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In 2024, the Federal Trade Commission (FTC) adopted clear rules that affect online reviews and endorsements. Under the rules and guidance on endorsements and testimonials, businesses could face potential liability for online reviews, endorsements, and other practices that are deceptive or misleading. But a business can stay compliant and maintain its reputation by understanding the basic principles set forth in the rules and taking practical preventive measures. This post briefly summarizes the key rules on endorsements and testimonials and offer practical compliance tips. TABLE OF CONTENTS The Consumer and the Manufacturer: A Practical Example of the FTC Regulations An Introduction to the Regulations on Endorsements and Testimonials Endorsements Testimonials or Consumer Endorsement Such as Online Reviews Disclosure of Relevant Connections Tips for Compliance Conclusion THE CONSUMER AND THE MANUFACTURER: A Practical Example of the FTC Regulations Did the influencer endorse the dog food, or was it an online review? To start, let’s look at a scenario involving online reviews and endorsements. This scenario is an abbreviated and paraphrased version of an example in the regulations on endorsement and testimonials. See  16 C.F.R. § 255.0(g)(7). The following is, however, only an example. Whether a specific endorsement or testimonial is deceptive will be evaluated on a case-by-case basis: Basic Scenario . A consumer regularly purchases a particular brand of dog food. One day, the consumer decides to purchase a more-expensive dog food from the same manufacturer. The consumer posts on their social media account that the more-expensive dog food has made their dog’s fur noticeably softer and shinier, and that the dog food was worth the additional expense. Was the Consumer’s Post an Endorsement ? No, because the consumer does not have any connection to the manufacturer other than being an ordinary consumer. The answer would still be “no” if the consumer’s post was a consumer review on an independent review website. What If the Review Was Posted on the Manufacturer’s Website ? In this situation, the post will be interpreted as an endorsement if the manufacturer chooses to highlight the post in some way. What If the Consumer Received the Dog Food as a Free Trial Bag ? The consumer’s post will not be interpreted as an endorsement if the manufacturer did not do anything to request that the consumer write and post a review. If the manufacturer requested the review, the post will be seen as an endorsement because the free bag of dog food was an inducement to write the review, which affects how potential consumers view the credibility of the review. What if the Consumer Voluntarily Participates in a Program to Receive Free Products from Various Manufacturers and Write Reviews ? Again, this will be seen as an endorsement because the sample of the manufacturer’s dog food was free, and the no-cost sample served as an inducement to write the review. What If the Manufacturer Provides Coupons for a Year’s Worth of Free Dog Food to an Influencer ? Suppose that the consumer’s dog is a “dog influencer” with a social media account and a large following, and the manufacturer asks the consumer to feature the brand in the dog’s social media feed. In this situation, any review would be considered an endorsement even though the consumer could have decided not to feature the dog food. Also, any review would need to disclose how the consumer is connected to the manufacturer and the supply of dog food. AN INTRODUCTION TO THE REGULATIONS ON ENDORSEMENTS AND TESTIMONIALS The FTC gets it regulatory authority from the Federal Trade Commission Act of 1914. Under the FTC Act, advertising must be truthful, not misleading, and “substantiated.” A claim about a product in an advertisement is substantiated if it is backed up or supported by some reliable evidence. In short, the FTC Act and regulations adopted by the FTC are intended to promote truth in advertising and protect the public from deceptive advertising and marketing practices. The FTC’s website is a good source of information on regulations affecting advertising and trade practices. To keep pace with more-recent developments—namely, the internet, online marketing strategies, and influencers—the FTC adopted the new rules on endorsements and testimonials in 2024. The regulations on endorsements and testimonials can be found here . The following is brief summary of some of the key provisions of the rule: Endorsements – 16 C.F.R. § 255.1: Section 255.1 covers various aspects of endorsements, especially celebrity and expert endorsements. Here are some of the key guidelines in this section: Honest Opinion, Belief, or Experience . Endorsements should be based on actual experiences of the person endorsing the product. “Endorsements must reflect the honest opinions, findings, beliefs, or experiences of the endorser” and “may not convey any . . . representation [a statement] that would be deceptive if made directly by the advertiser.” An advertiser cannot present an endorsement out of context or distort the endorsement that would be inconsistent with the endorser’s opinion or experience. An endorsement from a celebrity cannot misrepresent the product, the claims about it, or the celebrity’s experience or use of the product. 16 C.F.R. § 255.1(a)-(b). Disclosure of Relationships . An endorsement cannot mislead or make an unsubstantiated statement, and any unexpected relevant connection between the advertiser and the endorser must be clearly disclosed in the advertisement. A celebrity endorsement usually implies payment for the endorsement, but a commercial that appears to be based on a random interview of pedestrian in a large city may not imply payment. If the advertiser paid the pedestrian, but did not disclose it, the endorsement would likely be deceptive. 16 C.F.R. § 255.1(d). Expert Endorsements . Experts have knowledge and qualifications in their area of expertise, and consumers can reasonably expect that an expert’s endorsement is based on his/her analysis, knowledge, and experience. Both the advertiser and the expert may be liable if the endorsement is misleading, unsubstantiated, or the product does not perform as advertised. On the other hand, if the expert asks the advertiser for evidence to support the claims about the product, and the advertiser possesses but does not provide the results of a study that undermines the advertiser’s claims, the expert would not be liable. 16 C.F.R. § 255.1(e) and (h)(3). Testimonials or Consumer Endorsement Such as Online Reviews – 16 C.F.R. § 255.2: This part of the rule covers endorsements by consumers: An advertiser must have adequate substantiation to support claims about the product that are made in an endorsement even if the endorsement is made by a consumer. 16 C.F.R. § 255.2(a). A consumer endorsement or review on an advertiser’s website is interpreted as stating that other consumers will, in general, achieve the same or very similar results as the endorser experienced. 16 C.F.R. § 255.2(b). An advertisement must use the endorsement of an actual consumer if the advertisement states or implies that the consumer endorsement is from an actual consumer. 16 C.F.R. § 255.2(c). Advertisers cannot change, suppress, edit, or distort a consumer review or comment about the advertiser’s product. 16 C.F.R. § 255.2(d). Disclosure of Relevant Connections – 16 C.F.R. § 255.5: This section requires disclosure of relevant connections that may affect how the audience interprets the advertisement: Basic Rule . Any connection between the advertiser and the endorser must be disclosed in a clear and conspicuous manner if: (1) the connection might be relevant to the weight or credibility of the endorsement; and (2) the connection will not be reasonably apparent to the audience. What Is a Connection?  Connections can be a business, family, or personal relationship, and they include payments to the endorser, and other benefits such as early access to a product, the chance to win a prize, or appearing in a promotion. When Is Disclosure Required?  Disclosure is required when a “significant minority” of the audience does not understand or expect the connection. TIPS FOR COMPLIANCE The endorsement and testimonial regulations may seem complex or difficult to understand, but businesses can stay within the legal framework and minimize the chances of a violation. Here are some tips that businesses can follow: Gather Authentic Feedback : Always ensure that customer testimonials and reviews are based on real experiences. Fake reviews can lead to serious penalties. Disclose Relationships : If you provide incentives (like discounts or freebies) for testimonials, make sure to disclose these arrangements. Transparency fosters trust with your audience. Train Your Team : Educate your marketing staff about the FTC regulations. Offering training sessions can help everyone understand the importance of compliance. Be Clear About Results : When using testimonials to showcase product effectiveness, ensure that the results mentioned align with typical results for most consumers. Avoid exaggerating claims that could mislead customers. Review Content Regularly : Monitor your advertising material and any consumer endorsements that show up online. Regular checks can help ensure that no misleading content slips through. Focus on Authenticity : Instead of solely relying on endorsements and testimonials, explore diverse formats like case studies or video testimonials that present real experiences in a compelling way. CONCLUSION Understanding and complying with the FTC regulations on endorsements and testimonials helps to safeguard your business and maintain consumer trust. By adhering to the FTC regulations, being transparent, and providing real customer experiences, you can market your products ethically and effectively. Embrace the regulations and compliance with them as opportunities to foster honesty and integrity for your brand. Attorney James D. Griffith at Endurance Business Law, PLLC, is an experienced business attorney who provide advice and guidance on compliance with FTC regulations and the endorsement and testimonial rule. To set up a paid consultation regarding a legal matter, please call our office at (480) 997-2951 or use the Contact form on this website. If we establish an attorney-client relationship, the consultation fee will be deducted from the fees for our services.

In Arizona's dynamic business environment, employers face numerous challenges. One common challenge for employers is accurate classification of their workforce, and misclassifying employees can lead to significant legal and financial repercussions. According to a study by the Economic Policy Institute, the misclassification of workers costs U.S. taxpayers approximately $2.7 billion annually. This blog post delves into the key elements of employee classification, highlights common pitfalls, and provides practical steps for Arizona employers to navigate this complex landscape. Understanding Employee Classification in Arizona Employee classification involves determining whether a worker should be classified as an employee or an independent contractor. This distinction is critical, as it affects tax obligations, benefits eligibility, and compliance with state labor laws. Although the Internal Revenue Service (IRS) and the Department of Labor (DOL) provide guidelines, Arizona employers must also be aware of state-specific regulations that can lead to confusion. The Importance of Proper Classification Proper classification is not simply a matter of legal compliance because an incorrect classification can impact the overall health of your business. Misclassification may result in back taxes, fines, and potential lawsuits. For example, if a worker is incorrectly classified as an independent contractor, the employer may owe unpaid wages, overtime, and benefits, which can involve substantial amounts. In addition, misclassification can harm your business's reputation and diminish employee morale. Workers who feel unfairly treated may disengage or pursue legal action, creating a negative work environment. Common Misclassification Scenarios in Arizona The Gig Economy : With the rise of the gig economy, many Arizona businesses hire freelancers. But if too much control is exerted over performance of tasks, the worker may be classified as an employee. For instance, a rideshare driver who must follow strict company policies may qualify as an employee rather than an independent contractor. Part-Time vs. Full-Time : Some employers may label part-time workers as independent contractors to avoid providing benefits. But if these individuals perform essential functions for the business and have a regular schedule, they may be entitled to classification as an employee. Research indicates that misclassifying these workers can lead to disputes costing employers significant amounts in back pay and legal fees. Interns : Internships often exist in a gray area. If interns perform tasks that benefit the company but are unpaid or inadequately compensated, they may deserve to be classified as employees. Many unpaid interns report performing tasks similar to regular employees, making improper classification a common issue. Key Factors for Classification To determine whether a worker is an employee or an independent contractor, Arizona employers should consider the following: Behavioral Control : If your business dictates how a worker performs their tasks, they are likely an employee. Financial Control : Does the worker invest in their own tools and equipment? Independent contractors typically bear more financial risk compared to employees. Relationship Type : Is there a formal contract? Are benefits provided? A written contract and employee benefits can indicate an employer-employee relationship. Legal Tests for Classification in Arizona Classification tests can vary, but several key tests are commonly used: The IRS Test : This test assesses the degree of control the employer has over the worker, considering behavioral, financial, and relationship factors. The ABC Test : Used in various states, this test requires that a worker must be free from control, perform work outside the employer's usual business operations, and be engaged in their own legitimate trade. The Economic Realities Test : This test evaluates whether a worker is economically dependent on the employer, which often indicates employee status. Consequences of Misclassification Misclassification can have serious repercussions for Arizona businesses, including: Back Taxes : Employers may be responsible for unpaid payroll taxes if a worker is misclassified. Penalties and Fines : Regulatory agencies can impose hefty fines for non-compliance with labor laws. Lawsuits : Misclassified employees may pursue legal claims for unpaid wages, benefits, and overtime. Reputational Damage : Legal cases can negatively impact your company's image, complicating efforts to attract talent and customers. Best Practices for Arizona Employers To avoid misclassification issues, Arizona employers should consider these best practices: Conduct Regular Audits : Periodically review worker classifications to ensure alignment with current laws. Educate Your Team : Provide training to human resources personnel and management on proper classification and the associated criteria. Consult Legal Experts : When in doubt, seek advice from a business- and employment-law attorney for guidance. Document Everything : Keep detailed records regarding worker classifications, contracts, and communications to protect your business in case of disputes. Stay Updated : Employment classification laws are constantly evolving. Make it a priority to stay informed about any new legislation that could impact how you classify your workforce. Navigating the Complexities of Employee Classification in Arizona Understanding and properly addressing employee classification is essential for Arizona employers. Misclassification can lead to costly legal troubles that threaten a business's financial stability and reputation. By educating yourself on classification factors, taking the time needed to make good decisions, implementing best practices, and seeking guidance if needed, you can safeguard your business against potential issues and foster a more positive work environment. If you need assistance with an employee-classification issue, contact attorney James D. Griffith at Endurance Business Law, PLLC, to set up a consultation, please call our office at (480) 997-2951 or use the Contact form on this website [hyperlink]. If we establish an attorney-client relationship, the consultation fee will be deducted from the fees for our services.

In some business deals, the value of an attorney's contract review cannot be overstated. Businesses rely on contracts every day for parts, supplies, and services that are essential to their operations and financial success. Contracts establish the benefit of the bargain to be received by each party, define the relationship between the parties, set terms, obligations, and conditions, and protect each party’s interests. But contracts are also subject to well-established legal principles, and to be enforceable, contracts must be drafted to leverage these legal principles while also meeting the needs of the parties. Although some contracts are straightforward or fall under uniform commercial rules, many contracts are unique to the needs of the parties and can be complex, detailed, and lengthy. This is where review by an attorney is invaluable before entering into a contract. Real-World Examples Here are a couple of examples of situations where a review of the contract would have been beneficial: A commercial roofing business enters a contract to install a roofing system on a long-term storage facility. The roofer agrees to install the roof using a design that includes a ventilation system. After installation is complete, the storage facility owner refuses to pay because the installed ventilation system does not follow the design specified in the contract. The system as installed performs as well as or better than the specified design, but the contract makes no mention of whether an equal or superior ventilation design can be provided. An attorney reviewing the contract would have identified the potential ambiguity and recommended ways to clarify the contract. An individual, Max, is a member of a limited liability company and owns a 20% interest. He agrees to sell his interest to another person, Gloria. Max and Gloria agree to terms for Gloria’s purchase of Max’s ownership interest that include a promissory note and payments over one year. Max and Gloria sign a contract stating that the promissory note will have a principal amount of $10,000, with interest at six percent. The contract states that the promissory note attached as Exhibit A to the contract will be used, but the attached promissory note states the principal amount is $12,000 and interest will be calculated at ten percent. After she discovers the inconsistency, Gloria objects to the signed promissory note because it differs from the contract language. An attorney would have identified the inconsistency and recommended changes to the contract. The Value of Contract Review by an Attorney: Safeguarding Interests and Avoiding Expensive Litigation Contracts are essential building blocks that can significantly impact a business’s success. A well-drafted contract will protect the business’s interests and promote smooth operations and financial success. If the contract is poorly drafted, the enforceability of the contract can be challenged, and ambiguous contract language can result in confusion and conflict between the parties and potentially lead to expensive litigation. Here are some reasons why contract review by an attorney can be crucial: Identifying Potential Risks . Transactions often involve exposure to risks that may come up during performance of the contract, such as damage to goods during transportation or an injury to a third party. Other risks of contracting relate to hidden clauses or unfavorable terms, such as one-sided indemnification clauses or a requirement that a lawsuit can only be filed in the other party’s state. By understanding the transaction and the law of contracts, attorneys can identify these potential risks and recommend changes to the proposed contract. Avoiding Confusing and/or Ambiguous Language . Contracts can be detailed, confusing, and lengthy. Sometimes ambiguous language is used in the contract, such as a contract for the purchase of the seller’s “blue car,” and the seller owns two blue cars. Attorneys are adept at identifying language that is ambiguous or may allow differing interpretations, and they can revise and add language that clarifies and provides specificity. Regulatory Compliance . Different industries and businesses need to comply with laws and regulations that apply to their line of work. An attorney’s review of a contract may need to consider the client’s or the other party’s compliance with these laws and regulations. For example, a landowner who contracts with a general contractor to put up a commercial building needs language in the contract that requires the contractor and all subcontractors to be licensed and bonded. Negotiation . If a proposed contract or revised language must be negotiated with the other party, an attorney can provide a strategy and guidance to the client or step in and negotiate the changes. A good rule of thumb is to have an attorney handle the negotiations if the other party’s attorney is handling the negotiations or the contract is a high-value or mission-critical contract. Dispute Resolution . A dispute-resolution provision can help resolve a disagreement and prevent expensive litigation if a dispute comes up between the parties. A provision for dispute resolution can require negotiation to resolve any disagreement and/or require mediation before a lawsuit can be filed by one party against the other. A dispute-resolution provision can also require that the parties use an arbitration process in place of litigation. An attorney can provide advice and guidance on drafting a provision that fits the transaction and needs of the parties. The Contract Review Process: What to Expect Hiring an attorney to review a contract typically involves several steps. The following is a general overview of the process, but the exact process followed is less important than the attorney’s substantive review of the contract and its terms and conditions, which is the intended result of the review process: Initial Consultation . To initiate a review, the business owner will discuss the proposed transaction with the other party in some detail as well as any questions or concerns that the business owner may have about specific contract provisions. Thorough Review by Attorney . In this step, the attorney carefully and thoroughly reviews the draft contract. This review starts from a contract-law perspective to ensure that the basic elements of a contract have been met, but it also examines the details and language of the contract for clarity, consistency, and other potential issues. Feedback and Recommendations . Attorneys often prepare a report, letter, or email that provides his or her concerns and suggested changes. Another common approach is to provide the client with a “redline” that shows deletions, changes, and additions recommended by the attorney. Redlines allow the client to quickly review the recommended changes. Negotiation Assistance . If necessary, the attorney can assist with negotiating changes to the contract and reaching a final draft. If the other party has retained an attorney, your attorney can only negotiate with the other party’s attorney. Final Review and Changes . After the client has discussed the recommended revisions with the attorney and after any negotiations, a final version of the contract is prepared. Conclusion In many situations, the value of an attorney’s contract review cannot be overstated. Attorneys have the skill and knowledge to review detailed, complex, and often lengthy contracts; and the attorney’s review provides assurance that the contract will be valid, legally enforceable, and clear, and protect the client’s interests while also achieving the purpose of the transaction. Attorney James D. Griffith at Endurance Business Law, PLLC, is an experienced business and contract attorney who can review contracts and provide advice and guidance on protecting your interests and minimizing the chances of litigation over a contract. To set up a paid consultation, please call our office at (480) 997-2951 or use the Contact form on this website. If we establish an attorney-client relationship, the consultation fee will be deducted from the fees for our services.

Even your secret BBQ sauce could be a trade secret! All businesses have a need to protect information considered proprietary or confidential information. Other businesses have trade secret information that is directly related to a product or service that generates income. This information, especially trade secret information, can be essential to finding a competitive edge and must be protected to maintain that edge. Such information is legally protected under certain common law claims and the Arizona Uniform Trade Secrets Act. This article explores the basics of protecting proprietary and trade secret information under Arizona law. What is Proprietary Information? “Proprietary information” is a very broad term that covers intellectual property protected under federal law (patents, copyrights), confidential information, and trade secrets. Proprietary information is confidential if it relates to a business process, procedure, or personnel and is maintained by the business for internal use only. Proprietary information and confidential information can include formulas or spreadsheet for calculating a bid, marketing plans, design specifications, customer lists, business records, software developed for or by a business for its own use, human resources files, among other types of information. It can be protected under common law but does not have the stricter level of legal protection provided by statutes affecting trade secrets. What is a Trade Secret? Under Arizona law, a trade secret is any information that: Has “independent economic value, actual or potential,” because it is not generally known to and cannot easily be ascertained “by proper means by, other persons.” The “other persons” are persons who do not have the information but can use it for financial gain if the information is disclosed; and Was kept secret by the use of reasonable efforts under the circumstances. A.R.S. § 44-401(4). In short, a trade secret is any information that has economic value because it is not known to others, would difficult to discover through independent efforts, and was kept secret by reasonable efforts. An oft-cited example is the secret formula for Coca Cola™, but any method, formula, design, ingredient list, software, data, or other information can, potentially, be a trade secret. What Is Misappropriation under the Arizona Uniform Trade Secrets Act? The Arizona Uniform Trade Secrets Act (“AUTSA”) is a state law that protects against misappropriation of trade secrets. A trade secret is misappropriated if it was either: Obtained by a person who knew or had reason to know the trade secret information was acquired by improper mean (in other words, by theft or misrepresentation); or Disclosed or used by a person without authorization, and the person: Used improper means to obtain the trade secret; Knew or had reason to know the trade secret was obtained by improper means; or Knew or had reason to know the information was a trade secret but gained knowledge of it by accident or mistake. A.R.S. § 44-401(2); see also  A.R.S. § 44-401(1). In sum, the AUTSA applies to misappropriation of trade secret information either by direct use of improper means or by disclosure or use of the information in almost any circumstance except by a third party with no prior knowledge that it was a trade secret. The most-important remedy for misappropriation of trade secret information is an injunction, which is a court order directing a person to stop using the trade secret information and/or take other steps to return or destroy the information. A.R.S. § 44-402(A). The AUTSA also allows the business to recover monetary damages for the person’s misappropriation. The monetary damages can include both the value of any actual loss resulting from the misappropriation and any “unjust enrichment” (financial benefit) not covered by the actual loss calculation. The damages may be calculated as a royalty during the period of any unauthorized disclosure or use. A.R.S. § 44-403; see also  A.R.S. § 44-402(B). Finally, the AUTSA also allows claims for attorneys’ fees against the person who misappropriated the trade secret. A.R.S. § 44-404. How Do I Protect Proprietary Information and Trade Secrets? Many techniques are available for the protection of proprietary information and trade secrets. Some businesses only need to protect proprietary and confidential information, but other businesses also need to protect trade secrets, which requires stronger and more well-developed techniques. The following is a brief overview of common techniques that are used to protect proprietary and trade secret information, but the list should not be considered exhaustive. Although I can address the legal perspective on protecting this information, I am not a security or cybersecurity expert, and depending on your business, the information to be protected, and how it is stored, you may need to consult a security or computer consultant: Nondisclosure and Non-Compete Agreements / Clauses . Nondisclosure agreements or clauses are commonly used with employees and persons outside the company who will be allowed access to the proprietary or trade secret information. The employee or other person agrees not to disclose or use the information as part of the agreement for employment or access to the information. The agreement or clause will remain in effect after employment or access to the information ends. Non-compete agreements or clauses require that an employee or other person not engage in competition with the business, especially if the competition is based on the proprietary or trade secret information. These agreements and clauses, however, can be difficult to enforce. Policies and Procedures that Limit Access . Policies and procedures, whether written or unwritten, provide evidence that a business has identified information or files that are proprietary, confidential, or a trade secret and has taken steps to protect the information from misuse or misappropriation. A primary feature of the policies is that access to the protected information is limited only to those within the business who have a need to know. Because a trade secret has “independent economic value,” policies and procedures can be very useful confirmation that the business took steps to treat the information as a trade secret. The best approach is to document the effort to protect the information by developing written policies and procedures. Employee Training . Policies and procedures will have little effect if a business’s employees do not know or understand them. This is where training of employees (at least the employees with access to the information) is important. A good approach is to train all new hires on the policies and procedures covering proprietary and trade secret information and schedule additional trainings at least annually. Document the training sessions by using a sign-in list and issue certificates of training or keep some other documentation of the employee training. If some misappropriation occurs, the documentation serves as proof that the person knew and understood the policy. Security and Cybersecurity . In today’s fast-paced and technology-driven workplace, security and cybersecurity are an important consideration. Although some businesses are large enough to employ security professionals, many businesses will need to hire security consultants who can help identify gaps that employees or others can exploit. Similarly, IT consultants or cybersecurity experts can be retained to review technology systems for possible vulnerabilities. Finally, regular security audits can be essential to ongoing protection of proprietary, confidential, and trade secret information. Conclusion Protecting proprietary information and trade secrets is vital for the success of any business in Arizona. With a good understanding the legal framework and a practical approach, business owners can make informed decisions about protecting their business’s proprietary information and trade secrets. An experienced attorney can provide guidance and help businesses navigate the legal complexities and take appropriate measures to secure their proprietary information and trade secrets. Attorney James D. Griffith at Endurance Business Law, PLLC, can provide advice and guidance on protecting and preserving this valuable information, and, if necessary, litigate proprietary information and trade secret matters. To set up a paid consultation, please call our office at (480) 997-2951 or use the Contact form on this website. If we establish an attorney-client relationship, the consultation fee will be deducted from the fees for our services.

The Family Medical Leave Act (“FMLA”) is a federal law that applies to employers with 50 or more employees and gives employees the right to unpaid leave for certain family or medical reasons, along with a right to return to their job or an equivalent position. If an employee’s leave request qualifies for FMLA leave, the employer must grant up to 12 weeks of unpaid leave within any 12-month period to an eligible employee for certain family or medical reasons and must maintain the employee’s pre-existing group health benefits. The FMLA and its regulations are detailed and can be difficult to interpret in some situations. This article provides a brief overview of the FMLA and cannot be considered legal advice. If you are an employer and have questions about an FMLA request, reinstatement to work, or related matters, the best approach is to obtain advice from a legal professional to ensure compliance. For a consultation regarding the FMLA, please contact Endurance Business Law, PLLC, via our Contact page or by calling (480) 997-2951. The General Rule: The Employee’s Right to Leave under the FMLA General Rule . At the heart of the FMLA is a legal right that requires employers grant employee requests for up to 12 weeks of unpaid leave within any 12-month period if the employee is eligible for FMLA leave and the request falls under one of the following family or medical reasons: The birth of a child if the leave is taken within one year of the child’s birth; The placement of an adopted or foster child with the employee if the leave is taken within one year; A serious health condition affecting the employee; The need to care for a spouse, child, or parent with a serious health condition; Certain conditions arising from an employee’s spouse who is on active-duty status in the military. Serious Health Condition . A “serious health condition” is defined as “an illness, injury, impairment, or physical or mental condition” that: (1) affects the employee’s ability to perform one or more essential function of his or her job; and (2) involves inpatient care or ongoing treatment by a medical provider. Under this definition, cosmetic treatments generally are not serious health conditions, while dental restoration or plastic surgery after an injury is a serious health condition. Eligibility Requirements . To be eligible for FMLA leave: (1) the employee must have worked for the employer for at least 12 months; (2) the employee must have worked at least 1,250 hours in the 12 months before the FMLA leave commences; and (3) the employer must employ at least 50 employees within 75 miles of the employee’s work location. Intermittent Leave or Reduced Work Schedule . An employee may request intermittent leave or a reduced work schedule if the request qualifies for FMLA leave and the cumulative total leave does not exceed 12 weeks. To accommodate intermittent leave or a reduced work schedule, the employer may temporarily transfer the employee to another position if the employee is paid an equivalent pay rate and his or her benefits are maintained. Covered Employers . As noted above, the FMLA applies only to employers with 50 or more employees in 20 or more workweeks of the current calendar year or the prior calendar year. Requests for FMLA Leave Processing FMLA Leave Requests . The steps for processing an FMLA leave request are well established. The U.S. Department of Labor has posted an Employer’s Guide to the Family Medical Leave Act to assist employers with FMLA leave requests. The Department of Labor has also created two forms that can be used by employees and employers to help insure compliance with the FMLA: (1) Form WH-380-E for leave requests involving the employee’s serious health condition; and (2) Form WH-380-F for leave requests involving a family member’s serious health condition. All FMLA forms can be found here . Advance Notice of FMLA Requests . Employees are required to submit FMLA leave requests well before the leave will begin whenever the need for leave is foreseeable, but the FMLA does not state how many days’ notice of the request must be given by the employee. In general, employers can follow their internal procedures for advance notice of other leave requests, such as requests for vacation. Employees can request FMLA leave in circumstances where the need for leave was not foreseeable. Employers often have policies requiring employees to use all other available leave before using FMLA leave. Certification from a Healthcare Provider . Employers may request certification from a healthcare provider as evidence of the employee’s serious health condition or the immediate relative’s serious health condition. The employee must provide the certification within 15 days unless the employee can show a good reason why additional time is needed. The employer must notify the employee in writing of any deficiencies in the completeness of the certification within five days after receipt and allow time for the employee to overcome the deficiencies. For more detailed information on the process, please see the Department of Labor’s Employer’s Guide . Reinstatement and an Equivalent Position Upon completion of the FMLA leave, the employee has the right to reinstatement to the same position or an equivalent position with the same pay and benefits. An employer cannot terminate or make an adverse employment decision affecting the employee during the FMLA leave unless the employer can show that the employee would not have been employed for some unrelated reason when reinstatement was requested. For more information on reinstatement, please see the Department of Labor’s Employer’s Guide . Conclusion The FMLA was enacted to help employees balance their work responsibilities with their family obligations. Although employers can expect employees to work in support of achieving the employer’s goals and objectives, employers also need to comply with laws and regulations that protect employees and their families. Often, routine FMLA leave requests can be handled and processed without legal assistance, especially if the employer is large enough to employ experienced and well-trained human-resources personnel. The FMLA and its regulations, however, are detailed, can be difficult to interpret, and some FMLA leave issues do not neatly fit the regulatory scheme. To minimize the chances of an FMLA claim, the best approach for an employer is to seek advice from a lawyer if any question arises about whether and how the FMLA applies to an employee’s request for leave or reinstatement. Attorney James D. Griffith at Endurance Business Law, PLLC, can provide advice and guidance on the legal aspects of the FMLA and an employee’s request for leave, reinstatement, and other questions about the FMLA. To set up a paid consultation, please call our office at (480) 997-2951 or use the Contact form on this website. If we establish an attorney-client relationship, the consultation fee will be deducted from the fees for our services.

Small- and medium-sized businesses frequently seek loans to sustain and expand their operations, yet the loan application process can seem daunting. Although business owners may need to provide extensive financial details, they may not fully understand the bank’s evaluation process. Several online resources explain that banks assess business loan applications based on the "Five Cs of Credit" (character, capacity, capital, collateral, conditions). This post offers a concise overview of the Five Cs of Credit. Your bank officer or branch manager can provide more information and discuss the loan approval process in detail. Keep in mind that the bank’s goal is to have the loan amount returned with interest, and the bank will safeguard its interests. Before finalizing loan agreements, which are legally binding documents, a prudent approach is to have a lawyer review the proposed loan documents and discuss the transaction with the lawyer. The Five Cs of Credit for Business Loans Before summarizing the Five Cs, let’s clarify a few terms. In most cases, the business is the loan applicant, and if the loan transaction is finalized, the business will be the borrower. The business owner(s) serve as the guarantor(s) for the loan and will be liable if the business defaults on the loan. Banks examine both the business’s and the owner’s creditworthiness, which is likely to include personal credit reports on the owner. The definitions above will help in understanding the following Five Cs of Credit: Character:  In this context, character signifies the business’s credit history or reputation for debt repayment. Credit reports play a significant role in this assessment. Capacity:  Capacity concerns the business’s ability to both cover ongoing expenses and service the loan. This is a crucial factor for the bank. Income statements and monthly or quarterly income statements from several periods will be scrutinized. Capital:  Capital refers to the financial resources available to the loan applicant based on the owner's capital contributions, the business’s savings, and investments. Capital also reflects the business owner's personal investment in the business. The bank typically expects to see that the owner has placed personal financial resources at risk. Collateral:  Some loan transactions require a security interest in an asset as collateral (a potential source of repayment) if the borrower and/or guarantor defaults. Under a “collateral security agreement,” the borrower and/or guarantor agrees to give the bank a security interest in one or more assets owned by the borrower, such as equipment, a building, or a bank account. The agreement allows the bank to enforce the security interest and take possession of the asset if the loan is not repaid. Conditions:  This term refers to the purpose and amount of the amount loaned, the local business climate, industry factors, and recent economic trends affecting the business and the loan application. These risk factors may reduce the business’s ability to repay the loan in a timely manner. Banks and other lenders will evaluate a business loan application using the Five Cs. The evaluation process is a “factor analysis.” The Five Cs may not be considered as having equal importance, and no factor is determinative in all loan evaluations. Conclusion Small- and medium-sized enterprises often rely on banks for operating capital and business growth, and business owners assume responsibility for loan repayment through personal guarantees. Given the significant business and personal risks involved in business loans, understanding the Five Cs and the factors that banks consider when evaluating a business loan application is highly beneficial to borrowers. Business owners can also leverage this knowledge to enhance their chances of loan approval and address any deficiencies in the five considerations. Bank loan officers and branch managers usually welcome discussions with business owners regarding their businesses and how to increase the chances of getting approved for a loan. But loan transactions often involve complex legal documents, and because the bank aims to protect its interests, a wise business owner will consult a lawyer and ask the lawyer to review the loan documents. Attorney James D. Griffith at Endurance Business Law, PLLC, can review proposed loan transaction documents and provide advice and guidance on the legal aspects of the loan documents. To set up a paid consultation, please call our office at (480) 997-2951 or use the Contact form on this website. If we establish an attorney-client relationship, the consultation fee will be deducted from the fees for our services.

If you’ve purchased tax liens from a county treasurer in Arizona, you probably understand that you’ve made an investment that may result in the transfer of real property because of unpaid property taxes. Although investing in tax liens can be risky and speculative, and the process can take years, successfully foreclosing on a tax lien transfers the taxpayer’s real property to the investor, which can be sold at a profit. But the tax-lien foreclosure process can be difficult to navigate for anyone who does not understand the tax-lien laws and procedures. A wise investor’s best choice may be to retain an attorney to handle the lawsuit that forecloses on the property owner’s right of redemption. The following is a general overview of tax liens and the judicial foreclosure process, and it is not intended to cover every possible scenario. Your specific situation may vary from the description provided below. INVESTING IN TAX LIEN CERTIFICATES OF PURCHASE Unpaid Property Taxes and County Tax Liens A tax lien is created when a property owner fails to pay the property taxes owed on his/her real property. In Arizona, each county has authority to collect taxes from the owners of real property within the county’s jurisdiction. By law, the county (through the county treasurer) becomes the holder of a tax lien against an owner’s real property for the amount of the unpaid property taxes. Property owners have until June 1 each year to pay the assessed taxes. If not paid by June 1, the county treasurer is authorized to sell “certificates of purchase.” The cost of the certificate of purchase is the amount of the unpaid taxes owed by the property owner. By selling the certificate of purchase, the county receives funds equal to the unpaid property taxes, and the buyer (sometimes called the “certificate holder”) holds an interest in the tax lien. If the property owner redeems the property by paying the taxes he or she should have paid, the tax lien no longer exists, and the county reimburses the certificate holder the amount paid for the certificate. Certificates of Purchase and Foreclosure Three Years After Issuance The property owner can redeem the property at any time before foreclosure by paying the taxes he or she should have paid. If the property owner does not redeem the property, the certificate holder must wait at least three years before filing suit to foreclose on the tax lien. Three years after the date the certificate of purchase was issued, the certificate holder may start a judicial foreclosure process, but only if the certificate holder has purchased all other tax liens on the property. Foreclosing on the tax lien prevents the property owner from redeeming the property and may result in a treasurer’s deed transferring all right, title, and interest held by the county to the certificate holder. Research the Property Before Buying a Certificate of Purchase Many investors obtain a “litigation guarantee” or a property title search from a title company before buying a certificate of purchase. The litigation guarantee or title search will provide information on the recorded documents affecting title to the property and help to identify defects or “clouds” on the chain of title and other claims against the property. If clouds on title or other claims are identified before purchasing the certificate, the investor will have a better understanding of the risks of the investment and whether a quiet title action or other legal action will be necessary after foreclosure to clear the cloud on title. Again, purchasing tax liens and foreclosing the right of redemption can be speculative because the property owner can redeem the property at any time before (and sometimes after) foreclosure, and because defects in the chain of title may allow a prior owner to make a claim to ownership of the property. Sales and Assignments of Certificates of Purchase Certificates of purchase are often sold and assigned to others who want to foreclose on a tax lien. This market for the sale and assignment of certificates has developed because different certificate holders may hold tax liens on the same property for different tax years. So, a certificate holder may have a certificate for one tax year and may need to purchase the tax liens for tax years that are held by others. A certificate holder, however, can purchase the tax liens held by others on the same property, and by becoming the holder of all tax liens, the certificate holder can foreclose on the property. PROPERTY TAX LIENS AND FORECLOSURE OF THE RIGHT OF REDEMPTION A certificate holder cannot file a lawsuit to foreclose on the tax lien for at least three years after the date the certificate of purchase was issued. If the property owner does not pay the property taxes for the tax years after the certificate was issued, the certificate holder must purchase additional certificates of purchase and have the county treasurer endorse those purchases on the original certificate. Filing a Foreclosure Action and Due Process After at least three years have passed, the certificate holder must give notice of intent to foreclose by certified mail. Thirty days after the notice was sent, the certificate holder must file a lawsuit to foreclose on the property owner’s right to redeem the property. The lawsuit must name the “unknown heirs, devisees, and assignees” of the property owner and name the county treasurer as defendants. During the lawsuit, due process can be an important consideration. Due process requires making all reasonable efforts to formally notify the defendants by serving a summons and copy of the complaint on the defendants. The purpose of serving the summons and complaint is to allow the defendants an opportunity to contest the lawsuit—or in a tax lien foreclosure, simply redeem the property by paying the property taxes. This emphasis on due process makes sense considering that the foreclosure may result in the transfer of valuable real estate to the certificate holder. Seeking Default Judgment and Issuance of a Treasurer’s Deed If the property owner does not answer the complaint or redeem the property, the certificate holder can seek a default judgment that forecloses the right to redeem the property. If all requirements for a default judgment are satisfied, the court will enter a judgment that orders the county treasurer to issue a treasurer’s deed transferring title to the property to the certificate holder. The county treasurer is entitled to a fee of $50.00 for issuance of the deed. Finally, after the treasurer’s deed has been issued and recorded, the certificate holder (the new owner) will need to speak with a title company about title insurance, because title insurance will be necessary to sell the property. In some cases, the title company may not be willing to insure title unless several more years have passed after foreclosure and no claims have been made against the property. Benefit of Using an Attorney for the Foreclosure Action Many certificate holders find the lawsuit to foreclose the right of redemption difficult or intimidating, and it is possible that unexpected issues can arise during the lawsuit. The important thing to remember throughout this process is that, at any time before judgment is entered, the property owner can redeem the property by paying the taxes. In addition, the owner or the owner’s successor in interest can challenge the foreclosure or assert some claim to the property after  the judgment is entered, and the risk of a successful challenge cannot be completely ruled out. Finally, as noted, if there any defects or clouds on title, a former owner or his or her successor could make a claim to ownership of the property. Because buying certificates of purchase involves risk, the purchaser must carefully evaluate each purchase. CONCLUSION If you need assistance with foreclosing on a property tax lien, we may be able to handle the legal proceedings for you. Generally, we limit our tax lien foreclosure cases to Maricopa County, but we will consider tax lien foreclosures in other counties. Our regular hourly rates will be charged for this work. If you’re interested in our services for a property tax lien foreclosure, please contact our office at (480) 997-2951 or through the Contact form on this website.

The Arizona Corporation Commission (the “ACC”) recently voted to adopt new policies intended to deter fraudulent business filings and to help protect business owners. This post briefly summarizes the ACC Corporations Division’s notice that announces the new policies. A complete copy of the notice is included below. For all in-person (over-the-counter) filings at the ACC, these policies become effective on June 16, 2025. For electronic, fax, or filings by mail, Policies 1 and 2 will be implemented with the launch of the ACC’s new filing system later this year. Policy 4 becomes effective on June 16, 2025, for both in-person filings and electronic, fax, and mail filings. Policy 3, which does not involve a filing, will be implemented with the new online filing system. The four new policies are summarized as follows: Policy 1: Two Forms of Identification. Policy 1 requires that two forms of identification be presented when filing at the ACC Corporations Division. See below for the types of acceptable primary and secondary forms of identification. Policy 1 is effective June 16, 2025, for in-person filing. For electronic, fax, and mail filings, Policy 1 will be implemented with the launch of the new filing system later this year. Policy 2: Signing Authority Form. This policy allows LLCs the option to use a Signing Authority Form to designate individuals or entities, other than existing members or managers, who are authorized to sign ACC filings on behalf of an LLC. Policy 2 is effective June 16, 2025, for in-person filing. For electronic, fax, and mail filings, this policy will be implemented with the launch of the new filing system later this year. Policy 3: Verification LLC Is Active and Conducting Business.  Policy 3 establishes a procedure requiring verification that an LLC is active and conducting business if it has not filed anything with the ACC within the past two years. Notices to affected LLCs will be sent out each January. If the LLC does not respond within 60 days, the Corporations Division will begin the process to administratively dissolve the LLC. The ACC may send a copy of the notice to the LLC’s statutory agent, and the statutory agent will need to inform the appropriate member/ manager of the LLC upon receipt of a notice. This policy will be implemented with the new filing system to be launched later this year. LLCs and statutory agents could begin receiving notices in January 2026. Policy 4: Corporate Annual Report and Certificate of Disclosure Forms.  This policy allows corporations to file Annual Report and Certificate of Disclosure forms that are created by the corporation if the form meets the statutory requirements and is filed with a “Guidance Worksheet.” The Guidance Worksheet is intended to ensure that the statutory requirements are met. Corporations may still use forms provided by the ACC. This policy becomes effective on June 16, 2025, for both in-person and electronic, fax, and mail filings. If you need assistance with forming a business entity, filing a change or report, or another business-law matter, please contact our office at (480) 997-2951 or through our contact form . THE FOLLOWING IS A COPY OF THE ACC’S NOTICE ANNOUNCING ITS NEW POLICIES ACC Corporations Division Announces New Policies Aimed at Preventing Business Filing Fraud The Arizona Corporation Commission voted unanimously on May 8, 2025 to implement policies to help deter business fraud and to help protect business owners from unauthorized filings. The Commission voted to the implement the following policies: Policy 1:  Requiring two forms of ID when filing on behalf of a business. Policy 2:  Signing Authority Form, which allows LLC owners to designate who specifically can sign on behalf of their business. Policy 3 : LLC Attestation of Existence, which requires LLCs to periodically attest to their continued existence and activity. Policy 4:  The public can file Annual Reports and Certificates of Disclosure using their own forms, provided they meet statutory requirements. While continuing to refine and streamline processes to make it easier for entrepreneurs and business owners to register and file on behalf of their businesses, the Corporations Division has identified specific and limited policies that would be most impactful in improving overall customer experience while helping to deter fraudulent filings, in the least intrusive and burdensome ways. Policy 1: Two Forms of ID Customers will need to present two forms of ID when filing. From the prescribed lists below, customers can present one Primary Form and one Secondary Form, or two Primary Forms of ID to satisfy this requirement: Primary Forms of ID State-issued driver’s license State-issued photo ID Real ID Passport or Passport Card Permanent Resident Card Employment Authorization Document with photo U.S. Military ID Tribal ID Secondary Forms of ID W-2 Form Birth certificate Voter Registration Card Fingerprint Clearance Card Health Insurance Card Paystub Service company and law firm “runners” will have a different procedure for verifying their identity. Policy 1 Effect Dates: In-person filings: June 16, 2025 Online, fax, and mail filings: TBD (in conjunction with the Corporations Division’s new online filing system scheduled to launch later this year). Policy 2: LLC Signing Authority Form To help ensure proper signing authorization, LLCs have the option to complete a Signing Authority Form. A Signing Authority Form can only be completed by an existing and registered member or manager of an LLC. Existing LLCs may only complete a Signing Authority Form in-person, with appropriate identification, in the presence of ACC staff. Once completed, the Signing Authority Form will be retained and validated against all subsequent business filings. The Signing Authority Form is solely for the purpose of designating who, outside of existing members or managers, can sign on behalf of a business. The form cannot be used to limit any ability of a member or manager to sign on behalf of the business. Policy 2 Effect Dates: In-person: June 16, 2025 Online: TBD (in conjunction with the Corporations Division’s new online filing system scheduled to launch later this year). Policy 3: Attestation of Existence for LLCs Each January, the Corporations Division will identify and send electronic notice to LLCs that have not filed any documentation with the ACC in 2 years. The electronic notice will be sent to the LLC’s statutory agent and/or business owner, requesting an electronic response to verify that the LLC continues to actively exist and conduct business. The response will only require the action of clicking a respond button through the online portal. If a response is not received by the LLC within 60 days, the Corporations Division will commence the administrative dissolution process on the grounds that the LLC’s statutory agent and/or principal address have not been kept current. The LLC’s status will change to “pending inactive” until the completion of the 120-day administrative dissolution process. Policy 3 Effect Date: Online: TBD (in conjunction with the Corporations Division’s new online filing system scheduled to launch later this year). Policy 4: Filers May Use Their Own Annual Report and Certificate of Disclosure Forms Corporations may use their own Annual Report and Certificate of Disclosure forms, provided they meet the statutory requirements and are accompanied by the ACC’S Guidance Worksheet. The Guidance Worksheet is designed to ensure that self-drafted Annual Report and Certificate of Disclosure forms include all statutory requirements. If the Guidance Worksheet is not completed and filed with the self-drafted Annual Report and Certificate of Disclosure forms, the filing(s) will be rejected. As an alternative, filers will continue to have the option to use the ACC’s Annual Report and Certificate of Disclosure forms. Policy 4 Effect Date: In-person: June 16, 2025 Online, fax, and mail: June 16, 2025 These policies are designed improve the customer experience and to help protect business owners from fraudulent filings. The Arizona Corporation Commission and the Corporations Division will continue to strive to enhance the customer experience and the security of business filings. For questions, please contact the Corporations Division at: Email:  answers.azcc.gov Call Center:  (602) 542-3026 Toll Free In-State Only:  1 (800) 345-5819

Estate planning can be an uncomfortable topic to think about. The topic, after all, includes thinking about one’s own mortality and the effect it may have on loved ones. The topic also covers difficult subjects such as a significant decline in physical or mental health that affects the ability to care for oneself or make decisions. Although passing away and the inability to care for oneself or make decisions can be difficult to consider, the value of an estate plan outweighs the difficulty because a good plan can ease the burden on family members and caregivers during those difficult times. A good estate plan sets forth guidelines describing how to make financial and medical decisions if the person who made the plan is not able to make those decisions and how to distribute assets after the person’s passing. For some high-wealth individuals or couples, an estate plan may include strategies for minimizing estate taxes or transferring complex business or investment interests, but for most people, the value of an estate plan primarily rests in the peace of mind gained from establishing a framework for loved ones, caregivers, and others to follow. A Comprehensive Estate Plan and the Value Added by an Attorney A comprehensive estate plan uses several legal documents to set forth a framework for loved ones and others if a person who made the plan cannot care for him- or herself, make decisions on financial or personal business matters, or has passed away. In a good estate plan, each document is customized to the needs of each individual or married couple, and, more importantly, the documents are structured in a way so they work together to achieve the individual’s or couple’s goals for their assets and for the support and care of the beneficiaries. In the planning process, estate-planning attorneys add a great deal of value because they have the legal knowledge and skill to draft documents that fit the clients’ needs, achieve their long-term goals, and work together in an overall plan. The following paragraphs provide a brief overview of some of the most-common documents used in an estate plan. Last Will and Testament A last will and testament is a document signed by a “testator” that outlines how the testator’s property should be distributed to his or beneficiaries. A will also identifies one or more individuals who are named to act as the guardian(s) for the testator’s minor children. A will can name the testator’s trust as the beneficiary of the will. If, for some reason, an asset of the testator was not transferred to the trust before passing, the asset will be distributed to the trust during the probate process because the trust is the beneficiary. Trusts A trust is a specialized type of agreement between a person called the “trustor” (also known as the “grantor”) and a “trustee.” Under the agreement, the trustor transfers ownership of property to the trustee, and the trustee agrees to hold and manage the property for the benefit of beneficiaries named in the trust agreement. The trust document also gives instructions to the trustee on the transfer of property to the beneficiaries, which usually occurs after the trustor has passed away. Unlike a will, which must go through the probate process, a trust can be managed, and the trust assets can be passed to the beneficiaries, without a probate case (unless a dispute involving the trust arises). In estate planning, revocable living trusts are commonly used because they can be revoked at any time before the trustor passes away, or in the case of a married couple who were the trustors, before the first of the trustors passes. Durable Powers of Attorney Under a durable power of attorney, a person authorizes another person to act on his/her behalf in financial or business matters. For example, the person authorized to act, known as the agent, can sign transaction documents on behalf of the person who gave the authorization (the “principal”). The principal is legally bound by the action taken by the agent. Durable powers of attorney can take effect immediately on signing or take effect after the principal is incapacitated and not able to manage his or her affairs. Healthcare Powers of Attorney A healthcare power of attorney is a power of attorney that covers medical and healthcare decisions. Healthcare powers of attorney often become effective when signed, but the agent only steps in to make decisions if or when the principal is unable to make healthcare decisions. Living Wills / Advance Directives A living will is also known as an advance directive, and it provides instructions on whether and under what circumstances to follow “do not resuscitate” instructions. Other Documents Some other documents may also be necessary to implement the estate plan. For example, if the plan includes a trust, deeds will be necessary to transfer ownership of any real property to the trust. Another consideration is whether some assets can and should pass to a beneficiary through some sort of beneficiary designation. Common examples include insurance policies, investment accounts, and a beneficiary designation conveying title to a vehicle. These are sometimes called non-probate transfers because the beneficiary designation allows transfer to the beneficiary outside of the probate process. Concluding Thoughts on the Value of an Estate Plan For most individuals and couples, the main benefit of an estate plan is peace of mind. When an individual or couple establish an estate plan, they have stated their intentions as to how to make financial and medical decisions on their behalf and how to distribute their property after they have passed. Because the law governing wills, trusts, and powers of attorney seeks to uphold their intent, the individual or couple has assurance that loved ones, health providers, and caregivers will be obligated to abide by the guidelines and framework of the estate plan. Whether you are single or married, whether you do or do not have children, a solid estate plan is a responsible step that can minimize family conflict over difficult decisions and foster a sense of security that your intentions will be honored. Each individual’s or couple’s estate planning needs and goals will vary, and a well-thought-out estate plan will be tailored to fit the needs and goals of the individual or couple. An estate-planning attorney brings value to this process because the attorney considers needs and goals of the of the client and has the knowledge and skill to prepare estate-planning documents suited to achieve the client's long-term goals. Endurance Business Law can assist with developing an appropriate estate plan for you. To set up a consultation, please call our office at (480) 997-2951 or use the Contact form on this website We may charge a consultation fee, but if we agree to prepare an estate plan for you, the consultation fee will be deducted from the fee for preparing the estate plan.

In today’s dynamic business climate, minimizing the potential impact of liability risks and protecting business assets are essential to maintaining a stable operation and a foundation for growth. To achieve this goal, many entrepreneurs and business owners establish subsidiary limited liability companies (LLCs), which can be a very effective strategy. This approach is effective because it minimizes the parent company’s exposure to potential liability by containing or transferring the liability risk to the subsidiary LLC. If the LLC becomes liable for some claim or debt, the liability is limited to the subsidiary LLC, which, in most cases, protects the parent company’s business assets from being used to pay the claim or debt. This post is an overview of subsidiary LLCs and how they limit the parent company’s exposure to liability. I. What Is a Subsidiary LLC? A subsidiary LLC is a limited liability company that is formed, owned, and controlled by another company, known as the parent company. The subsidiary LLC is controlled by the parent company, but it has a separate legal status. Since each LLC is a separate entity, liabilities that attach to one subsidiary LLC do not automatically transfer to the parent company or another subsidiary LLC. II. Benefits of Using Subsidiary LLCs Asset Protection : By establishing subsidiary LLCs, business owners can protect the business’s assets and interests (and even their personal assets) if the LLC’s legal status as a separate entity is maintained. If a legal claim is made against the subsidiary LLC or it faces some other challenge such as debts, the parent company will be protected from financial liability so long as the subsidiary was operated and managed as a distinct entity. Risk Segmentation : Different business activities, and the liability risk associated with the activities, can be assigned to separate LLCs. For example, a company might own a subsidiary LLC for each store location (limiting premises liability to each LLC), or subsidiary LLCs for manufacturing and installation operations (limiting the potential liability to each LLC). This segmentation helps limit the risks of potential liability to the subsidiary LLC that, without segmentation, could be a financial threat to the parent company and other subsidiaries. Tax Flexibility : LLCs offer various tax benefits, including pass-through taxation, which can help reduce the overall tax burden. Each subsidiary can be structured to optimize tax advantages based on its specific operations. Enhanced Credibility : Operating through subsidiary LLCs can enhance a business's credibility. Clients and partners may feel more secure working with a company that demonstrates a commitment to risk management and legal compliance. Easier Management of Ownership Changes : A subsidiary LLC can be sold as a stand-alone business operation without affecting the parent company. This flexibility is particularly beneficial for businesses looking to attract investors or sell parts of their operations. III. Considerations When Forming Subsidiary LLCs Despite their advantages, establishing subsidiary LLCs usually involves more complexity, proactive management, and advice from a legal professional: Cost and Complexity : Additional expenses and administrative work may be involved in the creation of and operation of multiple LLCs. A careful business owner will need to determine whether the benefit of a subsidiary LLC (transferring certain liability risks to the LLC) exceeds the additional expense and work associated with creating and maintaining the subsidiary LLC. Compliance Requirements : State regulations may require that LLCs file annual reports and keep records in a proper manner. Keeping things orderly is crucial to avoid penalties. Legal Advice : A legal professional can assist you in ensuring that the structure is compliant with applicable laws and serves your business objectives. IV. Conclusion The use of subsidiary LLCs is a prudent method for reducing the potential impact of liability and safeguarding business assets. By identifying risk and creating a flexible operating environment, business owners can establish a strong foundation for a stable business and sustainable growth. Just like any business decision, implementing this structure requires careful planning and professional assistance to maximize its benefits. James D. Griffith at Endurance Business Law, PLLC, is a business law attorney who can advise businesses on liability risks and protecting business assets utilizing subsidiary LLCs. To set up a paid consultation, please call our office at (480) 997-2951 or use the Contact form on this website. If we establish an attorney-client relationship, the consultation fee will be deducted from the fees for our services.

Limited liability companies (LLCs) have become the go-to business entity for entrepreneurs and business owners. The combination of limited liability protection and partnership-like relationships between the members makes the LLC entity an easy choice for many business ventures. In the whir of starting a new business, however, the members of some LLCs forego drafting and preparing an operating agreement. Although not required by law, operating agreements are essential because they define the partnership relationship between the members, clarify the rights and responsibilities of members and managers, set up internal governance procedures, and establish the management structure for the LLC. Operating agreements can also include provisions such as the right of first purchase, valuation of membership interests, and procedures for dispute resolution, and other provisions. Because the operating agreement serves as a contract between the members, many problems can be avoided or minimized if an operating agreement is drafted and signed when the LLC is formed. The advantages of LLC operating agreements make them an essential component for most, if not all, LLCs. This post presents a brief overview of the benefits of LLC operating agreements under Arizona law. Legal Framework in Arizona In Arizona, LLCs are governed by the Arizona Limited Liability Company Act. A.R.S. § 29-3101 - 4202 (Title 29, Chapter 7) . Although not required, attorneys highly recommend the use of LLC operating agreements. If the members (and manager if there is one) have not signed an operating agreement, the rules set forth in the LLC statute will apply. As such, without a written operating agreement, the statutes will provide default rules that the members must follow if a dispute arises. What Is an LLC Operating Agreement? Under Arizona law, an operating agreement is an agreement between the members (owners) of the LLC that defines the rights and duties of the members and the agreed-upon rules for the governing the relationship between the members and procedures for management-level decisions. Some of the most-important provisions cover how profits and losses will be distributed and how key decisions will be made. By statute, an operating agreement governs all of the following, although other terms and conditions can be incorporated into the agreement: The relationship of the members to each other and to the LLC; The rights and duties of the manager (if it is a manager-managed LLC); The internal activities and affairs of the LLC and how they will be conducted; How the operating agreement can be amended. The operating agreement can revise or eliminate the fiduciary duties owed by members to the LLC, except for the obligation of good faith and fair dealing and the duty to refrain from willful or intentional misconduct. A.R.S. § 29-3105(C). Many other agreements can be, and often are, included in written operating agreements. These may include provisions for buyouts, valuation of interests, rights of first purchase, assignments of membership interests, dispute resolution, and other provisions. Benefits of an LLC Operating Agreement Operating agreements provide several benefits: Clarifies Ownership and Management Structure. An operating agreement will state the percentage of each member’s interest and the internal procedures for decision making and governance of the LLC. This clarity helps prevent disputes among members regarding their roles and responsibilities, ensuring that everyone understands their position within the company. Defines Profit and Loss Distribution. Because most LLCs are for profit businesses, an important part of the agreement defines how profits and losses will be distributed. This is particularly important in multi-member LLCs, as it helps avoid misunderstandings and conflicts over financial matters. Establishes Management Procedures. An operating agreement can outline the procedures for decision-making, including how meetings will be conducted, voting rights, and the process for admitting new members or handling the departure of existing ones. This fosters smooth, orderly, and efficient operation of the LLC. Protects Limited Liability Status. Having a well-drafted operating agreement can help reinforce the limited liability status of the LLC. In the event of a lawsuit against the LLC, a court may look to the operating agreement (along with other evidence) to determine whether the LLC is being operated as a separate entity. This can help protect members' personal assets from business liabilities. Facilitates Dispute Resolution. Unfortunately, disputes can arise between the members or between the members and the manager. If a disagreement arises, a dispute resolution mechanism will provide a procedure for attempting to resolve the dispute. This may include mediation or arbitration procedures, which can save time and money compared to litigation. Enhances Credibility with Banks and Investors. Having a formal operating agreement can enhance the credibility of the LLC when seeking financing or attracting investors. The operating agreement shows that the business is organized and has procedures for internal governance and operation, which can instill confidence in third parties. Customizable to Fit Unique Needs. An operating agreement can be tailored to meet the specific needs and goals of the members and the business, which allows the members to include provisions reflecting their intentions and business strategies. Conclusion Although not required under Arizona law, an operating agreement is an essential document that defines the relationship between the members and the LLC, establishes procedures for internal governance and management, describes the method for distribution of profits and losses, and states the duties and obligations owed between the members. By clearly defining these provisions, terms, and conditions, an operating agreement helps prevent disputes and reinforces the limited liability status of the LLC. Thus, investing time in drafting an operating agreement, or investing in an attorney’s time to draft one, is a wise decision that can promote long-term success and stability. James D. Griffith at Endurance Business Law, PLLC, is a business law attorney who can advise LLC members on forming an LLC and draft an operating agreement. To set up a paid consultation, please call our office at (480) 997-2951 or the Contact form on this website. If we establish an attorney-client relationship, the consultation fee will be deducted from the fees for our services.

For any small- or medium-sized business owner, the decision to sign a lease agreement for commercial space is one of the most significant decisions the owner will make. The decision involves finding adequate space in the right location, paying rent and related charges that may be a major budget expense, and entering into a long-term lease agreement. Because the decision to lease commercial property is so important, every small-business owner or first-time tenant needs to understand the basics of commercial leases and seek advice from a legal professional. This post provides a basic introduction to commercial leases and their key terms and considerations. Please keep in mind, however, that a brief post is not a substitute for advice from a legal professional and the due diligence needed to make an informed decision. What is a Commercial Lease? In short, a commercial lease is a legally binding contract between a landlord and a business tenant setting forth the terms and conditions for the tenant’s right to occupy and use a commercial property. Because it involves real property, the lease must be in writing. The types of properties covered by commercial leases include office space, retail stores, warehouses, and industrial facilities. Key Provisions of a Commercial Lease The following are some of the key provisions in a commercial lease agreement that business owners need to consider before signing a lease: Lease Term: The “term” of a lease refers to the duration of the lease agreement. Although the term of a commercial lease can be very short (a few months), many commercial leases have terms as long as five or ten years. A five- or ten-year lease is a significant commitment, which is why a business owner needs to make sure the lease agreement allows assignment of the lease. Rent: Rent is the amount paid by the tenant in return for the landlord’s agreement to lease the property or space. Typically, rent must be paid monthly, but quarterly and annual rent payments are occasionally used. In long-term leases, the rent may increase annually over the term of the lease. See below for more on rent provisions and expenses that may be added to rent in some commercial leases. Security Deposit: The landlord may require a security deposit to cover property damage or unpaid rent. A fair and balanced lease agreement will outline the amount and conditions for its return. Use Clause: The lease agreement will define how the space can be used. This usually aligns with the zoning regulations where the property is located and protects the landlord’s interests by ensuring that the tenant's business complies with the regulations. Termination Clause: A termination clause sets forth conditions that allow one party to terminate the lease before the end of the lease term. These clauses usually require some cause (a reason) for termination based on the other party’s action or failure to act, such as a landlord’s failure to make a repair or a tenant’s failure to pay rent. A termination clause may include a notice requirement that gives the other party a chance to correct the issue and may include penalties for termination. Maintenance and Repairs: Commercial leases vary when it comes to whether the landlord or the tenant is responsible for maintenance and repairs. In general, the landlord tends to have more responsibility for maintenance and repairs in leases for office and retail space. Rent Provisions in Commercial Leases In leases of commercial properties, the landlord is often in a position to negotiate terms that require the tenant to pay some expenses related to the property. The following are three common approaches to rent provisions: Gross Lease : In a gross lease, the tenant pays a fixed amount for rent, and the landlord is responsible for most or all expenses such as utilities, maintenance, and property taxes. Net Lease: Under a net lease, the tenant must pay a portion of the property expenses in addition to rent. Common net leases include: Single-Net Lease: Under single-net leases, the tenant must pay a set amount for rent plus the property taxes. Double-Net Lease: The tenant must pay a fixed amount for rent as well as property taxes and insurance. Triple-Net Lease: Under triple-net leases, the tenant must pay the amount set for rent, plus the property taxes, insurance, and maintenance costs. Percentage Lease: Under a percentage lease, the landlord is paid a percentage of the tenant's sales in addition to base rent. These are common in leases for retail space. Considerations When Entering a Commercial Lease For the small-business owner or first-time tenant, many factors need to be considered before signing a commercial lease agreement. Among other factors, these include: Location: The property's location can significantly impact a business's success. A commercial real estate agent can help business owners find available space or property in a good location for the business. Zoning Regulations: Business tenants need to consider whether the property is zoned for the intended commercial use. Zoning laws affect the types of businesses that can operate in a given area. Negotiation: Commercial leases are often negotiable. Don't hesitate to discuss terms with the landlord to reach a mutually beneficial agreement. Legal Review: Before signing a lease, it's wise to have a legal professional review the document. They can help identify potential issues and ensure your interests are protected. Future Growth: Consider your business's future needs. A lease that allows for expansion or subleasing can provide flexibility as your business grows. Conclusion The decision to enter into a commercial lease agreement is one of the most important decisions a small-business owner will make. By learning about key provisions, types of leases, and important considerations, along with the advice of a legal professional, the business owner can make an informed decision that supports the business's goals and objectives. Attorney James D. Griffith at Endurance Business Law, PLLC, can review proposed leases and provide advice and guidance on the legal aspects of commercial leases. To set up a paid consultation, please call our office at (480) 997-2951 or use our Contact form . If we establish an attorney-client relationship, the consultation fee will be deducted from the fees for our services.