Judges “get” Facebook & LinkedIn for Business

Last post, I mentioned a case where the judge was willing to disregard a corporate entity and allowed my client to look directly to the entity owner, personally, for relief.  A particular issue which came up was whether a certain corporation and a limited liability company were the same business.  I claimed they were, in part because they had the same name, employees, chief executive, and physical location.  Opposing counsel stood up and asked “how could Attorney Cooper possibly know this?”

That’s easy. His client proudly posted everything on Facebook and LinkedIn, and on his business website.  The judge understood that this is how a business, particularly one which seeks customers through the internet, communicates with those customers and prospective customers.  She was willing to treat those statements exactly as the owner intended when they were posted – what opposing counsel was trying to keep out of court.  She considered them as public statements to the world.  If that’s what you intend when you post on your company website or in social media postings, great!  Otherwise, you should rethink your policies on what you post…

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Corporate Formalities … or not …

Heading home from court the other day, I heard on the radio an ad from a company promising “inexpensive” incorporations.  They emphasized that there was no attorney needed.  It made me laugh.  I had just heard a judge tell opposing counsel that his client wasn’t likely to enjoy the protection of corporate form (through no fault of that particular attorney).

You’ve probably heard of “piercing the corporate veil”, which means that the court will disregard the corporate entity and allow you to pursue the owners personally.  At the hearing, the judge advised opposing counsel that his client had completely ignored corporate formalities, such that his client ‘wasn’t even wearing a dress, let alone a [corporate] veil’, resulting in suppressed laughter from the attorneys in the courtroom (save for one.)

What lesson can you learn from this?  Given an owner who was too lazy (?) or too ‘cute’ to adhere to even basic formalities, it may be a sort of “well, duh!” moment, if your attorney has emphasized to you the importance of formalities.  If not, it should be worth hour or two of your attorney’s time to educate you on how to safely operate as a corporate entity (including as a limited liability company).

Here, the price of ignorance may be personal liability.  In less than an hour of the attorney’s time, the owner could have learned what dreadful consequences might result from sloppiness with corporate formalities, which formalities are most important, and what formalities are most relevant to the particular business activities of this owner.

So, think about spending an hour with your business attorney in the New Year for a refresher, to make sure that you can enjoy the maximum benefit from the protections offered by your limited liability entity.

… next post – Judges do “get” Facebook and LinkedIn in the business world…

 

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An Introduction to this blog …

This blog is intended to be a collection of short items about legal issues which affect small businesses, or which come up in representing small businesses in court … Hopefully, you’ll find it interesting. Feel free to post questions and comments …

(I’d like to thank John Cunningham for good advice and tips – and for encouraging me to get this blog going.  John, who was formerly a practicing attorney, general counsel with extensive experience, and journalist at Massachusetts Lawyer’s Weekly, now advises lawyers and law firms on how to communicate, in addition to his writing and editing.)

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Small Businesses and Legal Issues

A blog about legal and not-so-legal issues affecting small businesses, from formation through maturity and dissolution, including observations concerning incorporation, contracts, corporate formalities, how to avoid disputes among owners, vendors, and customers, and what happens when things go wrong …

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