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New Expungement Law-Some charges can now be expunged even if you were convicted or Plead Guilty to the charge.

Jenee Oliver - Elliott & Davis, PC
In February of 2016, Pennsylvania Governor Tom Wolf signed in to law Pennsylvania Senate Bill 166, broadening Pennsylvania Expungement Law. The new expungement law creates Section 9122.1, which is a whole new class of expungements. Most misdemeanors of the second and third degree can now be expunged.

This new law allows for the expungement of convictions for misdemeanors of the 2nd or 3rd degree after ten years have passed and the person in conviction free. All Court costs must have been paid in full. The crime cannot be punishable by more than two years of incarceration.

Please note that may exceptions to this rule exist and if any of these exceptions apply, you may not be eligible for the new class of expungement. The main difference between the new class of expungement and the legacy expungement is the way the records are reported and maintained. Under the new Pennsylvania expungement law, law enforcement is required to maintain a record of the conviction, but is no longer allowed to disseminate the records to anyone outside of law enforcement.

If you feel like you may qualify for this new class of expungements call Jenee Oliver, our criminal defense guru, at 412- 412.434.4911 ext. 35 for a free consultation.

Choosing A Business Name

Eric Davis provided video interviews for Penn State World Campus related to entrepreneurship. We thought it would be good to share these videos via our firm blog and social media pages.

This first video provides helpful advice about things an entrepreneur should consider when choosing a business name.

Small Business Crowdfunding

A new trend for raising capital is a talking point for small business owners. Small business owners express tremendous interest in using crowdfunding platforms to raise capital by selling shares in the business or by selling debt securities like a note or bond.

What is driving all of this interest? The 2013 JOBS Act and the regulations that the Securities and Exchange Commission has issued about that act.

Selling securities is heavily-regulated. Current laws are designed to protect investors by requiring companies that want to sell securities to disclose all of the information a prudent investor would need to know in order to make an informed decision to buy. The most important law, the big Kahuna, is the Securities Act of 1933 (The 33 Act). The 33 Act requires a company issuing the securities to put together a detailed offering document containing extensive, specific information about the company, including financial information (which must be audited by independent accountants); this document must be filed or “registered” with the SEC and reviewed by its staff before any securities can be sold. The staff of the SEC insists that all of the information in the document is clear and complete. Usually, the securities are sold with the assistance of an underwriter. This process is very expensive and is out of reach for most small businesses.

Most small business owners look at the other options available. There are exemptions from the registration requirements of the 33 Act for sales of securities to folks who don’t need the protection created by preparing a big, reviewed and audited disclosure document. That is where the JOBS Act has created some buzz.

One of the most interesting exemptions available is set out in Rule 506(c) of the 33 Act. This rule (part of which was created by the JOBS Act) permits companies to sell securities using the internet to wealthy, sophisticated investors (accredited investors). In this case, there is no need to register the offering under the 33 Act and that makes it much less costly to raise the money. Investment crowdfunding! What a concept! Hence the tremendous interest.

BUT!!

(You knew it was coming, didn’t you?)

The exemptions that permit investment crowdfunding only exempt the company issuing the securities from the registration requirements of the 33 Act. They do NOT exempt the company from another, really big part of the 33 Act: what we securities lawyers call “the anti-fraud” provisions.

“Now, hold on a minute,” you say. “I’m not going to commit fraud while my company sells securities!” And, I know what you mean. Of course, you don’t intend to defraud and, lacking the requisite intent, cannot commit fraud.

But hold on: “Fraud” under the 33 Act does not involve intent to defraud at all. Nope! The 33 Act’s antifraud provisions require that the company selling the securities tells a prospective buyer everything the buyer needs to know in order to make an intelligent decision to invest. So, the company cannot say anything that is not true about the company or not say (omit to say) anything that is important to a prospective investor.

To learn more about the limitations and benefits of selling securities as a small business owner, connect with us here.

 

 

Time To Consult A Lawyer – Part 2

Last week, I wrote about an old Fram® Oil Filter television commercial—the one where the auto mechanic says at the end that he doesn’t care; you can pay him now (for a new oil filter) or pay him later (to replace the car’s engine). I promised to provide you with some examples of how this tagline plays out between small business owners and their business lawyers.

FYI: “Pay me later” is always lots more expensive than “pay me now.”

In the past, I represented the owner of a personal training business. She was successful and had a good clientele of steady, consistent training clients. She had other trainers working out of her rented facility who paid her a modest percentage of their training fee income. She sold supplements to her clients and the others who visited the gym. At the time, business was good.

After five years, she grew tired of the business and wanted out. She didn’t realize how draining it would be to have to work the three, simultaneous jobs of all entrepreneurs. She sought business, trained the clients and ran the business. It was more work than she ever anticipated.

She met with one of the other trainers whom she trusted and shared the idea of selling the business to him. He was interested and the two began to discuss the general terms upon which a deal could be made.

Neither consulted a lawyer at this stage of the process (Author’s note: This would be the “PAY ME NOW” moment), although both confessed thinking about and deciding against it. Instead, they discussed the price for the business. Although they had differing views of what the sale price should be, the owner assumed the pricing was close enough and trusted the buyer.

Unfortunately, the buyer didn’t have the funds on hand to purchase the business at the price she intended. This was not a problem to our two transaction partners. They agreed that he would begin to operate the business as if he owned it and then he would begin paying her the purchase price (still not agreed to) out of the operating profits of the business and give her the money to pay the rent during this “interim” arrangement. She would assist him in the transition of the business and its relationships with its customers, other trainers, suppliers, bank, credit card processor and landlord. He would take over her training clients and she would begin to enjoy life after owning a personal training business.

They decided to worry about all of the “details” later when they both had time and money to spend on lawyers. (The business lawyers in the audience are all shaking their heads about now.)

Fast forward:

During the first few months, it never generated the money that both parties expected.

The buyer woke up to the realities of marketing and administrative demands that business ownership entails and he began to have second thoughts about buying the business. He also missed a rent payment and my client had to pay the landlord out of savings rather than operating profits since those were now for the account of the buyer. She is still obligated on the lease since the “details” weren’t addressed. Also, the buyer was not very good with the training clients and several of them left the facility altogether amid complaints about missed and tardy training appointments. He alienated the training supplement vendors, all of which had been great sellers for the business, and several pulled their products.

Finally, the buyer made a decision. He walked away from the deal, leaving my client in the lurch, and took his training clients along with invaluable knowledge of various financial matters about my client’s business to another gym. My client rushed back into the business to discover the mess and that there was a discrepancy in the supplement inventory. The buyer was selling inventory and “forgot” to pay for it when the invoices came due. On top of what already seems like a terrible situation, several items of exercise equipment were missing.

Finally, she came to see me and dumped this messy story on my conference room table (Author’s note: This is the “PAY ME LATER” part), asking for my help to pick up the pieces and put things back together again.

Have you ever wondered when to consult a lawyer? Pay attention to that thought and trust it. Don’t push it away. Pay a lawyer now, save a bundle later.

Time To Consult A Lawyer

In 1972, Fram® Oil Filters began to air a TV commercial that featured an automobile mechanic in greasy overalls, wiping his hands on an oily rag while standing in front of an older car with the hood open. The mechanic, pointing to the engine compartment of the car says, “You see this? This guy needs a new engine. That’s about $1,400 dollars .” Untitled

The mechanic picks up a new Fram® Oil Filter and says, “This is a Fram® Oil Filter. It’s about $4.00. If this guy [pointing again at the car] had gotten regular oil changes and used Fram® Oil Filters [lifting the oil filter], he wouldn’t need a new engine.”

The mechanic shrugs and says, “Me? I don’t care. You can pay me now [holding up the oil filter again] or you can pay me later [once again pointing at the car’s engine].”

Pay me now or pay me later. This is a common story in the world of a business attorney. Clients routinely consult a lawyer when they have a legal mess that could have been avoided if only the client sought legal advice earlier.

I know. Trust me, I get it. Growing small business owners are focused almost exclusively on sales and getting cash in the door. The very survival of their business depends on this. They postpone addressing anything else until the business is up and running and has the cash and breathing room to hire the professionals who can address these matters.

In short, business owners elect to, “pay me later.” They choose to consult a lawyer at a time when they feel more ready, more able. The mindset that often accompanies this election can be summarized with saying, “It’s better to ask for forgiveness than permission.” While there are situations where opting for “pay me later” or planning to ask for forgiveness rather than permission make sense, in my experience these situations are the exception rather than the rule.

In the posts that follow, I will share some of the messes that I have helped clean up, along with some of the solutions that could have been implemented had the client opted to, “pay me now” and consult a lawyer earlier. I will demonstrate that business owners need to establish a relationship with a business lawyer sooner rather than later.

If you have any questions about when to consult a lawyer or the pay me now or pay me later method you can contact me, Mark Sullivan.

Do I Have to Disclose Crimes to Immigration that have been dismissed or Expunged?

 On many immigration forms or in interviews you will be asked whether you have been arrested, cited, charged or convicted of any crime. You must answer this question honestly, even if the charges were dismissed or the charges expunged.
Getting an expungement may be helpful for employment purposes, but not for immigration. With a previous arrest record you will be asked to provide police reports and/or a certified court disposition outlining the exact nature of the charges and any plea deal made.

Failure to provide this information is considered misrepresentation and could result in a denial of the case or worse. To find out how your record could affect immigration, it’s best to have an attorney review the documents and create an individual plan of action. Checking “yes” doesn’t always mean your case will be denied. Omitting the information, however, can be a costly mistake.

 

Avoiding Immigration Fraud

Have a Tourist Visa and Married to a United States Citizen? Be Careful.

One of the worst things an immigrant can do is make a misrepresentation to a government official. This can occur at the border, in the airport, to an officer or on immigration forms.  At first glance it seems rather obvious: don’t lie. Easy. In reality, however, innocent misunderstandings of immigration law can lead to a fraud charge with serious implications for immigration. Here are some things you should know when you’re traveling or applying for an immigration benefit.

Make Sure the Visa Matches the Intent.

If you’re traveling internationally while married to or engaged to a US citizen, make sure that your visa matches your intent. For example, say you’re traveling to the US on your passport (visa waiver). By using your passport to enter the United States you certify that your trip is temporary and you will return to your country. You testify to immigration officials that you do not intend to live permanently in the United States. You don’t have to say a word. At the border you don’t raise your hand and swear. The simple act of presenting your passport is your testimony.

Showing up at the airport with an engagement ring and wedding magazines is likely to trigger detailed questions about your intent and if immigration suspects your stay will be longer than the allowed 90-day period (or 6-month period for B-2 visitors), they can deny entry to the United States and ban you from returning.

What to do: If you are already in the United States on a nonimmigrant visa (F-1, B-2 tourist, visa waiver, J-1, L-1, TN, etc.) and are married or engaged to a United States Citizen, you may want to consider adjusting status to permanent resident prior to travel. If, however, you are located in another country, consular processing or a K-1 visa for a fiancé might be the more appropriate fit. Whatever you decide to do, be aware of the limitations of your visa or visa waiver and plan accordingly.

Actions Speak Louder Than Words

One common pitfall for immigration fraud is coming to the United States with a non immigrant visa (like a tourist visa or passport visa waiver) and getting married immediately. Even if you intend to return to your country, marriage within the first 30 days of arriving to the United States is a big red flag. So be careful about what your actions say, and when in doubt, consult with an immigration attorney prior to marriage or international travel.

Profit with a Purpose

Funding the Future: Does Social Enterprise Match Your Mission?

As nonprofit leaders look to emerging and innovative ways to fund operations, they may consider developing a social enterprise to generate revenue. In this emerging practice, it is important to understand the advantages and risks of establishing and operating for-profit businesses as a way to raise funds. There is a lot of interest in social enterprises recently that is, in part, due to Benefit Corporations becoming a new type of corporate entity in Pennsylvania and Delaware. Many nonprofit organizations are exploring whether it makes sense to go into for-profit business ventures and how to best form and manage these types of business operations.

Obtaining funding for a non-profit entity can sometimes be a challenge. Fluctuations in the stock market may make private foundations more or less likely to donate money to the non-profit and market uncertainty is making multi-year commitments scarce. Non-profits, however, are limited in the ways that they obtain capital to further their charitable purpose. Generally speaking, engaging in commercial activity can jeopardize the non-profit’s 501(c)(3) status if the non-profit generates taxable income unrelated to its charitable purpose. For example, many volunteer fire companies that are public charities operate private bars as a means of generating revenue. Often, the only employees of the nonprofit are bartenders and the largest budget item is alcohol. The financials of the nonprofit make it appear that it is a bar that occasionally buys some firefighting equipment rather than an organization that fights fires that generates a little extra revenue by operating a bar. The unrelated business income skews the financial statements of the nonprofit organization because it can make it appear that the purpose and activity of the organization is more directed to the commercial activity. This occurs because most commercial activity requires some sort of cost of good sold and money must be spent to make money. In contrast, most charitable funds go directly to the provision of charitable services and do not involve any sort of margin of profit.

Case Study: Benefit Corporations

One option for a nonprofit to consider it to establish a social enterprise in the form of a Benefit Corporation. This form of entity is a hybrid between a for-profit entity and a non-profit. It alleviates the tax implications of receiving taxable income for the non-profit as well as provides an additional source of sustainable funding in times of stock market decline.

Benefit Corporations differ from other types of for-profit entities in that they have a stated social purpose and are evaluated based on that purpose rather than purely on profit or shareholder return. The purpose of a Benefit Corporation includes creating general public benefit, which is defined as a material positive impact on society. A Benefit Corporation’s leaders operate the business with the same authority as in a traditional corporation but – whereas in a traditional corporation, shareholders with proper standing judge the company’s financial performance – here they judge qualitative performance based on the Benefit Corporation’s stated goals.

Some Benefit Corporations such as Tom’s Shoes, Seventh Generation and Ben & Jerry’s Ice Cream have become household names. The for-profit entities were established to both address a social or environmental issue and generate profit. They use their “do gooder” reputation to gain advantage from a marketing perspective or differentiate themselves from competitors. The recent trend of hybrid organizations provides a viable option for non-profit entities that are looking to generate income. This structure avoids mixing taxable and non-taxable income and supplements donations when the market and other factors preclude sufficient private donations. Benefit Corporations also further the non-profit’s charitable purpose while generating revenue.

Balancing More than the Books

Benefit Corporations, used properly, offer several advantages and opportunities. First and foremost, they allow the funding of the enterprise to be funded by sales of their product or service, rather than relying upon charitable giving. Simple on its face, this change has a profound effect at many levels of the enterprise’s operation, presenting both new opportunities and challenges for the enterprise. Market forces and competition will typically force the social enterprise to be more responsive and adaptable than a typical charitable organization due to the need to “sell” a product or service to customers rather than report outcomes or results back after charitable activity has taken place.

Charitable organizations often risk becoming “siloed,” providing the service they believed was necessary at their formation, and may have been, but never adapting to better serve the people or purpose they were formed to assist. Additionally, within the charitable structure, the organization must serve not only their intended beneficiaries, but often their donors as well, a situation often creating conflict and compromise avoided by the more direct market connection available through a commercial social enterprise.

At its core, the key challenge in the operation of the social enterprise is one of balance. While a traditional for-profit makes decisions based on maximizing profit, and the non-profit reinvests towards its charitable purpose, the social enterprise must always keep the two in balance. This must be done both on a balance sheet and in the perception of the enterprise’s investors, supporters and customers. In the right circumstances, this challenge pales in comparison to the benefits available to the social enterprise, and the ability to allow a successful business model generate profits for its operators, while also furthering its charitable purpose. Ultimately, the goal of any social enterprise should be to use the power of business and enterprise to advance charitable objectives.

Don’t Incorporate In Nevada!

When deciding to incorporate, the state in which you incorporate is an important consideration.  While you may have heard that Delaware or Nevada offer significant advantages to businesses incorporating in those states, this may not be the case in your specific instance.  While some of these business friendly states do not have corporate taxes, this does not mean that you will not have to pay taxes by incorporating in those states.

When you conduct business in a particular state, you will still be required to pay the appropriate amount of tax in that state. You must also register in any state in which you are conducting business. (Also, in addition to paying the fee to incorporate in Delaware or Nevada, you will also have to pay the fee to register as a “foreign corporation” in the state that you are conducting business).   So while you may not be paying any corporate tax to the state that you incorporate in, you are not realizing any tax savings (and in fact may be paying extra to register the foreign corporation).

A further danger is that you may be putting your personal assets at risk.  Unless you are registered in a state that you are doing business in, you may not be protected by the corporate form.  This means that your house, car, or any personal property may be lost in the event that you get sued and lose.

Thirdly, you will raise your administrative costs.   Filing in another state means that it is necessary to file paperwork with that state AND the state that you are doing business in.  This means that you will be paying an additional set of filing fees, not to mention any required reports that must be submitted to both states.

Lastly, Nevada and Delaware no longer keep officer and director information private.  Not only are they no longer confidential, but they will have to be disclosed when registering in the state that you do business in anyway.

Generally, unless there are other, specific circumstances that provide allure to incorporate in another “business friendly” state, small business owners will save time, money, and aggravation by simply incorporating in the state that they do business.

If you have incorporation questions or need help incorporating your business, do not hesitate to call Eric Davis at 412.434.4911 ext 11.

Hershey Chocolate “Trade Dress” Action v. Maryland Candidate “Hershey”

By Jeff Morris

Hershey, PA is a small town that smells like chocolate because of the manufacturing plant there.  It also has a an amusement park and a Hershey Company factory tour.  More important, from a legal perspective, is that some 90% of the American public knows the “trade dress” Hershey has used for over a hundred years to identify the source of its products, and the Hershey companies have numerous federally registered trademarks with the word HERSHEY in white or silver, in a particular size and font, on a black or dark brown or maroon background.   You know, something like this, from www.hersheyarchives.org:

image003

Recently, in three different campaigns, a candidate for political office in Maryland whose last name is Hershey used signs and a campaign logo featuring his name, the least egregiously similar logo being:

image005

That’s a very muted version of the Maryland state flag in the background.  There are some differences, but it certainly seems to me that when, in April 2014, the company sued for trademark infringement, they had a pretty strong case for something being wrong.  The judge agreed and granted the company a preliminary injunction in July 2014.  Although the ruling quite reasonably came to the opposite conclusion, there is a legitimate dispute as to whether the senator, who after all is just using his own name, is creating any real confusion in the public’s mind that he is in fact a chocolate bar, or that the Hershey company is running for office, to put it in “snarky” terms.  The other interesting question, whether political activities are “services,” is settled law.

Consider, then, why did he do it?  The answer is, at least in part, simply because of the very strength of the Hershey trade dress; misappropriating it has value.

Here’s a link to the memorandum opinion on the case, from the U.S. District Court for the Northern District of Maryland for those of you who feel a law-school-era need to read the entire case.

For more information about trademarks, generally, contact me, Jeff Morris, morris@elliott-davis.com (412)434-4911 ext. 31

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