Hot Topics for Small Businesses

Contractors: Know Your Mechanic’s Lien Laws

Joel SowalskyIf you are a building contractor, especially if you operate a small business, then you need to be familiar with your state’s mechanic’s lien laws. If you use these laws properly, they will become an important tool to assure that you get paid for your work.

What is a mechanic’s lien? Think of it as a type of mortgage. If you don’t pay your mortgage, your property can be sold to pay the mortgage. In the same way, if you do not get paid after creating a mechanic’s lien, the property where you did your work can be sold to pay you for your work. That is a very powerful tool to make sure you get paid!

Unfortunately, mechanic’s lien laws are different in every state. So, you need to know the laws in the state where your work is performed. This blog focuses on Massachusetts law. While there may be similarities between the law in Massachusetts and the laws in other states, every state has its only particular rules and requirements. So, don’t rely upon the information here for any other state.

The process of creating a mechanic’s lien begins by filing a “Notice of Contract” in the Registry of Deeds where the property is located and giving notice to the owner of the property. You generally need to have a written contract in order to have a mechanic’s lien. Also, you need to be working on private property, as you cannot put a mechanic’s lien on federal, state, county or municipal land.

You may file your Notice of Contract any time after you sign your contract until 90 days after the last date that any work was performed or materials were furnished to the project that you worked on. But, there are exceptions and limitations to this, and you really do not want to wait to the very last day. We recommend that you file your Notice of Contract as soon as you start feeling insecure about your payments, which might be very early in the job or even before you start your work. Once you file it, the odds are that you will be paid on time for your work.

The first time you file a Notice of Contract, it is a good idea to use a lawyer. You should have your lawyer explain all of the details of the form, how to complete it properly, and how it is filed. If you do this, you should be able to file it in the future by yourself, without a lawyer.

In the event that you are owed money after the project has been completed, you will need to file a “Statement of Account” within 120 days after all work was done on the project and, if that doesn’t get you paid, then you will have to file a lawsuit within 90 days after your Statement of Account. Unless the amount involved is very small, we recommend that you hire a lawyer to file your Statement of Account. It is not difficult, but it is very easy to make a mistake and lose your lien rights.

General Counsel says: Collecting on time what is owed to you is critical to the success of every business. There are many important aspects to the successful collection of receivables, which include choosing carefully with whom you are doing business, having good contract provisions, carefully keeping track of unpaid receivables, and knowing how to enforce your contract rights. The mechanic’s lien laws were designed to be another tool for contractors to be sure that they get paid for their work. Every successful contractor must know how and when to use a mechanic’s lien.

The Location of Legal Proceedings is Determined by the Forum Selection Clause in Your Contract

Joel SowalskyAlmost all contracts, especially form contracts, have what is known technically as a “Forum Selection Clause.” This is the part of the contract that says something like, “All disputes or legal proceedings arising under this contract will be brought in the courts of [city, state].” Often, this clause is in the small, fine print of the contract, and sometimes it is barely readable. But, that doesn’t mean it’s not important.

As a small business owner, you might even skip this clause when you are reading over a contract before signing it. If the contract is about something you are buying, then your mind is focused on the quality and price of the product or service that you are buying and getting it on time. If you are selling something, then you are focused on what you need to do to get paid. The last thing you are thinking about is the possibility of legal procedings over the contract and where it will go to trial.

But, the locale of legal proceedings is important. Continue Reading

What Type of Business Structure is Right for Your New Business?

Joel SowalskyOne of the first questions that you face when you start a new business is how should it be set up. What type of business entity or structure should you use? There is no simple answer, as it involves many factors, including the type of business, the industry in which it will operate, the number of people creating the business, the immediate and future cash needs of the company, how many employees you expect to have, and the overall growth and development plans of the company. You should review these factors with an experienced lawyer and/or accountant to determine the right structure for you.

I will outline here the most common choices for setting up a small business, identifying some of the main advantages and disadvantages of each. Although your business structure usually can be changed after you create it, the change can be time-consuming and costly, so it is best to try to get it right the first time.Continue Reading

Resolution of Disputes by Small Businesses: Should You Settle or Sue?

Joel SowalskyIf you own a small business, the day will come when you have to decide whether to sue or settle.  Perhaps you have a customer dispute, and your customer is not paying you because they claim that there is something wrong with what they bought.  Or, you may have a vendor dispute, where you purchased a product or service and did not get what was promised, so you refuse to pay, and the vendor is threatening to report you to a credit agency and sue.

In either case, the demands have been made and the other party refused.  Now what?Continue Reading

For Heaven’s Sake, Sign Your Contracts

Joel SowalskyHave you ever been in the situation where you sent or received a purchase order or a contract, one or both parties did not sign it, but each party performed their obligations in accordance with the unsigned agreement?  This happens more often than you might think.  For all kinds of reasons, many people think that they are better off if they don’t sign contracts.  Usually, that’s wrong.

I was consulted recently about an employment dispute that had gone to mediation.  Continue Reading

Should You Eliminate Group Service Charges in Your Restaurant?

Joel SowalskyMany restaurants require a mandatory minimum tip or service charge for larger groups of patrons. Often this is with parties of 6 or 8 or more, and usually a charge of 18% or so is added to the bill. The restaurant commonly gives the person paying the bill the option of adding more to the tip, but there is no option to pay less.

If you own a restaurant with a policy that includes mandatory minimum tips, you may want to reconsider that policy. In 2012, the IRS issued a Bulletin on the taxation of tips. Among other things, the Bulletin Continue Reading

Are Your Independent Contractors Really Employees?

Joel SowalskyOne of the most common mistakes that small businesses continue to make is treating their employees as “independent contractors.” It’s a tempting mistake. With independent contractors, you don’t have to deal with such things as withholding taxes, Social Security contributions, unemployment taxes, employee health insurance, retirement plans, paid time off, etc.

In Massachusetts, we have a law that defines who is – and is not – an independent contractor. The statute says Continue Reading

You Will Pay If You Don’t Make USCIS Form I-9 an Essential Part of Your New Employee Paperwork

Joel SowalskyFinding great employees can be very hard for small businesses.  But, once you hire them, completing all of the required paperwork can be even harder.  One essential document that sometimes is overlooked is USCIS Form I-9.  This is a form from the federal government that is intended to ensure that your new hires are eligible to work in the United States.  You can get a copy of the form here.

You are required to have a completed Form I-9 for every person on your payroll.  It must be completed no later than the end of your new employee’s first day of work.  The form is not filed with any state or federal agency.  Instead, Continue Reading

Enforcing Non-Competition and Non-Solicitation Agreements in the Beauty Industry

Joel SowalskyThe retail beauty industry is highly competitive.  Hairdressers, barbers, manicurists, cosmetologists and spas are everywhere.  As a business owner in this field, you rightfully want to make sure that the people you hire do not hurt your business if they leave.  To accomplish this, you may require your new hires to sign a non-competition agreement, to prohibit them from competing with you after they leave, and a non-solicitation agreement, to prohibit them from stealing your customers.  But, are these agreements worth the paper they are printed on?Continue Reading

Tip of the Day: Be Careful with your Tips

Joel SowalskyIf you own a Massachusetts restaurant, coffee shop or other business in the retail food service industry, you need to know the state law regarding tips and tipping. In some respects the law is counter-intuitive, and in all respects the penalties for violating it can be massive.

The law prohibits employers, managers and supervisors from taking any portion of tips that have been given by customers to “wait staff.” The law defines the “wait staff” as those who serve food or beverages directly to patrons, or who clear tables, and have no managerial responsibility. The law also requires that any “service charge” automatically added to food bills (as is often done for groups of 6 or more or for banquets and private functions) must be paid only to wait staff employees. Failure to comply with this law can result in double or triple damages to your employees.

Two cases illustrate how easy it is to violate this law and to pay dearly for it. Continue Reading

PRIORITY ISSUES DESCRIPTIONS
At DailyGC, we provide legal advice and counsel on the full range of legal problems and legal-related business issues that small businesses and startups routinely face in their management, sales, operations and administration. The following are examples of these kinds of problems. You may use these descriptions on your Priority Issues Identifier Form� or you may write your own descriptions.
Business Contracts and Relations:
� Customer Contracts and Disputes
� Vendor Contracts and Disputes
� Collections
� Bank/Lender Relations and Issues
� Landlord/Tenant Relations and Issues
� Bonding/Insurance
� Nondisclosure and Confidentiality Agreements
� Procurement and Management of Outside Counsel
Employment:
� Recruiting/Hiring Practices
� Employment Agreements
� Employee Compensation and Benefits
� Employee Manuals, Policies and Procedures
� Compliance with Government-Required Benefits Programs
� Payroll Compliance with Court Orders
� Discrimination and Harassment Claims
� Management and Discipline of Problem Employees
� Terminations
� Unemployment Insurance Claims
� COBRA Procedures
� Hiring Independent Contractors
Dispute Resolution:
� Case Analysis and Assessment
� Mediation/Arbitration
� Strategies for Litigation, Discovery and Negotiation
� Settlement Analysis
General Corporate:
� Entity formation
� Corporate Governance and Record-Keeping
� Shareholder Relations
� Compliance with Governmental Regulations
� Compliance with Corporate Contractual Obligations
� Contract Review, Analysis and Negotiation Coaching