How Lose Lips Might Sink Ships or in these cases get you sued.

A recent Virginia case and one being filed in New York illustrate the consequences of making public comments about individuals related to a sensitive issue. In the Virginia case a Commonwealth’s Attorney (CA) said that criminal charges against three current and one ex-supervisor were “winnable” and he “could have made them stick.” The CA made those comments after the criminal charges against the current and ex-supervisor were dropped. The four plaintiff’s cumulatively sued the CA for $5.4 million dollars. As reported by the Daily Press each of the plaintiff’s got a $250,000 judgment against the CA. Apparently none of the judgments are enforceable against the CA. So the fight is with the CA’s homeowner’s carrier to see if it’s liable for the judgments.

The New York case relates to allegations against former Syracuse basketball assistant Bernie Fine. Apparently two former Syracuse ball boys alleged they were molested by Fine. In response to the allegations head coach Jim Boeheim, as reported on SI.com, quoted an ESPN interview in which Boeheim said, “It is a bunch of a thousand lies that [ ] has told.” Boeheim is also quoted as saying the allegations were about trying to get money. In response to Boeheim’s comments the former ball boys filed a defamation suit against Boeheim and Syracuse University.

What’s to learn from these suits? One of questions to ask is how you would respond in similar circumstances? Both of these cases involve highly charged emotions and issues. Under these circumstances it may be very difficult not to want to express your opinion particularly if you feel justified in doing so. However, in this day and age one thing we  have to remember is what you said five minutes ago could be on You Tube or Facebook in a matter of minutes. Individuals and businesses need to understand the times we live in; they need to exercise restraint and if they feel they have to express themselves they should do so in an environment that affords them protection as privately with an attorney, where the attorney client privilege would prevent even the most inflammatory comments from ever becoming public.

End Note: The phrase Lose Lips Might Sink Ships and Careless Talk Costs Lives were coined during WWI as part of the US war department’s efforts to limit giving useful information to the enemy.

Stupid Technology Mistakes

In a recent Lawyer’s Weekly edition the editors published eight technology mistakes as reported by Sharon D. Nelson and John W. Simek with Sensei Enterprises, Inc. Here they are in bullet form:

1. Not using a screensaver;

2. Never turning off your computer; Nelson and Simek noted that turning off your computer once a day clears processes that didn’t terminate and applications that got tangled;

3. Always using eight character passwords. Nelson and Simek noted that anyone with any IT sophistication could crack an eight character password. However cracking a 12 character password would take 17 years;

4. Storing passwords on monitors, under keyboards or anywhere else that can be located. Passwords even 12 character ones should be easy to remember;

5. Installing illegal software in violation of copyright laws;

6. Not backing up your data and if you do back-up your data not doing a test restore;

7. Not having a PIN for your smart phone;

8. Depending too much on Outlook’s auto complete function.

For more information about these technology tips see www. lawyersweekly.com or contact Sensei Enterprises, Inc., in Fairfax, Virginia.

For more information about how our team of lawyers and other professionals can help protect and grow your business contact me.

Torus Law, PLC
JC Cancelleri

Email JC
Phone: 804-548-4810

Owner Liable for his company’s debt, part two

In my last post I discussed some of the trends related to LLCs and corporations. I noted that in 2010 LLC’s were the preferred entity choice over corporations by a more than two to one margin. One of the differences between LLC’s and corporations are the consequences that could result from failing to follow certain formalities.

In a recent case a local judge allowed a creditor to pierce a corporation’s veil and sue the corporation’s lone shareholder. The judge allowed the suit against the shareholder noting that annual meetings were not held, separate books were not maintained and the corporation was grossly under capitalized.The creditor obtained a $137,454.00 judgment against the shareholder.

While corporations have to adhere to numerous formalities, LLC formalities are fewer and the consequence of not following them is less significant than failing to follow corporate formalities. And while having fewer formalities should not be the only reason to chose an LLC over a corporation it can be an important consideration depending on one’s personality.

If you’re considering starting a business call us to discuss which entity would better serve you. If you have a business that’s incorporated you should take some time to review if you’re meeting the formalities that apply to corporations.

Torus Law, Dream, Plan, Plan, Protect

Torus Law, PLC
JC Cancelleri

Email JC
Phone: 804-548-4810

Owner Liable for his Company’s Debts

This is a two part series on the increasing popularity of using a limited liability company (LLC) to organize a business versus incorporating. In a recent continuing legal education seminar on LLC’s, presenters Allan Donn and Brian Farmer noted that in 2010 approximately 13,500 corporations were formed in Virginia. By contrast some 34,500 LLC’s were formed. This fact confirms the continuing trend to use LLC’s as the preferred business entity. One of the reasons LLC’s were formed last year by a more than two to one margin was the ease of forming an LLC and the fact that ignoring formalities maybe less consequential under and LLC than under an S or C corporation.

There are several corporate formalities that one has to perform to maintain the protection that corporations provide against individual liability. Among these requirements is the need to hold an annual meeting and the need to have separate books if you have separate corporations.

A recent Richmond case ACE Electric Co. Inc., v. Advance Technologies Inc., illustrates the consequences of ignoring the corporate requirements. My next post will briefly discuss what happened and will also discuss some additional differences between forming a corporation and an LLC.

Are taxes dischargeable under the bankruptcy code?

The answer is it depends. Some taxes like trust fund taxes are not dischargeable. Other taxes like income taxes may be depending on various factors.

There are five factors that must be satisfied to discharge income taxes:
1) the return date for the tax must be more than three years old. For example, the return file date for 2007 taxes was April 15, 2008. To satisfy this condition a bankruptcy petition would have to be filed after April 15, 2011.
2) The return has to be filed more than two years ago; and
3) Any assessment must have occurred more than 240 days before the filing of the bankruptcy petition; and
4) The tax return must not be fraudulent; and
5) The taxpayer must not have been guilty if a willful attempt to defeat or evade the tax.

If all five conditions are satisfied then the income tax would appear to be dischargeable. For example, if you were self-employed in 2007 but didn’t pay any income taxes for that year, if you meet all five conditions as stated above you should be able to discharge those taxes by filing a chapter 7. Of course you first have to be eligible to file a chapter 7. If you are eligible filing a chapter 7 could significantly reduce your tax burden.

To learn more about Torus Law and our commitment to help you grow your business through a process of Planning, Building and Protecting please contact me.

Torus Law, PLC
JC Cancelleri

Email JC
Phone: 804-548-4810

 

Negotiate with Creditors or File for Bankruptcy?

A prospective client contacted me and disclosed that they had over 50K in credit card debt. After explaining the bankruptcy process she said she would try to negotiate settlements with her creditors. While I applauded her efforts I also told her that the irony of negotiating settlements with creditors is that the creditor will likely issue her a 1099 for the amount written off, which she would eventually have to pay taxes on.

For example, if I owed 20K and negotiated a 10K settlement the creditor will send me a 1099 for the 10K that it wrote off.  Because the IRS treats write offs as income I am going to have to pay taxes on the 10K the creditor wrote off.  Consequently before negotiating a settlement with any creditor ask your tax adviser what effects it will have on your taxes.  On the other hand consumer debts discharged through the bankruptcy process are not considered income and will not affect your taxes.

For more information about workouts, negotiating with creditors and the bankruptcy process please feel free to contact me. An adviser can help you make informed and often better long-term decisions.

Contact Info

Torus Law, PLC
JC Cancelleri

Email JC
Phone: 804-548-4810