Michigan Business Lawyer Blog

Recently, a very good business client of mine asked for my advice about their plan to set up a probationary classification for new employees. The idea was that if you classify a new employee as a probationary employee, it would be easier to terminate them if they don’t work out by the end of their probationary period and you would have a basis for contesting that employee’s unemployment benefits application. In short, I don’t think having a “probationary” employee category is a good idea for a private, non-union business.

Continue reading " Should You Have Probationary Employees? " »

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Employment Law

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The US economy has showed the strongest quarterly growth in more than a year, growing at a 3.4% annual pace in the second quarter of 2007. That figure is based on the new gross domestic product figure that was released today by the Commerce Department. The new quarterly growth number marked a significant improvement from the first quarter of this year when economic growth fell to almost nill at just a 0.6 percent pace. That was the slowest growth the US economy had experienced in almost four years.

Increased spending by businesses and government fueled the rebound in the second quarter, which runs from April to June. The news wasn't all good however. Individuals were more frugal in their spending, grappling with high gasoline prices and the slumping housing market. The bad housing market continued to have ill effects on the national economic activity in the spring but not at the same level as it had in previous quarters.

The economy's second quarter surge was better than the 3.2 percent growth rate expected by economists. It was the highest level of growth since the first quarter of 2006, when the economy expanded at an annual rate of 4.8%.

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Michigan Business News

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The effort to provide Washtenaw County with wireless Internet has hit a funding snag, but officials claim the project will continue to move forward. The program is known as Wireless Washtenaw. It is been implemented in the downtown areas of three Washtenaw County cities: Ann Arbor, Saline, and Manchester.

The company working with the county to install the wireless network is 20/20 Communications. It has applied for a $14 million loan from the US Department of Agriculture, and is also trying to secure funding from other sources. The company's original goal was to start installing wireless service in the county's rural areas in the spring of 2007, with installation to have been completed by the end of the year.

20/20 also obtained a $2 million loan from United Bank & Trust Ann Arbor for the project. A number of venture capital investors have declined to contribute funds to the project, citing concerns about the technology being used growing obsolete and the management of the project by a small local company instead of a large national firm.

However, those involved remain optimistic. Project cost estimates have decreased significantly during the last 12 months. In August 2006, 20/20 estimated the cost for the project would run $42 million. That number was decreased to $26 million in December 2006. The is now estimated at $20 million. The company has stated that the lower costs are because of equipment improvements that mean fewer radios have to be purchased and installed. Equipment costs have also decreased.

According to Washtenaw County, no taxpayer money is being used to build, operate or maintain the wireless network. 20/20 officials have indicated that if the company gets the funding it seeks, it could wrap up the whole project by mid-spring of 2008.

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Michigan Business News , Technology & Law

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Intellectual property law protects a business's trade secrets. Private information that gives a company an advantage over its competitors is called a trade secret. For example, customer lists, formulas, manufacturing processes, cost information, sources of supply, market studies, and compilations of financial data may be trade secrets. Michigan law protects trade secrets against infringement. A business may be able to obtain damages or an injunction if a competitor or ex-employee steals trade secrets from the company.

Continue reading " Michigan Law Protects Business Trade Secrets " »

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Trade Secrets Law

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California-based Barracuda Networks is planning to open a new office in Ann Arbor after a successful recruiting effort by Ann Arbor Spark. Barracuda plans to initially employ a team of eight engineers, but is planning to recruit more employees from the Ann Arbor area.

Speaking to Metromode's Great Lakes IT Report, Ann Arbor Spark's CEO, Michael A. Finney, attributed a part of the recruiting success to the so called "Google Effect". "Barracuda's choice of Ann Arbor for its new office is reflective of the 'Google effect,'" said Michael A. Finney, Ann Arbor Spark's CEO. "We're getting more and more requests from companies on both coasts following Google's lead. Interest is growing among fast-growing, knowledge-based companies interested in our region and our exceptional talent pool." One important factor in Barracuda's decision was Ann Arbor's local universities such as the University of Michigan.

Barracuda provides network security appliances for comprehensive e-mail, Internet and IM protection. Its global customer base includes Adaptec, Caltrans, CBS, Georgia Institute of Technology, IBM, NASA, Pizza Hut, Union Pacific Railroad Company, and the U.S. Treasury Department.

Ann Arbor Spark is the economic development agency for Washtenaw County. Ann Arbor Spark worked closely with the Michigan Economic Development Corp. and the University of Michigan to attract Barracuda to Ann Arbor.

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Technology & Law

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The first step in starting your new business is to decide which entity you should use. It is important to choose the appropriate entity so that your business will be properly structured for legal and tax purposes. This post contains a discussion of some of your options.

Sole Proprietorship
If your business will have just you as the owner, you could operate as a sole proprietorship. Although it is very easy to get started as a sole proprietorship, these days it is as outdated as a Commodore 64. Those who work as sole proprietors have no legal liability protection and all income will be reported on their personal income tax returns, subject to self employment and regular income tax. Do yourself a favor and pass on this way of doing business.

Single-Member Limited Liability Company (LLC)
The single-member LLC is a great alternative to operating your business a sole proprietorship. On the surface, this type of entity will appear to be a sole proprietorship, but it will have the legal protection offered by the formation of the LLC. To form a single member LLC by filing articles of organization, you must file articles of organization with the state. Business formalities are minimal; you don't even need to have an operating agreement (although in some cases it would be advisable).

Multi-Member LLC
A regular LLC – as opposed to a single member LLC – is formed by two or more people. This is an entity that combines the tax advantages of a partnership with the legal liability protection of a corporation. An LLC offers many different options for structuring your business, and is particularly effective for real estate projects. Due to its flexibility, the LLC has become a popular choice in the past few years. However, an LLC is not suitable for all businesses. Self employment tax on the profit may apply if you are an active member and no members can take wages. If you are considering an LLC for your business, it is vital that you consult with your attorney to confirm that it would be an appropriate entity for your particular situation.

C Corporation
A C corporation is a separate taxable entity subject to federal and state income tax. Most of the major businesses you hear about in the news are C corporations. If you form your business as a C corporation, your company will pay tax, and any profits distributed to you will be taxed again on your personal income tax return. In spite of the double taxation issue, C corporations can provide good tax planning opportunities and may also have more employee benefits options available than other types of business entities. C corporations are also the preferred type of entity if you are contemplating soliciting venture capital for your company or taking your company public.

S Corporation
The S corporation has a tax structure similar to an LLC, but the legal structure of a corporation. The S corporation is formed with the state the same as a C corporation, but there is an additional step. You (and any other shareholders) must file an election with the IRS to be treated as an S Corporation for tax purposes. There will be no double taxation; all income will be passed to you on your personal income tax return. Before LLC’s were available, S corporations were generally the entity of choice for small (and even some mid size) businesses. There a number of restrictions on who can be shareholders in an S corporation (as well as a limit on the total number of shareholders), so you should check with your attorney to determine if this type of entity would be appropriate for your particular situation.

The choice of which business entity to use is one of the most important items to consider as you take the necessary steps to start your new business. As an experienced business lawyer, I would be happy to help you work through the various issues involved in your particular situation and work with you to choose the entity best suited to your business. You can contact me through my website or by calling me directly at (248) 952-0400

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Entity Selection

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Despite our state's well-known economic woes, Michigan's government has shown just how progressive it can be when it comes to using business and tax incentives to attract new business that will capitalize on Michigan's high tech infrastructure and highly educated and skilled workforce. For example, Google located its new AdWords headquarters due in large part to the government's offer of a $38 million tax credit. That investment will create 2,500 jobs and $2 billion in personal income for Michigan workers.

So, while coastal states like Massachussetts, New York, and California tax and regulate businesses at every turn, states like Michigan, and cities like Ann Arbor, are rolling out the red carpet and making significant efforts to attract highly desirable businesses to the area. Combine that with Michigan's highly educated workforce, and a compelling case can be made that Southeast Michigan should be on any entrepreneurial company's investment short list.

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Michigan Business News

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On Thursday, July 12, 2007 Michigan Gov. Jennifer Granholm signed into law a replacement for the controversial Single Business Tax that its supporters said would jump start the languishing Michigan economy. The Single Business Tax had long been hated by businesses in Michigan, and was seen by many as one of the factors that discouraged more businesses from investing in Michigan. Gov. Granholm has stated that she believes the new tax will give everyone in Michigan the opportunity to promote the state as "open for business."

Continue reading " Michigan Governor Signs New Michigan Business Tax Bill into Law " »

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Michigan Business News , Tax Issues

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