February 23, 2012

Business Law Blog

Failure to issue 1099s: What You Don’t Know Can Cost You

Over the course of a year, a corporation makes many payments – rent to the real estate limited liability company that owns your office space, professional fees to your attorneys and accountants, payments to the estate of an employee who passed away, service fees to subcontractors who operate as sole proprietorships, and many others.

Under the IRS requirements beginning in the 2011 tax year, if a corporation paid any one of the above more than $600 in a year, that corporation has an obligation to issue a 1099 for the payments.  The rules state that a 1099 form must be sent to any eligible recipient who was paid at least $600 during the tax year.  Eligible recipients include limited liability companies (“LLCs”), partnerships, estates, trusts and, only for payments for medical, health care, legal or fishing activities, corporations.

The 1099s must be provided to the eligible recipient by January 31st .  There are financial penalties related to failure to file and such penalties are assessed per 1099 not issued, so these penalties can accumulate quickly.  The penalties are on an escalating scale, from $30 to $100 per 1099 not issued, depending upon when or if you do issue one.

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How long may a non-competition agreement last for?

 In Massachusetts, non-competition agreements are frequently required of employees by employers.  These agreements must be reasonable both in terms of their geographic scope and in their duration.  Such an agreement will expire at the end of its stated term.  However, it is possible for the duration to be extended by the agreement of the parties.  Non-competition agreements may include a provision which provides for the tolling of the term due to litigation or willful employee conduct, such as concealment of the breach by the employee or theft of confidential information.  Some Massachusetts Courts have also extended the duration of a covenant not to compete based upon the conduct of the employee.

For questions about non-competition agreements in Massachusetts, or any other business questions, contact one of the Massachusetts business attorneys at the Franklin, Massachusetts law firm of Doherty, Ciechanowski, Dugan & Cannon, P.C.

Businesses Need to Keep Their Goggles Focused on Google Places

The New York Times has reportedly recently that businesses listed on Google Places can easily be erroneously listed as “reportedly closed” or “permanently closed” without the knowledge of the owner of the business. This can be done by just a few customers who may reach a business and find it closed. They don’t bother to note that they are making their report to Google at 8:00 p.m. and the sign on the front shows that the business closes at 7:00 p.m. This can also be done by an unsatisfied customer, or even worse by a competitor.

This problem is particularly difficult for retail businesses who count on walk in traffic, such as a restaurant, coffee shop or hotel. Customers will often locate these businesses via a Google search and if the customer thinks the business is closed, they’ll move right on to the next business.

Owners whose businesses are listed in Google Places should be alert. They should check Google Places at least a couple of times per day and click on “not true” if they see that their business has been listed as closed improperly. If the problem persists, business owners should contact Google directly. Google has indicated that they are aware of the problem and they are working on ways to reduce the errors.

If you have questions regarding Massachusetts business law or would like to learn more about how our firm may help advance your business, please contact us directly to speak with one of our business attorneys.

Does my business need a Confidentiality Agreement or Non-Disclosure Agreement?

A Confidentiality Agreement or Non-Disclosure Agreement is crucial for any Massachusetts business that wants to protect proprietary or confidential business information. A properly drafted agreement will clearly define the confidential information it is protecting: trade secrets, proprietary information, customer lists, pricing, source code, products, etc. In addition, the party receiving the information, an employee, business partner, customer, or independent contractor, will agree not to disclose and maintain the confidential information. Confidentiality or Non-Disclosure Agreements are crucial to protect information that has been developed at great time and expense, from falling into the hands of a competitor.

In general, Confidentiality and Non-Disclosure Agreements should be used whenever a business will be disclosing valuable confidential information. In particular, any business should present its employees and independent contractors, who have access to confidential information, with such an agreement. In addition, such an agreement should be used whenever a business sale is contemplated.

If you have questions about Massachusetts Business Law or Confidentiality or Non-Disclosure Agreements, please contact the business law attorneys at Doherty, Ciechanowski, Dugan & Cannon.

Do I need a written agreement when I go into business with another person?

A written agreement between business owners is vitally important.  We have seen numerous lawsuits and disputes between business owners which paralyze a business, and eventually cause the business to fail as a result disputes that could have been avoided or easily resolved if the owners had not neglected to sign a “buy/sell” or other agreement when they first formed the business.  We have often met with clients who have told us their business partner was a family member or a lifelong friend with whom they thought they did not need to have a written agreement or that they would have been embarrassed to ask for such a written agreement.  This is unfortunate because even when you go into business with family or friends, a written agreement can help to set a clear direction for the business and help to avoid misunderstandings as to what the parties expect from each other.

Furthermore, even if the business owners do remain on good terms, death is one of life’s certainties and disability, divorce and other life changes are also common.  When a business owner dies, wants to retire, becomes disabled or gets divorced, if there is no written agreement in place that provides a means to protect the other owner, disasters can occur that lead to former spouses, children or heirs now having an involvement in the business that may lead to disruptions and the business shutting its doors.

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What type of business entity should I use when starting a new business in Massachusetts?

There are many forms of entities that a person can choose when starting a business.  If there is only to be one owner of the business, the business could be an unincorporated sole proprietor, a corporation, or a limited liability company.  We generally recommend that business owners use either the corporate format or the limited liability company format in order to protect themselves from personal liability.  The limited liability company does provide additional liability protections, but in certain circumstances there may be tax and other reasons why the corporate form may be better.  We discourage people from being sole proprietors as this leaves personal assets open to liability claims that arise from their business and vice versa.

If there is more then one owner of the business, a corporation, limited liability company or limited liability partnership should be used to avoid the business being treated as a partnership.  In partnerships, the partners are personally liable for the business debts incurred by their partners on behalf of the business.  Shareholders in a corporation and members of a limited liability company are not personally liable for any of the debts of the business or debts that the other owners of the business incur on behalf of business. Furthermore, the corporation or limited liability company as the case may be, is not liable for the personal debt of the shareholders or members.
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Attorneys in Franklin Massachusetts and Medfield MA lawyers

The Massachusetts attorneys of Doherty, Ciechanowski, Dugan & Cannon provide legal services to Massachusetts businesses, families, and individuals in the practice areas of business law, criminal defense, divorce and family law, employment law, estate planning, personal injury, real estate, and litigation matters.

Our attorneys represent clients throughout Massachusetts and in every county of Massachusetts including Norfolk County, Suffolk County, Worcester County, Bristol County, Middlesex County, Plymouth County, Hamden County, Essex County and Barnstable County. Our attorneys represent clients in Massachusetts’ largest communities including the cities of Boston, Worcester, Springfield, Lowell, Cambridge, Brockton, New Bedford, Fall River, Lynn, and Quincy.

Our law offices are located in Franklin and Medfield and serve the Greater Boston MetroWest region and the neighboring towns of Bellingham, Milford, Upton, Hopedale, Holliston, Medway, Millis, Medfield, Norwood, Walpole, Sharon, Foxborough, Wrentham, Easton, Mansfield, North Attleboro, Norton, Plainville, Raynham, Taunton, Attleboro, Seekonk, Rehoboth, Uxbridge, Whittensville, and Worcester.