Author: Hoffman & Forde, Attorneys at Law

These New California Laws Take Effect in 2024

These New California Laws Take Effect in 2024

Last year, California Governor Gavin Newson signed several major laws passed by the state legislature. These bills, all of which went into effect January 1, impact a wide range of California residents, including business owners, employees, non-profit institutions, and even some Mexican residents looking for access to more affordable education.
Here are some of the changes you can expect to see in 2024. 

Extended Sick Leave  

Until recently, California law only required employers to provide employees three days (24 hours) of paid sick leave. As of January 1, California workers are entitled to five days (40 hours) of paid sick leave.

It’s worth noting that this change only extends to employees who have worked for the same employer for at least 30 days. The law applies to the following employees: 

  • Full-time
  • Part-time
  • Workers hired on an as-needed basis
  • In-home supportive service providers
  • And temporary employees

There are a few minor exemptions, but the law applies to most workers who meet the 30-day employment requirement. 

Protection For Recreational Marijuana Users

Late last year, Governor Newsom extended California’s Fair Employment and Housing Act (FEHA) with Senate Bill 700, a bill designed to protect workers from discrimination related to cannabis use. The bill prohibits employers from requesting information related to applicants’ prior use of marijuana.

In addition to Senate Bill 700, Assembly Bill 2188 further protects employees and applicants by prohibiting employers from:

  • Discriminating against employees who use cannabis on their time, outside of work
  • Taking adverse action against an employee who shows the presence of non-psychoactive cannabis metabolites (substances that do not cause a “high” or impair one’s ability to work)

There are some exceptions, however. The bill does not extend to construction workers and those applying to positions that require a federal background check or security clearance. 

More Access to Affordable Housing

It’s no secret—California has long ensured a housing shortage.

The new Senate Bill 4 bill opens up 170,000 acres of land for affordable housing, allowing non-profit colleges, churches, mosques, and other faith organizations to transform excess land and parking lots into affordable housing.

This new law allows qualifying institutions to bypass local permit restrictions to address California’s homeless crisis.

It’s also worth noting that Senate Bill 423 further strengthens affordable housing development by expediting approvals of affordable housing projects and introducing new labor standards that will make these projects more appealing to construction unions. 

In-State College Tuition For Some Mexican Residents

Nearly 170,000 people crisscross the California-Mexico border daily for work, school, or recreation. Assembly Bill 91 gives some individuals greater access to affordable education in the United States.

More specifically, the bill allows low-income students from Mexico who live within 45 miles of the border to pay in-state tuition at eligible community colleges. This five-year pilot program begins this year. 

Questions About How These New California Laws Impact You? We Have Answers.

These new changes have broad implications for many California residents and businesses. If you have questions about how they impact you, contact the experienced legal team at Horrman & Forde. We specialize in immigration law, real estate, administrative law, and more and can help you successfully navigate these changes.  

California Caps Security Deposits at One (1) Month’s Rent

In November Governor Newsome signed into law California legislation which limits security deposits to one (1) month’s rent for both furnished and unfurnished residential units. The new cap on security deposits for Leases takes effect July 1, 2024.

San Francisco Assembly person Matt Haney authored AB 12, which passed both the Senate and the Assembly houses in September. The legislation is a monumental shift from existing law, which allows up to two (2) months’ rent as security for an unfurnished unit and up to three (3) months’ rent for a furnished rental.

There is a major primary exception to AB 12. The law excludes landlords who own up to two (2) residential rental properties – which collectively include up to four (4) dwelling units offered for rent.  To qualify under the “limited number of units” exception, the owner must hold the property as (a) a natural person, (b) a limited liability company – in which all members are natural persons, or (c) under a family trust. If one satisfies these conditions, a “limited number of units” Owner is permitted to collect up to two (2) months’ rent as a security deposit.

As always, there is an exception – to the exception of every Rule. The “limited number of units” exception does not apply when the prospective tenant is a military service member.

Once again, the Law takes effect next Summer on July 1, 2024, which provides landlords time to make the necessary adjustments.

Contact one of our seasoned Landlord-Tenant Attorney’s to determine how California’s latest legislation impacts you.

 

12 Common Mistakes Landlords Make in California and How to Avoid Them

Rentals can provide a good income stream but can become costly if improperly handled. Here are some of the most common mistakes landlords make that can lead to severe problems.

1. Poor Tenant Screening

Good tenants pay their rent on time, keep your property in good condition, and don’t cause you any trouble. Bad tenants do just the opposite, and they can make your life as a landlord miserable.

To avoid problems with unpaid rent, disputes, legal issues, or property damage, your best defense is to do a thorough tenant screening that includes a background check, and employment and income verification.

2. No Written Rental Agreements

Relying on a verbal agreement is one of the most common mistakes landlords make. Not having a written contract makes you highly vulnerable to serious disputes or costly legal issues.

Take the time to prepare a written agreement outlining both parties’ rights and responsibilities. You won’t regret it.

3. Not Keeping up With Laws That Have Changed

Letting your knowledge of rental laws and their ever-changing iterations lapse can land you in legal trouble.

Laws on rental properties can change quickly in California, and it’s up to you to ensure you’re keeping up with them and remaining in compliance.

4. Not Paying Attention to Local Rent Control Ordinances

Does your city have a local rent control ordinance that protects tenants from excessive rent increases? Many cities do, especially in California, and you could land in some serious hot water if you start charging too much rent.

Stay informed at all times to ensure you’re in compliance.

5. Lack of Good Property Maintenance

A deteriorating rental property with unaddressed repairs is more than unsightly; it can lead to potential legal issues.

Ensure you have a proactive maintenance plan and regular inspections to address problems promptly. Your tenants will be happy, and you’ll be protecting your investment.

6. Poor Communication With Tenants

Without a clear line of communication between a landlord and tenants, conflicts and legal disputes can quickly arise. 

Open and transparent communication can foster a positive relationship to prevent misunderstandings and proactively address issues. 

7. Mismanagement of Security Deposits

Disputes over security deposits can get costly and are a financial loss that can be easily avoided.

In California, there are specific guidelines that landlords must follow when they handle security deposits. This includes:

  • Written notices to tenants about the amount being held
  • Returning deposits within the required timeframe
  • Documenting deductions

8. Not Complying With Habitability Requirements

If your rental has mold, pests, or other issues that make it inhabitable, you need to address these problems quickly. There are strict health and safety standards in California you must follow.

To avoid getting to the point where you’re facing legal consequences, ensure you are performing regular inspections and keeping up with California’s habitability laws.

9. Insufficient Insurance Coverage

Is standard insurance coverage enough for a rental property? It likely isn’t. You need to have enough coverage to protect you in property damage cases, personal injury claims, or loss of rental income.

Consult with an insurance expert. They can help you understand your options for coverage and assist you in selecting the right policy.

10. Discriminatory Practices

California’s fair housing laws strictly prohibit landlords from engaging in discriminatory practices. Protected characteristics include, among others, race, color, religion, sex, disability, and familial status.

As a landlord, you must know the fair housing laws and follow them accordingly.

11. Not Keeping Accurate Records

Poor recordkeeping isn’t just a mess. It can prevent you from collecting rent promptly, keeping up with maintenance and repairs, and ensuring legal compliance.

It’s critical to have an organized, systematic process for keeping records. 

12. Not Handling Evictions Correctly

Landlords must follow strict laws in California when evicting a tenant. You must:

  • Give proper notice
  • File the correct documents
  • Go through appropriate court procedures

Noncompliance can result in costly legal complications that can quickly drain your money. Before going through with an eviction, it’s critical to consult with an attorney.

Need Legal Advice?

Avoiding these common mistakes will help ensure your rental remains a solid investment. For legal matters, if you’re struggling to understand the laws you need to comply with or are in the midst of a dispute with a tenant, our attorneys can help. Schedule a consultation today.

LLC vs. Corporation in California: Which One Should You Choose?

You want to start a new business, which is exciting. But what type of structure is best? In California, like in other states, you can form an LLC or set up a corporation. Here are some of the differences between the two.

Limited Liability Company (LLC)

Typically, an LLC is run by business owners but can also be structured where a manager is responsible for daily operations rather than the owners. Small businesses, startups, and single-owner businesses are good fits for this type of structure.

The Advantages

An LLC is an entity separate from the business owners (members). This structure provides owners with liability protection to shield their assets from business debts and obligations. The risk of loss is limited to what the owners invested in the business.

Other advantages of forming an LLC include:

  • Perpetual existence (the business can remain in existence even if ownership changes)
  • Flexible management structure
  • Pass-through taxation that avoids double taxation (LLCs, as an entity, are not subject to taxation; tax obligations are passed down to members on their personal income tax returns)

The Disadvantages

An LLC can cost more than a sole proprietorship or general partnership. There’s an initial fee to form the LLC and ongoing expenses at the state level. In California, for example, there’s an $800 annual fee.

Transferring ownership of an LLC can also be more complex than transferring ownership of a corporation, where buying and selling shares of stock determine ownership.

How to File for an LLC Formation in California

Filing is handled through the Secretary of State. You’ll need to file an Operating Agreement – which outlines your company’s operations, management, and ownership structure.

Corporation

In a corporation, you’ll have shareholders, a board of directors, and officers such as CEOs and CFOs.

There are two main types of corporations – a C corporation and an S corporation. A C corporation is responsible for paying taxes on its profits. Shareholders also pay taxes on dividends they receive. An S corporation has pass-through taxation, similar to an LLC. It comes with limitations, though, such as the number and type of allowed shareholders.

The Advantages

A corporation provides personal asset liability protection that protects owners from the company’s debts or legal obligations. 

Other advantages include:

  • Access to capital (you can raise funds by selling stock)
  • Tax breaks available to corporations
  • Business perpetuity

The Disadvantages

Corporations can get bogged down in legal and regulatory requirements that can become time-consuming and costly. Recordkeeping can become a bear.

Double taxation comes into play when you form a corporation. The corporation is taxed and shareholders are also taxed on dividends.

How to File to Become a Corporation

To form a corporation in California, you must file for Articles of Incorporation with the Secretary of State

How to Choose the Right Structure

When deciding between an LLC and a Corporation, you’ll want to consult with a knowledgeable business attorney who can help you consider the following factors:

  • Liability Protection: Both structures offer liability protection, but the formalities and management styles differ.
  • Tax Implications: Evaluate how the business structure’s taxation aligns with your financial goals and the nature of your business.
  • Business Goals: Assess your long-term objectives, growth plans, and exit strategy to determine which structure better suits your needs.
  • Complexity and Formalities: Consider each structure’s administrative requirements and ongoing compliance obligations.

Making an informed decision now can set the foundation for your company’s success and mitigate potential challenges in the future.

Meet With a Business Attorney

At Hoffman & Forde, we provide business and legal guidance for business formation and more. To meet with one of our experienced business attorneys, contact our office to book an appointment.

Recent Regulations for Short-Term Rentals in Chula Vista

Short-term rentals, supported by online platforms such as Airbnb, have long been controversial. Travelers love them because they are often more affordable than hotels and give a sense of staying in a unique “home away from home.” However, they are not without their problems, and locals tend to look down on them. As their popularity has exploded, city governments have sought ways to rein them.

To this effect, the city of Chula Vista introduced a new set of regulations for short-term rentals that went into effect in 2022.

Background

City officials recognized that STRs bring some significant benefits to the community. They allow residents to earn supplemental income, generate tax revenue, and bring visitors to Chula Vista that might otherwise stay in other parts of the San Diego metropolitan area. Despite this, they identified several areas of concern.

1. STRs can change the character of neighborhoods

STRs essentially turn houses and apartments into hotels, which can negatively affect neighbors. STR guests come and go at all hours, make more noise, generate more trash, and occasionally throw big parties on the property. Beyond this, significant portions of neighborhoods can be taken up with STRs to the point where permanent residents are in the minority.

2. Housing shortages

There is a severe shortage of housing in California cities. Renting out homes to short-term guests takes them off the market for residents. This squeezes the housing supply even more, driving up rental prices for everyone.

3. STR operators were not paying taxes

Existing law already required STR operators to register with the city and to collect and pay a Transient Occupancy Tax (TOT) based on their revenue. Reviewing the situation, the city determined that, of approximately 350 STR operating within Chula Vista in 2021, only 125 were registered and paying taxes to the city.

The New Rules

In response to these concerns, Chula Vista passed an ordinance to limit the proliferation of short-term rentals and bolster enforcement of existing provisions. Here are some of the most important new regulations.

  • All STRs require a permit from the city
    On top of needing a business license, STR operators must receive a permit for each property. These permits must be renewed annually.
  • The permit applicant must reside within Chula Vista
    STR operators must have their primary residence within the city limits. “Primary residence” means they live there at least 275 days a year.
  • No more than two permits per operator
    Each person may get a permit to rent out their primary residence and one non-primary residence.
  • Rules on operation
    The law has various regulations on how STRs must be operated. This includes a mandatory quiet time from 10:00 p.m. to 9:00 a.m., prominently displaying the operator’s business license, and promptly hauling away garbage.
  • Special permits for large events
    Before allowing the STR to be used for a large event, the operator must get a Short-Term Rental Event Permit. A maximum of 12 such permits will be granted annually for each STR.
  • Hosting platforms must collect taxes
    Platforms like Airbnb must automatically collect the Transient Occupancy Tax and remit it to the city.
  • De-listing noncompliant STRs
    Upon notice from the city that the property does not have a permit, hosting platforms must take down listings.

Get Help with Your Short-Term Rental

The Chula Vista Short-Term Rentals Ordinance is a comprehensive law that sets out many new requirements for STR operators. To successfully obtain a permit and avoid costly fines, you will need to understand all of these rules and navigate a complicated bureaucracy. 

Our attorneys have years of experience in the fields of business and real estate, and can help you keep your short-term rental business on the right side of the law. To schedule a consultation, contact our office today.

Understanding HOA Disputes in California: Common Issues and Solutions

It’s curious how something so innocuous-sounding as a homeowner association can be so provocative. Yet, mentioning an HOA is enough to throw some people into a frenzy. For them, the HOA is antithetical to the idea that people should be able to use their property however they see fit. Of course, HOA advocates would quickly point out that they are communal organizations that exist for the benefit of all the members, primarily by maintaining common areas and enforcing community standards that affect everyone’s property values.

With these contrasting positions, it’s easy to see how disputes can arise. Here are some of the most common issues that occur with HOAs and ways to resolve them.

Common Types of Disputes

1. Rejection of Architectural Plans

Depending on the Covenants, Conditions, and Restrictions (CCRs) of your HOA, new construction or renovations to the exterior of your home may be subject to the approval of the HOA. Having your carefully considered architecture plans rejected can be pretty frustrating, and it may seem as though the board is being inconsistent or over-controlling.

2. Imposition of Fines

HOA bylaws often allow the board to impose fines on members who fail to abide by the CCRs. On the one hand, the HOA does need to have teeth to enforce the community standards. On the other hand, some boards can get carried away with this, primarily when enforcement is managed by a private company that may have a financial incentive for collecting fines.

3. Failure of the Board to Perform Its Duties

HOA boards have several important duties. They may be responsible for maintaining public areas such as parks and playgrounds and paying property taxes for those lands. If the roads are privately owned, the HOA is likely responsible for their upkeep. Failure to do these things can create problems and even lead to legal action.

4. Misuse of HOA Funds

A homeowner association has a fiduciary duty to its members, and board members must, therefore, use the HOA’s money in a fiscally responsible way. Embezzling money would violate this duty, but things like granting HOA contracts to a board member’s family business or just being wasteful could also be violations.

Resolving Problems with the HOA

The best place to start when resolving an HOA issue is to do so informally; that is, just talk to the board members and/or homeowner without escalating the situation. After all, these people are your neighbors, so it’s better to get along with them as much as possible. Bring up your concerns and try to find common ground.

If that doesn’t work, the next step may be mediation or alternative dispute resolution. Mediation can be quite effective and is usually much quicker and cheaper than going to court. If you are a homeowner in dispute with the HOA, it’s probably best to consult with an attorney; the HOA likely already has a lawyer on retainer that will be present for the proceedings. 

If mediation does not resolve the problem, the only remaining recourse is to go to court. To go this route, you will want an attorney, and you should be prepared for a process that can take months or even years to finish.

Talk to an HOA Attorney

HOA disputes can be complex to resolve and often quite emotional as well. Meeting with an experienced HOA attorney will help you better understand your situation and protect your rights as a homeowner.

Our residential real estate attorneys have a deep understanding of this area of law and know how to bring HOA disputes to a fair resolution. Contact our office to schedule a consultation.

New ADU Laws in California: What You Should Know

California is in the middle of an affordable housing crisis. City populations have swelled, along with home rental prices. The effects of a general lack of affordable housing are dire, pushing residents toward financial hardship and even homelessness.

In response to this crisis, state and local lawmakers are looking into accessory dwelling units (ADUs) to alleviate the pressure. As a cheaper and more flexible alternative to constructing new multi-family apartment buildings, ADUs are a viable way to add housing quickly. To promote new construction, the state legislatures have passed several new laws to reduce barriers and ease restrictions.

Here are some important changes to California ADU law that took effect in 2023.

Relaxed Height Restrictions

Despite the benefits of adding ADUs, not every community is on board with the idea, and some local governments have tried to deter homeowners from building ADUs by imposing restrictions such as on the maximum size of the dwellings. Under the changes included in Assembly Bill 2221, local authorities may impose height restrictions on ADUs, but they may not set a maximum height less than 16 feet. 

Additionally, there are circumstances where the limit is even higher:

  • If the structure is located within half a mile of a public transit stop: 18 feet
  • If the property already has a multi-family dwelling that is at least two stories tall: 18 feet
  • If the ADU is attached to the primary dwelling: 25 feet (If allowed by zoning laws for the primary dwelling)

60-Day Permitting Rule

Since 2020, state law has required that local permitting agencies either approve or deny a permit to build an ADU within 60 days of receiving the application. With the surge in applications, many agencies denied permits for little reason, just to avoid violating the 60-day rule. 

The new rule requires agencies to list their reasons for denying a permit. This is intended to force the agencies to take a closer look at each application and only deny them for good cause. Also, the scope of the 60-day rule has been expanded to include more entities, such as utilities and water districts.

Front Setbacks

Some local agencies denied ADU building permits based on setback requirements (the distance from the structure to the property line). Under the new changes to the law, if an ADU is no greater than 800 square feet in size, local authorities may not impose a front setback requirement. They may still impose rear and side setback requirements of no more than four feet.

Fire Sprinklers

Building an ADU used to trigger a Group R occupancy change for the property, requiring fire sprinklers to be installed in the primary dwelling. That is no longer the case.

Denials Based on Unpermitted Work

Formerly, ADU permits could be denied because there was existing unpermitted work that had been done to the property. Now, they can only be denied for this reason if the unpermitted work is a safety or health concern.

Demolitions

Many homeowners want to demolish or convert existing structures, such as garages, to build an ADU. To discourage this, some local agencies approved the building permit but refused to provide the demolition permit. Under the 2023 changes, cities cannot withhold a demolition permit if they have already approved the ADU permit.

Talk to a Real Estate Specialist

Building an accessory dwelling unit is a great way to alleviate the housing crisis and provide extra income to homeowners. The latest changes to the law make it an even more attractive option. However, even with the easing of restrictions, there are many bureaucratic rules to navigate, and local permitting agencies may continue to obstruct ADU construction. 

With the help of an experienced real estate attorney, you can clear these hurdles and get your project moving forward faster. To speak with a member of our legal team, schedule an appointment today.

Unlawful Detainer in California and How to Protect Yourself

eviction notice

Evictions are a nightmare, with many people rating it as the all-time most stressful experience of their lives. Even for the landlords themselves, usually, it is unpleasant and something to be avoided if possible.

If you are a tenant on the receiving end of an eviction notice, here is some important information about unlawful detainers in California.

What Is an Unlawful Detainer?

“Unlawful detainer” is the legal complaint a landlord must file with the court to have someone removed from their property—i.e., evicting that person. In effect, it is seeking a judgment that the tenant has no legal right to remain on the property. The most common reasons for filing an unlawful detainer complaint are (alleged) failure to pay rent, failure to adhere to the terms of the lease, and failure to vacate the property at the end of the lease term.

Common Defenses to Unlawful Detainer

Just because you’ve received an eviction notice doesn’t mean you necessarily have to leave the property. After all, you still have due process rights to challenge the legal basis of the eviction. Here are the most common defenses to an unlawful detainer complaint.

1. Already Paid Rent in Full

If the basis for filing the unlawful detainer was a failure to pay rent, then proving that you have in fact, paid the rent is a complete defense. Landlords must give tenants at least three days’ notice to pay the rent (a Notice to Pay or Quit) before proceeding with the eviction. You cannot be evicted if you pay the rent within that time.

 2. Fixing Violations of the Lease

If the landlord alleges that you have violated the terms of the lease, they may give tenants a three-day “Notice to Perform Covenants or Quit.” This notice must identify what the tenants have done to violate the lease and give them three days to fix it. For example, if the lease prohibited pets, the tenant would have three days to remove any pets from the property.

In the case of serious violations, however, a landlord is not required to allow the tenant to fix the problems. Examples of this include:

  • Conducting illegal activity on the premises (such as selling drugs)
  • Causing significant damage to the property
  • Endangering the health and safety of others

In these cases, the landlord need only serve a three-day Notice to Quit.

3. The Landlord Did Not Maintain the Property

Tenants may withhold rental payment if the landlord fails to maintain the property according to minimum livability standards. For example:

  • Failure to provide locks on the main doors
  • Failure to provide heating in cold weather
  • Failure to fully waterproof the roof and walls
  • Sewage backing up onto the property

4. Improper Eviction Procedure

Landlords may not resort to “self-help” eviction. That means they must give tenants notice, go through the unlawful detainer process to obtain a court order, and, if necessary, request law enforcement officials to remove people from the property. They may not skip the court process and change the lock while the tenant is away or remove their possessions.

Discuss Your Situation with an Attorney

California has robust legal protections for tenants, but you might never know about them or have any idea about how to protect your rights without the help of a lawyer. Our experienced attorneys know the unlawful detainer process inside and out; they can provide you with a practical assessment of your situation and a clear plan for moving forward. 

To schedule an appointment, contact our office today.

What to Know About Buying Rental Property Outside of California

Real estate investment can be a great way to grow wealth and even provide a steady stream of passive income. However, as every Californian knows, real estate prices in the state are often prohibitively expensive, leaving many people with few options. As a result, it is often necessary to look outside the state for more affordable opportunities.

For those who are drawn to the idea of buying rental property outside of California, here are a few critical points to consider.

1. Know the Market

Real estate values vary widely from neighborhood to neighborhood, even street to street. Most of us understand this intuitively regarding the area where we live, but it can be easy to lose sight of this fact when searching for property in another city. Without local knowledge, it’s easy to get lured in by a “great deal” that turns out not to be so great. Alternatively, there may be a part of town where real estate prices will likely  skyrocket in a few years, but you wouldn’t know about it.

If possible, it’s better to buy property in an area that you are already familiar with. If not, it’s a good idea to get to know the place and try to be physically present as much as you can throughout the process.

2. Find a Good Agent

Having a real estate agent you can trust is always important, but it is doubly so for people buying an out-of-state investment property. Tying in to the point above, a good real estate agent can be an invaluable source of knowledge about the local market. They can guide you toward great opportunities and steer you away from a money pit.  The wrong agent, or even just an indifferent one, may prioritize closing the sale over looking out for your best interests.

What’s more, your relationship with a real estate agent can be a great start to building a local network of connections. From inspectors to contractors to property managers, you’ll need a lot of help to make your rental property a success, and a good real estate agent can put you on the right path.

3. Property Managers Can Be a Big Help

It will be tough to administer an out-of-state rental property on your own. For starters, someone has to be on hand to show the property, collect rent, inspect the property for damage, etc. If maintenance issues crop up, they must be dealt with promptly, which may be challenging to orchestrate from another state. Also, you’ll need to be familiar with state and local laws regarding leases, evictions, and more.

Hiring a local property manager simplifies all of this. For a fee, often a percentage of the monthly rent, property managers will find renters, oversee the signing of the lease, collect rent, send maintenance workers, and take care of other problems as they arise.

4. Tax Implications

Owning an out-of-state rental property can be a great investment, but it will complicate your annual tax return. If nothing else, you will almost certainly have to file a return in the state where the property is located. 

You’ll want to take advantage of deductions for depreciation and other associated costs, such as fees paid to a property manager. If you operated at a net loss for the year, you may or may not be able to deduct that loss from your other earnings (like salary). To navigate all of this without incurring the wrath of the IRS, you should strongly consider hiring a tax professional.

Talk to a Real Estate Specialist

If you are considering purchasing a rental property, whether it’s in California or elsewhere, our team of experienced real estate attorneys can provide the expertise and assistance to make the process go smoothly. From minimizing tax exposure to reviewing contracts, we’ll be at your side every step of the way. 

Contact our office today to start putting your investment plan into action.

4 Reasons Your Business Might Need a Lawyer

As businesses grow, so do the legal complications and the potential pitfalls. For all but the smallest of these businesses, the question is not if your business needs a lawyer but when you should call in their services.

Most small to medium-sized businesses don’t need to hire full-time, in-house counsel.   Still, they should strongly consider forming a relationship with an outside attorney who is familiar with their operations and can provide assistance on an as-needed basis. 

Here are some of the top reasons your business might need a lawyer.

Business Formation

When your business is just starting, or if you are considering changing the way it’s organized, there are many decisions to make that can have significant consequences in the future. From a sole proprietorship to an LLC to incorporation, all of these structures have advantages and disadvantages in terms of taxation, liability, etc. It is a good idea to sit down with a business attorney to discuss your options and get help with the paperwork.

Similarly, if you are considering forming a partnership with other individuals, it is well worth your time to meet with an attorney and work out the details of an agreement. One of the best services a lawyer can provide in this situation is to help you and your business partners plan for potential conflicts and unanticipated events. What happens when one of you wants to sell their share of the business? What happens if one of you dies? How do you proceed if you disagree on important decisions? Understanding this in advance can save you a lot of grief in the future.

Compliance Issues

Spanning a myriad of areas, from taxes to HR to data privacy, compliance issues are the bane of many business owners. They are often viewed disdainfully as bothersome government interference that pulls resources away from the business’s core mission. Whatever your feelings may be on the topic, the consequences of noncompliance can be pretty costly for a business.

An attorney who understands how your business works can, first and foremost, bring compliance issues to your attention that you may not have even been aware of yet. Later, they can help you create policies and procedures that help keep your business on regulators’ good side.

Workplace Disputes

Employment law is a fraught area for businesses. Conflicts with and between employees have a high potential for future legal disputes. 

For example, firing employees is an unfortunate necessity that comes with running a business, and it should always be approached as the precursor to a lawsuit. Everything you do or say may come up later, so it’s essential to go by the book. However, that can be hard if you don’t know what rules to follow. Consulting with an attorney will help you navigate this situation without exposing your company to a lawsuit.

Similarly, dealing with problems between employees can be just as important. For example, if an employee complains that they were harassed in the workplace, it’s crucial to handle this properly and not just wing it. Draft policies in advance with the help of your lawyer, and then have their phone number ready if a situation arises.

Lawsuits

Some consider it a rite of passage or a sign of success when a business is sued for the first time. Indeed, the longer your business is around and the higher its profile, the more likely this will happen. 

If you or your business receives notice that it is being sued, the next thing you should do is contact an attorney. If your business already has a lawyer, you will be in a much better position than if you shop around for one while the clock is ticking.

Southern California Business Attorneys

Your business is too important to leave anything to chance. Having an experienced attorney who can advise you when needed is critical to protecting your business and building a sustainable foundation for future success.

Our highly credentialed attorneys have been proudly serving the Southern California business community for years. With broad-ranging experience in a variety of practice areas—from commercial real estate to civil litigationHoffman & Forde can provide the legal expertise your business needs.