Peer-to-Peer Carsharing: A Sunday Drive or a Nightmare Ride?

Not all side hustles are created equally, but they all come with serious considerations. Of course, the first consideration for most is financial. After all, the whole point is to supplement your income. The upside must be worth the investment of time and capital, if any, as well as the relevant risks. Even if all you are doing is selling homemade peanut brittle to people you know, there is a risk. What happens if your product makes someone seriously ill or even worse? Risk assessment must be part of that initial analysis, and the side hustle trends seem to get riskier every day.

Just like that mountain cabin or that spare room, many have turned to peer-to-peer car rental services to make an extra buck. These services function much the same as their property rental cousins. Vehicle owners rent their vehicles to other drivers through an app like Getaround or Turo, and the rate is typically hourly. Renters might need the car only for part of the day to run errands or make a special trip to a location devoid of access to public transportation. It seems like a great idea to make money with a car that would have sat unused while helping someone in the process. However, there are many unfortunate places where this type of arrangement could lead.

The two main concerns are damage to property and injury to individuals. When you drive your car, you rely on your insurance coverage to protect against those risks, but that coverage as written could prove worthless in a peer-to-peer car rental scenario. The Pennsylvania legislature has recognized this issue and has passed Senate bill 1222 as a result. This bill, as amended, requires carsharing companies to provide additional insurance to fill the gap when a vehicle owner’s policy excludes the peer-to-peer rental from coverage. The problem is that the coverage provided by the carsharing company might be much less than the vehicle owner enjoys under his or her own policy, meaning that an accident still could pose an unreasonable risk when compared with the relatively meager income gained from this enterprise.

When we think about lending someone a car, we might think that damage to the car is the big risk, but a dented fender or a cracked windshield really sits on the conservative side of the damage spectrum. The truth is that damage to the car might be the least significant risk you take when lending your wheels to someone else. Consider that any motor vehicle accident could result in significant damage to another’s property or the death of anyone involved. The potential litigation could be something much more than most would envision ever encountering. This is why it is important to understand fully the risks involved in these trendy ventures before handing over those keys.

Whether you are considering starting this kind of side business or any side business, or whether you already started and are in need of legal assistance, the attorneys at Cornerstone Law can help. Call us for a consultation today.

Occupational Licensure Defense and Appeals

Pennsylvania requires a licensure for a number of professions including nursing, inspecting cars, running a day care, cutting hair and many more. If a government agency is threatening your license to work, you have a right to counsel to defend yourself and to fight for your right to continue working.

When the government says your license is suspended or revoked, it can feel like you are guilty until proven innocent. The process can be complicated, and it can be very difficult to get clear information from the government agencies that govern your licensure. Depending on which license you have, sometimes you face suspension or revocation before you even have the chance to attend a hearing. Pennsylvania law also permits certain licensing boards to compel a licensee to submit to mental or physical examination as part of their investigation. In some cases, your hearing might be before an administrative law judge or hearing officer who is not particularly experienced in the field in which you are licensed. Their uninformed opinion of your situation can result in a permanent black mark against you if you do not act quickly.

Fortunately, you have a right to appeal any such determination by any board in Harrisburg. These appeals can go to the Court of Common Pleas of the county in which you live or to the Commonwealth Court. Every process is a little different, but all licensure appeals processes should give you the chance to challenge the case against you. In putting on your own defense, you have the right to present evidence, to hire expert witnesses who can testify that you have met all the appropriate licensure standards, and to have an attorney examine the Commonwealth’s witnesses.

In some cases, you might be limited in your appeal to presenting the evidence you presented at your first hearing, so it is important to have an attorney involved from the outset. Furthermore, an attorney can help you determine which evidence will strengthen your case and present it in a clearer light. Depending on the type of licensing issue, you can ask the Commonwealth agency attempting to suspend or revoke your license to temporarily stay that decision so that you can work while the appeal proceeds. This is important because some appeals can take several years to be heard. Obviously, you will want to work while the appeal goes forward.

If you are facing a licensure suspension or revocation, call the attorneys at Cornerstone Law Firm so that we can help defend you and protect your license.

Short-term Rentals & Long-term Headaches

Having a side hustle is becoming more and more popular by the day, and many people sure could use some extra income. This is why companies like Airbnb and VRBO have become so profitable. If you can take a current asset like your house and use it to generate extra income with little or no additional investment, why not give it try? Of course, not everyone in this rental arena is leasing a single room at a time. Some have taken this on as a larger investment opportunity, purchasing properties for the sole purpose of using them as short-term rentals. Regardless of the avenue chosen, whether the property owner is a person or a type of entity, starting a short-term rental business might not be so easy depending on zoning laws.

Before deciding to enter the short-term rental market, the first step is determining whether the municipality has an ordinance specifically addressing short-term rentals. These are not uncommon in larger cities and areas known for tourism. Even a town like State College passed its first such ordinance last year and already is considering changes to those rules based on how the industry operates practically. This kind of ordinance typically addresses:

  • limits on length of stay
  • limits on the number of nights a property can be rented in a given year
  • limits on the number of rooms which can be rented, occupancy limits
  • parking requirements

A municipality also might have different rules depending on whether an entire property is rented or just a portion of an owner’s already-occupied home, as well as a requirement to register as a landlord or obtain a rental operating license.

Where such ordinances exist, there are not too many questions to ask. The problem is when there is a lack of this kind of clear guidance, which is the case in most municipalities. In those instances, interpreting the local code and determining how it applies to your specific situation can be difficult. A number of different factors can make or break your plan to use the property as a short-term rental based on zoning requirements and prohibitions. These can include:

  • whether the property will be inhabited by the owner while also being partially rented
  • the language of related ordinances regarding other kinds of rentals
  • whether the property is owned by a person or an entity
  • how the code defines terms like “family” or “single-family dwelling”
  • whether the municipality wants to limit traffic in the zoning district

Since zoning ordinances specifically addressing short-term rentals are still generally lacking in Pennsylvania, and particularly in more rural areas, the issue has been brought to the courts on a number of occasions. Unfortunately, those cases have been decided in various ways, which only muddies the waters. Barring these specific ordinances, it is too easy and too common to enter the short-term rental market only to be slapped with a zoning code violation as a result. That is why due diligence is necessary before renting that room or that cabin for the weekend. While variances can be requested, a denial can mean that a rather large investment will not produce the intended return.

If you are considering entering the short-term rental space, your local attorneys at Cornerstone Law can help you navigate this emerging market. Give us a call to schedule a consultation today.

 

If you’d like to read more about rental properties, check out our post on Legal Things to Know Before Investing in Rental Properties.

August 2022 Review

This month the attorneys at Cornerstone Law Firm have been busy with:

  • landlord/tenant actions all over the state
  • personal injury cases that are settling and going to court
  • insurance disputes
  • contractor fights
  • a trade secrets and corporate freeze-out trial

Attorney Stephanie Rauch-Mannino has spent much of her month working out final custody arrangements for families that are splitting up, challenging a post nuptial agreement for unfairness, litigating the proper amount of child support to be paid to a single mom and working on a final distribution of assets in several divorces.

Attorney Tony Distasio has been handling landlord/tenant work for Section 8 clients, where evictions are based on everything from unpaid rent to allegations of criminal misconduct and violence. Attorney Distasio has been everywhere from Pittsburgh to Philadelphia this month as part of hearings on these issues.

Attorney Carl Carrero has been writing briefs and motions and has been to court to handle a request for a delay of a sheriff sale. As sheriff sales pickup and foreclosures continue, Attorney Carrero and the Cornerstone Law Firm team are expecting to see more last-minute litigation over attempts to sell houses after foreclosure.

Attorney Joel Ready began the month handling a 2-week trial on a claim regarding trade secrets and a fight over corporate ownership of a large company. From there, he has handled several contract disputes. He has also been finalizing a few guilty plea agreements in the last 2 weeks to ensure the best possible deal for individuals facing criminal charges.

Finally, the whole staff at Cornerstone Law Firm has been working to ensure that clients’ wills are being drafted, contracts are getting signed, deeds are being drawn up and filed, and that clients are getting quick responses to their concerns. If you have a question about your legal issue, call Cornerstone Law Firm today so we can help you.

Business litigation in Lehigh County

When it comes to running a business, every experienced entrepreneur knows that it’s only a matter of time before a great idea well-executed will meet with conflict. Whether it’s a competitor making false claims about you, a large customer that suddenly stops paying the bill, or an ownership dispute, successful businesses often find themselves in the middle of legal controversy.

For businesses in the Allentown area, this is a real concern. Allentown and the Lehigh Valley have seen an explosion of growth in the last ten years, with industry coming back to the city and a revitalized downtown. But for many, with this growth comes the growing pain of business conflict and litigation.

So how can you prepare your Lehigh County business for dealing with litigation challenges? Here are three steps you can take now to ensure that your company is ready for the storms ahead.

Review your ownership documents and your operating agreement or bylaws.

When you’re running a business day-to-day, it can be difficult to take time and review “old news,” like the documents that govern the running of your company. But this is an important step, and taking time to review these documents every year can save you a lot of headaches down the line. In his landmark book, Built to Last, business author Jim Collins wrote about how important it is for companies large and small to take time and review their mission statements and founding documents to guard against “mission creep.” This is doubly true of legal documents. Ignoring the rules you created for your company can open you to legal challenges and personal liability on many matters—and this is particularly true if you have multiple owners.

And while we’re talking about multiple owners, it’s also important to document your decision-making process together by means of corporate resolutions, meeting minutes, or other instruments designed to demonstrate who votes which way. Keeping track of this can guard you against later legal challenges that you, as a majority shareowner, failed to take care of your co-owners’ interests.

Develop a relationship with a business attorney.

When a crisis hits, it’s important to know whom to call. When a lawsuit is served on you, you typically have only 20 days to respond. At that point, in the midst of the pressures of your regular business operations, you have to find an attorney and they need time to answer the Complaint appropriately. You may need to explain the ins and outs of your company, as well as the origins of the specific dispute, to this attorney. This is why it is helpful to have a working relationship with a litigation attorney well before this sort of dispute breaks out.

Conclusion: Call Cornerstone Law Firm today

At Cornerstone Law Firm, we pride ourselves on our client-focused approach to the law. We get to know our clients personally and professionally, and want to know about their businesses before a dispute begins. If you own a business in the Lehigh Valley, call us for a free discussion of your business needs. We’re here to protect and promote your business growth, and we’d love the chance to get to know you.

What Should go in Your LLC’s Operating Agreement

Limited liability companies in Pennsylvania are organized by filing with the department of state. But the most important document that an LLC’s owners sign is the operating agreement. The operating agreement serves the same function that bylaws serve for a corporation. They are the constitution that governs the organization’s operations. The operating agreement is generally not filed with the department of state, nor with any other government agency. They are an entirely private document between the owners (called members in an LLC).

Operating Agreements are agreements between the LLC’s owners

The operating agreement is an agreement between the members and the organization itself as to how the LLC will be run. It lays out the ownership interest of the parties and provides for dispute resolution. Below are a few things that every LLC operating agreement should consider including:

  1. Ownership interest of the members.

The operating agreement is usually the first document to actually name who the owners of an LLC are. Indeed, it is often the only document to name the owners. The operating agreement should identify who the owners are and what their percentage interest is.

There’s a difference between beneficial and legal ownership in LLCs. Someone may have a non-voting interest in the LLC, meaning that they’re entitled to some of the profits of the entity without having any power to determine how the organization is run. Conversely, someone may have a high voting percentage but not necessarily a high ownership interest.

Most LLCs tend to keep it simple, however. If you have four owners, they each have 25%, or if you have two owners, they’re 50/50. But in the case of an even number of owners, what happens if there’s a tie? If the owners for whatever reason are unable to agree on how to run the organization on a very important issue, how do you break the deadlock?

  1. Dispute resolution provisions.

For this reason, a good operating agreement should include dispute resolution provisions. These provide that if the members are tied in an important vote, an outside party can be chosen as an arbiter. Sometimes this arbiter is named, but more often, a guide to how the arbiter should be chosen is laid out in case of such deadlock. In extreme cases, operating agreements that we’ve seen at our firm have dictated a coin flip to make a final determination. We certainly don’t recommend that! But even a coin flip is better than nothing in laying out ahead of time how conflict resolution will occur between the members.

Furthermore, having a plan in place sometimes helps everyone avoid such conflict. Knowing that an important vote might be left to a coin flip or an outside arbiter encourages the members to work harder to resolve things before invoking such provisions.

  1. Oppressed minority owner provisions.

In cases where there is a majority owner and minority owner, or even where there are a handful of owners, sometimes you want to write in provisions of what happens if one person or more feel like their interests are no longer represented by the whole. As a simple example, if you have six owners and two of them feel that the other four owners are “forcing them out” of major decisions, what rights do these two have?

When LLCs form, the members are usually getting along. But divorces, inter-personal fights, business or artistic disagreements and more can get in the way. If the majority is outvoting the same minority repeatedly, the minority can begin to feel as though their ownership interest is no longer valuable.

Although Pennsylvania law provides a number of avenues for minority owners to address this, its best if you spell out provisions in your operating agreement to govern these situations. Doing so also avoids fights in many cases by giving everyone ways to avoid conflict before it starts, and by spelling out how everyone loses if anyone is being pushed out.

  1. Indemnification of officers and members.

Another thing to consider in your operating agreement is having a clear statement about indemnifying officers or members for their work in the company. In the event that an individual is sued for their work with a company, the question often becomes whether the company should have to pay their legal bills. Making sure that your owner members aren’t left to fend for themselves if sued is an important step to maintaining the long-term commitment of all investors to the company.

  1. Buyout provisions.

Perhaps the most important part of an operating agreement is a statement about how a member’s interest is bought out once they’ve decided to sell. This happens both when a member sells voluntarily and involuntarily due to bankruptcy or other proceedings. Will the membership interest be appraised? Must it be sold first to other members or to the company? Or can they sell to an outside investor? These and other important questions should be resolved up front before the problem arises. Doing so can avoid costly litigation and unintended consequences of having an unexpected member buy in from the outside without warning.

Conclusion: Speak to a business lawyer about your LLC operating agreement

If you’re forming an LLC in the commonwealth of Pennsylvania, there are advantages to hiring an experienced business lawyer to help you. At Cornerstone Law Firm, our attorneys help draft operating agreements that foresee the types of problems that you may run into even with a single business partner with whom you’re on good terms. A good operating agreement is not a tool to start fights with; rather it can help to prevent conflict down the road.

Call us today to discuss how we can help you in your business.

How Businesses Use Small Claims Court to Save Money

One of the best kept secrets in business law is how companies can use small claims court to save money. In Pennsylvania, Magisterial District Courts (sometimes called “MDJs” for the Magisterial District Judges that sit in them) act as our small claims’ courts. Learning to navigate them can save time and money. MDJs have concurrent jurisdiction with the county Courts of Common Pleas for claims up to twelve thousand dollars, meaning you can file your claim in “big court” or in the MDJ.

Suing Without an Attorney

When small businesses have minor claims against business associates or customers who haven’t paid bills, the MDJs are a great venue to consider. Going to court in an MDJ does not always require the services of an attorney. Technically, any corporate entity, whether an LLC, a corporation, or similarly otherwise, is required to hire an attorney. This is because a corporate entity cannot represent itself the way an individual can. A corporate entity is technically a separate person. However, in practice, most MDJs allow a business to be represented by an owner or other representative pro se. As a practical matter, this means that businesses can pursue overdue bills, deadbeat tenants, and contract-breaching business associates without the expense of hiring a lawyer.

Of course, there are many benefits to having a lawyer, but even businesses that utilize the services of a corporate attorney will seek advice from this attorney on a specific case before deciding whether to undertake filing the suit and handling it themselves.

Small Claims Court is Quick

Another reason that small businesses utilize small claims court in Pennsylvania to save money is because the process to file in the MDJ is fast and leads to a hearing usually within around sixty days. Compared to filing in the Court of Common Pleas (the court that governs a county), this is lightning speed.

The MDJ will have one day of hearings, without any “discovery” process for producing documents between the parties, and without the litigation that accompanies the months of waiting on a response. MDJs don’t require complicated pleadings, and typically make a decision the day of the hearing or within a few days thereafter.

Small Claims Court gets the attention of your adversary

A final benefit to the MDJ process is that it is typically a simple way to get someone’s attention. It shows that you’re serious about collecting an overdue bill and triggers them to pay an attorney or at least respond. If they fail to show up to court, judgment is issued against them. Although you have the right to appeal from an MDJ decision within 30 days, as a practical matter, it often ends disputes and allows the parties to settle in the courtroom.

Conclusion: Call us for advice on how to handle your MDJ hearing

Our attorneys have helped business clients with hundreds of appearances before MDJs, and we’re ready to help you.  Call us at Cornerstone Law Firm today to discuss how your business could save money by utilizing small claims court.

Nonprofit Best Practices

When you are on the board of a nonprofit organization, you are handed the important trust of ensuring that your organization is complying with all legal obligations and is adhering to financial best practices in how it handles donor money. In addition to having a good accountant to help you figure out the best way to handle funds, it is important that you keep up with legal requirements for your nonprofit. Here are a few important steps every nonprofit should take to ensure long-term stability and legal compliance.

1. Draft a Constitution and Bylaws

Most people are vaguely aware of the requirement that nonprofits have bylaws that govern their existence. Once a nonprofit is properly formed, it is important to have an operating agreement that governs the rights and responsibilities that directors, officers, employees, and even sometimes the general public have in regard to the nonprofit. This includes answers to the following questions:

How many members are on your board?

How many committees will the board have?

Will you require more than one signature on checks before expenditures of a certain amount are made?

Does your organization hold to a specific statement of faith or political creed (and what hiring and other decisions will this affect)?

In your bylaws, these questions should be answered. They do not have to be lengthy and shouldn’t be hard to understand. Your bylaws should be setup like an owner’s manual—but one that you’ll actually consult! Good bylaws are empowering, allowing everyone to know their obligations and responsibilities, and foreseeing how to resolve difficult conflicts that inevitably arise in even the best-run nonprofits. Best of all, a good set of constitution and bylaws relieve everyone of the nagging fear that they’re not doing something right.

A common question we hear is what the difference is between a constitution and bylaws. As you can see above, we’ve used the term interchangeably. There once was a difference, but today, one document, called the “bylaws,” is more than enough to get your organization set and running on the right path.

2. Draft Resolutions and Keep Meeting Minutes

Once your bylaws are in place, it is important to produce “meeting minutes” at all of your meetings. These minutes can be the notes that your secretary takes, but ideally are typed up in a standardized format, reflecting the general flow of discussion of the board, and approved at the following meeting after everyone has had a chance to see them.

So what’s the point of meeting minutes? Meeting minutes act as the history of your organization showing what actions were authorized or rejected at various meetings. At first, it can be tempting to rely on one individual’s memory or on the board’s collective memory for these actions. However, in the case of legal action against the board by a donor or government agency, or even by a disgruntled board member, having meeting minutes can strongly support the validity and propriety of actions that the board has taken on behalf of the nonprofit.

Furthermore, organizations which keep track of minutes and are consistent with them provide helpful information for new board members and new officers of the organization to look back on and understand the trajectory of your organization. Meeting minutes are one of the first things to be sacrificed by nonprofits who have just formed. Often, officers and directors feel that they are a lot of work to keep up with. But meeting minutes are a vital form of guaranteeing that your nonprofit is operating according to law and protecting it from threats within and without.

What is the difference between minutes and resolutions? In general, minutes are for meetings that were held, while resolutions are actions the board takes by vote without a formal meeting being called. They are number of situations where this is necessary and many more situations where it is merely the most convenient. Sometimes the organization authorizes bonuses annually, or an emergency comes up in everyone’s absence. A resolution can be signed by everyone authorizing action and confirming that the board is in agreement with a specific proposal.

There’s no reason that meeting minutes are required over resolutions or resolutions over minutes. Both serve the same essential function in different ways.

3. Ensure no excess benefit

For smaller nonprofit organizations, this piece is easy, but as you grow, it presents new challenges. You must avoid excess benefit to any individual or group of individuals arising out of a nonprofit’s property. A few examples of this are when your organization enters into a transaction with a private party or group to give them a piece of real estate at less than full value. Any property exchanged that is not in an “arms-length transaction” can fall under suspicion and can put the nonprofit corporation at risk. Another common example is when an executive director and his family are all driving vehicles owned by the corporation, making money off of their private company’s services to the nonprofit, and bringing in large paychecks from the nonprofit for their labors. While any or all of these can be legal, they must be done in a way that does not transgress the IRS’s rules on excess benefit.

This is a complicated area of law, and sometimes the best you can do is manage the risks. But working with an experienced nonprofit attorney is an important step in ensuring that your nonprofit doesn’t lose tax exempt status or otherwise expose itself to lawsuits or other challenges.

Conclusion: Contact a Nonprofit Lawyer today

At Cornerstone Law Firm, our attorneys help nonprofit boards and leaders to manage their legal responsibilities and ensure compliance with best practices. If your organization could use a helping hand, call us for a consultation on your next steps.

January 2021 Update

Attorney David Crossett has continued working through personal injury claims for car accident victims in Reading, Pennsylvania this month. Speaking of clients who are concerned about whether their car insurance was sufficient during a car accident, Attorney Crossett explains: “Clients who are ‘limited tort’ should not assume their insurance will not cover their injuries, especially when the injuries are catastrophic. We don’t want to see clients give up their rights in those situations.” Attorney Crossett’s work has also included mediation with judges in attempts to help clients resolve their conflicts outside of court.

Meanwhile, Attorney Joel Ready has been handling a number of civil rights matters, including for violations of the 1st Amendment. “Harassment claims, in particular, bring an important legal issue into the crosshairs,” Attorney Ready explains. As part of his work in this area, Attorney Ready appeared on WFMZ to speak about the First Amendment’s application to private life and employment issues.

Finally, Tim Crossett, Cornerstone’s Firm Administrator, has been working on the launch of the all new web-show, “Business in Berks,” a series of interviews with local business owners about the challenges of 2020 and beyond. The show goes live in February on our youtube channel.

At Cornerstone Law Firm, our attorneys and staff are hoping that 2021 is more pleasant for the world than its predecessor! We look forward to helping you in the coming year.