Austin TX Business Law Blog

Wednesday, November 12, 2014

New Texas Legislation Allowing Crowdfunding

The State of Texas is taking another step in the right direction when it comes to small businesses.  The state is expanding the mechanisms that a business startup can use to raise money.  

Texas laws currently limit private investments in business.  To comply with Texas law, contributions from venture capital and angel funds must be from investors with a certain amount of wealth or that are accredited.  This regulation seriously restricts the types of investments businesses are allowed to obtain.  But, in November, these rules are changing after the Texas Board of Securities approved crowdfunding in the state.  

Crowdfunding is a method of raising capital, usually from a large amount of investors who all make small contributions.  This process is completed mostly online and is popular in a variety of industries.  Crowdfunding will be allowed between investors and businesses in the state and investors will be able to contribute up to $5000 to a particular venture.  Businesses in Texas will now be allowed to utilize the internet to raise funds and private investors will no longer have to meet strict requirements.  The Texas Securities Board will continue to regulate the practice and will still request that businesses disclose certain investor information.  Businesses will also only be allowed to raise $1 million dollars per year.  

While some believe that this is a breakthrough for startups and small businesses in Texas, others are not as enthusiastic.  Critics highlight that crowdfunding is not the best choice for all businesses and that the decision to utilize this method should be made on a case by case basis.  They also point out that crowdfunding is much more difficult for larger businesses and even small startups might not want to deal with a large group of investors in the future. 

In any event, as we are still waiting for Federal regulation of crowdfunding, it is important to know and understand the state specific rules applicable to investments in your business.  If you are considering starting a business and using crowdfunding to raise capital, you should consult with a competent attorney. Call Austin, Texas business law attorney Sanjeev Kumar at (512)323-6060 for a consultation today.


Wednesday, October 22, 2014

Managing Risk in Your Small Business

While starting your own business can be one of the greatest things you ever do, it does not come without risk.  Risk can come in many forms including disaster, debt and legal liability. Successful business owners are cognizant of the risks involved in owning and operating their venture and must manage these risks at every juncture.    Fortunately, there are things that you can do to protect yourself in these situations.

First, you must think about risk even before forming your business.  A major part of how your business manages risks comes from your business structure.  Sole proprietorships and partnerships do not offer the personal asset protection that corporations and limited liability companies (LLCs) do.  The corporation and LLC are considered separate legal entities and therefore their owners and managers are usually not personally liable for debts of the business, except in certain specific situations.  Overall, the structure of your business will have an impact on how you manage risk.

Once your business is formed, it is imperative that you obtain the appropriate insurance.  Some businesses are mandated by law to carry certain types of insurance.  Even if yours is not, you should always have some form of liability coverage.  General liability, errors and omissions insurance, specific coverage for corporations and many other types of insurance are available.  You should choose the insurance that is right for your business and stay up to date so that there is never a lapse in coverage.  

Even though you have taken steps to manage your risk, you should still act cautiously in your day to day operations. Do not to make statements in any forum that can be considered defamation.  It is also important that you pay attention to who you do business with as their reputation can and will be imputed to your business should a controversy arise.  In addition, do you best to avoid conflicts of interest as they can result in your business being viewed in a negative light and possibly expose you up to personal risk and liability.  

All small business owners should develop a relationship with an experienced attorney early on.  It is essential to the success of a small business to retain someone to advise you on risk management.  Austin, Texas business law attorney Sanjeev Kumar can help.  Call (512)323-6060 for a consultation today.

Tuesday, October 7, 2014

Cottage Food Law Reform Has Increased Entrepreneurship in Texas

There is a new movement among Americans- people are earning a living from food made in their home kitchens.  Bakers, canners and gardeners are starting their own businesses and selling their cottage foods to consumers.

Texas has recently passed and reformed the Cottage Food Law legalizing this activity in the Lone Star State.  
The Cottage Food Law was originally passed in 2011 and allowed individuals to sell baked goods, preserves and dried herbs out of their homes.  Then in 2013, the Texas legislature expanded the law to include many different kinds of foods, including but not limited to, candy, coffee and popcorn at craft fairs and other venues.  The revision of the law has also stopped municipalities from using their zoning laws to prohibit the production of cottage foods.  While they could once stop individuals from conducting this type of business out of their residential kitchens, they are now barred from doing so.  While the law has opened up a variety of doors for those wishing to sell homemade foods, there are a number of restrictions.  Cottage food makers cannot produce foods that have the potential to be hazardous to consumers.  They must also complete a food handling course and obtain a certificate of completion.  These courses are readily accessible and affordable.  In addition, all products must be appropriately packaged and accurately labeled in order to be sold.  

Cottage food laws have allowed and inspired many entrepreneurs to start their own businesses out of their homes.  While statistics on the number of businesses started are not available, over one thousand individuals have taken courses specifically related to cottage food handling over the last year.  These laws are enabling businesses to operate with low or no overhead costs and are therefore giving individuals an option that was not available before.  

Although the cottage food business is one that you can engage in out of your home kitchen it is still important to adhere to all of the formalities applicable to any other business.  An experienced business law attorney can assist you with legal concerns associated with formation and operation of a business.  If you are considering starting a cottage food business, or any other type of venture, call Austin, Texas business law attorney Sanjeev Kumar at (512)323-6060 for a consultation today.

Friday, September 19, 2014

What Type of Business is Right For You?

You want to go into business for yourself.  You have developed a business plan, secured the necessary funds and are ready to invest in formation and get your business off the ground.  The first thing you need to do is decide how your business will be organized.  There are many different types of structures available depending upon the size and nature of your business.  The main factors to consider are ownership, taxes and personal liability.

You must consider ownership when choosing a business form.  If you are going to own the business yourself, or with a limited number of other individuals, a sole proprietorship or partnership might be a good fit.  These types of businesses are usually fairly easy and inexpensive to start and maintain.  If your business will be owned by more than a few and/or an indefinite number of individuals, a corporation or limited liability company might be right for you.  Corporations and LLC’s, depending on their structure, allow for a business to have many owners.  These types of businesses are subject to more technical requirements than their counterparts to become established, but they are a good choice for many entrepreneurs.

We all have to pay taxes on our income and the same rules apply to businesses. The business form you choose has an effect on the taxes that you pay.  For example, corporations and LLC’s are usually eligible for more tax benefits than sole proprietorships and partnerships.  When it comes to corporations, the tax treatment depends upon the type (S or C corporation).

Individuals are held responsible for the liabilities of their businesses on a regular basis.  Some business forms can prevent your personal assets from being factored into the equation.  Corporations and LLC’s shield business owners from being personally responsible for business liabilities in most situations.  Sole proprietorships and partnerships do not offer this protection, so if you are likely to be involved in litigation or are taking considerable business loans, you might want to think twice before using these business forms.

It is essential at this point to think about where your business is starting and where you see it going.  Do not worry, if you need to change the business structure to suit your needs in the future, it can be done.  If you are considering starting your own business and need advice as to the structure, call Austin, Texas business formation attorney Sanjeev Kumar at (512)323-6060 for a consultation today.

Tuesday, September 9, 2014

Tips for Obtaining Venture Capital

You have a great idea and you want to start a business, or you have a thriving business and are looking to expand. Either way, you need money.  Most new companies get the funds they need to get off the ground though venture capital.  Venture capital is an investment in a new business or start-up that involves a significant amount of risk. Although you should speak to a qualified business law attorney before attempting to obtain venture capital, if you think it is the right option you should have everything in order before starting your quest for an investor or investors.  In this tough economy only the businesses with an organized approach with get the funding they need.

In order to obtain venture capital you must have a solid business plan.  Investors want to fund businesses that are going to be successful and a well thought out business plan is the first step towards that goal.  Your plan should be as detailed as possible and include an overview of the business and the industry it will operate in.  You should contemplate and acknowledge the strengths and weaknesses of the business as well as any obstacles that it may face.  Most importantly, you must include financial information.  Investors want to know how your business performed in the past (if it did) and what the finances might look like in the future.  A business law attorney can help you put together a comprehensive business plan that includes all of the necessary elements.

After you have a business plan in place, you can start your search for funds.  You should take advantage of the internet and all of the social and professional networking opportunities it has to offer in order to connect with and possibly hook an investor.  You might also want to look into crowd funding.  Crowd funding refers to raising money to start a business using small amounts from a large number of people.  There are websites devoted to just this process which you can easily exploit.

Finally, don’t be afraid to go right to the source.  Venture capitalists know best what other venture capitalists want in an investment.  Talk to anyone that will see you and present them with your business plan.  Then ask for and listen to their advice.

If you are in need of advice with regard to venture capital, call Austin, Texas business law attorney Sanjeev Kumar at (512)323-6060 for a consultation today.

Wednesday, August 27, 2014

Number and Success of Female Entrepreneurs Growing

According to a recent study by Expert Market, business is no longer completely a man’s world.  The number of female entrepreneurs and female-owned businesses in the United States has increased exponentially over the last 20 years. From 1997 to 2014, almost 4 million of these businesses have popped up.  These ventures make trillions in revenue and employ millions of people.

Certain states are leading the others in this area.  For example, states including Washington, D.C. (although not technically a state), Maryland, New Mexico, Hawaii and Georgia have the highest number of female-owned businesses in the country. From 1997 to 2014, Georgia, North Carolina, Nevada, Mississippi and Texas have seen the most growth in female entrepreneurship.  Texas has seen the second highest amount of growth of any state in this area with a 98% increase in female-owned businesses.

Some female entrepreneurs claim that men are still dominating the Texas markets.  A few of these business owners lament that people often avoid doing business with them because of their faulty presumption which equates being a woman with inadequate knowledge of the business.  Others claim that men in the various industries do not give them a fair break because of preconceived notions about women in general.  But, this has not stopped them.  One theory claims the increase in female-owned businesses in these states to be a result of the cyclical nature of business and the snowball effect.  As more women become entrepreneurs, the more women look up to them as role models and believe that they too can do the same thing.  Women no longer consider the dream of owning their own business an insurmountable task. 

Starting your own business can be a difficult situation regardless of your gender.  Even in these times, if you are a woman, it is exceptionally important to have a well thought out business plan to overcome the obstacles that may come before you.  The advice of a qualified business law attorney in matters of structure and day to day operations can be essential to your success. Call Austin, Texas business law attorney Sanjeev Kumar at (512)323-6060 for a consultation regarding your business start-up today.

Wednesday, August 6, 2014

Slip and Fall Case Impacts on Spoliation Rules

A large part of running a business is dealing with records.  If a business disposes of records that may serve as evidence in a legal matter they can be found responsible for spoliation.  Spoliation is defined as the destruction of or failure to retain evidence.   It can be hard to determine which records must be preserved and which can be disposed of.  With a new ruling by the Texas Supreme Court, the task may become slightly more bearable.

In 2004, former professional football player Jerry Aldridge fell in a grocery store after slipping on grease that was on the floor.  He filed a personal injury suit against the grocery store which was owned by Brookside Brothers.  A surveillance camera recorded Aldridge walking into the store and falling.  When his attorney asked for more footage than that showing the fall, it was discovered that Brookside Brothers had only kept the 8 minute clip and failed to retain any other surveillance video.  At the end of the case, the judge issued a spoliation instruction to the jury asking them to determine if the defendants knew or could have known that the surveillance footage might be relevant to the dispute. The jury found that spoliation did occur and issued a $1 million dollar verdict in the plaintiff’s favor.  

On appeal, the Texas Supreme Court came to a different conclusion.  The court found that spoliation did not occur and reversed the verdict.  In their decision they also explained the elements required for a finding of spoliation.  They detailed that the court's first inquiry must be whether a party failed to retain evidence and, if so, if the party had a duty to retain the evidence.  If the answers to the previous inquiries are both yes, the court must then determine whether the party did so intentionally or negligently.  Once the court has determined that the spoliation did occur, they can then assess a remedy.  If the party committed spoliation intentionally, the jury may construe the unavailable evidence against that party.  If they did so negligently, it must be determined whether the spoliation prevented the other party from making a case.  The decision also instructs businesses as to how they should preserve records and electronic data although it does not give them a time-frame for retaining these records.

If you are engaged in a business dispute and are concerned that you may be liable for spoliation or need advice on any other matter, call Austin, Texas business law attorney Sanjeev Kumar at (512)323-6060.

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