Business Transactions

Why Having a Contractor Agreement Doesn’t Make Someone an Independent Contractor

March 1, 2025 | Priyanka Talukdar, Esq.

In this second of our series of blog posts on common misconceptions around hiring and working for startups, we address a common misconception around classification of independent contractors. Most startup owners do not want to deal with the costs of hiring employees. So, many engage new hires as independent contractors. The common misconception is that getting these new hires to execute a well drafted independent contractor agreement is conclusive of their status as independent contractors. While such an agreement is one indicator of the parties’ intent to establish an independent contractor relationship, it is by no means conclusive and offers little by way of protection against employment related claims (especially in California) if factually the relationship is more akin to that of employer and employee.

Various factors go into the analysis of classifying a new hire as an employee or independent contractor. The analysis is not identical across the board and often the test to be applied turns on who is investigating the alleged misclassification. For instance, the test the IRS applies is not identical to one applied by the Department of Labor.

Under federal Fair Labor Standards Act (“FLSA”), the definition of employee is vague— employee is defined as “an individual employed by employer”. In analyzing an individual’s status under the FLSA, courts have looked at the totality of the circumstances including contractual language. The test, commonly known as the “economic realities test”, generally looks at these factors:

LLC vs. C-Corp: Which Business Structure is Right for You?

February 21, 2025 | Priyanka Talukdar, Esq.

Once you have started your own business, one of the first decisions you must make is choosing the form in which you want to conduct your business – whether as a sole proprietorship (or partnership, in case of more than one founder) or by organizing your business in an entity form. Your choice will lay the foundations for your business and guide tax efficiencies, liability exposure, administrative ease, attractiveness to investors, and therefore, your ability to scale. Also, choosing a form that best fits your needs helps avert disputes and prevent misunderstanding among the stakeholders by defining their ownership, roles, and duties in the business.

Whether your business should be organized as a corporation, partnership, limited liability company (“LLC”) or a sole proprietorship, depends on various factors including your goals for the business, whether you intend to raise outside capital, whether your business will be a lifestyle business, your desired tax treatment for the business, whether you intend to offer equity to employees and service providers, and so forth. However, in this blog we limit our discussion to adding our two cents to the ever-going debate of whether a new business should organize as a C-corporation (“C-Corp”) or an LLC. Our conclusion, to no ones’ surprise we hope, is there is no one-size-fits-all answer.

Arguably, one of the biggest drawbacks of a C-Corp is the potential for double taxation. A C-Corp is a separate taxpayer independent of its stockholders. The income earned by the C-Corp is first taxed at the entity level and then again in the hands of its stockholders when the net income is distributed to them as dividends[1]. For the same reason, distributing cash to the owners on an ongoing basis is difficult to accomplish with a C-Corp (though by no means impossible). Also, to avail the protection from personal liability that C-Corp affords its owners (and to avoid the piercing of the so called “corporate veil”), it is important that a corporation complies with all corporate formalities stringently. LLCs (which also shields its owners from personal liability) offer much more flexibility in matters of corporate governance. Also, statutorily mandated fiduciary duties of the board of directors of a corporation cannot be eliminated by the corporation’s owners via a private agreement, whereas the members of an LLC have much flexibility to reduce (or altogether eliminate in some states) a manger’s (or managing member’s) fiduciary duties to the LLC and its non-managing members through the LLC’s operating agreement.

Greenwashing in Advertising: Legal Implications and U.S. Framework

January 31, 2025 | Structure Law Group, LLP

As 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

Dealing with Payment Disputes: Mechanic’s Liens and Other Remedies

November 15, 2024 | Mark Figueiredo

In 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.

Legal Considerations for the Gig Economy in 2024

October 11, 2024 | Structure Law Group, LLP

The 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.

Use Cases for AI and Generative AI in the Legal Industry

July 5, 2024 | Rakesh Ramde

Artificial Intelligence (AI) and generative AI have been revolutionizing various sectors, and the legal industry is no exception. The deployment of these technologies is transforming how legal professionals operate, enhancing efficiency and opening new avenues for creative problem-solving. The use of AI in the legal domain encompasses a diverse range of services:

Legal Research Using Specialized Technology Legal research can be time-consuming. AI-powered legal research platforms like Co-Counsel can analyze and summarize vast amounts of legal data to identify statutes, and regulations. These technologies can sift through databases to find relevant information quickly. By leveraging natural language processing (NLP) and machine learning algorithms, these tools help lawyers build stronger cases faster using fewer resources.
Rewriting Emails and Letters Generative AI excels in tasks involving language generation and rewriting. Lawyers frequently draft, revise, and personalize emails and letters. AI can assist by providing polished drafts, suggesting edits, and ensuring that the tone and language are appropriate for the intended audience. This not only saves time but can enhance the clarity and effectiveness of communication.

Mitigating AI Risk Considerations

May 31, 2024 | Rakesh Ramde

The rapid evolution of artificial intelligence (AI) is reshaping the world through new trends, regulations, and shifts in user behavior. While AI offers numerous benefits, it also introduces significant risks, particularly concerning accuracy, accountability, data privacy, and security. By proactively implementing mitigation strategies, businesses can harness AI’s potential while protecting their operations and reputation. Below, we explore key considerations for deploying AI across business processes while minimizing legal and regulatory risks.

AI Accuracy and Accountability

A major obstacle to fully realizing AI’s capabilities is concerns about its accuracy and accountability. The core of this issue lies in the quality and quantity of the data used to train AI models. The accuracy of AI models directly reflects the data sets they are trained on. If these data sets are biased or inaccurate, the resulting algorithms can perpetuate hidden discrimination against certain groups. This lack of transparency raises questions about the reliability of the output data, which can be misleading, biased, or incorrect.

Trade Secrets In Austin Texas

May 3, 2024 | Structure Law Group, LLP

Chapter 134A of the Texas Civil Practices and Remedies Code is known as the Texas Uniform Trade Secrets Act, and Texas Civil Practices and Remedies Code § 134A.002(6) establishes that a trade secret is defined as “all forms and types of information, including business, technical, scientific, economic, or engineering information as well as any design, formula, pattern, prototype, compilation, plan, program, code, program device, device, technique, method, process, procedure, financial data, or list of actual or potential customers or suppliers, whether it is tangible or intangible and whether or how compiled, stored, or memorialized physically, electronically, graphically, photographically, or in writing when an owner of a trade secret takes reasonable measures under the circumstances to keep the information secret, and the information derives actual or potential independent economic value from not being generally known to and not being readily ascertainable through proper means by another person who can obtain economic value from the disclosure or use of such information.” Trade secrets are valuable because there are considerable efforts to protect the information, and people will need to work with a Texas business attorney for help protecting their trade secrets.

A legal cause of action for exposed trade secret information is known as misappropriation of trade secrets. This occurs if a trade secret is improperly acquired or is otherwise disclosed or used without consent.

Reasonable Measures to Maintain Trade Secrets

Inflation Reduction Act (IRA)

April 26, 2024 | Structure Law Group, LLP

Enacted in 2022, the Inflation Reduction Act (IRA), enacted in 2022, stands as a pivotal United States federal law with a multifaceted approach addressing inflation, climate change, and healthcare costs. Representing the largest investment in climate action in U.S. history, the IRA is poised to achieve a substantial 40% reduction in greenhouse gas emissions by 2030.

This groundbreaking legislation incorporates diverse provisions strategically designed to curtail greenhouse gas emissions, foster renewable energy initiatives, and catalyze job creation within the burgeoning clean energy sector. Notably, the IRA allocates a substantial $369 billion investment in clean energy and climate change mitigation. This encompasses tax incentives for renewable energy projects, capital infusion into clean energy manufacturing, and financial support for climate research endeavors.

Emphasizing its commitment to advancing technologies that actively contribute to carbon neutrality, the IRA prioritizes Negative Carbon Use (NCU) technologies. These innovative solutions play a pivotal role in offsetting greenhouse gas emissions, offering companies a spectrum of benefits, including tax credits, government funding, and heightened market demand. Consequently, the IRA presents a momentous opportunity for corporations specializing in NCU technologies.

How to Open a Company in Delaware

December 22, 2023 | Structure Law Group, LLP

Many startups in the San Jose area look to Delaware when establishing their corporate structure. You have probably heard that many top companies are incorporated in Delaware. Delaware is a popular state to form a corporation. But what are the advantages to a Silicon Valley company operating in Delaware? And how can you create your own Delaware company? The San Jose corporations lawyers at Structure Law Group, LLP can help answer these and other questions about the startup process.

What Are the Advantages of Incorporating in Delaware?

Despite being one of the smallest states, Delaware plays a significant role in corporate formation and law, offering numerous advantages. The state’s appealing tax laws are a primary factor for companies choosing to incorporate there. Corporations not conducting business in Delaware are exempt from the state’s corporate income tax, even if incorporated there. Instead, they are subject to a ‘franchise tax,’ which is typically much lower than corporate taxes in other states. Furthermore, Delaware offers considerable privacy for incorporators, requiring only the registered agent’s name on filings. Additionally, the state allows a single individual to establish a corporation and hold multiple corporate roles simultaneously.