Kaplan & Cruz, PLLCKaplan & Cruz, PLLC2024-03-19T08:04:13Zhttps://www.kaplancruz.com/feed/atom/WordPress/wp-content/uploads/sites/1101569/2022/01/cropped-site-identity-01-32x32.pngOn Behalf of Kaplan & Cruz, PLLChttps://www.kaplancruz.com/?p=540802024-03-14T08:04:44Z2024-03-19T08:04:13ZHow to identify potential fraud by creditor scrutiny
Creditor scrutiny can help to identify potential fraudulent transfers by thoroughly examining transaction details, including but not limited to:
Assessment of involved parties: Background checks on individuals or entities involved in the transaction can reveal any past instances of fraudulent behavior or suspicious activities. This includes examining their financial history, business practices and any affiliations with known fraudulent entities or individuals.
Review of transaction documentation: Creditor scrutiny involves carefully examining all documentation related to the transaction, such as contracts, invoices, purchase orders and financial statements. Discrepancies or inconsistencies in these documents such as mismatched figures, forged signatures or unusual payment terms can indicate potential fraud.
Analysis of transaction patterns: By analyzing transaction patterns and behaviors, creditors can identify any deviations or anomalies that may signal fraudulent activity. This includes looking for unusual transaction amounts, frequencies or timing as well as any sudden changes in spending habits or payment methods.
Conducting interviews: The creditor scrutiny process may involve conducting interviews with parties involved in the transaction such as vendors, customers or third-party intermediaries. These interviews allow creditors to gather additional information and clarify any discrepancies or suspicions uncovered during the review process. By asking targeted questions and assessing the consistency of responses, creditors can further validate the legitimacy of a transaction or uncover potentially fraudulent activity.
By engaging in this kind of scrutiny, red flags indicating potential fraud can be identified early, allowing businesses and individuals to take necessary precautions to protect their assets and interests.]]>On Behalf of Kaplan & Cruz, PLLChttps://www.kaplancruz.com/?p=540782024-03-11T08:39:08Z2024-03-14T08:38:33Zbusiness interruption insurance to cover fixed costs in case a company must suddenly cease operating for reasons outside of its control.
Businesses carry that coverage to mitigate operational risks and help to ensure the company's ongoing solvency even after something unexpected happens. With that said, even insured parties aren’t guaranteed a favorable outcome if something goes wrong. What if an insurance provider doesn't uphold a policy protecting a company?
The policy may provide some answers
Sometimes, those tasked with securing insurance coverage for a business focus more on cost than policy terms. They may have unknowingly agreed to a policy that has limitations on coverage that could complicate claims. It is, therefore, typically necessary to review the actual policy paperwork to establish if the coverage applies and how much compensation the business could be able to secure. That information is crucial if a policyholder needs to take legal action.
A lawsuit could be necessary
Unfortunately, simply reviewing a policy to validate someone's belief that there should be coverage isn't automatically enough to get an insurance company to pay a claim. Even if someone is confident that the policy applies to their situation, their insurance company may continue to stonewall them and deny coverage.
If a business needs coverage and wants to hold an insurance company accountable for what is essentially a breach of contract, it may be necessary to pursue bad faith insurance litigation. Should the courts agree that the insurance provider acted in bad faith, the policyholder could be eligible not just for the approval of their claim but possibly also for damages awarded by the courts.
Insurance bad faith might include intentionally deceiving the policyholder or openly refusing to uphold the terms of a policy. Even inappropriately extended claims processing could constitute bad faith insurance practices, as it may be a way of trying to wait out the business until it fails.
Those who recognize that insurance companies may be liable when they won't uphold the policies that they underwrite may be able to take appropriate action when facing claims denials that could endanger the financial future of an organization. For many, taking timely action when facing bad faith insurance issues can make a major difference for organizations that are facing certain kinds of unexpected and unfair challenges.]]>On Behalf of Kaplan & Cruz, PLLChttps://www.kaplancruz.com/?p=540752024-02-23T05:05:07Z2024-02-29T05:04:53ZIn many cases, a contract breach means that goods or services were never provided. For instance, a general contractor may have hired a roofing company to put a roof on a new build, but the company never shows up and doesn’t complete the project. They have violated their contract, especially if they already took money for services that were never performed.
But there can be other breaches, such as when the other party simply misses a deadline. This may not seem as serious as a complete failure to adhere to the contract, but it can still be a significant breach. Even if the other party says that they will fulfill their contractual obligations at a later date, that could be too late.
Parts and materials
For example, many companies that manufacture consumer products will buy the parts and materials from other suppliers. They simply do the assembly.But if one of those suppliers misses a deadline, then the assembly line grinds to a halt. No one else can proceed because they don’t have the necessary materials on hand.This can cost the company a significant amount of money in lost production. They could also lose sales because they aren’t creating products and fulfilling orders or getting them on shelves. As you can see, just because the contract is eventually fulfilled doesn’t mean that the missed deadline had no impact on the other company.
What options do you have?
If you and your business are in this situation, you could be looking at a significant financial loss. Make sure that you know exactly what legal options you have and what steps to take next.
]]>On Behalf of Kaplan & Cruz, PLLChttps://www.kaplancruz.com/?p=540722024-02-08T05:53:06Z2024-02-14T05:52:56ZNoncompete agreements are legally binding documents that employers sometimes use with their employees. If an employee signs such a document, they’re saying that they won’t leave their position to take the same job with the competition. In some cases, they’re also agreeing not to start a business that could be viewed as competition to their prior employer. These agreements usually have a certain scope, such as lasting for 12 months.
However, the Federal Trade Commission (FTC) is considering a ban on noncompete agreements. This would make it so that employers are no longer able to use them and would likely mean that they wouldn’t be enforced in court moving forward. So, even if an employer didn’t know that the law had changed and had an employee sign such a document, if they tried to exercise it when the employee got a new job, the employer would find out that it was no longer legally binding.
Why is this being done?
The main issue with noncompete agreements that critics cite is that people may feel that they are trapped in their jobs. If they only have a specific set of skills that they’ve learned on the job, but they’re not allowed to work for the competition, then they can’t seek higher wages. The business doesn’t have to try to retain their loyalty by giving the employee a raise or a promotion. The employee knows they cannot leave even if they’re unhappy. In other words, if noncompete agreements are eliminated, employees will be able to move around more freely in the workforce. This could theoretically lead to an increase in employee wages overall – or, at least, that is what proponents of the ban claim.It’s very important to keep an eye on how the laws may be changing, and this is one example. Business owners need to know about all their legal options.]]>On Behalf of Kaplan & Cruz, PLLChttps://www.kaplancruz.com/?p=540672024-01-29T08:26:43Z2024-02-01T08:26:26ZNo business owner wants to take time and money away from their company to go to court. When a competitor or other business acts in a way that violates the law and is harmful to your business, however, you can’t let it stand.
Fortunately, there are typically steps you can take to let another business or individual know that what they’re doing is wrong, you’ve noticed it and you’re notifying them that if they don’t stop (generally by a specific date), you will be forced to take legal action. That’s essentially the purpose of a cease and desist letter.Whether you’re telling a competitor to stop saying untrue things about you in their advertising or a neighboring business to stop encroaching on your property, a cease and desist letter can be a powerful first (and, if successful, last) step in resolving the problem.
Cease and desist letters vs. orders
A cease and desist letter isn’t a legal document. It’s simply a notification to another party that they’re doing something wrong. By sending it (and confirming the other party’s receipt of it), you’re ensuring that they’re aware of that wrongdoing and giving them a chance to “cease and desist.”If there’s no response or the other party doesn’t comply, the next step is usually a cease and desist order. This order is a legal document. You need to inform either a court or a government agency of the situation and ask them to send it.If you’re dealing with a situation that you believe warrants a cease and desist letter, it’s wise to get legal guidance. While such a letter may seem straightforward, you want it to have maximum impact. You also want to be sure that it’s clear and concise. A letter coming from a legal professional will naturally carry more weight than one you send yourself. A well-crafted cease and desist letter can also help you resolve the issue without spending further time or money on it.
]]>On Behalf of Kaplan & Cruz, PLLChttps://www.kaplancruz.com/?p=540552024-01-12T05:50:34Z2024-01-18T05:50:20ZIf you’re passing your business on, it’s important to carefully consider how you want to do so. Business succession planning is, in some ways, very similar to estate planning. As you seek the best results for your family and your business, it’s wise to have a plan in place.
But you may never have been through this process before. To help, here are some tips to keep in mind.
Consider the next generation’s strengths
If you are passing the business to your children, it’s important to consider exactly what roles they should have. Everyone has different strengths and weaknesses. Remember that the roles within the business don’t have to be equal. You can pick specific jobs for children that you think will excel in those positions.
Get started early
One of the best things you can do is to begin the process of the transition months or even years in advance. This way, the future business owner can learn on the job, and they will be far more prepared when they actually take over. They can also ask you questions and get feedback long before you exit the company.
Be sure they are interested
Never assume that your children are going to be interested in taking over the business. In some cases, parents will begin the planning process, only to find that the child has no desire to own the business and doesn’t want to run it. It’s best to know about this in advance so that you can consider other succession options, like selling to a third party and then leaving the proceeds to your beneficiaries. Succession planning is a critical part of your business’s future. Make sure you know exactly what steps to take.]]>On Behalf of Kaplan & Cruz, PLLChttps://www.kaplancruz.com/?p=540522024-01-10T08:36:04Z2024-01-15T08:35:33ZCompanies don't always fully control their own operations
Whether a company succeeds or fails depends as much on the market as it does on the company's leadership. The collapse of an established supply chain, acts of war, terrorist activity and natural disasters are all circumstances that companies cannot control or prevent.
They are also all circumstances that could cause extreme consequences for a previously successful organization. If a company fails due to poor business practices, only careful negotiations with the landlord can eliminate future rental obligations. However, when factors outside of the company's control cause a disruption in operations, certain lease inclusions could help eliminate future financial obligations.
A force majeure clause is a useful inclusion in a long-term commercial lease. Some people refer to it as an “act of God” clause. The original French phrase technically translates to mean the greater force. Circumstances outside of the control of a company's leadership could trigger a force majeure clause in a lease. When extreme and unpredictable events prevent a company from meeting its obligations or operating profitably, it may be able to cancel the lease or use the clause as leverage to renegotiate terms with the landlord.
The clause could potentially offer similar protections to the landlord if unforeseeable and uncontrollable circumstances prevent them from continuing to offer the space or providing key amenities to tenants. Given that force majeure clauses can easily benefit both parties, landlords may sometimes agree to add them to a commercial lease.
With the right contractual protections and advocacy, organizations can sometimes reduce or eliminate specific financial obligations that could otherwise push the business toward insolvency. Integrating thoughtful terms into commercial leases and other business contracts might prove crucial for the protection of organizations and the executives that operate them.]]>On Behalf of Kaplan & Cruz, PLLChttps://www.kaplancruz.com/?p=540372023-12-29T08:00:54Z2024-01-03T08:00:12ZThird-party beneficiaries are individuals or entities that stand to benefit from a contract between two other parties. While not directly involved in the contractual relationship, they hold rights conferred upon them by the agreement.
The role of contracts in establishing beneficiary rights
Contracts, often considered the lifeblood of business dealings, play a pivotal role in defining the scope and rights of third-party beneficiaries. A well-drafted contract explicitly outlines the intended beneficiaries and the extent of their rights. This clarity is essential to avoid ambiguity and potential disputes down the line.
Legal recognition of third-party beneficiaries
Texas follows the doctrine of “intended beneficiaries,” which means that if a contract explicitly states that a third party is intended to benefit from it, that party may have the legal standing to enforce the contract.
In The Lone Star State, there are two types of intended beneficiaries: creditor beneficiaries and donee beneficiaries. A creditor beneficiary is someone to whom the promisee owes a legal duty or obligation, and the contract is entered into for the purpose of satisfying that duty. A donee beneficiary is someone intended to receive a benefit gratuitously without any obligation owed by the promisee.
Strategies for effective risk mitigation
Businesses should adopt a proactive approach to mitigate the risks associated with third-party beneficiaries. This involves meticulous drafting of contracts, ensuring explicit identification of beneficiaries and specifying the nature and scope of their rights.
That said, it’s crucial to remember that while third-party beneficiaries pose legal considerations, they can also be strategically leveraged for business growth. By carefully selecting and delineating beneficiaries, businesses can create alliances and partnerships that can contribute to their success. This strategic approach requires foresight and a comprehensive understanding of the industry landscape.
As a business owner, overlooking the implications of third-party beneficiaries can be a costly oversight. Businesses can proactively address this concern, not only to mitigate risks but to harness opportunities for growth.]]>On Behalf of Kaplan & Cruz, PLLChttps://www.kaplancruz.com/?p=540342023-12-14T07:45:48Z2023-12-19T07:45:06ZWhat due diligence might uncover
The purpose of due diligence is to discover information about a company or a proposed transaction that might not be readily available upon a cursory review. For example, someone seeking to sell a business might not disclose that there have been protracted conflicts between workers and management that could lead to a strike or a lawsuit. Companies may overvalue their facilities and equipment. They may fail to report information about product defects or complaints by clients.
Issues that could lead to litigation, including defective product claims or employee harassment allegations, could impact the business planning the merger or acquisition. It is crucial to know what liabilities a company has and what legal issues it could potentially face in the immediate future.
The due diligence process is crucial when planning for any large business transaction, especially a purchase with so many different variables. Properly preparing for a sizable business transaction can help reduce the risk inherent in a merger or acquisition.]]>On Behalf of Kaplan & Cruz, PLLChttps://www.kaplancruz.com/?p=540302023-12-01T05:51:03Z2023-12-07T05:49:41ZStarting a new business is an exciting journey, albeit an involved one. One of the first critical decisions you'll face involves choosing the right entity type for your new enterprise. Your choice will result in significant implications for taxation, personal liability risk and the overall management of your business.
There are four primary options when it comes to structuring a new business, although some states offer additional specialized and hybrid formation options. When choosing between them, you’ll want to consider your goals for the business, how likely your business is to succeed and a host of other practical matters before committing to one option over the others.
Sole proprietorship
This is the simplest business structure. This kind of business is owned and run by one individual. It requires minimal paperwork and offers complete control. However, as there is no legal distinction between the owner and the business, personal assets are at risk in case of business liabilities or debts.
Partnership
If you’re starting a business with one or more partners, a partnership might be suitable. It allows for shared management and pooling of resources. Partnerships come in various forms, including general partnerships and limited partnerships, each with different implications for control and liability.
Corporation
A corporation is a more complex structure, as it is treated as an independent legal entity. It offers the advantage of limited liability, meaning personal assets are protected from business debts. However, corporations face more regulations and tax requirements. Additionally, there is a rigid managerial structure that must be maintained for most of these entities.
Limited liability company (LLC)
An LLC combines the benefits of both corporation and partnership structures. It offers protection from personal liability like a corporation but with the tax benefits and flexibility of a partnership. It’s a popular choice for many small business owners due to its flexibility.Ultimately, choosing the right entity type for your business is a matter that should only be cemented after you have considered multiple factors including liability, taxation, administrative burden and your future business goals. Carefully weigh each option and consider seeking legal guidance to ensure that your decision aligns with your business plan and long-term objectives.]]>