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AdobeStock_594857662-300x200We often see business owners ignore corporate formalities after incorporating their businesses. They labor under the misconception that forming a corporation[i], provides them with a full-proof shield from personal liability, despite how they conduct corporate affairs post incorporation. Many are not aware of the doctrines of “piecing the corporate veil” or “alter ego”. In this blogpost, we discuss briefly why corporate formalities are important to follow— owners of incorporated businesses must follow corporate formalities to ensure protection from personal liability.

Why corporate formalities are important to follow? The short answer is because following corporate formalities ensures the separateness of identity between the corporation and its owners is maintained. This is essential to ensure personal liability protection for the owners. Under the corporate statutes of all jurisdictions, after a corporation is formed it is treated as a separate “person” distinct from the owners holding interests in it.  This separateness of legal identity shields the corporation’s shareholders, officers, and directors, from personal liability from the debts and obligations of the business. However, the important caveat is this protection is available only if steps are continuously taken through observing of corporate formalities to maintain the separateness of the corporate entity from its owners.  If owners do not observe corporate formalities and run their business like a sole proprietorship (or partnership in case of more than one owner) and if a creditor or an obligee of the business sues to hold the owners personally liable, a court will likely disregard the corporate shield to hold the owners personally liable. This is the so called “piercing the corporate veil”—a doctrine under which the courts can disregard the corporate entity and hold its owners personally liable for the corporation’s debts and obligations. In California this is done under the “Alter Ego” doctrine. Under this, a court will hold business owners of a corporation personally liable if it finds (a) a unity of interest and ownership between the corporation and its owners (that is these owners have treated the corporation as their “alter ego” rather than as a separate entity); and  (b)  it will be an inequitable result if these acts are treated as those of the corporation alone and failing to hold shareholders accountable would sanction a fraud or promote injustice.  Burden of establishing alter ego liability is on the plaintiff creditor.  Therefore, mere incorporation of a business will not shield its owners from personal liability if they have failed to follow corporate formalities post-incorporation.

So, what are considered corporate formalities? Some of the many examples of corporate formalities that must be observed to ensure owners are shielded from personal liability are:

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AdobeStock_513700263-300x200As consumers increasingly seek eco-friendly products, some companies engage in “greenwashing” — misleading marketing that exaggerates or fabricates environmental benefits of its products or services, to appeal to environmentally conscious buyers. Greenwashing can include vague claims like “all-natural” or “eco-friendly” without providing evidence or proper certifications, undermining genuine sustainability efforts and eroding consumer trust.

While promoting green credentials become a central marketing strategy for many businesses, regulators respond with more rules to eliminate misleading and unsubstantiated green claims and increased enforcement activity against those guilty of such deceptive practices.

U.S. Legal Framework Against Greenwashing

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AdobeStock_1070496539-300x200Benefit Corporation and Social Purpose Corporation—alternatives to forming a purely “for profit” Business

What do you do when you want your business to incorporate positive social or environmental impact goals into its core objectives along with maximizing profits? In California, entrepreneurs who do not want to form a nonprofit but, nevertheless, want to structure their business to take into account a social purpose or a public benefit (and not focus only on maximizing profits for its shareholders) have the options of forming a public benefit corporation or a social purpose corporation. In a traditional corporation, directors and officers must prioritize shareholders’ interests above all else or risk being in breach of their fiduciary duties to them. In these alternative forms, the business must consider the interests of other stakeholders and not just its shareholders in making corporate decisions. Note, however, that, unlike nonprofits, neither benefit corporations nor social purpose corporations get special tax treatment. In many respects they are identical to a traditional corporation. Some of the main feature of these alternatives to a traditional corporation are briefly discussed below.

Benefit Corporation: One alternative to a traditional purely for-profit corporation in California is a benefit corporation. Under this structure, the corporation may pursue public benefit goals along with the traditional goal of maximizing profits for its owners. Benefit corporations are creatures of statute in California and are organized under the General Corporation Law of California. The articles of a benefit corporation must state “this corporation is a benefit corporation”. The articles may also identify one or more specific public benefit purpose(s) which may include:

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AdobeStock_199775106-300x200As we approach 2025, several new employment laws in Oregon will significantly impact workplace policies and operations. These changes address a range of topics, from wage requirements to worker classification and family leave. Below is a summary of the most important updates that Oregon employers should be aware of, ranked from most to least significant.

1. Paid Family and Medical Leave Expansion

Effective January 1, 2025, Oregon’s Paid Family and Medical Leave Insurance (PFMLI) Program will undergo significant updates. These include increases in the maximum weekly benefit for employees and broader eligibility for part-time and seasonal workers. Strengthened anti-retaliation protections will also be introduced, ensuring that employees returning from leave are protected, and that job reinstatement rights are clearer.

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AdobeStock_1099092318-300x132California’s 2024 legislative session concluded with Governor Gavin Newsom approving several critical bills that will impact workplace policies starting January 1, 2025. These new laws cover a broad spectrum of areas, including anti-discrimination protections, paid family leave, freelance worker rights, and more. Employers need to review and update their policies, handbooks, and training programs to ensure compliance. Below are some of the most notable updates for 2025.

1. Minimum Wage Increase for 2025

Starting January 1, 2025, California’s statewide minimum wage will increase to $16.50 per hour for all employers, regardless of size. This increase is part of the state’s ongoing effort to keep up with the cost of living and ensure fair wages for workers.

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AdobeStock_164449269-300x2001. Some corporations undertake extreme Corporate Social Responsibility (“CSR”) initiatives, such as pledging to donate a significant portion of their profits to social causes or implementing radical environmental sustainability measures. While these practices can enhance a business’s  reputation, they are not always without legal and financial risks.

Legal Implications:

  • Fiduciary Duty: Companies must balance their CSR goals with their fiduciary duties to shareholders. Excessive spending on CSR initiatives could lead to legal challenges if shareholders believe it adversely affects their returns.
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AdobeStock_883988613-300x200In the construction and property improvement industry, payment disputes frequently arise, creating significant financial stress for contractors, subcontractors, and suppliers. Understanding your rights and the available remedies is essential for navigating these disputes effectively. This blog will explore one of the most powerful tools available to those in the construction industry: mechanic’s liens, along with other remedies to resolve payment disputes.

What is a Mechanic’s Lien?

A mechanic’s lien is a legal claim against a property that has been improved or repaired. It gives contractors, subcontractors, and suppliers the right to seek payment for the work they have performed or materials they have provided. By filing a mechanic’s lien, the lienholder can secure their interest in the property, which can ultimately lead to payment through the sale of the property if necessary.

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AdobeStock_453563458-300x200Corporate mascots and logos are integral components of brand identity, often becoming iconic figures in popular culture. The creation and use of these characters can give rise to intricate legal challenges. This article examines some of the most notable mascots and logos, highlighting the legal complexities involved in their protection, and utilization.

Before delving into specific case studies, it’s essential to understand what a trademark is and the legal framework underpinning the protection of corporate mascots and logos.

A trademark is a recognizable sign, design, symbol, mascots, word, or phrase that distinguishes goods or services of one company from those of others. The importance of a trademark springs from the necessity to assist consumers identify the source of the goods or services that they are acquiring. By ensuring that consumers can reliably recognize a brand, trademarks play a crucial role in fostering trust and loyalty between customers and a company.

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AdobeStock_857536293-300x168Corporations, those big players in today’s global economy, have come a long way since their early days in ancient Rome. Let’s take a look at how these entities evolved over time and what that means for the future of business.

Ancient Beginnings

It all started in ancient Rome, where early forms of business entities began to take shape. The Roman legal system laid the groundwork for what would eventually become modern corporations. Back then, these entities were more like collaborative partnerships, with limited liability for the partners—a far cry from the multinational giants we see today.

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AdobeStock_502835611-300x200The gig economy provides flexibility and autonomy, but it also comes with important legal responsibilities. With the rise of gig work, the legal landscape has grown increasingly complex, particularly around worker classification and the application of labor laws. In a tech-forward city like San Jose, these evolving legal challenges have a significant impact.

1. Worker Classification: Employee or Independent Contractor?

One of the primary legal concerns in the gig economy is determining whether a worker is classified as an employee or an independent contractor. This distinction is crucial because it dictates the rights, obligations, and benefits—such as minimum wage, overtime pay, and health insurance—that both the worker and the business must follow. In California, the “ABC test,” introduced under Assembly Bill 5 (AB 5) in 2020, remains a key standard for determining worker status.

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