Non-Competes in this LinkedIn World!

A profile update on LinkedIn informing those in network about the person’s new job profile became a cause of action in a lawsuit against the person for infringement of non-compete juxtaposing announcement/update to solicitation to targeted audience, which was prohibited by Non-Compete.  A good tactic to inform about your new position to targeted audience without personally contacting them, which would otherwise have been prohibited by Non-Compete.

In the case in Massachusetts, a recruiting consultant allegedly entered into a written Employee confidentiality and non-Compete agreement prohibiting solicitation, recruiting or hiring other Company employees apart from other things for a period of one year after leaving. The employee after leaving employer updated her profile on LinkedIn informing her 500+ contacts of her new employer, current title and contact information. A Massachusetts Court Judge in his Order dated October 24, 2013, held that a mere announcement or a job update is not a Solicitation hence no breach of non-compete. 

                                                                                   

Series LLC-Companies within a Company!

A series LLC (“SLLC”) is basically multiple entities within one company and each entity has its own identity and existence. So if you are an investor, instead of having multiple entities for multiple properties, you could have a one series LLC and each component within Series LLC could each own a property without having to go through forming multiple entities. Each Series within a company can have its own business purpose, own assets, separate liabilities and need not even have same members for all Series all this comes with the protection of limited liability for each individual Series i.e. each component within a Parent Series, LLC has same advantages of an LLC without having to waste resources on forming separate LLC’s. A series has the power to: (1) sue and be sued, (2) contract, (3) hold title to assets of the series, and (4) grant liens and security interests in assets of the series[1]. Members and Managers also enjoy limited liability of the parent Series LLC and its each individual Series within the parent Series LLC[2]

 In Texas Series LLC’s are relatively new, since September 2009 codified under Bus. Org. Code Subchapter M, §101.601-§101.621. For a Series LLC’s to be enforceable as intended it must strictly adhere to some basic requirements stated in Bus. Org. Code § 101.602[3] namely that Certificate of Formation and the Company Agreement must contain Notice of limitation of liability of Series and there must be separation of accounts of each Series.

Traditional LLC Owns one property		Series LLC
		Series A Owns one property	Series B Owns one property	Series C Owns one property	Series D Owns one property	Series E Owns one property

Not many people know about it and those who do know are skeptical since it is not very much tested. Series LLC’s may be new in Texas but States like Delaware whose model Texas adopted, have had it since 1996.  The skepticism is understandable. There is not much case law on how things will be handled if one series goes bankrupt, how do we handle the taxes, does each series gets its own EIN number, since not all States have provision for Series LLC, how will that Jurisdiction treat Texas LLC?  Most of these issues are resolved if you just consider each component as an entity in itself which concurs with the stand taken by IRS. This will mandate you to have an EIN for each, file separate taxes, maintain separate records etc.  As far as doing business in Jurisdictions which do not have provision for Series LLC, a Series LLC which is well organized and maintained I do not see it as an issue however to avoid undesired consequences if you do business beyond Texas and other States that have provisions for Series LLC[4], you may want to refrain from forming Series LLC and just stick to a traditional LLC.

The popularity of Series LLC is growing.  More recently D.C. has also adopted a provision for Series LLC. Further a Series LLC can wind up individual series without winding up parent LLC or any other Series. A Series LLC is a great tool for having multiple investments under one umbrella without the added cost of forming multiple companies at the same time enjoying benefits of insulation of each investment.

****The information in this column is not intended as legal advice but to provide a general understanding of the law. 

---

[1] Bus. Org. Code § Sec. 101.605.  GENERAL POWERS OF SERIES.  A series established under this subchapter has the power and capacity, in the series' own name, to:

(1)  sue and be sued;

(2)  contract;

(3)  hold title to assets of the series, including real property, personal property, and intangible property; and

(4)  grant liens and security interests in assets of the series.

[2] Bus. Org. Code § Sec. 101.606.  LIABILITY OF MEMBER OR MANAGER FOR OBLIGATIONS; DUTIES.  (a)  Except as and to the extent the company agreement specifically provides otherwise, a member or manager associated with a series or a member or manager of the company is not liable for a debt, obligation, or liability of a series, including a debt, obligation, or liability under a judgment, decree, or court order.

(b)  The company agreement may expand or restrict any duties, including fiduciary duties, and related liabilities that a member, manager, officer, or other person associated with a series has to:

(1)  the series or the company;

(2)  a member or manager associated with the series; or

(3)  a member or manager of the company.

[3] Sec. 101.602.  ENFORCEABILITY OF OBLIGATIONS AND EXPENSES OF SERIES AGAINST ASSETS.  (a) Notwithstanding any other provision of this chapter or any other law, but subject to Subsection (b) and any other provision of this subchapter:

(1)  the debts, liabilities, obligations, and expenses incurred, contracted for, or otherwise existing with respect to a particular series shall be enforceable against the assets of that series only, and shall not be enforceable against the assets of the limited liability company generally or any other series; and

(2)  none of the debts, liabilities, obligations, and expenses incurred, contracted for, or otherwise existing with respect to the limited liability company generally or any other series shall be enforceable against the assets of a particular series.

(b)  Subsection (a) applies only if:

(1)  the records maintained for that particular series account for the assets associated with that series separately from the other assets of the company or any other series;

(2)  the company agreement contains a statement to the effect of the limitations provided in Subsection (a); and

(3)  the company's certificate of formation contains a notice of the limitations provided in Subsection (a).

[4] Apart from Texas, U.S. States and territories where a Series LLC can be formed:

•    Delaware

•    District of Columbia

•    Illinois

•    Iowa

•    Kansas

•    Minnesota

•    Nevada

•    North Dakota

•    Oklahoma

•    Tennessee

•    Utah

•    Wisconsin

•    Puerto Rico

•    Washington, D.C