California State Court Jurisdictional Filing Limit Changes for 2024

Effective Jan. 1, 2024, the following changes to the jurisdictional amounts for California state courts apply:

Small claims:  Maximum claim increased from $10,000 to $12,500;

Limited civil and unlawful detainer cases:  Maximum claim increased from $25,000 to $35,000; and

Unlimited civil and unlawful detainer cases:  Minimum claim increased to $35,000.

Filing fees are unchanged.
These changes can be seen here.

Economic Assistance Programs for California Small Businesses Affected by Coronavirus (COVID19)

Federal, state, and local governments are announcing economic aid and loan programs to assist small businesses impacted by COVID-19 (coronavirus). These include:

U.S. Federal government (IRS): https://www.irs.gov/coronavirus?utm_source=Summit+CPA%2C+Inc.&utm_campaign=f247223cfa-EMAIL_CAMPAIGN_2020_03_22_02_30&utm_medium=email&utm_term=0_c3b50b8184-f247223cfa-356485491

IRS tax filing and payment deadlines extended to July 15, 2020: https://www.irs.gov/newsroom/payment-deadline-extended-to-july-15-2020

Federal government (SBA loans): https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

State of California: https://oewd.org/covid-19-small-business-resiliency-fund

New 4/2/2020: Gov. Newsom announces additional small business loans for those that may not be eligible for federal SBA loans: https://www.gov.ca.gov/2020/04/02/governor-newsom-announces-new-help-for-small-businesses-workers-displaced-by-covid-19/

State of California Franchise Tax Board (FTB) tax filing and payment deadlines extended: https://www.ftb.ca.gov/about-ftb/newsroom/covid-19/index.html

State of California Employment Development Department (EDD): https://www.edd.ca.gov/about_edd/coronavirus-2019.htm

City of Los Angeles: https://www.lamayor.org/mayor-garcetti-announces-economic-relief-package-small-businesses-impacted-novel-coronavirus

City and County of San Francisco: https://oewd.org/assistance-guidance-businesses-and-workers-impacted-covid-19

Facebook Small Business Assistance Program: https://www.facebook.com/business/boost/grants

For businesses that are permitted to remain open by state and local authorities, guidance from the U.S. Center for Disease Control has best practices to avoid spreading coronavirus.

Posted March 22, 2020, updated April 2, 2020.

How to Avoid Tax Audits by Incorporting Your Business

Updating my 10-year old post, How to Avoid an IRS Tax Audit: Incorporate Your Small Business, the IRS' own most recently available data (for tax year 2017), show that, for a taxpayer with $100,000 or more in gross revenue, the chances of being subjected to an audit vary substantially based on whether the business was operating as a sole proprietorship reporting taxable income on Schedule C of the owner's personal income tax return (1040) or an incorporated business reporting income on a corporate tax return (1120 for C corporations, 1120S for S corporations), with unincorporated sole proprietors being 12 times more likely to be audited by the IRS:

Sole proprietor:  2.40%

Corporation:  0.20%

Out-of-state Online Retailers Now Required to Collect California Sales Tax

As a result of the U.S. Supreme Court's Wayfair decision, starting 2019, California will require remote sellers with no presence in the state to register and collect and pay over to the state sales taxes (technically, "use tax") on sales made to California consumers. This requirement will apply if the seller has made 200 or more transactions, or $100,000 or more in sales, into California in the preceding calendar year.

Other states are also rolling out similar requirements, so California businesses selling tangible goods to consumers in others states will need to be aware of any out-of-state filing requirements.

FTB Loses in Out-of-State LLC "Doing Business" Tax Case

The recently created California Office of Tax Appeals (OTA) has issued a ruling in the Satview case against the Franchise Tax Board (FTB)'s position that a 25% member of a California limited liability company was "doing business" in California and subject to California's minimum annual corporate franchise tax. The OTA found that passive ownership, without management, did not subject the out-of-state corporate member to California tax (although the LLC that was conducting the business in the state, and that the out of state company had invested in, was of course subject to it).

With this and other decisions, the OTA has shown that it will not rubber stamp positions taken by the FTB or other California tax agencies, especially when they make little sense, like the FTB's position in this case. Nonetheless, the FTB is anticipated to continue to apply the prior Swart case narrowly, and continue to maintain that passive members of LLCs organized or doing business in California are themselves also doing business in the state.

California Supreme Court Ruling Makes Independent Contractor Classification More Difficult

The California Supreme Court has made an important change to employment classification law for California employers, that will make it more difficult for companies to appropriately classify workers as independent contractors.

The new "ABC" standard is simpler but more strict than the prior classification scheme. In order for the company to properly classify a worker as an independent contractor, the company must prove the following (note that the burden is on company seeking IC treatment and if the burden is not met, the worker is an employee, the criminal law equivalent of "guilty until proven innocent"):

A - that the worker controls his or her work,

B - that the duties go beyond what the business normally does, and

C - that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

Any of these can derail a would-be independent contractor relationship, but it is the second of these prongs - the "B" in "ABC" - that will be perhaps the most difficult for many California companies including ride-sharing services that claim all drivers are independent contractors.

Whether Uber and Lyft, who have just received subpoenas for more information from the California Attorney General, will be able to argue they are in the business of providing a mobile app, rather than actual transportation, remains to be seen. If not, their business model will need to change dramatically, at least in California.

Companies whose consulting arrangements with ICs previously may have passed muster may find themselves unable to show that the pre-existing relationship still qualifies under the new ABC standard and are well advised to have a business and employment law attorney review the circumstances and agreement and then implement any needed changes.

The case is Dynamex Operations West, Inc. v. Superior Court, County of Los Angeles, Supreme Court of California, No. BC332016, April 30, 2018.

In 2012, a California law went into effect providing for additional civil penalties for wilfully misclassifying workers as independent contractors of $5,000 to $15,000 per violation.

Update: On January 1, 2020, AB 5 became law, which essentially codified Dynamex into statutory law.

SCOTUS Rules for Employee Arbitration Class Action Waivers

The Supreme Court has resolved a conflict amongst the U.S. Federal Circuit Courts, and once again the Ninth Circuit has been overruled. This time it was for SCOTUS to confirm that class action waivers in employee arbitration agreements are enforceable (if properly drafted). The Supreme Court had previously ruled these as enforceable in consumer arbitration agreements in 2011.

Despite the favorable ruling for employers that was opposed by the Obama Administration and supported by the Trump Administration, California employers need to ensure their arbitration clauses are carefully drafted and be aware of the trade-offs in selecting arbitration over litigation in the first place.

The cases are Epic Systems Corp. v. Lewis, No. 16-285; Ernst & Young LLP et al. v. Morris et al., No. 16-300; and National Labor Relations Board v. Murphy Oil USA, Inc., et al., No. 16-307 (May 21, 2018).

Suspended Corporations and LLCs Lose the Right to Conduct Business in California

Jonas M. Grant was recently quoted as a California corporate law subject matter expert in an article in an online journal covering Los Angeles real estate news:

[The] corporation ... continues to conduct business even though the state of California suspended its registration over two months ago. Operating without a valid registration is illegal under California law, legal experts said. ...

Jonas Grant, an L.A.-based attorney who practices corporate entities law, said as a business without a valid corporation registration, “you’re basically dead in the water until you fix the problem.” ...

Suspension temporarily strips corporations of a number of rights ... including being able to defend itself in court or bring a lawsuit. Such corporations could also have contracts voided by a court, according to California law.

“If you don’t have the right to conduct business that would include the right to contract,” said Grant.

Inside Mercer Vine: A suspended brokerage, a potential fraudster at the helm, and $260M in dead deals by Natalie Hoberman and Will Parker, The Real Deal, December 1, 2017.

A suspended corporation cannot conduct any business in the State of California until it is revived to active, good standing, a process called revivor. This is generally accomplished by filing any past due annual reports or tax returns, and by paying any past due taxes, interest, and penalties with the Franchise Tax Board.

Recommended steps to avoid a suspension include engaging an accountant to assist with tax preparation and filing and to keep track of associated deadlines, and enrolling the LLC or corporation in a lawyer's corporate maintenance program to ensure legal compliance.

Does LegalZoom Handle Its Own Trademark Registrations?

LegalZoom offers trademark filing services, so naturally, when it comes to its own trademarks used to promote this and other of its online, non-attorney document preparation services, it trusts these to its in-house team, the same ones used by its customers, right?  

Wrong.  According to publicly available U.S. Trademark Office records, LegalZoom.com is currently using Bryan Cave, a large law firm, to register its new trademarks and maintain its existing marks.

Click the image below to view one example:

You may want to consider following Legalzoom's lead and engage a trademark attorney to register, maintain, and advise your small business regarding trademark matters.

Why don't TV/film studios and producers accept unsolicited material?

Why Do TV Networks Have 'No Unsoliciated Materials' Policies?
One reason:

LAWSUITS. Networks do not want to get sued because you thought they stole your idea. When creators pitch an undeveloped idea anybody could have come up with ... they think a show that has anything do with their idea was stolen from them. For instance, Marc Zicree was a writer on “Star Trek Next Generation” and he told us there were one, or more, lawsuits filed for every episode by people who claimed their ideas had been ripped off. Are ideas ever stolen? Yes. Does it happen as often as rumored? Absolutely not.

Also see: Help, Hollywood Stole My Idea (or Script)!

Screenwriters: How to Find An Agent

ScreenwritingU is offering a free teleconference on a topic many new screenwriters have lots of questions about - how to land an agent. Sign up here.

Tips for Starting a Part-Time Side Business While Still Employed

Tips for Starting a Side Business from balance.com include:

[C]onsider running your business as a part-time operation alongside your current job...

understand and follow your employment contract to the letter, especially if it makes reference to inventions and intellectual property (IP) that you develop as part of your job. Almost always, anything developed on company time and using company property belongs to the company.

Screenwriters: Find An Agent (or Manager) with Script Contests

Getting representation from an agent or manager in Hollywood is not easy. You have to find someone who believes in you and your work, and you need to believe that they are both capable and willing to sell your work.

One of the better ways to get noticed by agents, managers and producers is script contests. ... it can lead to an offer of representation.

5 Script Contests Actually Worth Entering, Screenwriting Magazine, Sept. 16, 2016

Inspirational Quotes for Entrepreneurs

Some of my favorite quotes of interest to entrepreneurs and small business people from a collection of 20 Small Business Quotes ("20 Small Business Quotes That Will Inspire You", about.com, March 15, 2016):

“The critical ingredient is getting off your butt and doing something. It’s as simple as that. A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer” - Nolan Bushnell

“If you're going to run a small business, you need to know what everyone is doing, be the first one in and the last one out, and work weekends.” - Glen Mazzara

“In America, small business is a big deal.” - Bob Beauprez

Client Launches New Science Fiction Website

Today, a client launched a new website - www.recursor.tv - "The Future Reflected" - dedicated to original and aggregated science fiction videos and web series. Please visit and enjoy!

California personal income taxes

Two-thirds of California's overall tax revenue comes from personal income taxes, with the top fifth of income earners paying 90% - and the top one percent paying 45% - of these taxes.

Source: The tax man cometh, and California rich – getting richer – pay most

See how California compares to other U.S. states, including the seven that have no personal income tax, here:
2016 Top State Marginal Income Tax Rates.

State of the San Francisco and Los Angeles, California Legal Markets 2015 / 2016

A recent survey of 15,000 California lawyers uncovered the following statistics concerning the Los Angeles and San Francisco legal markets and the lawyers who work there:

New business growth slowed by 16 percent in Los Angeles and 26 percent in San Francisco; however, growth in Los Angeles (2.7 percent) was still lower than San Francisco (6.7 percent) in 2015;

Los Angeles has one lawyer per 23 businesses, while San Francisco has one lawyer per eight businesses;

Growth in the number of newly barred attorneys in 2015 was comparable in Los Angeles (1.6 percent) and San Francisco (1.4 percent);

The number of newly barred attorneys across all of California in 2015 was the lowest it has been in 10 years;

Hourly billing rates are slightly higher in Los Angeles (on average $302 - $410) than in San Francisco (on average $293 - $408); and

Customer satisfaction with legal services in both Los Angeles (86 percent) and San Francisco (84 percent) is slightly higher than the California average (82 percent).

Source: UpCounsel's 2016 Los Angeles Business Law Report.

2016 California Minimum Wage Increase

California has implemented legislation that is slated to increase the state minimum wage to $10.50 for larger employers on January 1, 2017, with employers of 25 or less employees following behind a year later. Further annual increases will push the state's minimum wage to $15.00 per hour by year 2022.

That is, unless the law's economic downturn provisions delay the implementation of the increases. After the $15.00 level is reached in 2022 (2023 for small employers) - or later if the governor delays implementation of the increases - then further increases tied to inflation will occur automatically.

Either way, Los Angeles' minimum wage law will increase the city minimum wage to $10.50 on July 1, 2016, with phased increases to $15.00 by 2020, and a similar Los Angeles County law will do the same thing outside of city limits.

The current California minimum wage can always be viewed on the Department of Industrial Relations website. Employers must generally comply with the highest of the U.S. federal, California state, or local city minimum wage where their employees work.

Jerry Brown Signs $15 Minimum Wage in California, Sacramento Bee, April 4, 2016:

California and New York become first states to commit to $15 minimum wage;

Bill expected to avert costly November ballot measure fight;

Labor unions celebrate, while Republicans and business groups groan

Hillay Clinton Calls for Estate Tax Increase

As part of her campaign, Democratic candidate for president Hillary Clinton has called for increasing the estate tax rate and the number of estates the tax would apply to. Specifically, her proposal calls for reducing the individual estate and gift tax exemption from its current level of $5.45 million to $3.5 million, and raising the estate tax rate from 40% to 45%.

President Obama has supported similar tax increases, but a Republican Congress has not enacted them.

Some estate planning techniques that critics term loopholes would remain under her plan, including some she and Bill Clinton have used themselves.

Form Operating Agreements Not Recommended For Multi-Member LLCs

New York "business divorce" lawyer Peter Mahler blogs about his experiences involving two members of a New York limited liability company who relied on LegalZoom to draft their LLC's operating agreement. New York's LLC act differs from California's, but the key takeaways may be the same for Californians considering entering into a partnership based on an online, cookie-cutter document:

[When] the members’ relationship turned bitter .... shortcomings in the operating agreement also contributed significantly to the parties’ legal postures and willingness to risk litigation.... I’m not suggesting that every lawyer-drafted LLC agreement is a model of perfection, but I found it incredible ... that a standard form operating agreement being sold online by a major company to the unknowing public as a more affordable alternative to using a lawyer could suffer from such a fundamental flaw that, in the end, only intensified the parties’ legal conflict.