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Hackensack Business & Commercial Law Blog

The importance of a business plan

There has been a recent trend of entrepreneurship advocates telling people interested in starting a business in New Jersey or elsewhere in the country that creating a business plan isn't necessary. Some believe that due to the fast pace of the current business world, it is better to just get started and react as issues develop. While this may be attractive due to the fact that creating a business plan takes time and effort, there are a number of reasons individuals should take the time to do so, one of the biggest being that it increases a new enterprise's chance of success.

Some of the reasons for the increased ability to succeed are that people who create business plans are better able to compare their expectations for products and income with reality. Creating a business plan requires that companies map out a plan of action and take the time to calculate costs and compare them to expected income as well as the capital needed to operate.

New Jersey corners life-sciences market in real estate

A Houston drug company with a new influx of $65 million plans to move to New Jersey. Pernix Therapeutic Holdings revamped the company, installed new executives and found investors willing to back company growth as they look at developing specialty drugs. However, the company will need to relocate to New Jersey because of the established pharmaceutical talent already there.

One consideration is a transition from larger campuses to renting space in smaller facilities. Some companies have vacated New Jersey, but people with a strong background in the industry might not have left the state. These individuals sometimes transitioned to smaller, local companies. As for Pernix, they relocated to a 6,400 square-foot building in Morristown. Despite reduced square footage, the new location has space for expansion and will provide better accessibility to New York City. The proximity to New York City with access to its financial marketplace along with certain transportation options has also attracted businesses.

Deciding on the best structure for a business

Before starting a business in New Jersey, it is important to think about the best structure based on plans and goals. Experts indicate that this decision about legal structure is one of the most important parts of the business formation process. The legal structure plays an important role in determining personal liability and taxation. No specific structure is necessarily the best; the unique details pertaining to a startup are important for making the decision to form a sole proprietorship, partnership, corporation or LLC.

Those who have been involved in more than one business startup emphasize the importance of investing in sound advice prior to formalizing a business structure. Sources of information include accountants, lawyers and organizations such as the Service Corps of Retired Executives.

Man convicted of fraud in New Jersey court

A New Jersey federal court recently obtained a guilty plea from a 41-year-old businessman who was accused of fraud. The businessman is a resident of Lithonia, Georgia, but the charges were brought against him in Newark. The business owner pleaded guilty to one count of conspiring to commit wire fraud, which involved defrauding investors of more than $800,000.

The businessman's sentencing hearing will be held on Sept. 30, at which point the man could be subject to a fine and sentenced to up to 20 years in prison. A co-defendant allegedly involved in the wire fraud conspiracy is also facing charges.

Supreme Court releases decision on investor class-action lawsuits

New Jersey business owners may be interested in a recent Supreme Court decision reducing a class-action plaintiff's ability to succeed in a shareholder action. Some, including three of the justices, believe that this decision does not go far enough.

In 1988, the Supreme Court decided a landmark securities litigation case, Basic v. Levinson. The holding in Basic stated that a court considering a claim of securities fraud should presume that any public misstatements are built into the share price and influence purchasing decisions. This allows the investors to claim reliance on the false statements when buying shares. Since 1996, there have been thousands of class-action securities fraud lawsuits, resulting in settlements totaling nearly $80 billion.

Considering an LLC for a New Jersey business

An individual who is new to owning and operating a business may need some insight as the foundation is laid. The structure considered may affect everything from licensing fees to income tax returns, making it important to evaluate a variety of issues before making a decision about the type of business formation. Additionally, it may be important to consider one's personal assets and insurance to determine how much risk is involved in choosing or not choosing an option such as an LLC.

If there are minimal personal risks involved in a venture, a sole proprietorship may be appropriate. However, an LLC offers the opportunity to protect one's personal belongings and finances from liabilities incurred through business activities. It is important to keep in mind that corporate debt may only be granted with personal guarantees involved, meaning that the means of securing funding may be just as important as the form the business takes. In dealing with taxes, the IRS does not currently offer a return option for an LLC, but an LLC may be treated as a sole proprietorship for filing purposes. It may also be treated as a C or S corporation, but the default is partnership status where there is more than one member .

Supreme Court rules on pomegranate juice, Coca-Cola loses

New Jersey readers might be interested in the details of a recent U.S. Supreme Court decision that went against beverage giant Coca-Cola. The Court's opinion, written by Justice Anthony Kennedy, clarified the interaction of federal food labeling laws with the Lanham Act, which governs trademark and false advertising claims. The ruling may lead to more lawsuits in the future.

The plaintiff in the case, juice company Pom Wonderful, sued Minute Maid, which is owned by Coca-Cola, alleging that the labeling of the defendant's pomegranate blueberry drink was deceptive or misleading. Specifically, Pom Wonderful said that their competitor's drink, which is labeled "Pomegranate Blueberry Flavored Blend of 5 Juices," is 99 percent grape juice and apple juice. The drink contains .1 percent raspberry juice, .2 percent blueberry juice, and .3 percent pomegranate juice.

Commercial real estate owners liable for mercury cleanup

The high cost associated with the cleanup of environmentally contaminated property is a burden that some New Jersey property owners would prefer to walk away from rather than accept responsibility. A recent decision in a commercial real estate dispute imposed liability on two former owners of a contaminated piece of property for more than $6 million in cleanup costs and punitive damages. The mercury-contaminated property housed a day-care center that drew national attention when reports of children being exposed to potentially harmful vapors were made public.

A thermometer factory located on the property was the source of the mercury contamination. The owner of the factory was one of the parties held responsible by a state court for half of the more than $2 million cost of cleaning the property. The owner of the factory also was assessed $4.09 million in punitive damages. The second owner who acquired the property for unpaid taxes was ordered to pay half of the cleanup costs. No punitive damages were imposed upon the second owner.

Coal company awarded $5 million in lengthy contract dispute

Many business owners give their all to their companies, so if something goes wrong, it can be devastating, emotionally as well as financially. Many New Jersey employers get caught up in complex business litigation every year and it is costly for all concerned. Even if a positive settlement is reached, the time and money that goes into the legal process can still leave companies at a loss.

In Virginia, a now-defunct coal company is finally seeing results from a legal battle that has been running since 1998. The dispute concerns a coal supply contract the firm held with Massey Energy. The owner of Harman Mining alleges that his company suffered financial damages because Massey dramatically reduced the amount of coal they were prepared to buy. Harman and two other companies involved in the dispute have since been awarded damages totaling $4 million.

Darden to sell casual dining chain

Buying and selling real estate is an important part of many business operations in New Jersey. Growing companies may need room to expand, creating extra branches or acquiring warehouse space. Other companies may seek to sell on unprofitable sections of the business. In order to avoid a real estate dispute when engaging in such transactions, however, there are many issues for a company to consider.

Contracts need to be drafted and agreed upon and the property needs to be reviewed for safety and suitability. All the details of the property have to be taken into careful consideration, so the buyer can be sure of what they are purchasing. This is also important for the seller as missing any details could lead to accusations of misrepresentation.

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