower than in many other places.

Real estate costs less in our state than in many other locations, with corresponding lower property lease expenses. Buying or leasing the physical facilities for your corporation is one of the highest ongoing bills most owners face. Reducing this expense can make the difference between success or failure, particularly in the early years when launching a start-up company. 

A South Carolina business attorney can advise you on the laws that apply to your industry, draft your incorporation documents, and serve your company with ongoing guidance as the laws change. Contact our office today. 

All South Carolina employers who have at least 50 employees for at least 20 weeks this year or last year have to follow the federal Family Leave and Medical Leave Act (FMLA). Due to the COVID-19 pandemic, some employers are eligible for financial assistance from the federal government if they pay wages to employees for extra sick, medical, or family leave.

The COVID-related legislation is temporary, lengthy, and complex. A South Carolina business attorney can explain your obligations under the standard federal FMLA and the laws that expand the FMLA for COVID-related absences from work. Here are four things every employer should know about FMLA:

Pre-COVID FMLA Provisions

These are the general provisions of the federal FMLA as it stood before the COVID-19 pandemic. When the temporary COVID-related legislation expires, these regulations will control.

• An employee of a qualified employer must work for the company for at least one year at a location that has at least 50 employees within a 75-mile radius and log at least 1,250 hours of work time within the previous year to be eligible for FMLA benefits.
• FMLA benefits apply to several different situations, such as a worker who just gave birth or adopted a child, is recovering from a significant illness, is a caregiver for a family member with a severe medical condition, or certain military-related issues.
• Qualifying military-related situations can provide up to 26 weeks of leave in a 12-month period, but there are restrictions.
• Qualifying non-military-related situations can provide up to 12 weeks of leave in a 12-month period.
• FMLA standard leave is unpaid. 
• The worker can maintain the employer-provided health insurance during leave but will have to pay their usual contribution for the coverage. 
• Usually, the worker has the right to return to the same position or a similar one when returning from leave.

This is merely an overview of the standard FMLA as it existed before the COVID-19 pandemic. There are many restrictions, limitations, and exceptions within the legislation.

No South Carolina Law That Provides Additional Benefits 

The Family and Medical Leave Act (FMLA) provides some leave benefits for employees in specific situations. Some states have their own legislation that expands those benefits beyond federal law, but South Carolina does not have such legislation. 

Which Employers Qualify Under the FFCRA

The Families First Coronavirus Response Act (FFCRA) applies to employers with fewer than 500 employees who paid “qualified sick leave wages” and/or “qualified family leave wages under the Emergency Paid Sick Leave Act (EPSLA) and/or Emergency Family and Medical Leave Act (Expanded FMLA.  These companies can receive funding to help cover the cost of the expanded sick, family, and medical leave for COVID-19 related absences from work. The absence could be due to any of these situations:

• The employee was unable to work or telework because the employee was sick with or quarantined due to COVID-19.
• The employee was a caregiver for a family member with COVID-19 or for a child whose school or childcare location was closed, or the regular caregiver was unavailable due to the pandemic.

The American Rescue Plan Act of 2021 (ARP) offers small and midsize employers and some governmental entities refundable tax credits for employers who pay sick leave or family and medical leave for COVID-related illness, caregiving of a family member, or for an employee to receive the COVID-19 vaccine and recover from those vaccinations.

No South Carolina Law That Provides Additional Benefits 

The Family and Medical Leave Act (FMLA) provides some leave benefits for employees in specific situations. Some states have their own legislation that expands those benefits beyond federal law, but South Carolina does not have such legislation. 

How COVID-19 Changed the FMLA Temporarily

The federal government increased the required amount of paid sick leave as well as family and medical leave in the Families First Coronavirus Response Act (FFCRA). That expanded coverage applies to COVID-related leave taken between April 1, 2020, and December 31, 2020. The FFCRA offers tax credits for up to two weeks (up to 80 hours) of qualified sick leave pay and up to ten weeks of qualified family leave pay.

The FFCRA has two parts:

• The Emergency Paid Sick Leave Act (EPSLA) – that covers up to 80 hours of paid sick time when a worker cannot work due to COVID-19, and
• The Emergency Family and Medical Leave Act (Expanded FMLA) – that increases the amount of paid leave for family and medical leave.

Some self-employed individuals can receive benefits under the FFCRA.

If you paid sick, family, or medical leave benefits to employees related to COVID-19 between January 1, 2021, and September 30, 2021, you might be eligible for a tax credit under the American Rescue Plan Act of 2021 (ARP). The IRS has online guidance for small and mid-sized businesses that find themselves in this situation. 

Unless the federal government passes additional legislation, the expanded paid leave coverage will expire after September 30, 2021, and employers will return to the previous FMLA terms. A South Carolina business attorney can provide guidance and answer your questions about the FMLA.