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S.C. Supreme Court Sets Criteria to Pierce Corporate Veil of Sibling Businesses

On July 10, the South Carolina Supreme Court handed down an important decision in Pertuis v. Front Roe Restaurants, establishing the criteria to determine when the corporate veil can be pierced horizontally – in other words, when a court can disregard the corporate form of sibling companies having common ownership, control, officers, or members.

The practice of corporations joining forces with others that share business goals, leadership and even finances to mitigate personal liability for those in charge is not a new one. The merging of business interests has long-been debated, going back to a 1986 Court of Appeals decision in Kincaid v. Landing Development Corp. The theory generally states that, “where multiple corporations have unified their business operations and resources to achieve a common business purpose and where adherence to the fiction of separate corporate identities would defeat justice, courts have refused to recognize the corporations’ separateness, instead regarding them as a single enterprise-in-fact.” Corporate entities could be combined into a single entity if their interests, entities and activities are so interconnected, “as to blur the legal distinction between the corporations and their activities.” Kincaid v. Landing Dev. Corp., 289 S.C. 89, 96, 344 S.E.2d 869, 874 (Ct. App. 1986).

The South Carolina Supreme Court’s latest decision in Pertuis v.  Front Roe ruled in a minority shareholder oppression dispute between the owners of three restaurants and their general business manager, who claimed part ownership in the entire enterprise. The restaurants were incorporated separately in North and South Carolina but had the same shareholders and general manager. The general manager sued the majority shareholders claiming part-ownership in the entire operation and asserted that he was entitled to a percentage of the entire business as a buyout. 

The trial court found that the S-corporations owning each of the three restaurants were a “partnership.” It disregarded the corporate entities and awarded the general manager a cut of the whole. The Court of Appeals affirmed.

Ultimately, the Supreme Court rejected the lower courts’ refusal to respect the individual corporate forms of the three S-corporations.

In so doing, the South Carolina Supreme Court, for the first time, adopted the single business enterprise theory and established the criteria for disregarding the corporate existence of commonly owned sibling entities. 

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Records Retention: Which Documents Should You Keep and Which Should You Trash?

Keeping documents has never been easier or cheaper. Cloud storage has opened up nearly infinite room to save digital files and data indefinitely. However, just because you can save documents conveniently doesn’t mean it’s always a good idea. While storage is relatively inexpensive, the risks related to retaining unneeded records can be costly.

If your business documents have been stacking up in the absence of a formal retention plan, it’s time for a spring cleaning. Don’t have a retention plan? All businesses should have one.

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Court of Appeals Protects Recurrent Retirement Plan Contributions from Post-Judgment Attachment

A recent, very debtor-friendly decision of the South Carolina Court of Appeals essentially put most routine retirement account contributions beyond the reach of creditors seeking to satisfy past judgments. The court made clear its strong stance toward protecting individuals’ retirement accounts and, for one of the first times, explicitly said that funds deposited into retirement accounts generally can’t be undone as fraudulent transfers.

The debtor in the case, First Citizens Bank v. Blue Ox, signed a confession of judgment after his LLC had defaulted on loan payments owed to its bank. After failing to pay the judgment, the debtor contributed money to his retirement accounts as well as a 529 college savings account. The bank contended that it could attach these post-judgment contributions because they were fraudulent transfers and therefore not subject to protections otherwise provided to retirement accounts under Sections 5-41-30(A)(13) and (14) of the South Carolina Homestead Exemption Act. Rejecting the bank’s claims (and reversing the lower court), the Court of Appeals ruled that Statute of Elizabeth, which generally prohibits fraudulent conveyances, did not apply because the movement of money did not transfer ownership from the debtor but rather converted the funds into protected assets that still belonged to him.

The Court of Appeals further noted that while there were several “badges of fraud” present, on balance there was no fraudulent intent because the “contributions were limited in amount, were not secretive in nature, and most tellingly, were in line with [the debtor’s] long-standing pattern of investing in his retirement – conduct that is encouraged by the very existence of [protections typically afforded to IRAs and 401(k) accounts under the Homestead Exemption Act].”

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Free speech in the workplace: Can private-sector employees be fired for political opinions?

An increasingly divisive political climate has put the exercise of constitutional freedoms in the spotlight. While the First Amendment states, in relevant part, that “Congress shall make no law . . . abridging the freedom of speech,” the First Amendment’s restrictions do not apply to private-sector employers. In other words, an employee’s freedom of speech and expression can have limits and repercussions in the private-sector workplace.

The polarizing political discourse has been on display along NFL sidelines since former San Francisco 49ers quarterback Colin Kaepernick began kneeling during the national anthem in 2016. Hundreds of NFL players and other professional athletes have joined the protests, and others have followed in solidarity.

At the beginning of the NFL season, President Donald Trump urged league owners to fire players whom he said showed a “total disrespect for everything we stand for.” But is it legal for an employer to fire employees for expressing their political opinions?

South Carolina is an “employment at-will” state, which means that either an employer or an employee can terminate the employment relationship at any time, for any reason, if such termination is not in violation of state or federal law. Private sector employers always will have a certain degree of control over employees’ speech. For instance, it is appropriate for a company to prohibit employees from discussing trade secrets or revealing confidential information. Employers also can prohibit harassing speech or conduct in the workplace. 

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Mediation is key to efficient, cost-effective e-discovery

Nearly everything we do leaves a trail of data, and the abundance of electronic evidence has transformed the way legal disputes are handled from beginning through resolution.

Think of all the different ways we communicate with others – either directly, with text messages or emails, or passively, where social media posts may be viewed by friends or connections. Before electronic evidence became the norm, printed documents relevant to a case were placed in a file, boxed and stored along with countless others to be turned over to opposing counsel, who had to sort through it all by hand. Now, the realm of discoverable digital data has grown exponentially, making the ability to search efficiently even more important. The Radicati Group, a technology market research firm, estimated that 269 billion emails were sent per day in 2017. That’s a lot of data.

Each piece of data helps tell a story, and that data can be used as evidence in a lawsuit. Preservation, retrieval, review, and production of electronic data can dramatically affect the expense of litigation, and controlling those costs through careful management of the discovery process is the key benefit of employing a mediator to assist with discovery.

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Finding Your Next GC: Succession Planning for Corporate Law Departments

The general counsel of a business is integral to executing the company's strategy, handling litigation, overseeing compliance and, ultimately, the bottom line. So why do corporate law departments tend to pay so little attention to succession planning for the role?

Many GCs simply feel they don’t have enough time to look ahead, given day-to-day work and immediate needs to advance their strategic priorities. Moreover, not everyone thinks that succession planning is in his or her best interest. And, all too often, a burgeoning plan is sabotaged by a lack of progress in identifying and training successors.

How can a law department break through inertia and make a solid GC succession plan?

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Eminent Domain in South Carolina: What Happens When the Government Wants Your Land?

South Carolina property owners and businesses have taken notice of recent actions across the state where the government is using eminent domain authority to clear the way for roads, infrastructure and other public uses.

Although a state constitutional amendment in 2006 prohibited the use of eminent domain for economic development, eminent domain is on the table for other uses and has been viewed as a bargaining tool for municipalities to accelerate the sale of coveted land.

Negotiations to acquire property for a library and museum in Myrtle Beach are continuing after the city council in February allowed the city manager to use eminent domain, if necessary, to force the sale of two downtown parcels.

In April, the Charleston City Council authorized the use of eminent domain to acquire the site of a former supermarket for a new intersection and park. One month later, the city reached an agreement with the developer to purchase the 2-1/2-acre site for $3 million.

And plans for Interstate 73, which aims to connect Myrtle Beach to North Carolina and up to Michigan, could involve more right-of-way acquisitions across South Carolina.

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Businesses Collecting Purchased Debt Get Relief In Supreme Court Ruling

A June 12, 2017, U.S. Supreme Court ruling means businesses have less to worry about from regulations designed to protect consumers from abusive and deceptive practices when attempting to collect their own debts.

The Fair Debt Collection Practices Act (FDCPA) authorizes private lawsuits and weighty fines to deter the wayward practices of debt collectors. In the high court’s view, “debt collector” refers to a third-party servicer collecting debts on behalf of a creditor. A bank or other provider that originates a loan and tries to collect the debt itself is not a debt collector and therefore is not bound by the FDCPA.

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5 things every business should know about FMLA

Health issues are a part of life and often can have both personal and professional effects on employees.  Life events such as the serious illness of an employee or family member or the birth or adoption of a child may require an employee to take extended time off from work. A business must understand its obligations and responsibilities in such a scenario.

The Family and Medical Leave Act (FMLA) is a federal law that protects an employee’s job and medical benefits while he or she takes up to 12 weeks of unpaid leave for a qualifying event. Employers that meet certain criteria are covered by FMLA, and South Carolina businesses are no exception.

Under the FMLA, covered employers have specific obligations to their employees and can be subject to liability if these obligations are not followed. A business should review the following five-question checklist to assist in understanding its FMLA responsibilities:

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When Entering into a Commercial Lease, Understand Your Obligations

Entering into a commercial lease is a significant responsibility for both the landlord and tenant. Before a commercial lease is finalized, it is critical that both sides perform due diligence on the lease provisions and protections.

In City Electric Supply v. Johnny Murray – a lease dispute between an electric company and a family-run boat repair shop in North Charleston – the Court of Common Pleas granted the plaintiff’s motion for summary judgment and ordered the tenant to be evicted from the property. The case featured several legal missteps by the defendant that can serve to inform parties who are entering into commercial leases.

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Minority Shareholders Navigating a Buyout: Know The Landscape

Minority ownership of a closely held company can be a lucrative but risky proposition. A minority shareholder’s marginal voting position can unfairly empower other shareholders, especially if they vote together.

To illustrate this point, consider a family business owned by three siblings working for the company. Without laws protecting each individual shareholder, one sibling would be powerless to stop the others from cutting her out of a profitable deal or firing her and refusing to pay dividends, thereby depriving her of any ownership benefit. The two siblings could also vote on a risky business change – like selling all of the company’s assets in a blue chip market to finance the production of a fad product – without opposition from the minority owner. 

South Carolina has attempted to balance the power enjoyed by majority shareholders through laws that permit an alienated owner to force the company to buy out her shares. These laws are applicable to situations like those discussed above, when a minority shareholder is being treated grossly unfair (often called “minority oppression”) and also when a minority shareholder dissents on a vote that would fundamentally change the way the business operates or is owned, as in a merger (often called “dissenter’s rights”).       

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Not On My Land? Clarifying the Elements For a Prescriptive Easement

Imagine finding that a neighbor, or a company, or even the public has acquired the right to use part of your property without compensating you. A recent ruling in South Carolina sets new case law and provides important guidance for issuers of title insurance, parties impacted by property litigation and anyone who may be seeking advice about the validity of an easement, which is a right to cross or use someone else's land for a specified purpose.

In Simmons v. Berkeley Electric – a property dispute over whether utility companies had the right to use a individual's land for water and power lines – the South Carolina Supreme Court held that the Court of Appeals erred in recognizing two methods, adverse use and claim of right, of proving the third element of a prescriptive easement. (A prescriptive easement is earned by regular use; it is not something that is purchased, negotiated or granted, and the user does not gain title to the land.)

This ruling concluded that when analyzing the third element of a prescriptive easement, South Carolina courts should apply a new test for adverse use, which is the practice of using property without the authorization of the owner.

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Attorney-Client Privilege: Use with Care

A bedrock principle of our legal system is the protection that the law gives to communications between an attorney and the client.

Like most legal rights, however, attorney-client privilege has limits. Every word shared between a client and attorney isn’t protected. If you’re talking to a lawyer about a sensitive matter, don’t take attorney-client privilege for granted. The law provides exceptions, case law sometimes offers muddled guidance and opposing parties may litigate vigorously over what is covered. Your attorney can advise you as to how it applies to your circumstances, but here are some guidelines about relying on attorney-client privilege and waiving it. 

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Don’t Let Your Workplace Become Collateral Damage in the Cultural Wars

The so-called cultural wars have roiled politics since at least the 1990s and now have invaded the workplace.

However you feel about these issues personally, you should know they are going to spawn confusion and litigation in the workplace as employers try to make sense of conflicting mandates in the courts and legislatures. Uncertainty is the enemy of risk management, and unless you want to make an expensive public statement about your beliefs, we advise you to approach these issues with caution – and sound legal counsel – until the smoke clears.

Many date the cultural wars to 1992, when presidential candidate Patrick J. Buchanan delivered what became known as the “cultural war” speech at the Republican national convention, warning that “there is a religious war going on in this country. It is a cultural war, as critical to the kind of nation we shall be as was the Cold War itself, for the war is for the soul of America.”

You don’t have to agree with Buchanan’s politics to recognize that he was right about the nature of the battle. And with talk radio and cable TV’s insatiable appetite for controversy and our never-ending cycle of national campaigning, we don’t expect the cultural wars to abate, even following the election in November. 

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Shareholder Agreements Give Minority Owners Peace of Mind

When entrepreneurs start a business, they are long on optimism and short on contingency plans. That faith in free enterprise and the willingness to take risks has made America great. But businesses do hit speed bumps and the best-business-friends who worked so well together at the beginning of the enterprise sometimes find that their relationship unravels. When that happens, it can be frustrating if you’re a minority owner of the business.

As a dissenting minority shareholder, you can find yourself with no voice in a business where you invested money or sweat equity. That can include operations, hiring and firing, how profits are distributed, and mergers and acquisitions. While people often have honest disagreements over business strategy, the majority also can embark on a deliberate strategy to devalue a minority shareholder’s interest or shut him out of a fair share of profits.

As in most things, you often can avert headaches in a business relationship by assuming the best and planning for the worst.

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Forming an LLC? Don’t Forget to Have “The Talk”

About two-thirds of all new businesses in the U.S. start out as LLCs, or limited liability corporations. Entrepreneurs recognize that LLCs combine the protections of a traditional corporation with the operating flexibility that small businesses need. 

We’re big fans of LLCs, but they are not without potential pitfalls. When there are problems, it’s usually because the LLC members were in a hurry at the outset, and didn’t take advantage of all the safeguards and flexibility this business formation entity allows.

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Business Visas Help Companies Fill Critical Positions

Immigration is much in the news these days as the presidential candidates discuss border security, terrorism and preserving jobs for U.S. citizens. These public policy issues deserve a thorough vetting of candidates, but they shouldn’t be confused with the legal business visa process that thousands of American businesses depend upon.

Unfortunately, our schools are not producing a sufficient number of graduates in some professional fields, and American businesses have to bring in foreign nationals to fill critical positions. There is a common misconception that these businesses are hiring cheap labor that displaces U.S. citizens, but that’s wildly inaccurate. American businesses are incurring substantial expense to bring in foreign workers with specialized skills, and they would gladly hire U.S. citizens but for the dearth of domestic talent in some professional areas. 

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Avoid These Legal Snares in 2016

We always like to look ahead and advise our business clients about legal issues that may receive more attention throughout the year. Some are pushed to the forefront by public policy and politics – immigration, for example. Other issues, such as data protection and workplace harassment training, always are important, but the beginning of the year is a good time to review whether your business follows best practices.

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Loan Servicers Must Continue to Follow Both Federal and State Rules in Foreclosures

Banks have now had two years of experience with the Dodd-Frank Act and the Consumer Financial Protection Bureau (CFPB), the agency that implements the parts of the law that apply to mortgage servicers.

The foreclosure crisis and accompanying recession are in the rearview mirror, but the stringent consumer protection rules attached to the law continue to set tight boundaries for how banks handle loss mitigation. Dodd-Frank was a response to a period when many mortgage servicers were unresponsive to consumers as a result of being overwhelmed by the volume of defaults. As a result, the law severely tightened protections for borrowers, requiring mortgage loan servicers to follow strict procedures and documentation in loss mitigation.

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Creditors’ Rights Trump Ownership Restrictions in LLC Operating Agreements

A recent South Carolina Supreme Court decision affirms the supremacy of creditors’ foreclosure rights, and sounds a cautionary note for LLCs. The state’s high court said that LLCs can’t use an operating agreement to force a creditor to sell a distributional interest it obtained via judicial foreclosure. 

The ruling came in Levy v. Carolinian, LLC, a case involving an LLC that owns an oceanfront hotel. One of the members, who owned about a quarter of the LLC, found himself on the wrong end of a judgment for $2.5 million. Creditors obtained a charging order – essentially a lien – against their debtor’s distributional interest in the LLC. The creditors then foreclosed on its charging lien and purchased the member’s distributional interest at public auction. 

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Your Right to be Free of Your Neighbor’s Water

Almost any change that people make to the natural landscape can alter the flow of surface water, and that often creates problems that grow into legal disputes. It’s an area where property rights, nature and engineering intersect in unpredictable ways.

A new subdivision, parking lot, expansion of a building or even change in the use of rural land can result in water washing out a neighbor’s lawn, flooding homes, attracting mosquitos in standing pools, depositing silt on a golf course, polluting a backyard pond or rendering crop land less profitable. While we typically see these problems emerge in urban developments, disputes can arise anywhere water flows. 

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Precise Communication is the Antidote to Accounting Malpractice Claims

In my experience as both an attorney and a formerly licensed CPA, true accounting malpractice is rare. But, when there are claims, they can be expensive. It’s incumbent on accountants, as well as clients, to take steps to minimize the misunderstandings that can lead to litigation. 

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Records Retention - Do You Have a Plan?

For many small businesses, deciding what documents to keep and for how long is a function of storage capacity. As servers and filing rooms reach capacity, businesses look for documents to discard. 

This is not the way to manage your documents.

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Court Comes Down Hard On Bank That Didn’t Satisfy Open-Ended Mortgage in 90 Days

The South Carolina Supreme Court recently sent a clear message to banks: all mortgages – including those with a home equity line of credit (HELOC) – must be satisfied within 90 days of receiving a payoff. Banks that don't have a procedure for timely execution of payoffs where there is a line of credit should implement one immediately or risk certain liability.

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Why You Must Renew South Carolina Buy-Sell Agreements to Reflect Inclusion of Goodwill

A recent South Carolina court ruling has adopted the emerging majority approach utilized by the courts nationwide, and for the first time has recognized the distinction between “enterprise goodwill” and “personal goodwill” for equitable distribution purposes in a divorce action. 

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New Litigation Handbook is a Quick Reference Guide for Busy South Carolina Lawyers

Lawyers have access to millions of pages of reference materials, thanks to the Internet and law libraries. But sometimes practitioners just need a quick way to find practical information, such as a filing deadline for an appeal or appropriate objections to an overly broad discovery request.

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Communication is the Key to Managing Litigation

Communication is essential to a good relationship between an attorney and client in litigation. One thing we don’t ever want to hear from a client is that she went into a meeting and was asked about the status of a lawsuit and didn’t know what to tell her directors or partners. Our philosophy is that clients should always know where their litigation stands.  

That doesn’t necessarily mean daily phone calls — more is not always better. While some business leaders want to know about everything that happens in their case, others just want us to hit the high points. They’re busy people running a business, and they tell us not to bother them with anything except important developments. 

Both styles work, and it’s important for the lawyer and client to establish right at the beginning what kind of communications process they are going to use.

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Protect Your Intellectual Property with Employment Agreements

In an era when confidential information can be secreted out the door on a thumb drive, business owners can’t depend on the goodwill of employees to keep their intellectual property safe. If you have any form of IP – and almost every business does – we recommend that you protect it with employee agreements. 

While many businesses have unique intellectual property concerns, here are some of the topics we often see emerge. 

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Key Legal Issues for Entrepreneurs

If you're thinking of starting a business, you likely are focused on how to sell the product or service you plan to offer. But don't neglect to set up a legal framework that will protect your business and allow it to thrive. In our litigious society, a working knowledge of business law and a relationship with a law firm has to be part of your entrepreneurial toolkit. 

Here are six areas where we recommend that first-time entrepreneurs protect themselves by getting good legal counsel at the outset to reduce the possibility of problems down the road.

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What to Expect When You are the Target of a Lawsuit

It’s frightening for most business owners to receive notice of a personal injury or premises liability lawsuit, and one of the first questions lawyers are asked is whether to settle the suit and for how much. The good news is that a majority of suits settle, usually within the limits of insurance coverage, and those plaintiffs who insist on going to trial generally have weak cases.

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Business Start-up Legal Checklist

Anyone who has started a business can tell you that they were surprised at how many legal and regulatory hoops they had to jump through just to open their doors. My husband and I experienced this first-hand when we opened a coffee shop and retail business in Greenville. We’re both lawyers, and we still found the process daunting. 

When you start a business, be sure you have the right people in place to help you. A lawyer will be one of them, and here’s a checklist that will help new entrepreneurs stay out of trouble and increase the chances of getting their business off to a trouble-free start. 

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Considerations for Whether, When and How Much to Pay to Settle Litigation

Most lawsuits never go to trial, but it is still difficult for a business that is the target of litigation to know whether and when to settle, and for how much. 

It may be especially challenging for a defendant to take the initiative to settle when it feels it occupies the moral or legal high ground. However, while it may not seem fair, every defendant starts losing money the day the complaint is filed. Unless a defendant has a viable counter claim or a contractual agreement that the loser pays the winner’s fees and costs, the best a defendant can hope for is to lose only the cost of defense. For this and other reasons, it is often the best business decision to settle, even when in the right. But how much should a defendant pay to settle and at what point in the litigation, and at what number is it better to try the case? 

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Be Careful What You Sign: Red Flags in Commercial Contracts

When businesses sign a contract, they’re usually focused on the opportunity it represents – a new customer, a better supplier or a partnership that expands their reach. Unfortunately, when we, as lawyers, see some of these same contracts, it’s after the air has gone out of such expectations and a deal has soured. 

While our best advice is to have every contract reviewed by your attorney, we realize that most businesses aren’t going to do that for every agreement. If there is a lot of money – or risk – involved, consider asking your attorney to review a contract – a process that usually isn’t time consuming for legal counsel familiar with your business. 

However, in those cases where you choose not to make a call to your attorney, here are some things to watch for based on our experience. 

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How to Pick a Lawyer

Just as we all need a family doctor who we can rely on, every small business eventually finds that it needs a relationship with a lawyer. As with the family doctor, many small business owners find it beneficial to develop rapport with one lawyer as a point of contact. While the relationship attorney may sometimes direct the client to someone with specific experience, it’s reassuring to begin the conversation with someone who understands your business and industry – and remembers the names of your kids.

I frequently go shopping for other lawyers myself, so I have some experience in this area. In my case, I’m usually looking for a lawyer or firm in another state who can handle a matter for a client. Even as a lawyer, it’s not always easy to judge if another is going to be a good fit, so I understand how business owners may find it difficult to pick an attorney. Here’s my test for picking a lawyer. 

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How to Collect Business-to-Business Bad Debts

Uncollected business-to-business debt is a huge problem for most small companies, and unlike consumer debt, there are no laws in South Carolina that directly address either the rights of creditors or debtors. Hardly a day goes by that we don’t hear from a client seeking advice on how to collect on a long-overdue commercial debt. Here is a list of best practices to help collect bad commercial debts, and to avoid ending up with these tough-to-collect liabilities in the first place.

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LLC or Corporation? Which Is Right for Your New Business?

For most entrepreneurs, the choice of business entity comes down to an LLC or corporation, since both insulate personal assets from liability claims. LLCs, S corporations and C corporations all have advantages, depending on your business goals. 

Generally, the comparisons among the three will center on taxes, operating flexibility and treatment of investors and shareholders. 

Here’s a quick overview of these three alternatives that will give you a starting point for considering your options before you talk to your attorney. 

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All Businesses Should Have a Document Retention Policy

Technology has made it easy for us to electronically store documents that would have required warehouse-size space in paper form. Now, businesses wrestle with the question of what they can safely get rid of, and what they must retain. This is especially a problem for small businesses, which may not have the luxury of designating someone to supervise document retention.  

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Guns and the Workplace in South Carolina

Guns are a tough issue for many business owners. They may own guns and support the Second Amendment, but as business owners, they recognize that when employees bring guns to work, potential liability is created. And while some employees may feel like their Second Amendment rights are limited by workplace policies, most will understand their employer’s concern for dangerous accidents – and resulting lawsuits – that can occur when employees are permitted to carry concealed weapons. 

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Don’t Let Hackers Cripple Your Business

Some of the biggest names in American business were the victims of data breaches last year, but hackers didn’t limit their attacks to companies such as Target, Home Depot and eBay. If trends hold, almost half of American businesses each year will have sensitive data stolen, according to the Ponemon Institute, which studies cybersecurity. 

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Don’t Automatically Include Arbitration Clauses in Commercial Contracts

For years, mandatory arbitration clauses have been almost automatically included in many commercial contracts, because they’ve been regarded as cost-effective detours for matters that might otherwise work their way through the courts. Over the last few years, we’ve adopted a more critical view of arbitration, and now regard it as a good strategy for some clients, but not for others.

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How to Write a Workable Non-Compete Agreement

Employers invest time, training and trust in key employees, and they don’t want to see them walk out the door and help a competitor. Non-compete agreements can protect your investment in employees – but only if they’re written with reasonable restrictions. 

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Criminal Background Checks are a Minefield for Employers

A big issue that will continue to vex hiring managers this year is criminal background checks of job applicants. Employers should be cautious in how they use background checks while we wait for the courts to clarify an area of the law that is fraught with peril.

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Don’t Misunderstand the Memorandum of Understanding

Can a city change its mind about development partners after signing a memorandum of understanding (MOU)? 

That question bounced around in South Carolina courts for a decade, and the state Supreme Court issued the final answer last summer. A city – or any party – may back out of an “understanding” that doesn’t include a definitive agreement. 

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Judicial Dissolution of an LLC: Why You Need a Prenupt

The formation of an LLC could be viewed like a business marriage in which members join their respective interests to attain mutual objectives. Keeping the analogy going, it’s a marriage that needs a prenuptial. Members who form or join an LLC may have every intention to keep the LLC going indefinitely, but as life happens and problems arise, dissolution of the entity may be in everyone’s best interests. If the LLC’s operating agreement clearly defines the why’s and how’s for voluntary dissolution (what we mean by prenuptial), the process to windup the company can be relatively easy and accomplished without the need for judicial involvement. However, without a clearly articulated plan, LLC members may be forced to have their entity dissolved through judicial action. 

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Managing Lawsuits that Go Beyond State Borders

Just because a lawsuit originates in a particular state does not mean that all relevant information or people will be neatly located in that same state. For instance, what if you file a claim in South Carolina against a North Carolina-based business, and the records you need to review and the people you need to depose are also in North Carolina? If the case were filed in federal court, the court’s subpoena power would extend to all fifty states. However, if the case were filed in state court, the South Carolina court would not have subpoena powers beyond the state’s borders.

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Keeping the “Limited” in Limited Liability Companies:  Promoter’s Contracts and Torts

Organizing a limited liability company (LLC) often requires more than simply preparing and filing articles of organization. Like any other corporate entity, an LLC frequently has to prepare itself to conduct business even before the LLC is formally organized. Enter the promoters - individuals who act on behalf of an LLC prior to its formal organization and conduct necessary pre-organization work, which generally includes entering into various contracts. Until recently, South Carolina courts had not directly addressed the issue of whether an LLC may be held liable for the actions of a promoter taken prior to the organization of the LLC.

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The South Carolina Business Court:  What It is and Why It’s Used

On September 7, 2007, the Chief Justice of the Supreme Court of South Carolina signed an administrative order creating the Business Court Pilot Program in South Carolina. The signing of this order was not a laissez-faire undertaking; rather, it was the result of a well-reasoned recommendation by the South Carolina Bar’s Task Force on Courts.

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The Best-Laid Plans of LLCs…Sometimes Turn into Disputes Between Members

The Limited Liability Company structure can be a great option for businesses; it combines the best of partnerships and corporations. Like corporations, members are not personally responsible for company debt.

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Arbitration:  Should I Stay (in Court) or Should I Go (to Arbitration)?

In South Carolina, 33 out of 46 counties are “mandatory mediation” counties, and circuit court litigants in these counties are required to participate in mediation of their lawsuits prior to trial (with certain limited exceptions).

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Five Ways to Save a Family Business for the Next Generation

It’s a harsh, but motivating reality - more than 70 percent of family businesses do not survive the transition from one generation to the next. While many family business owners dream that their legacy will survive deep into their family history, the idea that their long-term investment may not outlast them is a reality they should face … and work to protect against. With some smart and proactive measures, business owners can go a long way to protect against generational demise.

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Advice to Opposing Counsel: Do Your (Legal) Homework

Recently, a widely watched television show composed of a panel of diverse women discussed the recent decision of the United States Supreme Court in the case of Burwell v. Hobby Lobby, Inc. The Hobby Lobby case involves three closely held corporations’ challenges to the Affordable Care Act’s mandate that they provide insurance coverage for four contraceptive drugs or devices that operate after the point of conception.

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“Bank” – The New Four Letter Word: Tips to Avoid Lender Liability Claims

Being a lender or an investor has its perks: you have money, you control it, decide where it goes and how it is used. But being a lender or investor certainly has its drawbacks, especially in a progressively litigious world. Most people have little sympathy for the seemingly impersonal financial monolith – the bank. Despite the reality that the majority of individuals and companies could never achieve their personal or business goals without the assistance of banks and other lenders, they are often viewed as unsympathetic gatekeepers. So it is not surprising that when individuals and businesses fall on hard times, they are increasingly challenging their financial institutions in court.

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Reaching a Favorable Settlement in a Multi-Party Construction Defects Case

Turner Padget represented a national manufacturer of an Exterior Insulation and Finish System (EIFS) in a multi-party case that involved alleged construction defects in a luxury oceanfront condominium complex on Hilton Head Island, South Carolina. The Plaintiffs alleged that their building suffered damage as a result of various construction defects, such as water intrusion at several locations, including the roof, windows and doors, and the EIFS. They sought over $17 million in damages.

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