Business Law Notes
Winter 2008 Edition
There is a very old saying that a person who represents himself in legal matters has a fool for a client. While this rule is not universally true, do-it-yourselfers can cause serious problems for themselves when they try to practice law. Here are a few of the more risky areas:
- Wills – Never do your own will. The rules concerning wills are way too complicated and the consequences of making mistakes are way too serious. (By the way, dying without a will can be just as bad.) Do not try to do an amendment (codicil) to your will without a lawyer for the same reasons.
- Commercial leases – Commercial leases are typically extremely one-sided in favor of the landlord and there are many potential traps. Recent case law in North Carolina has upheld some very onerous terms. You need a lawyer to at least point out the major pitfalls in the lease.
- Franchise agreements – The trend nationwide is for franchise agreements to be extremely one-sided and overreaching. The courts tend to enforce them as written and typically a trial or arbitration is in some other state. You should not sign a franchise agreement without having it reviewed by a competent attorney familiar with franchise law.
- Court – Don’t go there alone. In North Carolina, corporations, limited liability companies and similar business entities are required to be represented by a licensed attorney. You cannot represent your corporation yourself (except for small claims court). In your individual capacity, you are allowed to represent yourself, but remember the first sentence to this article. Court procedures are very, very complicated and judges have very little patience with pro se (representing yourself) parties.
- Small claims court – Small claims court is relatively safe for the non-lawyer. However, it normally is a good idea to discuss your small claims case with a lawyer. There may be aspects of the case that are more serious than you realize. Also, a good lawyer can give you some quick tips that may substantially increase your likelihood of success.
- Corporations – If you are the sole shareholder of your corporation, incorporation is relatively simple. However, it is critical that corporate formalities be followed and that the corporation is adequately capitalized. If not, you may find your “corporate veil” can be pierced, exposing you to personal liability. Also the S Election for favorable tax treatment is usually a critical and time sensitive issue. If there is more than one shareholder, a shareholders’ agreement is important to address such issues as death, sale of stock to third parties, and management issues.
- Limited liability companies – Same issues as the corporation though you normally would not make the S Election. Choosing to be a “member managed” limited liability company is usually a big mistake. Taxation can be complicated.
- Just a simple partnership – Partnerships are fraught with danger and, except in rare circumstances, are not a good choice for operating your business. You are personally liable for all partnership debts. Also, every partner, even if he owns only a small percentage, can bind the partnership to an unwise contract without the other partners’ consent. Taxation issues can be complicated.
About our Author:
DISCLAIMER: Johnson, Hearn, Vinegar & Gee, PLLC, provides this newsletter for general information only. The materials contained herein may not reflect the most current legal developments. Such material does not constitute legal advice, and no person should act or refrain from acting on the basis of any information contained In this newsletter without seeking appropriate legal or other professional advice on their particular circumstances. Johnson, Hearn, Vinegar & Gee, PLLC and all contributing authors expressly disclaim all liability to any person with respect to the contents of this newsletter, and with respect to any act or failure to act made in reliance on any material contained herein. Distribution of this newsletter does not create or constitute an attorney-client relationship between the firm and any reader or user of such information.
Johnson, Hearn, Vinegar & Gee, PLLC
434 S. Fayetteville Street #1800, Raleigh, NC 27602, P: 919.743.2200, F: 919.743.2201, Email
Copyright © All Rights Reserved.