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AdobeStock_1049776145-300x200Texas entrepreneurs often embody a ‘do-it-yourself’ (DIY) ethos. In a typical startup, a compact team of committed individuals assumes various roles across the organization. While this approach can be instrumental in driving a company towards success, applying a DIY mindset indiscriminately can be detrimental and lead to significant costs for the business. Entrepreneurs must recognize when professional expertise is needed, particularly in areas with legal implications.

In recent years, we have seen several online services promote DIY legal services as an inexpensive way to help get a business up and running. But when it comes to understanding and complying with the multitude of federal, state, and local regulations that may affect a new business, legal advice is one area where you do not want to cut corners. Instead, you should strongly consider working with an experienced Texas start-up and financing attorney.

Beware of Legal Templates

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AdobeStock_1285714358-300x171In 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:

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AdobeStock_209431934-300x200In 2025, Texas employers will face several key updates to employment laws that could significantly affect workplace policies. While Texas maintains its reputation as a business-friendly state with fewer regulations, new legislation at the state and federal levels aims to address employee rights, workplace safety, and wage issues. Below are the key updates for 2025 that Texas employers need to consider.

1. Paid Family Leave Developments

Texas does not currently have state-mandated paid leave laws. However, employers should stay informed about federal changes that could affect their businesses. The current administration and Congress have been debating the possibility of a federal paid family and medical leave program, which could require Texas employers to provide paid leave for qualifying family and medical reasons.

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AdobeStock_190612024-300x200Once 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.

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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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2025 brought several new employment laws in Oregon that 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 has gone 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 were 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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