California Defies High Business Tax Rates with Boost in Job Creation

Job-creation-300x200California, which sent a delegation to Austin, Texas last year to find out how the Lone Star State had beat it in employment growth, surged ahead of Texas to lead the nation in job creation for the last two consecutive months.

Texas led California in job creation in 18 of the last 24 months, since August 2010, the first month both states posted employment gains following the longest recession since the 1930s.

Texas’s economic performance impressed California Assemblyman Dan Logue enough that the Republican from Linda organized a delegation of California lawmakers and Lieutenant Governor Gavin Newsom, a Democrat who was San Francisco mayor, to Austin in April 2011.

California added 365,100 nonfarm jobs in the year ending in July, a 2.6 percent increase and the state’s largest 12-month gain since 2000. Texas picked up 222,500, or 2.1 percent, according to U.S. Labor Department statistics. California also outpaced Texas the prior month.

California’s job picture reflects the depth of the recession in the state, where the economy relies more on housing and construction than energy-dependent Texas, said Christopher Thornberg, principal of Beacon Economics LLC in Los Angeles. “California got hit a lot harder than Texas during the downturn,” Thornberg said. “We hit the ground pretty hard, so you’d expect more of a bounce back.”

The increase runs counter to the notion that growth favors states with lower taxes. California, the world’s ninth-biggest economy, has the highest statewide sales tax in the U.S., at 7.25 percent. That would rise to 7.5 percent if voters approve a November ballot initiative. The income tax rate for those making $1 million or more a year, now 10.3 percent, would rise to 13.3 percent, the most of any state.

For information on California Business Law, contact a professional California Business Attorney. In the San Jose area or within California, call Amiel Wade at Wade Law Group at(888) 909-9430.

California Clears Way for Facebook Acquisition of Instagram

facebook-buys-instagram-for-1-billion-0-300x236Facebook was cleared by the state of California to issue stock for its purchase of Instagram. State officials declared the transaction was “fair, just and equitable” at the conclusion of a hearing in San Francisco before the Department of Corporations. The decision was expected.

The hearing was unusual but not for California. California is one of six states that allows for companies to seek permission to issue stock rather than dealing with the Securities and Exchange Commission.

Facebook agreed to buy popular mobile photo-sharing app Instagram in April for $300 million in cash and nearly 23 million Facebook shares. The shares were valued at $31, making the purchase worth at the time a cool $1 billion.

The transaction is no longer worth as much after Facebook’s bungled initial public stock offering in May. The social networking giant priced its shares at $38. Since then the shares have dropped below $20.

The deal drew huge headlines because the company was so young (launched in late 2010), has only 16 employees and, as Systrom acknowledged during Wednesday’s hearing, does not make any money. Asked how Instagram makes money, Systrom said: “That’s a great question. As of right now, we do not.” Systrom, like many in Silicon Valley, said he wasn’t focused on generating revenue, just on making “something that people really loved.”

But in the end, the company that had “defaulted” to remaining independent decided the Facebook acquisition was “the right thing to do for everyone involved” considering prevailing market conditions and competition from major players, Systrom said.

None of the details that emerged at the hearing were new. Facebook Chief Executive Mark Zuckerberg negotiated the deal over Easter weekend with Systrom. Systrom said Instagram had talked with potential acquirers big and small but never received a formal offer. The final valuation of Instagram before the Facebook deal was “just south” of $500 million at the end of March, Systrom said.

For information on California Business Law, contact a professional California Business Attorney. In the San Jose area or within California, call Amiel Wade at Wade Law Group at(888) 909-9430.

California Court Mistakenly Posts Secret PG&E Settlement with Teen Girl

PGE-300x201Pacific Gas & Electric Co. agreed to pay more than $2 million to a teenager burned in the 2010 San Bruno gas pipeline explosion that killed eight people and destroyed dozens of homes, according to secret settlement documents mistakenly posted by a California court.

The documents provide the first glimpse at settlements reached by the utility in lawsuits filed by victims of the blast. Details of settlements reached with more than a quarter of the roughly 400 plaintiffs have previously been confidential, the San Mateo County Times reported on Wednesday.

The documents posted on the San Mateo County Superior Court website show the company paid the teenage girl $1.8 million and an additional $677,700 to cover her attorneys’ fees and $19,400 for medical expenses. The girl suffered second and third-degree burns in the blast that was blamed on an inferior pipeline weld. Her injuries required extensive treatment and will likely leave her with permanent scars, the lawsuit states.

The documents, sealed by court order, were filed on July 18. It was not immediately clear how they got online.

“From the clerk’s office to the IT department, something happened,” said Judge Steven Dylina, who is presiding over the girl’s case. “I don’t know where the glitch is.”

The page on the court’s website connected to the San Bruno blast was briefly shut down but was back up on Thursday.

PG&E would not say if the disclosure would impact other civil cases. Some victims have complained that lack of information about other settlement amounts has made it difficult for them to evaluate offers from the utility.

“The contents of any settlement remain confidential but we stay committed in our efforts to resolve these matters as quickly and fairly as possible,” PG&E spokeswoman Brittany Chord said last Thursday.

For information on California Business Law, contact a professional California Business Attorney. In the San Jose area or within California, call Amiel Wade at Wade Law Group at(888) 909-9430.

California Lawmakers Seek Restrictions on Environmental Lawsuits

enivronmental-law-300x144Four Orange County Republican state lawmakers have signed on to co-author last-minute legislation that would restrain litigation under California’s environmental-protection laws.

The proposal, Senate Bill 317 by State Sen. Michael Rubio, D-Bakersfield, seeks to scale back lawsuits faced by construction projects under the California Environmental Quality Act, a 42-year-old law that requires state and local agencies to analyze and require mitigation for the environmental impacts of proposed developments.

CEQA, as the law is known, has long been a source of contention among Republicans, who say its provisions, particularly those that allow for litigation by environmental-protection groups, dramatically increase the cost of doing business in California.

Every year, it seems, the Legislature approves a handful of bills that create CEQA exemptions for specific projects, like the one approved last year for the proposed Farmers Field football stadium in downtown Los Angeles. Republicans, however, have pushed for broader reforms and some said Wednesday that the Rubio bill might just be the solution they’ve been looking for.

“It’s closer than we’ve ever been to real CEQA reform,” said Assemblyman Don Wagner, R-Irvine, one of the Orange County co-authors.

Joining Wagner as co-authors is Assemblyman Chris Norby, R-Fullerton, and state Sen. Mimi Walters, R-Laguna Niguel, and Senate Republican Leader Bob Huff of Diamond Bar, whose district includes a piece of Orange County.

“It’s still percolating,” Norby said, “but I think if we’re going to have a bipartisan vote on it, it will pass.”

The proposal is likely to face opposition from the environmental lobby as well as some Democrats in the Assembly and Senate. Earlier this month, more than 30 Democratic lawmakers sent a letter to Assembly Speaker John A. Perez, D-Los  Angeles, and Senate Leader Darrell Steinberg, D-Sacramento, saying they’re concerned about proposals to weaken CEQA.

For information on California Business Law, contact a professional California Business Attorney. In the San Jose area or within California, call Amiel Wade at Wade Law Group at(888) 909-9430.

Importance of Buy-Sell Agreements for California Business Partners

partnership-300x129All business partnerships start with the best intentions, but many do not end that way. This is why buy-sell agreements are so important, and every company with multiple partners or shareholders should have one the moment the business is formed.

A buy-sell agreement is a contract between partners in a business that dictates who can buy a departing partner’s share of the business and establishes a fair price for the partner’s stake. If a co-owner wants out of the business, wants to retire, wants to sell his shares to someone else, goes through a divorce, or dies; buy-sell agreements act as a “premarital” arrangement to protect everyone’s interests, setting the price and terms for buyout options.

You, Brian, and Dan opened your company in San Jose 20 years ago, but the business never established a buy-sell agreement. The company is now worth millions, but Brian has died of a sudden heart attack, and his young wife of two years now wants an active management role in business decisions. At the same time, Dan decides to retire and turn his shares of the company over to his son who never finished high school. What do you do? Sound impossible… Think again… Only a buy-sell agreement 20 years earlier would have prevented years of litigation.

Any business in the San Jose area or within California with partners and no buy-sell agreement, or those in the San Jose area or within California entering into a multiple partnership who do not consult the services of a San Jose area Business Lawyer for a buy-sell agreement are gambling with their future interests.

For experienced legal advice on buy-sell agreements in the San Jose area or within California, contact the Wade Law Group at (888) 909-9430, or contact Amiel Wade directly atawade@wadelitigation.com.

Failure of Fannie and Freddie Aiding to More California Foreclosures

Fannie-FreddieHome values have fallen so much in California that almost half the people with mortgages there owe more than their homes are worth. So when federal money became available to help stem the tide of foreclosures, the state flagged that group for help. If banks would forgive some of a homeowners’ mortgage debt, the state said it would pay half, up to $50,000 of a $100,000 loan reduction. Despite the generous terms, most banks balked.

Only three homeowners have been approved for debt reduction since the program began in September 2010. A major obstacle has been that the two largest mortgage guarantors, Fannie Mae and Freddie Mac, will not participate in California. No loans are eligible for the state’s program if they were bought and held or securitized by the two companies, which are now under government control and guarantee more than 70 percent of the country’s home loans.

About one in five homeowners with a mortgage is underwater, and the total amount of negative equity is estimated at $700 billion to $800 billion. While many of those borrowers are coping with self-inflicted wounds, the problem is not limited to subprime loans. Among mortgages backed by Fannie and Freddie, a vast majority of which are prime, the percentage of underwater homeowners is virtually the same as the percentage among all mortgages.

For more information on California Business Law, contact a professional California Business Attorney. In the San Jose area or within California, call Amiel Wade at Wade Law Group at(888) 909-9430.

Beware of Unlicensed California Contractors

construction-worker-300x207The California Professional Association of Specialty Contractors (CALPASC) is urging homeowners to think twice before hiring unlicensed contractors. California law holds that significant residential remodels and new construction fall under Cal/OSHAsafety regulations. As such, the homeowner is treated as an employer and required to furnish a safe place of employment.

This is in contrast to “domestic household services,” such as home maintenance, both inside and outside of the house, which are exempt from Cal/OSHAregulations, as are projects where homeowners are doing the work themselves.

According to CALPASC CEO Cees Molenaar, “Homeowners who are remodeling their homes often are in the dark about this requirement. They assume the contractors they hire are licensed professionals and carry the necessary insurance to abide by Cal/OSHA regulations. Unfortunately, today’s growing underground economy creates opportunities for contractors and subcontractors to take advantage of homeowners.”

Homeowners are often unaware of the consequences of hiring unlicensed contractors and assume homeowners’ policies cover unlicensed contractors, which is not the case. Besides the obvious lack of professional ethics and not abiding by California’s legal standards, unlicensed contractors often generate inferior work products and services and subject homeowners to financial exposure if an injury occurs.

Hire only licensed contractors, and ask to see their license and a photo ID to verify their identity.

Always check the California license status at www.cslb.ca.gov to make sure the contractor is in good standing. Don’t pay more than 10 percent or $1,000, whichever is less, as a down payment. Don’t pay in cash, and don’t let payments get ahead of the work. Get at least three bids, check references and get a written contract.

For businesses in the San Jose area or within California requiring more information, contact theWade Law Group at (888) 909-9430 or email Amiel Wade directly.

LLC or INC? – Making the Right Choice for Business Formation

llc-vs-inc1There’s more to starting a business than coming up with a great idea. A business owner also must decide how the business should be structured. Until recently, most California businesses chose between sole proprietor, partnership, and incorporation. However, California businesses are now choosing to go with a limited liability company (LLC) structure more than any other. An LLC offers more legal protection of personal assets than a partnership, but retains the tax savings pass-through characteristics.

Unlike LLCs, corporations can go public. For that reason, venture capital companies prefer to work with corporations rather than with LLCs.  But unless you are planning to take your California business public, an LLC may well be the best business formation structure to serve the business needs of the owners.

Unlike corporations, LLCs don’t suffer from double-taxation, in which the corporate entity is taxed and then its shareholders’ dividends are taxed as well. This benefit applies to LLCs that are classified as partnerships for tax purposes. An LLC tax preparer simply checks a box on his or her federal return to indicate how the organization will be taxed. Earnings and losses pass through to the owners and are included on their personal tax returns.

There’s also less paperwork involved with running an LLC than a formal corporation, and LLCs are the most flexible when it comes to organization. There are fewer rules regarding who can be a shareholder, and they also tend to be more informally run than a regular corporation.

Sitting down with an Experienced Attorney in California Business Law is the best way to sort through the tax and organizational ramifications of business formation, and figure out what’s right for the needs of your business. In the San Jose, CA area, as well as any other area in Northern California, contact the Wade Law Group at (888) 909-9430.

Defenses to California Business Contract Disputes

post1If a business in California is being accused of breaching a contract by the other party, it must be determined whether there are any defenses that call into question the validity of the contract. There are some defenses that make a contract unenforceable (void), and other defenses that give the parties the option to enforce the contract (voidable).

1) Legality of the Contract: Although two persons may enter into a contractual agreement, if the subject matter of the contract is illegal, the contract is invalid and unenforceable.

2) Capacity of the Parties: In order to be bound to a contract, the parties must be competent to enter into such a legal arrangement. Underage persons, persons who are mentally ill, and intoxicated persons are usually not held to the contracts they enter.

3) Mistake, Duress, and Fraud:

a) A mistake by both parties to a contract on an important issue makes the contract unenforceable.

b) Duress is the use of physical force or mental pressure by one party to make the other party agree to the contract, which is ultimately unenforceable.

c) Fraud is the intentional misrepresentation of an important issue of the contract which makes the contract voidable by the party upon whom the fraud was perpetrated.

4) Unconscionability: A contract may be unenforceable if it is found by a court to be flagrantly unfair.

5) Statute of Frauds: In many instances, contracts do not have to be in writing to be legally binding. However, a law known as the “statute of frauds” requires that some contracts must be written to be valid.

If you are a California business owner in the San Jose area, as well as any other area in Northern California, with more questions about defenses to contract disputes, contact the Wade Law Group at (888) 909-9430.