Michigan Business Lawyer Blog

One of the most important assets a business can have is its name. A business name sets the tone and marks the brand of the goods or services offered by a company. In Michigan, business names are registered with the Michigan Department of Labor and Economic Growth, Bureau of Commercial Services.

Possible names for Michigan corporations, limited liability companies (LLC's) and limited partnerships can be pre-cleared by using the name availability search utility on the Michigan Department of Labor and Economic Growth's website. You can also call the Bureau of Commercial Services and obtain pre-clearance over the telephone. The purpose of pre-clearing a business name is to reduce the chances that a business's organizational documents will be rejected by the Bureau of Commercial Services because of a name conflict. That said, pre-clearing is not the same as reserving a name. It is possible for a name to be pre-cleared in the state's name database only for a conflict to be discovered when an examiner actually sits down to review the business organization documents.

The Bureau of Commercial services maintains a list of the names of all domestic and foreign corporations, LLC's and limited partnerships that have been duly formed or registered under the laws of the State of Michigan. The Bureau of Commercial Services will not accept business organizational documents for filing if the business's name conflicts with the name of a business that is already registered with the State of Michigan. A business name will conflict if it is not distinguishable from other business names on the records of the Bureau of Commercial services. A business name is distinguishable if it contains one or more different letters or numerals, or if it has a different sequence of letters or numerals from other business names on record.

Although that standard may seem simple enough, it gets a little bit more complicated because there are a number of terms and characters whose presence or absence will not make a name distinguishable. The Bureau of Commercial Services has published an online memo giving guidance on determining whether a business name will conflict with other business names already registered with the Bureau of Commercial Services.

In my next post, I will discuss a number of additional issues that must be addressed when considering what name to give a new business entity.

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

Posted In: Business Formations

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One of the perks of retaining an attorney to assist you in a legal matter is the age old protection offered by the doctrine of attorney-client privilege. Communications with a lawyer are protected by the attorney-client privilege when they are between a lawyer and a client seeking confidential legal advice. When the client is a business - such as a corporation - the privilege will protect the communication between a company employee and the company's lawyer so long as the communication pertains to the employee's duties and was made at the direction of the employee's supervisor.

It is important to remember that the attorney-client privilege only covers legal advice. It does not cover business advice. Moreover, communications between an attorney and his or her client will not be protected if they are made to further an illegal action or crime. It is also very important to remember that communications can be stripped of the attorney-client privilege if the client discloses the protected communications to third parties or allows a third party to listen to the attorney-client conversation.

These issues can become difficult when two or more business partners retain an attorney to incorporate or otherwise organize their new business. This is because a lawyer who is retained to organize a business usually considers the business entity itself to be the client. This means that although the business founders may initially be the representatives of the company, they may well not be considered the client for purposes of determining the existence and extent of the attorney-client privilege for communications between the founders and the company's lawyer. If a dispute arises between the founders or a founder and the company, the company's attorney ethically cannot represent opposing parties. Plus, communications the attorney had with the parties may not be covered by the attorney-client privilege.

It is important for Michigan business owners and entrepreneurs to consider their need for a lawyer to assist them with their legal issues. Business lawyers can play a number of different roles for business owners. A good Michigan business lawyer can help a Michigan business succeed by providing good advice and legal guidance. Keeping attorney-client communications confidential is an important part of of this process and is something that all businesses and entrepreneurs should be aware of.

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

Posted In: General Topics

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The Michigan Supreme Court recently heard oral arguments in the case of Miller v. Allstate. The major issue in this case is whether those providing a service requiring a license must incorporate under the Michigan Professional Services Corporation Act (PSCA) instead of under the Michigan Business Corporation Act (BCA). Before the Miller case reached the Michigan Supreme Court, the Michigan Court of Appeals ruled that under the language of the PSCA, any licensed professional who incorporates must do so under the PSCA and not the BCA.

Traditionally, only members of the “learned professions” (i.e., doctors, lawyers, and the clergy) have been required to incorporate under the PSCA. All other businesses that provide personal or professional services have had the option to incorporate under the BCA or the PSCA, even if a license was required to provide those services.

In Miller, the patient was referred for physical therapy treatments. The treatments were administered by licensed physical therapists according to prescriptions that were properly issued by the patient's doctors. The company providing the physical therapy services was incorporated under the BCA. When the physical therapy company billed Allstate, Allstate refused to pay, on the basis that it believed the physical therapy company had been improperly incorporated under the BCA instead of the PSCA.

Allstate asserted that the physical therapy company had to incorporate under the PSCA because it provided a personal service requiring a license. Allstate claimed that because the physical therapy company was incorporated under the BCA, its incorporation was defective, thus allowing Allstate the legal right to refuse to pay the physical therapy company's charges. Importantly, Allstate has asserted that if any corporation provides services that require a license and is not incorporated under the PSCA, the corporation’s incorporation is defective. If incorporation is deemed to be improper there can be negative repercussions with respect to a number of issues, including whether the corporation can collect its outstanding accounts receivable and whether shareholders may be personally liable for company obligations.

The Miller case has caused a major uproar in the business and legal communities. It appears to have caught many, including the State of Michigan, off guard. Numerous business interests as well as the State of Michigan have taken formal positions opposing Allstate’s arguments as being illogical and inconsistent with the plain language and purposes of the business incorporation acts in Michigan.

While there are several other issues involved in the Miller case, the question of defective incorporations is the most wide-reaching and has the greatest potential to disturb the status and operations of many Michigan corporations. An adverse ruling by the Michigan Supreme Court on this point could mean that any Michigan business corporation that incorporated under the BCA and has provided services requiring a license could experience some difficulties.

An experienced Michigan business lawyer should be consulted if a business or professional has any questions about the issues raised in the Miller case, or any other issues concerning the proper incorporation of a business.

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

Posted In: Business Formations , Corporations , Entity Selection

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One of the perks of obtaining nonprofit status is getting tax breaks. Not only can charitable institutions get federal and state income tax breaks, they can also get real estate property tax breaks.

The requirements that must be satisfied in order to get a property tax exemption are contained in MCL 211.7o(1). These requirements include the provision that the real estate be "owned and occupied" by the nonprofit charitable institution. While that may seem easy enough, it was enough to trip up the Liberty Hill Housing Corporation in its recent Michigan Supreme Court case.

The case arose out of Liberty Hill's request to the City of Livonia for a property tax break. The City declined Liberty Hill's request. All parties agreed that Liberty Hill owned the property in question. The request was denied because the City didn't believe that Liberty Hill actually occupied the property. Liberty Hill leased to the property to disabled and low income individuals for their own personal use as housing. Liberty Hill mounted unsuccessful appeals to the Michigan Tax Tribunal and the Michigan Court of Appeals.

In its decision, the Michigan Supreme Court affirmed the lower tribunals, ruling that "to occupy property under MCL 211.7o(1), the charitable institution must at a minimum have a regular physical presence on the property." Leasing the property disqualifies it from being eligible for a tax break even though such activity is in furtherance of Liberty Hill's charitable purpose.

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

Posted In: Nonprofit Organizations

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