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Archive for December, 2014

Legal News Update: Lawyer’s “million-dollar challenge” was not an enforceable contract.

December 30, 2014 1 comment

So a lawyer headlined in the ABAJournal yesterday because he evidently announced on national television that he would pay $1 Million to anyone who could disprove his client’s alibi.

As the ABA Journal Reports it “In the interview, recorded before trial and broadcast after his client’s 2006 conviction, [the lawyer[ said the prosecution’s theory was impossible. “I challenge anybody to show me—I’ll pay them a million dollars if they can do it,” he said in the edited interview. “Twenty-eight minutes, can’t happen. Didn’t happen.”

A law student took up the Lawyer’s “million dollar challenge”

Once the lawyer decided not to “pay up”, the law student sued the attorney for the million dollars.

The 11th Circuit Court of Appeals held in favor of the lawyer – that the “million dollar challenge” did not give rise to an enforceable unilateral contract.

Unilateral v Bilateral Contract?

According to Black’s Law Dictionary, Eighth Edition, pg 349, a unilateral contract is “[a] contract in which only one party makes a promise or undertakes a performance.”

As further clarified: “[M]any unilateral contracts are in reality gratuitous promises enforced for good reason with no element of bargain.” Id. citing P.S. Atiyah, An Introduction to the Law of Contract 126 (3d ed. 1981).

in a unilateral contract, something needs to happen in order for the contract to be binding. In the context of real estate, think about the difference between a “purchase agreement” and an “option to purchase” (If I lost you on that one, just e-mail me)

So, using the $1 Million challenge as an example, the law student argued that there was an offer made to him (and anyone watching the T.V. broadcast, apparently) and he accepted that offer by travelling from Florida to Georgia…

The Court did not buy that argument.

in contrast:

a bilateral contract  embodies “mutual and interdependent conditions and obligations.” Brauer v. Hobbs, 151 Mich. App. 769, 776, 391 N.W.2d 482, 485 (1986).

For example, most written contract between two parties. the conditions and obligations go both ways, and there are remedies in the event that one party does not do what they promise to do.

Lesson:

I don’t think there is one here. Unless you are considering to take the $1 Million Challenge, I think the lesson is, don’t do it, or the 11th Circuit Court of Appeals will hold against you once your case gets dismissed at the trial level.

http://www.dwlawpc.com

email: Jeshua@dwlawpc.com

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Business Law Update: It Will Be a Merry Christmas For Some Startup Non-Profits.

December 24, 2014 3 comments

Christmas has come early for some small non-profits seeking federal tax exemption under the 1023-EZ Application Process.

Back in September I posted on the Federal Government’s new process for a potentially quicker and more cost-effective way for small startup non-profits to gain 501(c)(3) Exemption. You can see that article here

As a recap, The IRS  came out this year with its IRS 1023-EZ form which would allow certain startup non-profits to apply for tax exemption online.

This is a much quicker process than filling out the lengthy traditional 1023 application, and submitting all of the required supporting documents.

You can review the instructions to the 1023 EZ form by going to the follow link.

In fact, before you complete the application you are required to review the instructions and go through the checklist.

The Application requires you to attest that you have gone through the checklist (although you don’t need to submit the checklist with your application).

Completing the checklist ensures that your non-profit is not automatically ruled out before you begin the application.

A few requirements before you can submit your application are:

1. Application is only good for 501(c)3 Exemption – if your business is claiming non-profit exemption under any other subsection, it has to go through the traditional 1023 application.

2. Your entity cannot be an LLC.

3. Your entity cannot be a successor to a for-profit entity.

3. Your entity does not expect to raise revenue of more than $50,000 each year for the first 3 years.

Assuming you pass this checklist, you need to have set up (but do not submit to the IRS) all of the traditional legal documents that are required under Michigan law (articles of incorporation, bylaws, board of director information, etc..)

After these steps have been completed, the application itself can be completed rather quickly.

The Big Question:

The big question among lawyers and non-profits has been – will this process turn out to be quicker than the traditional application?

Will non-profits receive their determination letters from the IRS any sooner as a result of filing the 1023-EZ?

I’m here to report to you, based upon my experience: “yes”

I had some skepticism, but can report that within a few weeks of completing the application process, a client of mine recently received its determination letter of recognition for tax exempt status from the IRS. Congratulations Grace’s Table! What a worthy cause. Grace’s Table is a ministry to teen mothers in Grand Rapids. It’s mission statement, in part:

is a resting place, an anchor, and a firm foundation for teen mothers and their kiddos. It represents safety and stability in the midst of uncertainty. Each week, the families are welcome to come share a meal with us Around the Table. Both simplicity and complexity exist in our time together during which we welcome Jesus to be a part…

What a fantastic Christmas gift for Grace’s Table and other startup non-profits who have applied through the 1023-EZ Application process.

They will be able to tell their donors that their year end gifts will be tax deductible.

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

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Detroit’s Blight Removal: Opportunity For Social Entrepreneurs to Utilize Crowdfunding?

December 15, 2014 Leave a comment

Today’s Detroit Free Press had an article about Detroit’s blight removal campaign – see it here

The article reports that through various avenues, including the Detroit Land Bank Authority:

Detroit now demolishes 200 eyesores a week,

The article goes on to report all of the challenges ahead for Detroit, including a vast amount of blighted properties still needing to be demolished, scarce trained workers, etc..

The article ends with a question: “But perhaps the biggest question confronting Detroit’s blight campaign is what to do with all the cleared land”

I answer that question with a question of my own (lawyers do that): could this be a viable avenue for local crowdfunding?

Are there groups of individuals, let’s call them “social entrepreneurs”, in Michigan who would come together to revitalize a community, one neighborhood at a time?

Maybe these entrepreneurs are investors who would be willing to work and live in the community they revitalize.

These investors wouldn’t need tens of thousands of dollars of their own funds to make a difference.

Michigan’s intrastate crowdfunding exemption (Michigan Invests Locally Exemption) limits these crowdfunding projects to a maximum of $2,000,000 per 12 months and investors are limited to $10,000 each (unless an accredited investor) – so the deal size is relatively limited.

I like Attorney Anthoni Zeloi’s proposed bill for Illinois, capping projects to $20,000,000, you can read his proposed bill, and rationale at his blog here

Could you imagine living in a neighborhood where you invested real money into, and could say:

I helped build this neighborhood

or

I helped revitalize Detroit“.

Calling all Michigan Social Entrepreneurs to weigh in.

What do you think?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Michigan Business Law Update: Bill Presented to Gov. Aimed to Help Remove Employment Barriers

December 10, 2014 2 comments

I previously reported on House Bill 5216 which would give incentives to Michigan businesses for hiring convicted felons back into the work force. Yesterday, the final Bill was passed by the legislature and was sent to the Governor for signing. See article from the Mining Journal

Also, if interested in some details of the enrolled bill, see the most recent Bill Analysis from November 21, 2014 here

Grand Rapids Business and Non-Profits Support Removing Barriers to Employment

As I’ve previously stated,

There are a number of great companies who reach out to support putting Michiganders with certain barriers to work.  Goodwill Industries of Greater Grand Rapids lead by CEO Kathy Crosby does a fantastic job of equipping this demographic and putting them into long term employment. Mel Trotter Ministries has placed over 100 individuals in their shelter into full time employment in 2014.

Some West Michigan companies who do a great job of reaching out to hire/place those with employment barriers are Proos Manufacturing and Fabricating lead by CEO Amy Proos and Cascade Engineering lead by (former) CEO Fred Keller. Others include Lacks EnterprisesKentwood Office Furniture and Express Employment Professionals of Grand Rapids lead by Janis Petrini  to name a few.

HB 5216

This new law would seemingly reward such companies for their good work, by limiting their liability for such actions as “negligent supervision of employees” or other claims for person or property damage claims.

You can check out the text of the final enrolled bill here

Hopefully, this new law would also give incentive to other great companies through out Michigan to hire employees who are otherwise qualified but their only barrier is a felony conviction.

questions? comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Michigan Crowdfunding Law Update: Viable Tool for Social Entrepreneurs?

December 8, 2014 5 comments

I had a client come in yesterday  – a local restaurant owner. A startup business.

– quick comment – 

Gotta love local start up businesses. I love their value in being an active part of a local community – their entrepreneurial spirit –  willingness to take risks.

– Ok – back to where I was going…

One of the client’s concerns was (like every startup business) cash flow.

Question: If you are a startup local business where do you get funding?

It can be a challenge going to a commercial lender without having any track record of success and asking them to loan you money to start up a business. (Especially if you are restaurant).

Crowdfunding could be the answer.

The Michigan Invests Locally Exemption (MILE Act) MCL 451.2202a 

For local small business startups, the MILE Act could be the answer.

It allows any Michigan resident to invest up to $10,000 in a locally owned business seeking to fund a project up to $1 million ($2 million with audited financials). If the investor is an “accredited investor” that investor is not limited by the $10,000 cap.  I wrote an article about the MILE Act back in March for Grand Rapids Area Professionals For Excellence, you can view that article here.

Also, for more information, you can check out the State of Michigan’s Frequently Asked Questions Page

What I love about Crowdfunding.

What I love about crowdfunding can be illustrated in Charles Best‘s company DonorsChoose. Charles spoke today at the Grand Rapids Economic Club – great event! It isn’t every day a speaker gets a standing ovation. To date, Donors Choose has raised over $291,000,000 directly for specific needs in classrooms all over the U.S.. What an impact!

After the event, Charles Best gave every attendee a 50 dollar donation to give towards a school need.  I donated to Mrs. Sanchez’ 2nd grade class  at Stocking Elementary in Grand Rapids. Feel free to donate as well!

The whole concept of Donors Choose is for schools who have legitimate needs to connect with donors who care. Donors Choose “gets around the gatekeepers” (e.g. – government, foundations, knowing the right people, etc…)

This is what I love about crowdfunding.

Crowdfunding gets around the “gatekeepers” to connect worthwhile projects to “investors” who care about a project. Investors who care about a community.  This is particularly true of Intrstate Crowdfunding Exemptions – a pre-requisite is that both the investor and the business need to be Michigan based. What potential to impact a local community!

To learn about some local West Michigan businesses utilizing crowdfunding, check out these: Pilot Malt House,  Loquidity, LLC.

The Current State of Crowdfunding in Michigan.

There have been changes in the crowdfunding landscape since I posted back in March. Other states have enacted Crowdfunding Laws. Most of them have closely mirrored earlier states’ legislation.

Since January, there have been few local businesses to utilize the MILE Act in Michigan. Currently, Michigan has only a handful of registered portals, and only 1 project that was successfully funded using the MILE Act.

Why the lack of funded projects?

A few reasons come to mind:

  • The MILE Act is still new, and relatively unknown as a viable funding source.
  • Although not as cumbersome as securities registration, there are still several forms to file and hoops to jump through, and ongoing compliance with LARA.
  • Most importantly – there is a general lack of guidance on how the MILE Act is implemented.

The MILE Act provides that the Administrator (LARA) may enact rules to implement the Act, but currently no rules have been implemented. As relayed to me, rules have been proposed, but still need to go through the administrative rulemaking process of public hearing and comment, and then ultimately legislative review. These rules will help both investors and startups navigate this new landscape of Intrastate Crowdfunding. Some states have proposed rules, which provide some guidance to other states, like Michigan.

Conclusion: 

The MILE Act is a viable option to connect investors who care about their community with local startup businesses who seek to revitalize and play an active role in their community. Particularly investors who traditionally did not have access to invest (as non-accredited investors), and to business startups hindered from access to start up funds by “gatekeepers”

State legislatures and regulatory bodies are currently working to provide more guidance on implementing the crowdfunding exemption.

My take: there is plenty of room for good start up businesses (with a sound business plan) who want to make their local community a better place. The MILE Act could be a useful tool.

Questions? Comments?

Email: Jeshua@dwlawpc.com

http://www.dwlawpc.com