Whether you are starting a small business or running an established company, it is vital to understand business laws and regulations. But that is easier said than done. My goal is to provide business-related legal services so that you can spend more time dealing with the actual business and less time with legal intricacies of operating your business. My services include:

Business formation

You have a new and innovative product or service and you are interested in forming a new business. You may have concerns about liability, taxes, investors and other considerations. As your small business lawyers, we will assist you in deciding whether your startup business should organize as a limited liability company (LLC), partnership, S corporation or C corporation. We will form the most appropriate business organization for your new business and register the business in all jurisdictions in which it will conduct business.

Mergers and acquisitions

If your business is fortunate to thrive and become a merger or acquisition target, we can represent you as the seller; or if you are on the other side and looking to acquire a business, we can assist with the due diligence in purchasing a business. We will review various approaches in purchasing a business through merger or acquisition. We will discuss with you various structures in purchasing the stock or purchasing the assets of an acquisition target. In either case, your business will need thoughtful and comprehensive representation in all aspects of a merger or acquisition.

Government contracting

Government contractors face numerous issues when contracting with the government. And with a hands-on approach and substantial experience, we will help you navigate those legal issues. We prepare teaming agreements, subcontracts and joint venture agreements and can handle a variety of other government contract matters. As government contract lawyers for your small business, we can assist you in applying for programs for HUBZones, service-disabled veteran-owned small businesses or women-owned businesses. If your company is facing debarment or suspension because of allegations of corruption or bribery, we can assist in your defense before the U.S. government or the World Bank.

Business transactions

Once you have an ongoing business, however organized, you will have a host of various commercial transactions. We prepare agreements with lenders, lessors, partners, customers, employees, and consultants. We provide business legal services for your company, preparing confidentiality agreements, nondisclosure agreements, licensing agreements, distribution, employment agreements, independent contractor agreements, lease agreements, and many others. We will help you understand what each part of these agreements require and make sure that these agreements provide protection to you and your business.

Corporate law

Once your startup business has been created, your company will have ongoing requirements to maintain its separate status. We will assist in guiding you on how to prepare corporate minutes or resolutions of the company to maintain the corporate form and other steps to protect the limited liability of your company. You will also have to make sure that your bylaws or operating agreement continues to reflect the needs of the business organization. We are available to assist you in addressing these issues. And once your company is ready to raise additional capital from investors, we can work with you to determine whether you are subject to securities laws or fall within one of the exemptions.

Business disputes

Few businesses are immune to business disputes. If your small business was well-advised, you have an agreement that will provide guideposts on how to resolve your business dispute. If you are unable to settle your dispute, you may have a dispute resolution mechanism such as mediation or arbitration in the agreement. An alternative dispute resolution mechanism such as arbitration or mediation generally can provide a relatively quick resolution of your business dispute. If not, then you may have to consider litigation. We handle business disputes, including pre-litigation matters, mediation, arbitration and litigation.

Anti-corruption compliance

Every company should have procedures and policies to minimize its exposure to allegations of corruption or bribery. An integrity compliance program (ICP) is essential for businesses doing work internationally for the United States government or work financed through one of the development banks. We can assist in reviewing or preparing an ICP to assure that is consistent with the anti-bribery and anti-corruption guidelines from the World Bank. If your company is facing debarment or suspension because of allegations of corruption or bribery, we can assist in your defense before the U.S. government or the World Bank.

Non-profit law

We work with organizations to obtain their tax exempt status under Section 501(c)(3) of the Internal Revenue Code. There have been recent changes to obtaining 501(c)(3) status and we have worked with organizations in submitting successful applications on the simplified track by filing a 1023-EZ and the more rigorous 1023 application for larger organizations. Nonprofits also face similar legal challenges to assure that they comply with business requirements and additional requirements to assure that they do not jeopardize their tax exempt status. As a law firm for nonprofits, we work with nonprofit organizations to guide them through these issues.

FAQ Small Business Attorney in DC

What is considered a small business?

Almost all our clients fall within the definition of small business/startup as determined by the Office of Advocacy of the U.S. Small Business Administration. Under this definition, a small business has fewer than 500 employees. Small businesses encompass about 99.9% of all business organizations in the United States.

Which industries do you serve as a small business attorney?

Most of our clients are service providers such as consulting companies, law firms, accounting and bookkeeping services, cybersecurity consultants, video production companies, and lobbyists, just to name a few. We also represent foreign and domestic manufacturers and software developers.

As a small business lawyer in DC, we represent some retail operations, such as bookstores and restaurants. We also represent numerous nonprofits with varying missions. Our government contractors clients hold various IDIQs (Indefinite Delivery, Indefinite quantity Contracts) and GSA schedules.

In which areas of the law does a small business or startup need legal assistance?

Most times, small businesses/startups need the services of outside general counsel. As outside general counsel for small businesses, we can handle most matters as a small business attorney that small businesses generally encounter. Usually, anything with the word agreement or contract is within our practice areas. This includes operating and shareholder agreements, which are used for small businesses and startups that are formalizing their relationships with their owners. Once a business is formed, then we prepare and review a host of other agreements, such as service agreements (which may be referred to as client agreements or consulting agreements), independent contractor agreements (which may be referred to as subcontracting agreements), employment agreements, teaming agreements, purchase and sale agreements, merger agreements, option agreements, license agreements, lease agreements, and the list goes on.

What factors should a small business and startup look for in retaining the services of a lawyer for small businesses?

With our extensive experience of working as a small business attorney in DC for decades now, background and experience should come right at the top of the list when looking for a small business lawyer. We think that accessibility and communication are essential for a successful relationship between an attorney and a client. Hourly rate is important but not as important as quality of service.

What kind of experience do you have in advising small businesses as an attorney?

Keith Rosten has not only legal experience but also business and practical experience that allows him to relate to the trials and tribulations of a small business owner. Keith has BigLaw experience before working for small and medium-sized businesses, first at his own law firm focused on small businesses and then with Berliner Corcoran & Rowe LLP.

Keith has substantial business experience. He received an MBA from the Tuck School at Dartmouth College. During his business studies, he worked on several group projects with small businesses, including a furniture manufacturer, a manufacturer of leak location precision equipment, real estate developer. After business school, Keith operated a successful real estate business in California and overcame numerous issues, such as asbestos abatement and underground storage tank remediation.

Keith worked as a legal adviser to a government contractor and was a legal adviser to a major initiative in Russia. Keith ran another small business, selling and marketing solar energy equipment. The business had an e-tailer component, hosted the largest solar energy forum online, and sold solar energy equipment to the government. Keith negotiated two GSA schedules for the business and obtained HUBZone certification for the business. Keith was also president of the Dartmouth Entrepreneurial Network – Washington, a networking organization for small businesses in the greater Washington, DC community.

Keith has also volunteered for Compass Pro Bono, working with local business professionals to conduct long-term consulting engagements for local nonprofits in fundraising, governance, and strategy.

With this breadth of legal and business experience, Keith is attuned to some of the challenges facing small businesses, which allows him to provide effective advice and guidance.

As a small business lawyer, do you take in-person meetings only?

Yes. We are located in downtown Washington DC and host many of our clients. For those clients who cannot come into our offices, we usually meet over Zoom or by telephone.

How do you charge for your services as a small business attorney?

We charge our clients based on hourly fees. We usually provide a budget of how much certain matters cost so that startups and small businesses know in advance the ballpark cost of the matter.

What if a client does not like our services?

Clients can terminate our services anytime if they don’t find it satisfactory.

Should my small business lawyer or startup lawyer be in the same state as me?

No, not always necessary and may depend on multiple factors. For example, though we are an expert small business lawyer in DC, we have also provided consultation to other cities’ clients.

LLC Managers Owe Fiduciary Duties

You may have heard about fiduciary duties, something about loyalty and care, but truth be known, you have no idea what that all means. This blog is to demystify some of the legalese.

Let’s set the scene. Your startup company is up and running. You have consulted with your startup lawyer about forming the company as a limited liability company. You have friends and family who have cheerfully invested in your budding enterprise. Can’t miss, you have told them.

Artur Szczybylo © 123RF.com

Let’s say that you are the sole manager. Now you ask, what duties do you owe to your friends and family. They are after all part owners and have invested their hard-earned money into your company.

You talk with your startup lawyer and he or she explains that you owe the owners a fiduciary duty—fiduciary what, you ask? If you violate these fiduciary duties, you may be personally liable. Well, that should get your attention. This article discusses what a fiduciary duty is and who it is applied to.

Fiduciary duties on managers

Fiduciary duties come in to play when you are thinking about the limits imposed on the managers of a company.

In general, fiduciary duty serves as a safeguard from mismanagement because every person who manages the operations of the entity owns fiduciary duty to the entity’s owners. Fiduciary duties exist regardless of the entity form and is regulated by state business law and contract law.

In the context of a corporation, officers and directors of the corporation owe a fiduciary duty to the corporation and to its shareholders. When it comes to partnerships, general partners owe a fiduciary duty to each other, but in the partnership context the extent of duties and who is subject to them depends mostly on the partnership agreement.

Fiduciary duties in member managed LLCs will be different compared to manager managed LLC, because only those who manage the affairs of the company are subject to fiduciary duties. To try to prevent some confusion, when we refer to a manager in this article, we are referring to the manager of the LLC regardless of whether the manager is a manager in a manager-managed LLC or a member in a member-managed LLC.

Fiduciary duties on company managers

There are a lot of things to consider when choosing the form for your future business venture, for example: business purpose, taxes, accounting, extent to which the owner is willing to subject him or herself to personal liability and other considerations.

Related article: Negotiating LLC Operating Agreements

We are going to concentrate on the fiduciary duties imposed on managers in limited liability companies.

In manager managed LLC, members appoint a manager or managers to take care of the day to day operations of the LLC. The LLC manager can be both an outsider (not a member or owner) or a member.

Managers have a duty to the members and other managers to act in good faith and promote the interests of the LLC. Fiduciary duties include the duty of loyalty and the duty of care.

In member managed LLC, members take part in the day to day operations of the LLC, so they will owe a duty to each other and to the LLC to act in good faith and promote the interest of the LLC. In the following discussion, we refer to managers, which may mean the manager in a manager managed LLC, or means the members in a member managed LLC.

Note that LLC laws that regulate fiduciary duties are state specific, which means that some states have stricter requirement for fiduciary duties and some states allow the parties to narrow those fiduciary duties to which the manager is subjected. Indeed, you may find that a startup lawyer may recommend Delaware as the state of organization for a LLC because Delaware allows greater flexibility to the parties to negotiate the extent to which the manager or member of a LLC is subject to the fiduciary duties.

Duty of care: manage the affairs and activities of the company with care

There are two major fiduciary duties. The first is the duty of care, which is an obligation to act in the best interest of an entity and with the same level of care that a prudent person in a similar situation and under similar circumstances would exercise. A manager will not be liable if the manager acted in good faith and with a certain level of care, even if his or her decision eventually adversely impacted the LLC.

Examples of breaches of duty of care:

– While going through the dissolution the LLC has to limit expenses, instead the manager, on his own accord, decides to significantly increase his own compensation which in turn increased companies general and administrative expenses;

– Manager gets an offer from a big company to acquire the LLC, without assessing the terms of the sale and bringing the offer to the attention of the members he dismisses it on behalf of the LLC.

Duty of loyalty: be loyal to the company

The duty of loyalty is a more extensive obligation, or set of obligations, imposed on the manager. Most of the litigation revolves around the duty of loyalty. The manager owes a duty of loyalty to the LLC and to the members. Depending on the jurisdiction, the members may reduce or even eliminate the duty of loyalty. In Delaware, for example, the members can completely eliminate the duty of loyalty. But if the duty is not narrowed, it can be a major constraint on the manager.

Under the duty of loyalty, the manager has a duty not to compete with the LLC. If you think that the purpose clause in the LLC agreement is not important, think again. If the purpose of the LLC is to do anything that is allowed under the law and the manager has other business interests, he or she can easily violate the duty of loyalty. If the manager simply steers a business opportunity to one of the manager’s other companies, that in of itself could be a violation of this fiduciary duty.

Similarly, if there is a business opportunity that the manager discovers, the manager cannot take it for his or her own purposes. The manager has the duty to maintain the information of the LLC as confidential. The duty of loyalty may also include an affirmative obligation to disclose important information to the members.

Examples of breaches of duty of loyalty:

– While being a manager of company A the manager is also involved in the operations of company B, which is in the same area of business as company A. Manager decides to redirect some orders received by company A to company B, stripping company A of potential profit;

– While being a manager of company A the manager is also involved in the operations of company B, which is in the same area of business as company A. Company A has some licenses and tools that company B does not. The manager uses his or her position to allow company B to access tools and licenses of company A without demanding any compensation for the use from company B.

Remedies for breach of fiduciary duties

One remedy for breach of the manager’s duties to the owners is dissolution of the company. That’s right, a court can enter an order dissolving a company. For example, under District of Columbia law on limited liability companies,

On application by a member, the entry by Superior Court of an order dissolving the company on the grounds that the managers or those members in control of the company: (A) Have acted, are acting, or will act in a manner that is illegal or fraudulent; or (B) Have acted or are acting in a manner that is oppressive and was, is, or will be directly harmful to the applicant.

If a manager is found to violate a fiduciary duty, he or she can be personally liable for damages. The manager may also be removed from the management of the LLC through expulsion or by a judicial order. The person petitioning to the court for an expulsion also has to show actual harm from such violation in order to prevail.

Related article: Business Divorce and Small Businesses

Keep in mind that because LLC laws are state specific, the outcome of the judiciary decision as to the remedy can vary state by state. In general, courts prefer to dissolve the LLC. The reason why dissolution is preferred is that courts interpreted expulsion to be a discretionary remedy and under the principles of equity it is unfair to remove the member/manager from management but still have him be a “member” of the LLC in other ways (liability, contribution remains tied in to the LLC until its dissolution etc.) so they do not exercise this discretion very often.

There are not many situations in which expulsion of the member/manager (removal) was granted, even though LLC statutes have provisions listing the causes for which judicial expulsion is warranted.

Operating agreements may help in defining the managers’ duties

The operating agreement is an agreement among the members of a limited liability company. Some states allow the members to contract away or limit fiduciary duties in the operating agreement.

The members may also want to expand the fiduciary duties. In general, members do not have fiduciary duties to one another in a manager-managed LLC. But let’s say that in a closely-held business, the members want to impose the duty of loyalty on all the members. They can do so in the operating agreement.

Even if you don’t want to limit or expand the fiduciary duties, addressing the fiduciary duties is a good idea as it allows the members and managers to know what is expected of the managers. In other words, it can be an educational tool. And if there is a breach, the court or arbitrator will first look to the operating agreement to understand the breadth of the fiduciary duties and the remedies for their breach.

To make sure that your interests are protected, you should consult with a small business attorney before organizing an LLC or amending an existing operating agreement.