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Archive for December, 2008

Important legal tidbits for Ohio DIY Landlords

Published on December 23, 2008

ohio house rentingThis post is directed to the many “do-it-yourselfers” in the residential leasing market.  This post is not meant to help the large, multi-dwelling landlords with full-time management and legal staffs. No, this is for the guy who gets transferred to another city and decides to rent out that house or condo in his current location rather than deal with market, or those budding real estate mogulists who’ve squirreled away money from their day job to have acquired 3 or 4 properties rented around town.  These are the landlords that will most likely deal directly with tenants, and those that are least prepared to do so, considering their skills lie in engineering, or medicine, or building decks, or anything besides leasing residential housing.  So here is a quick checklist for those who play landlord on the weekends:

1) Make sure to reduce the lease agreement to writing if the tenancy period is going to last over a year.  You should always reduce your agreements to writing in order to prove the deal anyway, but oral tenancies lasting longer than a year are not even enforceable.

2) Never threaten to physically remove the tenant or lock the tenant out of the premises, even if they have failed to pay rent.  Self-help is completely illegal in Ohio.  Even if you can do so peacefully, you are never allowed to personally dispossess the tenant from the premises.  The only legal way to evict a residential tenant in Ohio is through the statutory procedures proscribed in O.R.C. Sec. 2913, and the eviction must be sanctioned by a court in all circumstances.

3) You have a duty to keep the premises in a safe and habitable condition. This duty is not negotiable and you cannot shift this duty to the tenant, even in exchange for lower rent. It is ultimately the responsibility of the landlord to ensure the premises is up to building, housing and health codes, and at all times remains in habitable condition

4) Never retaliate against a tenant should they report code violations.  You could be open to damages and attorneys fees if the court finds that you initiated eviction proceedings in retaliation for the tenants reporting alleged code violations.

5) Make sure to carry-out each duty the law requires of you under the Landlord-Tenant Act (O.R.C. Sec 5321). Most of the duties are self-evident and require only that you conduct yourself with basic human decency in the leasing of property, but you should look them over nonetheless.

6) If you intend to evict the tenant for the non-payment of rent or other default, make sure you provide the required Three-Day notice to vacate, required under state law before you do anything else.  Do not file the eviction action in court until you have first provided the tenant with a notice to vacate, and then have waited at least three days.  The court will lack jurisdiction to hear the eviction action unless the tenant is given the notice.

Guns, the NFL, and the Second Amendment Rights of Players

Published on December 15, 2008

I’m sure that everyone who follows the NFL has surely heard more than they ever cared to about the recent Plaxico Burress-shoots-himself story. And along with the discussion about his particular situation came a broader discussion about NFL players carrying handguns, and the NFL’s league-wide gun policy, or lack thereof. Unfortunately, one thing that I have seen repeated over the airwaves (I’m talking to you ESPN) is the notion that the NFL is somehow limited in what it can do about its players carrying handguns by the Second Amendment.  

Plaxico and his rights

Plaxico and his rights



This idea is simply rubbish. The NFL can contractually obligate its players to refrain from carrying handguns without running afoul of any constitutional rights. The reason is that the NFL can never, no matter how hard it tries, violate the constitutional rights of anyone. The most basic of constitutional principles is that the constitution protects people from governmental action, not those of other private individuals or organizations, such as the NFL.

In order for anyone to have a legitimate claim that their constitutional rights were violated, the conduct complained of must have been engaged in by a “state actor” (like the police, the FBI, or the IRS). Absent state action, there simply cannot be a constitutional violation of any sort – with some very limited exceptions where private citizens are acting on behalf of a state actor (like if the police asked your landlord to go into your apartment and confiscate illegal drugs).

So while there are interesting public policy and labor issues surrounding a potential NFL gun policy that it will negotiate with the Players’ Union, there are no constitutional issues anywhere in the picture. The NFL can mandate that players refrain from carrying guns just the same as it can mandate that players refrain from taking steroids.

For a NY Giants fan’s (and criminal defense attorney’s) perspective on the entire fiasco, check out Simple Justice.

Why would someone choose an S-Corp over an LLC in Ohio? What’s the difference?

Published on December 13, 2008

Ok, so you are thinking of creating a business entity in Ohio and you are thinking to yourself, why in the world would anyone choose an LLC over an S Corp? Well, the short answer is that generally one would not. However, there can be substantial advantages to having an S-Corp as opposed to an LLC in certain circumstances, one such advantage being savings on social security taxes.

Typically, if you earn at least $200,000 a year as a sole proprietor you will pay self–employment tax is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).

Maximum earnings subject to SE tax. Only the first $102,000 of your combined wages, tips, and net earnings in 2008 is subject to any combination of the 12.4% social security part of SE tax, social security tax, or railroad retirement (tier 1) tax.

Obviously this tax can be substantial under a pass through taxation entity such as a sole proprietorship or limited liability company.

But one can go ahead and actually incorporate that entity as an S corp. Then, instead of paying out a large lump salary to the owners or members, the owner would actually get what’s called ‘reasonable compensation’ and would end up paying Social Security tax, which is the equivalent on that reasonable compensation, and take the rest as corporate distributions and not pay any self–employment tax on that portion. You just have to run the numbers and figure out what fits your specific situation and requirements.

Do I really need an attorney to form an Ohio LLC?

Published on December 4, 2008

A common question that many aspiring small business owners have is whether they actually need to hire an attorney to form the business entity they desire, more commonly these days, the LLC.  Well, the short answer is no. This may surprise you coming from an attorney who practices in small business law, but the truth is that forming a business entity, including an LLC, is so simple that anyone with a high school degree should be able complete the process without the assistance of counsel. Under Ohio law, an LLC is formed the minute that the Articles of Organization are filed with the Secretary of State (and you pay the appropriate filing fee). That is, a separate, legally cognizable entity (e.g., widgets are us, LLC) exists as soon as the State files the very simple document it provides to public free-of-charge. Take a look at the standard form contained at the Secretary of State’s website and see for yourself: (form 553a).

This is the reason that our firm doesn’t charge for the time spent forming the entity. As small business owners in our own right, we would feel guilty billing for such a menial task, especially when there are so many more important issues that we will spend our time on.

Forming a business entity is only the beginning, however.  Just because you manage to bring a business entity into existence doesn’t mean it is set-up in such a manner that it will function as you envisioned.  There remains the issue of drafting the all important Operating Agreement,  that adequately covers all aspects of your particular business, and this document can (and should) vary greatly depending on several factors, including: (a) the particular industry in which the business is engaged, (b) the number of owners/investors that will be involved in the business (and in what capacity), and (c) whether the business anticipates adding or losing owners/investors in the future, and many other variables that you may not initially think of as you structure your operations.

The real value in retaining an attorney during the start-up phase of business is their ability to counsel you regarding the nuances of internal organization and control of the business, common misconceptions about personal liability of the owners, the tax consequences of various business endeavors that may be on the horizon, the ramifications of making certain types of business investments, and properly setting up the business so as to reduce problems when owners pass away, want to leave the business, or otherwise disagree with the direction that other owners want to take the company – the dreaded “Agency Problem.”

Many clients also wonder about their ownership share and whether they can pass their wealth in the company along to non-owner family members.  A good small business attorney will make sure these issues are taken care of up-front.

Therefore, while you can easily form a business entity by yourself, it may not be structured so as to meet all of your personal and professional needs. And quite often there are problems down the road that could have been avoided with proper planning and advice from a small business attorney.   The good attorneys will not charge you to form the entity, but rather to structure the entity in a manner that meets your particular needs.