Frequently Asked Questions
Corporate/Business
- Do I need to incorporate?
- Is a limited liability company better than a corporation?
- Once I am incorporated, do I really have to bother with bylaws and stockholder agreements?
- I only need a boilerplate contract. Can I just use one I found on the Internet?
Litigation
- What is a statute of limitations?
- What is the difference between contributory negligence and comparative negligence?
- Is it better to arbitrate a case or take it to Court?
- What is the "Cap" in Maryland and does it exist anywhere else?
Wills
FAQ’s Corporate/Business
1. Do I need to incorporate?
Whether to incorporate depends upon a variety of factors. Most people incorporate to protect their personal assets from the debts or liabilities of their company. This "protection" can be also gained from other entities such as limited liability companies and limited liability partnerships. However, the "protection" is not as all-inclusive as some think. While incorporating may protect your assets from the actions of other persons acting on behalf of the corporation (i.e. employees), it does not necessarily protect you from your own actions. Additionally, many landlords and banks require personal guarantees. If you sign such a guarantee, the existence of the corporation will generally not protect you from personal liability.
2. Is a limited liability company better than a corporation?
The answer to this question varies on a case-by-case basis. Which business entity is best for you depends upon your situation and your goals. Both LLCs and corporations provide the "protection" discussed in the previous question. However, each is taxed differently. For instance, an LLC is generally taxed as a partnership or sole proprietorship. Therefore, while an LLC does not have to worry about the "double taxation" that may be applicable to corporations, members of an LLC must pay self-employment tax. Further each of these entities, as well as other forms of business entities, have characteristics that may be advantageous or disadvantageous to you.
3. Once I am incorporated, do I really have to bother with bylaws and stockholder agreements?
Whether you are forming a corporation or some other business entity, it is important to take all necessary steps to ensure that the task is complete. If you want the corporate "protection" discussed above, it is important to treat the corporation as an entity separate and distinct from yourself. What you may view as unnecessary corporate formalities are often, in fact, the very activities that provide the desired protection. If you own the business with other people these documents govern your relationship and in turn may prevent disputes by setting forth the rights and obligations of each person involved in the business. In the event that a dispute does actually arise, these documents, if properly drawn, should guide the resolution of the dispute.
4. I only need a boilerplate contract. Can I just use one I found on the Internet?
Boilerplate language, if used without thought, can have disastrous results. Boilerplate language is generally used because it is supposed to have been interpreted by courts and found to be effective in conveying certain ideas. However, using boilerplate can be dangerous unless you know how the language has been interpreted. A court may not read the language in the same way that you do. As for contracts taken from the Internet, they most likely do not take into consideration all of your needs. Nor are they likely to fully apply to your situation.
Litigation
1. What is a statute of limitations?
This is time within which you must file a lawsuit. In Maryland and the District of Columbia, you generally have to file a lawsuit within three years of the date of the incident for which you want to sue. However, there are exceptions. Sometimes, the time does not begin to run right away. Additionally, some causes of action such as libel or assault must be filed within one year. When dealing with a governmental entity, the rules are different again. If you think that you have a case against a governmental entity, there are many statutes that require you to make a claim in a specific form and manner within a short period of time, such as six months or 180 days from the time your cause of action accrues. If you are not sure if or how this applies to your situation, you should call an attorney immediately.
2. What is the difference between contributory negligence and comparative negligence?
Contributory negligence is a defense to a negligence case in which the Defendant (the person or entity sued) asserts that the injury was caused in whole or in part due to the negligence of the Plaintiff (the person or entity bringing the lawsuit). If a plaintiff is found to be negligent to any degree, his/her claim is barred even if the defendant was more negligent than the plaintiff. Comparative negligence assesses by percentage, the negligence of both the plaintiff and the defendant. Any award in favor of the plaintiff is reduced by the percentage of negligence that the Plaintiff contributed to his/her own injury. Both Maryland and the District of Columbia recognize the concept of contributory negligence. Neither recognizes the concept of comparative negligence.
3. Is it better to arbitrate a case or take it to Court?
Each has its advantages and disadvantages. Arbitration can generally be conducted more quickly than a trial. However, by going to arbitration, you may not end up with an arbitrator that knows the law as well as a Judge and you generally give up the right to appeal egregious outcomes. Additionally, the rules of evidence found in the courtroom generally do not apply or are extremely relaxed in arbitration proceedings. While some may see this as an advantage, the result may be that a decision in arbitration may rest on matters that are not really relevant to the issues involved. You also give up the right to a jury in arbitration proceedings.
4. What is the "Cap" in Maryland and does it exist anywhere else?
Maryland has imposed a "Cap" on non-economic damages in negligence cases. Economic damages are actual expenses incurred in the past or expected to be incurred in the future, such as medical bills and lost wages. Everything else is considered a non-economic damage. This includes pain and suffering, inconvenience, as well as emotional injuries. In Maryland, but not in the District of Columbia, non-economic damages are limited, such that a Plaintiff may not be awarded more than the maximum allowed by law, or the "Cap".
Wills
1. What happens if I do not have a will when I die?
Property owned jointly with a spouse ordinarily passes to the spouse. Life insurance and retirement plans with beneficiary designations are generally transferred to the beneficiary. However, property that you own in your own name will pass in accordance with a State's statute that covers this situation. This is not always how you would wish for your assets to be distributed upon your death. That is why it is important to have a will and keep it current. If you have significant assets, a will and associated documents can help minimize any estate tax that may be due upon your death.
2. Can I use a will that I found on the Internet?
Each State has specific rules that effect the manner in which a will must be prepared in order for it to be valid. Wills on the Internet may not comply with the laws of your State.
