Category: Business Law

Should South Carolina have a uniform standard for issuing business licenses?

If you are starting a business in South Carolina, there are a number of steps you must take, starting with selecting the right business organization, filing foundational documents with the state, crafting a business plan, and obtaining the necessary business licenses.

While this seems straightforward, these matters can become complicated, particularly when it comes to licensing. This is because there is no uniform licensing law and the state’s 270 cities and towns (and some counties) have different classifications, forms, due dates, term and renewal dates, and fees. So if you intend to operate in more than one municipality, there are many bridges to cross.

However, this patchwork of laws reportedly can cost the state about $300 million, which is why there is a growing movement for a statewide uniform law. At the same time, business licenses are a crucial source of revenue for cities, towns and counties. In addition, licensing requirements at the local level allow municipalities to monitor the types of entities that set up shop and also serve as a means to enforce building codes, zoning laws, and environmental ordinances.

But a uniform law will support business customers, and there are several advocates who support the law, including the South Carolina Chamber of Commerce, and the Municipal Association. Nonetheless, plans for a uniform law have been in the works for five years as business leaders, lawmakers and officials try to carve out a compromise.

With the next legislative session underway, some are hopeful that a uniform standard is within reach. At the same time, a bill has yet to be crafted. However, the bill could include provisions such as a uniform application, fewer classifications, and a definition of gross income for purposes of calculating the license tax.  In addition, the Municipal Association also supports the creation of a centralized computer system and a clearing house through which applications would be submitted and processed. However, cities are opposed to having a state agency run this portal.

The Takeaway

At this juncture it is uncertain if and when lawmakers will draft the needed legislation, and how long it may take to approve a uniform licensing law. While the objective is to streamline the business licensing process, it remains to be seen how the measure could affect the income streams these municipalities have long relied on. In the meantime, if you need assistance with obtaining a business license or any related start-up matters, you should engage the services of an experienced business law attorney.

How can I prepare a business plan?

If you’re planning to start a new business in 2017, having a well-designed business plan is essential for attracting investors or other sources of capital. Moreover, creating a business plan is an essential first step in launching a new venture. This document establishes what your business does, where it plans to go, and how it plans to get there. In other words, it’s your roadmap to success.

In short, a well-crafted business plan will include a description of the business and the leadership team, the target market, what sets you apart from the competition, and last but not least, financial projections. These are all key considerations for potential investors.

Company Description

The description of your company should not only provide information on what the business does, but how it is different from other businesses in your space, and what the target market is.

The Business Team

Business teams are usually comprised of people with varying skill sets. Some have expertise in product development or a history of providing a particular service, others may have executive capabilities to run the operation while others have a proven track record of delivering goods or services to the market. It is vital to have a well-rounded team.

Market Analysis

It is crucial to do your due diligence on the industry, the market, and competitors and demonstrate there is a need for what you plan to sell, and that you will attract customers.

The Competition

The road to success means having a competitive advantage. Your product or service must be unique, or failing that, your marketing plan will differentiate you from your competitors.

Financial Projections

If your goal is to obtain funding, you must be able to provide financial projections of your profit and losses during the first few years, and how you intend to grow revenues. This estimate provides both investors and the leadership team with realistic goals you intend to achieve.

The Takeaway

In the end, a business plan should be a three-to-five-year projection of where you intend to take your venture, that also considers risks, barriers to entry, and how you will respond to these challenges. By having a well-thought-out plan, your investors will have confidence in knowing that you are prepared and committed to achieving success. Before launching your venture, you are well advised to engage the services of an experienced business law attorney.

Many businesses have customer lists that they consider their own private property.  It is common, however, for sales representatives and other employees to regard customer lists as theirs too, something they can take to a new employer. Employment agreements, confidentiality agreements, non-competes, and non-solicitation agreements can all be used to eliminate confusion over whether a customer list is transferable or not.

In the absence of clear contractual protections, however, case law and state trade secret laws may decide whether a list is the exclusive property of a business.  If the list is a “trade secret,” a business owner may have an easier time protecting it and obtaining damages for its use by ex-employees and competitors. The Uniform Trade Secrets Act, that has been adopted by most states and the federal Defend Trade Secrets Act provide for penalties and remedies for the misappropriation of trade secrets.

When is a list a trade secret?

Generally, a list receives “trade secret” protection if, first, it contains information not readily ascertainable from public sources.  Merely listing customers and general contact information is usually not enough to elevate the information to trade secret status. Second, owners must usually take some measures to keep the information confidential.

What steps can a company take to ensure that a list is viewed as a trade secret?

The following are elements which, when present, can lead to a customer list being deemed a trade secret.

• The list contains unique, non-public information about each customer, such as ordering history, needs and preferences, and private phone numbers and e-mail addresses.  The more a customer list contains valuable details compiled about each customer, the less likely a court is to say that the list could have been readily assembled from public sources.
• The list is marked “private” or “confidential,” and employees are informed that it the property of the company.
• Electronic versions of the list are password-protected, and access is limited to certain users.
• Printed copies are kept under lock and key.
• When the list is shared with third parties, there is a confidentiality agreement.
• The owner can show that time and effort were invested in building and maintaining the list.

A recent case involving former employees of an insurance company shows how these factors can influence a court.  In that case, the customer list contained more than just customer names, birth dates and drivers’ license numbers.  It also contained laboriously compiled information about the amounts and types of insurance each customer had bought, the location of insured property, the personal history of policyholders, policy termination and renewal dates, and other potentially valuable details.  The list conferred a powerful, competitive advantage and the court deemed it a “trade secret.”

Meeting the criteria spelled out in that case and in the suggestions above does not guarantee that a customer list will be deemed a protected trade secret.  It could, nonetheless, increase the odds.

How can I protect my business from employment discrimination claims?

Business owners need to be aware of a variety of state and federal laws, not the least of which are employment discrimination laws. In short, these laws prohibit employers from discriminating against employees and prospective job applicants when making any employment decision, including hiring, firing, promoting, demoting or compensating employees. These laws also make it illegal to discriminate regarding any other terms and conditions of employment. While state laws vary, let’s take a look at the federal laws governing many employers.

Title VII of the Civil Rights Act of 1964

Workplace discrimination based on race, color, national origin, religion, and gender is prohibited by Title VII of the Civil Rights Act of 1964, a law that also established the Equal Employment Opportunity Commission (EEOC). This agency is responsible for investigating claims of employment discrimination.

Before a lawsuit can be brought under Title VII, an employee or job applicant must first file a claim with the EEOC. Even if the agency finds there is no basis for a claim, a lawsuit can still be brought against an employer. Lastly, this law only applies to employers with 15 or more employees.

The American with Disabilities Act (ADA)

Employers with 15 or more employees are barred from discriminating against or harassing disabled employees by the Americans with Disabilities Act. In addition, this law requires employers to make reasonable accommodations to enable a qualified disabled worker to complete his or her job functions.

The Pregnancy Discrimination Act (PDA)

The PDA prohibits discrimination against, or harassment of,  women based on their pregnancy status regarding any aspect of employment. In short, women who are temporarily unable to perform their jobs due to pregnancy must be treated similarly to other temporarily disabled workers. The PDA also applies to employers with 15 or more employees.

Age Discrimination in Employment Act (ADEA)

This law prohibits employers with 20 or more employees from discriminating against individuals who are 40 years or older. An employee’s age cannot be used as a factor in any employment decision.

Retaliation

Lastly, employers are also barred from taking retaliatory measures against employees who file a complaint about discrimination or who engage in other protected activities. Retaliation can include firing or demoting an employee, changing job assignments, or work shifts. Other forms of behavior, such as hostile attitudes by supervisors or coworkers toward an employee who has filed a discrimination complaint are also considered retaliation.

The Takeaway

It is essential for business owners to be aware of their responsibilities under state and federal discrimination laws. A business that violates these laws can be fined by the government and face costly lawsuits. Even if a business prevails in these actions, discrimination claims can damage its reputation, and hinder its success in the marketplace and its ability to attract talented employees. By consulting with an experienced business and employment law attorney, you can establish policies and procedures that ensure your business adheres to these laws.

These days you can do almost everything online- grocery shop, find a date and even get an eye exam. If you are outside of South Carolina, that is. This State just passed a hotly contested law banning the practice.

Opternative is a web-based company that offers online eye exams. The eye exams are administered using a computer display and a wireless device, such as a smartphone. The user is asked to step away from his or her display and a wireless device is used as a remote. He or she is then asked a number of questions and to submit certain medical records. The results of the exam and the other information is then forwarded to a licensed ophthalmologist who reviews it and issues a prescription. Many are drawn to the online-based service because it is less expensive than a traditional in office exam, which is usually not covered by health insurance.

The new South Carolina law prohibits the practice of providing prescriptions for glasses and contacts based on an eye exam administered online. Governor Nikki Hayley opposed the law and vetoed it, but her veto was overridden and the law was passed anyway. Some representatives, such as Senator Ray Clearly have defended the law by stating a public health concern.  Specifically, that individuals should submit to an in office eye exam as this is the only type of exam that can detect serious problems, such as tumors. But, not everyone believes that is the real purpose of the law.

Opternative has filed a lawsuit against the South Carolina Department of Labor. The company claims that the law has an ulterior motive. Namely, to protect the profits of those who offer traditional eye exams. They allege that this law is unfair in what is supposed to be a free market existing in the United States. The company seeks to have the law declared unconstitutional so that they can resume business in the state. If you are a business owner and have a law related issue that you would like to discuss, contact an experienced business and corporate law attorney today.

Small businesses are the heart of the American economy. If you are a small business owner and you hold certain beliefs, you might want to use your business property to put those beliefs on display. As long are you are not discriminating against anyone, you should be able to do that. Right? Maybe not, as one South Carolina business owner is finding out the hard way.

Around the Fourth of July holiday, Bob Michaelis, the owner of the Michaelis Mattress Company, which operates four stores, put up 10 American flags outside his Lexington store. He claims that he put the flags up to because he wants a “return to patriotism in America” because he feels it has been lost. After putting up the flags, he was visited by officers of the Lexington Police Department. They informed him that there is an ordinance in effect that allows only three flags of the same kind to be displayed at one time. The ordinance was passed in 1999 after an incident involving the Confederate flag. The police allegedly asked Michaelis to take the flags down. Although Michaelis could be subject to fines for breaking the rule, and he stated that he believes the ordinance is a good thing, it is unclear whether he removed the flags.

The Mayor of Lexington responded to the situation by saying that Michaelis had an ulterior motive for putting the flags up: a Fourth of July sale. He also mentioned that he did not want to interfere with business.

As a small business owner one of the most important aspects of day-to-day operations is compliance with the myriad of rules and regulations, federal, state and local, that your venture is subject to.  Non-compliance can cause you to be sanctioned and fined. But, being aware of and ensuring that you are in compliance with these rules can be a handful. That is why it is in your best interest to retain an experienced business law attorney.

What business entity is right for me?

Choosing a corporate entity is one of the most important initial decisions you will make for your business.  Your entity selection can affect your control and management of the business, funding eligibility, the number of shareholders and partners, taxes, and much more.  When forming a new business, you should keep two important things in mind:

• Entities are state specific.  When you incorporate or organize, it is done at a state level, and your entity will be subject to the laws of the individual state.
• Your corporate entity selection may not match your tax entity.  You can incorporate or organize as a certain entity at the state level, but elect to be taxed by the IRS as a different entity.

Entity selection is complex, and there are numerous factors you must consider.  Potential entities available to you include:

1. Sole proprietorship:  This is a popular entity choice for home-based businesses.  It is the simplest entity to form and has the least formalities, but it also provides minimal legal protection.  It usually involves one owner who also operates the business.
2. Limited liability company (LLC):  Probably the most popular business entity today, LLC’s combine the benefits of corporations and partnerships.  They offer protection in the event of a personal lawsuit and flexibility in membership.  It can, however, be difficult to offer stock options to investors with an LLC.
3. Partnerships:  Partnerships can be either general or limited.  In a general partnership, partners manage the company together and assume equal responsibility for debts.  In a limited partnership, limited partners invest, but do not have control over the company.  Partnerships can be complex to set up due to the often multiple parties involved and differing roles of some partners.
4. Corporations:  A corporation is typically used for larger entities, especially when a business will have shareholders or investors.  Corporations can shield owners from liability for the debts of the company.  This entity allows for ease of funding and has tax benefits, but forming a corporation is an involved process.

For assistance creating your business, contact the South Carolina business organization attorneys at Willcox, Buyck & Williams, P.A.

What is the future of non-compete agreements?

The debate over the use of non-compete provisions in employment contracts continues to stir as state and federal regulators push back against the inappropriate use of these provisions for low-wage workers. In New York, for example, the state Attorney General has been actively challenging the use of these restrictive covenants and recently announced settlements with three companies that will effectively end their use of non-competes. These settlements come on the heels of a report issued by the White House in May 2016 that criticized the use of non-compete agreements.

The report, based on a Labor Department study conducted in March, questions the extent to which many employees actually have access to proprietary information and the effectiveness of non-competes in preventing the misappropriation of trade secrets. In sum, the federal government has taken the position that workers are unfairly hampered from negotiating for better compensation and benefits and are often prevented from advancing in their fields by overly restrictive non-compete provisions.

What is a non-compete agreement?

Non-compete agreements are restrictive covenants that are typically included in executive-level employment agreements designed to prevent them from working with competitors after resigning or being terminated. The provisions usually include a term of 6 months or up to two years, and specify a geographic region as well. These agreements, however, are currently being used more broadly to cover lower-level employees. Proponents contend that these provisions are necessary to prevent employees from taking sensitive business information, or trade secrets, to competitors. On the other hand, some observers argue that non-competes can also stifle innovation and mobility in the labor market.

The Takeaway

Other states besides New York, particularly Illinois, Nevada, and Massachusetts have been taking a look at the use of non-compete provisions. In addition, legislation was considered by lawmakers on Capitol Hill in 2015, to no avail. Whether the Labor Department will take any action in this regard is unclear, the growing trend of action by the states in this area should give business owners pause.

That being said, there are other ways a business can protect its trade secrets, such as relying on confidentiality provisions in employment agreements. In the end, there needs to be a balance between protecting sensitive information and not impermissibly binding workers from pursuing opportunities. The best way for a business to achieve this objective is to engage the services of an experienced business law attorney.

How will the new arbitration rule affect lenders and other financial firms?

The Consumer Financial Protection Bureau (CFPB) intends to limit mandatory arbitration clauses that banks and financial firms have long relied on to prevent class action lawsuits. This move comes after the CFPB conducted a study that was authorized by the Dodd-Frank law. The proposed rule applies to a variety of consumer financial products and services such as lending, storing and exchanging money.

While arbitration clauses will no longer encompass class actions, the new rule will keep mandatory arbitration in place for individual consumer actions. It remains to be seen whether this is the first step in completely eliminating arbitration clauses, however. CFPB Director Cordray painted these agreements as “gotcha contracts” that force certain groups of consumers to forfeit their legal rights.

The new rule will require firms that include arbitration clauses in their client agreements to revise these provisions by explicitly stating that arbitration cannot be used to prevent consumers from being part of a class action. One the final rule is issued, after the comment period closes in August, the CFPB intends to provide specific language that these firms must use. In addition, the consumer watchdog intends to monitor arbitration proceedings and will require firms to submit any materials used in an arbitrated case.

Industry groups are obviously opposed to the CFPB’s proposed rule because they contend removing class actions from arbitration will lead to a surge of lawsuits that will only benefit trial attorneys. They also contend that consumers will not be helped by the new rule in light of an earlier study by the CFPB that revealed that groups of consumers fair better in arbitration proceedings than those who join a class action.

Others argue that the proposed rule is designed to protect low income families and students who are typically more vulnerable to being pushed into loans and other consumer finance products with higher interest rates. These individuals also have no choice but to accept mandatory arbitration and in so doing surrender their basic legal rights.

The rule will become effective 210 days from the date when a final rule is announced which gives banks and other financial firms time to plan ahead for the compliance costs associated with revising their client agreements and the administrative costs they will incur for providing arbitration material to the CFPB. If you have questions about the new arbitration rule, you should engage the services of an experienced regulatory/compliance attorney.

If you own a business or would like to create one, you need to seek the expert advice of an attorney.  Counsel will be able to answer your questions regarding what type of business you may form as well as the dealings you may engage in.  He or she will also delineate any limitations in managing your company and will advise you as to the chronological steps that need to be taken to ensure your success.

For instance, you may require certain licenses to carry out business as usual.  These licenses may include a “Retail Sales Tax License” or an “Alcohol Beverage License,” and you will need to be listed with the South Carolina Department of Revenue (SCDOR).  However, some businesses may be exempt from registering if certain services are provided.

If you are planning to form a business, you will need to be versed in the filing requirements of South Carolina as well.  This will include filing with the Secretary of State (SOS).  Upon successful registration, the SOS will issue you a Certificate that you should maintain as proof of your South Carolina listing.

Moreover, you typically need to provide a name for your business, but the business name must not be used by another company.  An attorney can guide you as to how to determine whether the business name you desire is available.  Your business may also require a registered agent and office, and your company must comply with the South Carolina Code of Laws.

Furthermore, there are various tax and liability consequences associated with your business structure or form.  Several types available in South Carolina include Limited Liability Companies or Partnerships, Statutory Close Corporations, Professional Corporations, or even Non-Profit Corporations.  There may be different requirements and benefits depending on whether you are a for-profit or non-profit corporation.

Lastly, if your corporation has employees or plans to have employees, you will need a Federal Employer Identification Number (FEIN).   You may need to register with the Internal Revenue Service (IRS) or other organizations of the state and county within South Carolina throughout this process.  Confer with your attorney to ensure that every requirement is met.