Many entrepreneurs will organize their business into a limited liability company (LLC) or similar entity to obtain limited liability protections. Lawyers counseling these business owners often recommend that their clients observe corporate formalities by following such practices as conducting regular corporate meetings, taking minutes of those meetings, and approving resolutions of important actions taken by the LLC. Maintaining limited liability is an important reason for a company to follow corporate formalities and maintain formal records, but there are other important reasons to maintain these practices that are even more basic.

In the case Kelegian v. Mgrdichian (1995) 33 Cal. App. 4th 982, a California Court of Appeal quoted the trial judge’s wise words:

Since the outbreak of COVID-19 began, business as usual has been disrupted. As a result of various government interventions, there has been a disruption of supply chains across all industries. Manufacturing, processing, transportation, and agriculture have either slowed or ground to a halt. As a result of these disruptions, businesses find it increasingly difficult to meet their demands and, in some cases, their contractual obligations.

This leaves an unanswered question, who should bear the losses and face the consequences of a contractual breach?

California Judicial Council Adopts New Rules to Lower Jail Population, Suspend Evictions and Foreclosures

By Julia M. Wei, Esq.

On April 6, 2020 by teleconference, the Judicial Council issued 11 temporary rules effective immediately. The full text of the emergency rules here.

As our firm’s earlier update regarding eviction moratoriums noted, there has been movement both on the state and local government level to halt or otherwise slow the progression of evictions due to non-payment of rent for COVID-19 related reasons. The practical implications are that any unlawful detainer must be filed in the courts and now the California Rules of Court emergency rules are in effect as to ALL unlawful detainer actions (whether COVID-19 related or not). My reading of the new rules is that it applies to both commercial and residential eviction.

Businesses of all kinds will be forced to keep their doors closed in the coming weeks in the face of COVID-19 and the orders from Governor Newsom [1] and the Santa Clara County Health Officer. [2] Business owners should be turning to their insurance policies to consider what help they will be able to obtain. Each business will have different results depending on the kind of coverage they have. This article outlines a few of the common insurance issues that will be relevant in the current crisis.

Co-author Josue Uribe Fonseca

We are getting a lot of questions about contract enforcement during this state of emergency. Many people need to be excused from contract performance for reasons entirely out of their control. That means we are throwing around terms like "force majeure" to address whether performance is excused due to COVID-19's' effects such as the State of Emergency and California's Executive Orders, and the various counties' shelter-in-place orders.

The California Corporations Code requires founders to follow specific procedures and file specific forms before the entity comes into existence. For example, articles of incorporation must be filed with the Secretary of State in order to create a corporation. In contrast, a general partnership can be formed without any document at all.

A partnership is formed when two or more individuals co-own a business for profit. Cal. Corp. § 16101 (9). No writing at all is required to form a partnership. However, written partnership agreements are often created by the partners and this article discusses one reason why a partnership agreement is important.

For example, Sallie and Juan open a bakery shop together in downtown San Jose. Sallie buys all the groceries, pays for them and hires the staff. Juan gets up early, bakes everything and stocks the display windows. Together Sallie and Juan help customers and man the cash register. At the end of each day, they split the proceeds after costs are paid. They are clearly doing business together in their San Jose bakery. Even without a written partnership agreement or the intent to form a partnership, they have.

However, one day Sallie tells Juan that she has to move out of state to care for an elderly relative. Sallie leaves San Jose for Reno the next day. Juan no longer has a partner.

Regardless of the type of business you run here in California, you need to get your name out there in order to draw in customers. This makes marketing and advertising a vital part of nearly every business since word of mouth alone may not be enough to expand your customer base and make your business a success.

The problem is that if you fail to exercise caution, you could end up facing allegations of false advertising. In the alternative, you may suspect that a competitor's product claims are false. Understanding this issue could be as simple as learning from other major companies who ended up in trouble for false advertising.

More than likely, you measure at least part of your business's success by its profits. Your company makes money by providing either or both goods and services to customers. As such, you expect payment in an amount agreed upon between you and each customer.

When you don't receive payment as agreed, your first inclination and action would most likely involve contacting the customer for payment. In some cases, that may work, but in others, the customer continues to withhold payment. At this point, you may need to know your options regarding collecting these debts. Each type of debt collection method involves the increasing need for court intervention.

Contract disputes are unfortunately an inevitability in the course of doing business over the long run. There are intentional breaches, inadvertent breaches, breaches caused by a third party, and in some cases, contracts that have become impracticable or even impossible for one or both parties to perform.

When confronted with the headache that a business contract dispute represents, you may have different reactions. Like many, you may be overworked, overstressed, and simply want to resolve the dispute as efficiently as possible. Sometimes, however, a speedy resolution is not feasible, especially when another party to the contract maintains that there is no dispute to be resolved or claims, incorrectly, that an adequate remedy has already been seen to.

If you have a plan for a new business, your head may be spinning with ideas to make your company a success. You may even hope to grow your business into a franchise or simply to expand in your area of California. Whatever your plans, you know you can't do it alone.

Whether you are looking for someone to share the load day by day, or you need someone to partner with you financially, it has to be the right person. Bringing someone on board who clashes with your personality or business philosophy could mean disaster before you even graduate from being a start-up.

The vernacular used in discussing unfair competition and antitrust in matters of business and commerce is often antiquated. Think, for example, of the term "robber baron," which was used to refer to titans of shipping, real estate, and other industries who acquired vast wealth by consolidating power and influence to thereby virtually control relevant markets. In doing so, the board game Monopoly might come to mind, with its old-time tycoon fashioning a bowler hat and spectacles.

For modern day businesses, however, it is critical to understand that unfair competition and even violations of federal antitrust law are no longer a thing of the past to be reduced to fun family games. An experienced San Jose business law and bankruptcy attorney is already well aware of this, keeping up at all times with the "rules of the game."