NON-COMPETE AGREEMENTS IN NEVADA

Many businesses have an interest in protecting themselves from competition engendered by a former employee or executive who might have specialized knowledge of the business or business components that puts him or her in a more advantageous competitive position than outside competitors. To address this situation, businesses often utilize non-compete agreements to contractually prevent company personnel from competing with the business or capitalizing on established relationships by soliciting existing clients or customers. Most often, non-compete agreements are designed to restrict the former employee after leaving the business on the theory that once the business invests time and capital into training the employee and entrusting him or her with sensitive business information, the business should be protected from the employee's use of that information to the business' disadvantage.

Non-compete agreements are enforceable in Nevada. However, in reviewing them, the Nevada courts have determined to strike a balance between the protection of the former employer and the ability of the former employee to make a living. Generally speaking, if overbroad, non-compete agreements in Nevada, if litigated, will be modified by the Court to the shortest duration of time (generally a year) and the smallest geographic area (city, county or state) that will achieve that balance. These considerations may weigh in favor of a broader non-compete agreement, however, if the knowledge or skills of the former employee, directly attributable to his former employment, are highly specialized, rare, or confidential.

As with any business agreement, business owners are encouraged to seek the counsel of a Nevada business lawyer to assist in producing a non-compete agreement that is narrowly tailored to the business and the unique competition issues it may face from former employees, rather than relying on an "off-the-shelf" non-compete agreement that is sure to be reformed by the court if litigated.

Disclaimer: This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. If you have questions or need specific advice relating to the matters contained herein, please contact Lovaas & Lehtinen, P.C.

WHAT IS A NEVADA SERIES LLC?

Nevada is one of the only states in the United States to allow businesses to operate under an organizational structure known as a "Series LLC." A Series LLC is an ideal structure for the ownership of income producing real estate holdings, such as rental properties. In forming a Series LLC, the organizer files only one set of Articles of Organization to establish a master or "mother ship" limited liability company. So long as the Articles and Operating Agreement provide for the establishment of a series under the mother ship LLC, as allowed by Nevada statutes, the organizer can then establish cells or "series" underneath the mothership within which to hold assets.

For example, the organizer establishes "Anybiz, LLC," which under its Articles and Operating Agreement allows for the creation of series within its structure. Anybiz, LLC then purchases three (3) rental properties and title is taken to each property in the names of Anybiz, LLC Series 1; Anybiz, LLC Series 2; and Anybiz, LLC Series 3 respectively. So long as each series is governed by its own Operating Agreement and is treated by membership and manangement as separate and distinct business entities, the liabilities of one series will not infect the others. Series LLC's reduce costs in allowing for the formation and maintenance of only one LLC with the Nevada Secretary of State (and therefore the payment of formation and annual renewal fees for only one LLC) while providing the limited liability benefits of multiple LLC's. Under the right circumstances, the series LLC may have to file only one federal income tax return as well.

Series LLC's are yet another component of Nevada's pro-business arsenal and favorable corporate climate. In order to benefit fully from this unique business structure, however, it must be formed correctly. Consult with your Nevada business lawyer to ensure proper formation and operation of the Nevada Series LLC.

Disclaimer: This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. If you have questions or need specific advice relating to the matters contained herein, please contact Lovaas & Lehtinen, P.C.

BUSINESS AGREEMENTS - ASSEMBLING THE RIGHT TEAM

Business agreements run the gamut of subject matter from employer/employee relations, to shareholder issues, business governance, distributorship of products, relationships with vendors - the potential subject matter is almost endless. Your Nevada business lawyer is the appropriate first stop in the consultation and preparation of the various business agreements that your enterprise will need in conducting its business, but realize that assembling the right team of professionals to collaborate in the generation of a properly functioning and enforceable agreement is essential.

For example, most good partnership or buy-sell agreements address succession in the business among principals. Insurance is a tool widely used to fund various succession plans. Involving an insurance professional in the generation of this agreement ensures that it functions as intended from the beginning, thereby avoiding costly amendments, or worse, ambiguous situations in the future.


Business valuation and buy-out agreements will necessarily require the involvement of accountants and other financial professionals. When considering international relationships as a business takes its enterprise global, distributorship and other agreements that cross national boundaries must consider the laws of each jurisdiction involved. This necessitates the involvement of lawyers and other professionals in those jurisdictions. If a company is moving its principals or key employees to another country to facilitate global expansion, or bringing skilled employees in from other areas of the world, immigration counsel must be involved every step of the way.


Global Business Lawyers maintains an extensive network of attorneys in every discipline around the world, as well as a network of other professionals needed to facilitate soundly functioning business transactions. Assembling the right team at the outset of a project guards against unwanted time, expense and ambiguities at critical points in the future.

Disclaimer: This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. If you have questions or need specific advice relating to the matters contained herein, please contact Lovaas & Lehtinen, P.C.

NEVADA LITIGATION: HOW DO I SUE AN INDIVIDUAL OR ENTITY LOCATED OUTSIDE OF THE UNITED STATES?

Assuming that the overseas individual or entity has sufficient contacts with Nevada to make them subject to Nevada’s jurisdiction and the subject matter of the case has a sufficient connection with Nevada, parties located in other parts of the world can be sued in Nevada just like those parties located in Nevada and within the United States. The issue in effectively commencing the case, however, lies with proper service of process on the overseas party through a method recognized as valid service in that party’s home jurisdiction. The most prevalent of these methods is through the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (commonly known as “The Hague Service Convention”), to which sixty-two (62) nations subscribe.

The Hague Service Convention specifically describes how service must be made upon a party located in one of the member nations and addresses issues such as translation and who may serve the documents. The laws of that individual country must be consulted as well in order to determine more specific issues. For example, while the Hague Convention describes service by a “judicial officer,” the laws of each subscribing nation will define what a “judicial officer” is in that nation.


Without proper service of the initiating documents, the case will go nowhere – even if the overseas defending party has actual prior knowledge of the case. Nevada is very strict on parties’ compliance with the Hague Service Convention in these circumstances and affords no method for a defending party to waive proper service even if willing to do so.


Global Business Lawyers routinely represents parties in U.S.-based litigation involving parties in international locations. We and our worldwide network of professional partners are proficient at Hague Convention service and have prevailed on many occasions in defense of deficient service under the Hague Convention for many transnational clients.


Disclaimer: This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. If you have questions or need specific advice relating to the matters contained herein, please contact Lovaas & Lehtinen, P.C.

MY BUSINESS WAS SUED IN NEVADA - WHAT DO I DO NOW?

No Nevada or international business owner looks forward to receipt of a Complaint against their corporation or LLC. In Nevada, there is very limited period of time (20 days) to prepare a response to the Complaint. A response to the Complaint may be an Answer or a Motion to Dismiss. Not responding to the Complaint within the deadline allows the Plaintiff rights to file a Default Judgment against the corporation or business. Accordingly, upon receipt of a Complaint or other pleading, forward immediately to your business law attorney. If the Complaint is in a jurisdiction outside of the business’ home country, a business lawyer dealing with global entities will be able to assist in the resident state jurisdiction or forward to their law firm partners in the country of the lawsuit to ensure a strong and efficient defense against the Complaint.

 

Other points to consider:

• Have a Nevada law firm as the business’ Registered Agent. Upon service of any Complaint, the law firm can act quickly to provide recommendations regarding responses to the Complaint and potentially negotiate a longer time to respond.

• Ensure all business contracts contain provisions stating the jurisdiction of where disputes between the parties will be litigated or mediated. Ensuring a jurisdiction is stated in the contract eliminates costly fees at the outset of the litigation where parties may begin arguing what court, state, or country is the appropriate venue. Agreeing to a jurisdiction eliminates these costly fights.

 
Disclaimer: This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. If you have questions or need specific advice relating to the matters contained herein, please contact Lovaas & Lehtinen, P.C.

CLOSING A CORPORATION THAT NO LONGER DOES BUSINESS - IS THERE PERSONAL LIABILITY?

One of the primary benefits of doing business in the form of a Nevada corporation or LLC is the protection of its officers, directors and shareholders from personal liability for the acts of the corporation or LLC. Sometimes a corporation ceases to do business and the question becomes, can I just walk away and let the corporation "die?" The answer is yes, but that route is not advisable.

In Nevada, a corporation or other entity that fails to maintain its annual filings and fees with the Nevada Secretary of State will fall into progressively more permanent states of default until, eventually, the entity is "permanently revoked." Often, directors of a corporation or other entity that is no longer doing business, as a result of some business failing, or otherwise, will simply cease maintaining the entity, with the notion that the entity will "die" as it falls into "permanently revoked" status. The flaw in this thinking is that closing a corporation is an act of maintaining corporate formalities, just as conducting regular meetings and maintaining corporate records is when the corporation is actively doing business. Maintaining corporate formalities is the aspect of corporate governance and activity that protects directors from personal liability for the acts of the corporation. It is not surprising then, that a failure to shut down the corporation in the proper way would potentially expose those directors to personal liability for the acts or debts of the corporation after the corporation ceases to do business.
In Nevada, the filing of Articles of Dissolution and the payment of the proper fees to the Secretary of State certify that the corporation is no longer doing business, that it has no further debts, and that all corporate liabilities have been discharged. Proper filings at the end of the corporate life help to protect the directors from becoming "trustees" of the now defunct corporation and personally liable for its prior acts and still outstanding debts.
Global Business Lawyers routinely assists its clients not only in corporate formation and maintenance, but also in the winding down of corporate affairs and proper dissolution of Nevada entities. After conducting business through an entity with the goal of protection from personal liability, it is unwise to ignore the last step in corporate protection - properly winding down the company.

Disclaimer: This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. If you have questions or need specific advice relating to the matters contained herein, please contact Lovaas & Lehtinen, P.C.

"MOVING" AN EXISTING CORPORATION TO NEVADA

A corporation or other entity formed in a jurisdiction outside of Nevada, or outside of the United States, may be converted into a Nevada entity through the filing of Articles of Domestication with the Nevada Secretary of State. Once domesticated, the "new" Nevada entity enjoys all of the benefits of doing business in Nevada as if it had been formed in this state originally. The entity to be domesticated in Nevada must also appoint a registered agent for service of process in Nevada. While the domestication process is usually straightforward, it is important that the entity seeking domestication consult with its business lawyers and greater business advising team through the process. Questions of compliance with foreign law and internal governing documents come into play through the domestication process. Finally, the principals of the entity to be domesticated must also be aware of continuing liabilities for any obligations of the entity prior to domestication.
Global Business Lawyers routinely assist non-Nevada and non-U.S. entities relocate their corporate domiciles to Nevada. Global Business Lawyers' international team of advisors and professionals are also brought in to assist with questions of foreign law compliance when necessary. It is not necessary to form a completely new entity in Nevada, or a subsidiary, if it is more beneficial for the specific business to simply relocate its corporate domicile.

Disclaimer: This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. If you have questions or need specific advice relating to the matters contained herein, please contact Lovaas & Lehtinen, P.C.

NEVADA SUBSIDIARIES OF FOREIGN ENTITIES

One of the beneficial attributes of Nevada corporate law is that Nevada has no requirement that the shareholders, officers or directors of any Nevada entity be citizens of the United States. While the obvious initial reaction to this point is the availability of share ownership or officer and director positions to individual citizens of other nations, another benefit is the ease with which an entity organized under the laws of a different country can form a wholly-owned Nevada subsidiary.
Considering the importance Nevada places on corporate privacy by not requiring the reporting of the identities of shareholders, a foreign entity can utilize wholly-owned Nevada subsidiaries in its international expansion plans while protecting information as to its originating nation. We at Global Business Lawyers assist business entities from around the world with their expansion plans through the formation of wholly-owned Nevada subsidiaries as well as other methods suitable to the particular business entity.

Disclaimer: This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. If you have questions or need specific advice relating to the matters contained herein, please contact Lovaas & Lehtinen, P.C.

NEVADA VS. DELAWARE: 2011 STATE BUSINESS TAX CLIMATE INDEX

The 2011 State Business Tax Climate Index, published by the Tax Foundation, ranks Nevada as the state having the fourth best business tax climate in the United States. The 2011 Business Tax Climate Index provides additional evidence as to why Nevada is preferable to Delaware (plus the states that ranked 1-3) as your state of incorporation.

While Delaware was ranked a very respectable eighth in the nation by the Business Tax Climate Index, its Corporate Tax Index Ranking (a component of the overall ranking) of 49 - the second worst in the United States - should give business owners pause. In Delaware, corporations pay corporate income taxes to the state at the rate of 8.7% of their net income. Nevada, on the other hand, imposes no corporate income tax at all, allowing business owners to use their companies' income for reinvestment and other opportunities rather than paying the state.

Which states ranked 1-3 above Nevada? South Dakota, Alaska and Wyoming, respectively. Consider the population base, weather and remote locations of these top ranking states. Consider further those attributes of Nevada: Extraordinary weather; urban centers of Las Vegas and Reno offering world class dining, shopping, accommodations and convention space; Las Vegas as home to the seventh busiest airport in the nation; Reno serving as an industrial transport and warehousing hub to the California Bay Area and Pacific Northwest; Las Vegas as the hub of spokes to Southern California, Phoenix and Salt Lake City. While the Business Tax Climate Index ranks Nevada as fourth in the nation, a consideration of the higher ranked states and the attributes the index did not measure, proves that the clear choice is Nevada as the home for business.

Global Business Lawyers takes pride in its representation of businesses and business owners from across the country and around the world in their efforts to incorporate in and establish their U.S. headquarters in Nevada.

Disclaimer: This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. If you have questions or need specific advice relating to the matters contained herein, please contact Global Business Lawyers.

NEVADA VS. DELAWARE: FAVORABLE CORPORATE TAX CLIMATE

An oft asked question is whether it is more favorable for an entity to incorporate or organize in Nevada or Delaware. Global Business Lawyers recommends Nevada as the state of incorporation to all of its clients. One reason Nevada is so favorable and, in this instance, preferable to Delaware is the favorable corporate tax climate in Nevada. One such example is the franchise tax. A franchise tax is a tax imposed upon an entity by its state of incorporation for the privilege of incorporating or organizing within that state. In Delaware, the franchise tax imposed upon Delaware corporations is calculated upon the number of shares of stock the corporation has authorized to be issued. Alternatively, the Delaware franchise tax can be calculated upon a reported combination of total issued shares and total gross assets of the company. In either case, the annual franchise tax imposed by the State of Delaware upon Delaware corporations could be as high as $165,000.00.
In Nevada, there simply is no franchise tax - period. Another issue raised by this distinction between Nevada and Delaware is that in Delaware, in order to report and pay the franchise tax, a Delaware corporation must publicly disclose and report its number of authorized shares, issued shares and total gross assets. In contrast, Nevada requires no such reporting, thereby allowing Nevada corporations to keep their business and corporate information internal and private.

Disclaimer: This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. If you have questions or need specific advice relating to the matters contained herein, please contact Lovaas & Lehtinen, P.C.

THE DIFFERENCE BETWEEN ARBITRATION AND MEDIATION

Arbitration and mediation are two different forms of alternative dispute resolution, or ADR, that parties may elect to use, or which may be contractually mandated, to resolve a business dispute without resorting to filing a law suit in court. Arbitration and mediation are entirely different processes than one another.
Arbitration involves the appointment of one or more arbitrators to hear and consider evidence and actually make a decision in the dispute facing the parties. The arbitrator occupies the role that the judge would occupy in a court of law. Often, arbitration is contractually mandated as the exclusive dispute resolution process that business parties may utilize. Contractual arbitration provisions may go so far as to require that the arbitration be conducted within a fixed time-frame; that a certain arbitration provider be used (e.g. the American Arbitration Association or other service); and may limit discovery, the number of witnesses presented at the arbitration proceedings, and other practical issues. In such circumstances, contractual arbitration provisions often call for binding arbitration - that is a proceeding that affords no right of appeal following the arbitrator's rulings on the issues of the case.

By contrast, mediation is a facilitative system where the parties agree to the appointment of a neutral mediator to try to assist them in reaching a negotiated resolution to the dispute they face at the time. Unlike the arbitrator, the mediator has no decision making authority over the issues in the dispute. Rather, the mediator's role is to facilitate communication between the parties to allow them to come up with their own resolution to the pending dispute. While mediators are typically skilled in presenting alternatives that the parties may not have previously considered, it is ultimately the parties themselves who make the decision whether to resolve the dispute and who shape and agree to the resolutions terms.

Partner Aaron Lovaas of Global Business Lawyers serves as a private mediator and arbitrator for clients on a regional, national and international basis, also serving the local legal community in Nevada as a court-appointed arbitrator in Nevada's court annexed arbitration program.

Disclaimer: This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. If you have questions or need specific advice relating to the matters contained herein, please contact Lovaas & Lehtinen, P.C.

THE IMPORTANCE OF UPDATING SHAREHOLDER AGREEMENTS

Many closely held corporations and other entities utilize shareholder or membership agreements to govern the relationship among its shareholders and to address contingencies that might arise in the future. Once a shareholder agreement is drafted and executed, however, it is unwise to simply put it on a shelf and think that it is forever sufficient. Just with other aspects of the business, Global Business Lawyers recommends that shareholders' agreements be reviewed annually to ensure that the contingencies that are real possibilities in the future of the business are adequately addressed and continue to be as the business evolves. For example, there are a number of business valuation methods that could be employed to value the shares of a departing or retiring shareholder. Just because the shareholders agreed on a particular valuation method when the agreement was initially drafted doesn't mean that they must stick with that method forever. If a different valuation method better fits the evolving needs of the business and individual shareholders, a revision to the shareholders' agreement is probably in order. The investment of time and fees into a visit with your business lawyer to periodically review and maintain your shareholders' agreement and other business agreements helps to prevent significantly greater expenditures and potential damage to your business if litigating over an outdated and somewhat inapplicable shareholders' agreement in the future.


Disclaimer: This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. If you have questions or need specific advice relating to the matters contained herein, please contact Lovaas & Lehtinen, P.C.

A GREAT TIME FOR A BUSINESS CHECK-UP

Early in the year is a great time for a visit with your business lawyer and a business check-up. We frequently encounter business owners who have overlooked the payment of their annual filing fees to the Nevada Secretary of State, resulting in their corporation or LLC falling into a “default” status. The primary reason for forming a corporation, LLC or other like entity is to limit, to the greatest extent possible, the personal liability of the business’ principals for the errors or omissions of the entity. Failure to maintain the entity’s good standing with the Secretary of State is a common mistake that jeopardizes the protection of the individual business owners that entity formation is designed to provide. Likewise, many business owners overlook routine record keeping in the nature of corporate minutes and resolutions, or keeping stock registers and other records of ownership up to date. While the record keeping can be brought current annually, or periodically throughout the year, a consistent failure to maintain and update such records can also endanger the protections afforded by forming the entity in the first place. Your business lawyer is the appropriate person to review the status of your corporate filings and record keeping to ensure that your business is positioned to take advantage of the protections that Nevada law allows.

This time of year is also a great time to examine whether your business has evolved to the point where a different business form may be more advantageous or whether it is time to retain your business lawyer as your company's resident agent (which we always recommend) rather than a commercial resident agent service.
There are many "to-do's" this time of year. Adding a business check-up to the list is likely to save time and expense for your business as the year wears on.


Disclaimer: This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. If you have questions or need specific advice relating to the matters contained herein, please contact Lovaas & Lehtinen, P.C.

MANDATORY ARBITRATION IN NEVADA

In the Nevada court system, cases involving amounts in controversy of less than $50,000.00 (subject to certain exemptions) are assigned to the court annexed mandatory arbitration program. The goal of this program is to resolve lesser value cases on an expedited basis, with limited discovery, thereby freeing up valuable court resources for application to higher value cases. The case is assigned to a third party arbitrator, who is charged under the Nevada Arbitration Rules, with rendering a decision on the merits of the case within six months (up to twelve in extraordinary circumstances).
Partner Aaron Lovaas serves as an Arbitrator within Nevada's Court Annexed Arbitration Program and Global Business Lawyers has represented scores of clients within arbitration proceedings in Nevada.


Disclaimer: This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. If you have questions or need specific advice relating to the matters contained herein, please contact Lovaas & Lehtinen, P.C.