Take a Whisk & Start a Business from Scratch: Registering Your Kitchen as a “Limited Food Establishment” in Pennsylvania

By: Jasmine Sandhu

I frosted my carrot cake with buttercream icing. I thought to myself: “Drop out of law school; this masterpiece will make millions.” But this recipe already had made millions. Yes, I used a store-bought cake mix and icing. If the thought crossed my mind, people with actual baking skills must think about starting a business often. Unfortunately, 60% of traditional food businesses fail within their first year, and 80% fail within four years.

You may be able to test your idea without the risks associated with starting a traditional food business – “Cottage Food” state laws allow entrepreneurs to sell food produced in their kitchens. In Pennsylvania, a person may start a food business in their home as a limited food establishment (“LFE”).

I’m not the face of the next Cake Boss, but this blog makes Pennsylvania and federal rules about LFE registration digestible.

why register your kitchen as a lfe?

Selling food within friend circles or on social media without LFE registrations may be illegal. The first violation is a summary offense. Three violations within two years is a third-degree misdemeanor. Each violation can also result in a $10,000 fine.

what are the barriers to obtaining a lfe registration?

Before discussing the LFE application, you should be aware of the barriers below that could prevent you from obtaining an LFE registration. If you cannot overcome a barrier, consider: (1) contacting a nearby commercial kitchen; or (2) creating another kitchen in your home and applying for commercial status with the Department of Agriculture (“Department”).

  1. Prohibited Foods

The Department prohibits Time/Temperature Control for Safety (“TCS”) foods. Typically, foods requiring refrigeration are TCS. Rejected TCS foods include:

  • Fresh fruits/vegetables;
  • Garlic-in-oil products;
  • Meat; and
  • Desserts with cream-based fillings (no Boston crème donuts – I know, blasphemy).

What if your masterpiece is a moist cake or salsa? These foods are “questionable products.” You must submit the food to a lab to test the pH and water levels.

2. Pets/Animals
You cannot register your kitchen if you have pets in your home at any time. However, the Department may grant the registration if there is:

    • A physical barrier (e.g., door) to the kitchen making it inaccessible to pets; and
    • A separate entrance to the kitchen, so ingredients are transported through areas inaccessible to pets.

    Fish, reptiles, or other cage-confined animals aren’t considered “pets,” as long as they aren’t located near the kitchen.

    1. Private Water and Sewage System

    Water supply and sewage disposal must be approved. If you use public water and sewage system, you’re in the clear. If your source of water is private, you must submit the water to a lab to test for chemicals. Annual testing is required to maintain registration. If you have private sewage disposal, you must contact your certified Sewage Enforcement Officer to discuss if your system is appropriate for a food business.

    1. Local Requirements

    Local zoning or ordinances may prevent the use of home kitchens for businesses. Department approval doesn’t imply that the business complies with local requirements.

    Contact your municipality to ensure that a food business from your kitchen is allowed.

    how do I prepare and submit the application?

Everyone who wants to sell from their kitchen must fill out a free application to register it as a LFE. Submit the application to your regional office, who will review it within 3 to 5 weeks. The application packet is 20 pages. Don’t be alarmed – the actual application starts on page 15. Here’s a checklist to help you prepare:

Click to learn more about allergensNet Wt. calculations, and licenses to collect taxes.

what should i expect after submitting the application?

If your application is rejected, the Department will issue a letter specifying reasons for the disapproval. You can resubmit applications.

If your application is approved, an inspector will examine your kitchen and collect a $35 registration fee upon a successful inspection. After this, you can sell foods produced in your kitchen. The inspection report serves as approval before you receive registration in the mail.

If the inspector finds deficiencies, you may correct them and ask for another inspection.

what rules are there to consider when running a lfe?

  • Don’t process business and personal food simultaneously. Don’t commingle ingredients between business and personal food processing.
  • Don’t allow children in the kitchen during business food processing.
  • Be wary of health claims on labels (e.g., “Gluten-Free”). These must be verified through sub-ingredients or testing.
  • Food and Drug Administration requires nutritional labeling if you sell foods across state lines. A small business exemption may apply.

final “food” for thought…

Debbi Fields, an entrepreneur, explained: “I loved making cookies, and every time I did, I made people happy. That was my business plan.” She started her business from scratch – baking cookies from her kitchen, which turned into a million-dollar company.
I’m not a baker. Yet, I felt joy from baking a store-bought cake mix. This joy must be small compared to what Ms. Fields or you may experience. Starting a food business is risky, but the risk is lower when you can use your kitchen. Register your kitchen as a LFE, so you can take that whisk, roll in the dough, and make that bread.


This post was originally authored January 30, 2020, and can be found here.

Jasmine Sandhu, at the time of this post, is a third-year law student at Penn State’s Dickinson Law. She grew up in Northern California and completed her B.S. at UC Davis. Jasmine is interested in transactional law, specifically corporate and real estate. She is also passionate about legal topics where the law intersects with race (e.g. immigration and criminal law). She currently serves as a Law Lion Ambassador and the Symposium Executive Editor of the Dickinson Law Review. After graduation, Jasmine will join a transactional practice group at Dechert LLP in Philadelphia.

Sources:

Official Website for Limited Food Establishments

PA Consolidated Statutes, Title 3, Chapter 3

Statute Language on Criminal and Civil Liability for Violations

https://forrager.com/law/pennsylvania/

https://www.pickyourown.org/CottageFoodLaws-Pennsylvania.php

Photo Sources:

https://www.vectorstock.com/royalty-free-vector/hand-hold-gavel-icon-cartoon-style-vector-23227498

https://www.countrycottagesonline.com/pet-free-cottages-uk.htm#.XkF9Qi2ZOu4

https://www.wikihow.com/Check-Zoning-Laws 

https://blog.insyncinsurance.co.uk/index.php/takeaway-insurance-tips-how-to-prepare-for-health-inspections 

https://www.amazon.com/One-Smart-Cookie-Housewifes-Multimillion-Dollar/dp/0671618385 

 

Are Your Employee Payments “Above Board” or “Under the Table”?

By: Michael Giordano

For many small businesses, payroll is not just a hassle but also an expensive operating cost. Business owners often think, “Wouldn’t it be easier to just pay in cash?” Paying employees cash under the table might seem attractive to some entrepreneurs, but beware! It may look easier and cheaper in the short-term, but in the long-term, it can land you and your business in trouble.

This post will discuss what “under the table” payments are and their associated risks.

what is an “under the table” payment?

The phrase “under the table” references off-the-books or unreported employment payments. The most common form of the under the table payments is cash as it is more difficult for a governmental agency to trace.

The main intent of “under the table” payments is tax evasion, as neither the employer nor employee report and pay taxes. With this form of payment, the business does not withhold the statutorily required payroll taxes from an employee’s paycheck. The employer also then fails to send these withholdings to appropriate tax agencies. Payroll tax deductions include the following:

  • Federal income tax withholding (see withholding tables in Publication 15).
  • Social Security tax withholding (6.2 % up to the annual maximum).
  • Medicare tax withholding (1.45 %) and Additional Medicare tax withholding for employees earning over $200,000 (0.9 %)
  • State income tax withholding.
  • Various local tax withholdings (such as city, county, school district taxes, state disability or unemployment insurance).

Correspondingly, the employee does not report the cash payments as income.

Some employers may pay cash “under the table” so they can hire workers who are unauthorized to work in the United States. Other businesses simply do not want to keep up with the records.

“Above board” vs. “under the table” cash payments

It is important to note that not all cash payments to employees are illegal! In fact, it is not uncommon for small businesses to pay employees in cash.

If your business does use cash payments, it is important to remember that businesses are required to report ALL wages to the IRS, including cash payments. If your business pays workers in cash, the business is still required to pay payroll taxes. If your business does not pay payroll taxes, whether intentional or an accidental oversight, this means the payments are illegal and “under the table.”

the government will find out!

You might be wondering, “How does the government find out about under the table payments?” It can happen in a variety of ways:

  • An employee or another person reports your business for illegal payments.
  • An employee files for unemployment and your business has not contributed.
  • An employee files for social security, receives a payment less anticipated, and the Social Security Administration investigates.
  • An employee gets injured at work and files a worker’s compensation claim which your business does not carry.

the risks of “under the table”

By now, you realize that under the table payments can bring a myriad of risks and consequences that can negatively affect your business, which include:

  • It can be a safety risk to withdraw and store a large amount of cash until you pay your worker. Additionally, if the money is lost or stolen it can economically set back your business.
  • The exchange of cash rather than check or payroll system increases the likelihood of mistakes in payroll and tax-related laws
  • Even if you make an honest mistake in payroll, you and your business can face serious penalties including fines and imprisonment that can shut your business down.
  • “Under the table” can harm your workers’ futures. While your employees may agree to cash payments, they will miss out on benefits such as social security.
  • Your employee could turn you in. IRS will reward employees up to $2,000,000 depending on the assistance provided in the prosecution of an unlawful business owner

how to be “above board” with your payments

Be accurate and organized. If your business does cash payments, it is vital to keep accurate records which would include the amount paid and on what date you paid them. This will help mitigate issues if your business is audited.

Since there is no paper trail when you pay employees in cash, managing payroll can become complex. Instead of cash payments, you might consider paying employees with direct deposit or checks with pay stubs. These options guarantee that you will have a paper trail.

Regardless of how you pay employees, you need to make sure you comply with employment laws. You must obtain a federal employer identification number (FEIN), set up state tax accounts, report new hires, and obtain workers’ compensation insurance.

When you run payroll, do not forget to withhold taxes and other deductions, like health insurance premiums, from employee wages. You will also need to contribute employer taxes, including Social Security and Medicare taxes. You also need to know when to deposit and report employment taxes to stay compliant with tax laws.

Remember, you still must pay unemployment tax and workers’ compensation insurance no matter if you pay using cash, direct deposits, or paychecks. Failure to do so will put your business in direct violation of unemployment and workers’ compensation laws.

at the end of the day, the decision is yours!

The amount of money or effort saved by not paying taxes on employee salaries is underwhelming when you consider the number of risks that you as a business owner are exposed to.

The IRS is quite capable of finding employers who try to get away with illegal activities. The IRS can find irregularities in business owners’ income and their lifestyle with various methods. Such irregularities can be the basis of an investigation, which is sure to hurt you and your business.

Chances are you’ll be caught and lose more money than you would have made from skipping out on paying taxes.


This post was originally authored February 20, 2020, and can be found here.

Michael (“Mike”) Giordano is a third year law student at the Pennsylvania State University, Dickinson School of Law. He received his Bachelor of Arts in History with a minor in Global Studies from the University of California, Los Angeles. Mike is interested in the nexus between businesses and the federal tax code. As a result he has taken Basic Federal Income Tax, Advanced Federal Income Tax, Taxation of Business Entities, Unincorporated Entities, Corporations, Operational Issues of Businesses, Accounting for Lawyers, and Information Privacy.

Sources:

https://www.thebalancesmb.com/payroll-taxes-3193126

https://www.irs.gov/businesses/small-businesses-self-employed/understanding-employment-taxes

https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online

https://www.irs.gov/irm/part25/irm_25-002-002

https://www.irs.gov/statistics/soi-tax-stats-irs-data-book

https://www.patriotsoftware.com/blog/payroll/paying-employees-cash-under-table-illegal/

Photo Sources:

https://www.dreamstime.com/stock-illustration-two-businessmen-passing-money-under-table-business-corruption-concept-image59130184

https://www.patriotsoftware.com/blog/payroll/paying-employees-cash-under-table-illegal/

https://www.moneyunder30.com/finance-a-purchase-or-pay-cash

 

 

Operating Your Business During a World Health Crisis — The Coronavirus

By: Sarah Zomaya

At the time of posting, the coronavirus has surpassed SARS with a death toll of over 3,000 people.  International governments and organizations are working together to curb this outbreak, but businesses also have a duty and commercial interest to help.  Companies have the ability to impact their employees’ behavior, in addition to their high-level communications infrastructure, putting companies in a strong position to respond to an outbreak.

Business owners should not wait and hope the coronavirus doesn’t spread in the U.S., rather business owners need to prepare and figure out how to operate during a time of outbreak. “Companies that protect their assets, employees and communities will be rewarded with increased economic resilience, competitive market advantages and greater social relevance…companies that respond slowly will find themselves increasingly at odds with customers, investors and workers.”  This post will cover managing employees, maintaining a clean supply chain, and avoiding contract liability due to the disease outbreak.

In an increasingly globalized market, many companies have employees travelling or living in foreign countries.  Companies should ban or limit travel to and from China and other infected areas.  For example, Amazon has banned employee travel to and from China and is requiring any employees recently in affected regions to work from home for two weeks before returning to the office.  Apple has similarly restricted travel and is deep-cleaning stores and shutting down retail stores and corporate headquarters.  Google and Microsoft are requiring all employees in China to telecommute.  Similar to these tech giants, all companies should develop a plan to protect employees during disease outbreak.

To further prepare and protect employees, companies should compile information on the coronavirus to educate employees and help them avoid infection.  Make sure the information is from a credible source (like this CDC guide), because of the growing amount of misinformation on social media. Additional suggestions for protecting employees include giving out free masks and sanitizers and increasing the office cleaning schedule.

Next, disease outbreaks can have a significant impact on global supply chains.  And with no end in sight, companies should map out their supply chains to determine whether they are at risk.  Foxconn, the world’s largest electronics manufacturer and largest iPhone supplier, was forced to shut down production.  If Foxconn can’t assemble the iPhones, Apple can’t sell them.  Many predict Apple will report reduced sales and production, explaining, “[t]he supply chain of these high value consumer electronics products is so tight and efficient that disruptions are felt quickly, and there’s limited ability to catch up once you get in the hole.”

Additionally, companies are typically familiar with immediate suppliers, but the locations and operations of any second-tier suppliers and subcontractors may be less clear.  Understanding how disease outbreak can impact your supply chain is crucial, and that includes how the outbreak affects your customers.  While there is a very low risk of infection in the U.S., the fear of infection could reduce foot traffic, decreasing retail and entertainment sales. One more important note, you cannot catch the coronavirus when receiving packages or mail from China.

Finally, what liability will a business have if it cannot perform a contract due to the disease outbreak?  Fortunately, most boilerplate contract language includes a force majeure clause, excluding liability for events beyond a party’s reasonable control.  If a business cannot perform a contract due to the coronavirus, the force majeure clause will likely kick in and shield the business from any liability.  Most force majeure clauses likely will not specify protection in the event of a pandemic, epidemic, or disease outbreak. However, most force majeure clauses do cover natural disasters, “acts of God,” government acts, or “other circumstances beyond the parties’ control.” Such provisions would likely apply if the coronavirus causes a party to breach a contract.

If a party invokes the force majeure clause, they typically must show no alternative means of performance were available.  If a party breaches a contract because it is more expensive or less convenient due to the outbreak, the force majeure provision likely will not apply.  For example, during the SARS outbreak in 2003 some courts found the force majeure clause did not apply because the government acts only partially impacted the business and did not “directly or radically trigger the non-fulfillment.”

As a practical note, parties should also confirm the notice requirements under the contract are met with regard to the force majeure clause.

Absent a force majeure clause there is no implied protection, but a party may assert the doctrine of “frustration” and avoid liability.  Frustration allows a party to set aside a contract if an unforeseen event makes the contract impossible to perform, at no fault of either party.  The standard for a frustration argument is high and requires more than a contract becoming too expensive or difficult to perform.

Notably, the China Council for the Promotion of International Trade (CCPIT) is providing “force majeure certificates” to businesses in China.  If a business in China can prove it is unable to perform a contract due to the coronavirus, the CCPIT will issue a force majeure certificate, absolving the breaching party from liability.

While we hope we never have to experience the effects of a disease outbreak, businesses cannot risk doing nothing.  The occurrence of epidemic events has been on the rise over the past 30 years and with our globalized society, that number is only expected to grow.

“Business leaders who are aware of the changing nature of commercial infectious disease threats are better able to position their organizations to avoid exposure, respond effectively and support global health security for the good of communities.”


Sarah Zomaya, at the time of this post, is a third-year law student at Penn State’s Dickinson Law. Following graduation, Sarah will practice corporate transactional law at Morris, Nichols, Arsht & Tunnell. Sarah is currently serving as Vice President of the Business Law Society and as a Comments Editor for the Dickinson Law Review.

 

 

Sources:

https://www.nytimes.com/2020/01/29/business/china-coronavirus-economy.html

https://www.clydeco.com/insight/article/novel-coronavirus-outbreak-implications-for-international-trade-shipping

https://www.businessinsider.com/wuhan-coronavirus-apple-amazon-google-close-offices-travel-china-spread-2020-1

https://thehill.com/policy/international/479950-state-department-orders-us-employees-in-wuhan-to-evacuate-due-to

https://www.cnbc.com/2020/01/27/coronavirus-prompts-automakers-to-evacuate-workers-from-china-weigh-factory-delays.html

https://www.natlawreview.com/article/managing-commercial-impact-coronavirus-outbreak-force-majeure-declarations

https://www.npr.org/sections/health-shots/2020/02/03/801620037/no-you-wont-catch-the-new-coronavirus-via-packages-or-mail-from-china?utm_term=nprnews&utm_source=facebook.com&utm_campaign=npr&utm_medium=social

https://www.natlawreview.com/article/coronavirus-and-force-majeure

https://www.china-briefing.com/news/coronavirus-in-china-applicability-of-force-majeure-in-contract-disputes/

https://www.reuters.com/article/us-china-health-trade/china-trade-agency-to-offer-firms-force-majeure-certificates-amid-coronavirus-outbreak-idUSKBN1ZU075

https://www.entrepreneur.com/article/345759

 

 

Mustafa Nuur | Entrepreneur of the Month | March 2020

By: Sarah Zomaya

I had the pleasure of interviewing Mustafa Nuur as our March Entrepreneur of the Month.  Mustafa was born and raised in Somalia as the eldest of eight siblings.  But unfortunately, Mustafa was born during Somalia’s civil war.  His family escaped to Kenya for eight years before settling in Lancaster, Pennsylvania in 2014.

When his family moved to the United States as refugees, the first thing Mustafa observed was that he “came to a very diverse country that has so many different people from so many different places,” when he was coming from “a country with one nationality and one language.” Mustafa was so excited to be in this kind of culture.  But, he immediately saw that everyone was “living in a silo”; nobody knows each other, nobody talks to each other.

One day, Mustafa was involved in an incident with someone who didn’t understand his story and was sending harassing messages.  Mustafa sat down with that person, shared where he is from, and connected with them on a personal level.  From that experience, Mustafa realized there has to be a way people can connect with one another, because that will allow people to understand each other in these very polarized times.

Building Bridge

This is where Mustafa generated the original idea of having people sit down together for a meal, “but it took a couple of sleepless night to finally come up with the concept of Bridge.” If you ask him what he does for a living, Mustafa would say he’s “in the business of bringing people together.”  But more technically, through Mustafa’s business, Bridge, a local refugee can be a host and any guests who want to learn about the refugee’s culture and story can sign up online to have a meal with the refugee and eat their county’s traditional cuisine. Bridge also provides refugees the opportunity to supplement their income.

Many people travel so far to experience different culture and cuisine.  Mustafa says, “it’s available in everybody’s backyard, if they only took the time to get to know their neighbor who is from another country.”

Mustafa was working full-time at a marketing firm when he started Bridge, and he continued full-time for the first five months of operation.  One day, while working at the marketing firm, he decided he was either going to close down Bridge or walk out, so he “walked out and started to follow what I enjoy doing every day and it’s been the most exciting thing I’ve ever done in my life.”

Mustafa began by hosting meals for free to see whether people would show up, and they did.  News about Bridge spread by word of mouth, then there was a Facebook page, and before they knew it, so many people knew about Bridge and they were being covered by local press.

Today, Bridge is made up of Mustafa, one employee, and one intern.  They have so many different things to do, and everyone wears multiple hats – they joke and call each other “magicians.” Mustafa says, “No day goes by without me interacting with at least six different cultures, I switch between three languages throughout the day.” (Somali, English, Swahili, and some Arabic).

Socially Conscious Attorneys

Mustafa started using attorneys right when he began charging for Bridge experiences.  Although this was a significant cost for a brand-new  business, Mustafa recognized involving attorneys was necessary to protect his business.  Mustafa has worked with a number of attorneys and he’s observed, “there are traditional attorneys that do everything by the book, and I’ve noticed there’s a new type of attorney who is socially conscious.” They have helped him figure out the best path for this unique business.  Mustafa prefers the latter.

Lately, Mustafa has been working with attorneys to expand Bridge into different cities.   Almost every state has reached out to Bridge, wanting to have Bridge in their cities.  Bridge is considering cities all over, such as Portland, Boise, San Francisco, and Syracuse.  Because of Bridge’s unique business, there are many atypical considerations when making legal and business decisions, such as the number of refugees in a city.  Mustafa says most attorneys have to do a lot of research due to the type of business.

What makes Bridge so successful?

When asked what makes Bridge so successful, Mustafa explained that it’s all about timing.  Right now, so many people are “getting really tired of not feeling like they know their neighbors or feeling like they are part of the ‘other,’” and Bridge provides a unique opportunity to connect.  Additionally, Mustafa says, “when you’re really trying to bring good into the world, people try to support it.” And finally, Mustafa attributes Bridge’s success to upholding their values.  Although sticking to their values may have cost Bridge certain opportunities, “at the end, it made us successful.”

Advice for the Socially Conscious Entrepreneur

To the socially conscious entrepreneur, Mustafa says, “Anything that’s going to be changing the world is going to be considered weird – so swallow your heart and if something is different and nobody knows what box it fits in, it’s usually the next great invention.” He continued, saying, “Just get something started – you don’t have to wait until everything is perfect to start your business.”

How can we all help refugees?

To wrap it all up, I asked Mustafa how everyone can help refugees.  He said the best way to support refugees is to “give them a sense of belonging, because it can be extremely overwhelming to come to a new place, without knowing anybody, without knowing the culture and the best thing you can experience is something as simple as a neighborly smile or a greeting.”  Mustafa explained that just asking a refugee where they are from and hearing about their home country will have a major impact in allowing the refugee to feel welcome.

Mustafa was recently featured on NPR’s Planet Money podcast – you can listen here!

Follow Mustafa on Twitter: @RealMustafaNuur


Sarah Zomaya, at the time of this post, is a third-year law student at Penn State’s Dickinson Law. Following graduation, Sarah will practice corporate transactional law at Morris, Nichols, Arsht & Tunnell. Sarah is currently serving as Vice President of the Business Law Society and as a Comments Editor for the Dickinson Law Review.

 

 

Photo Sources:

https://www.unrefugees.org/news/meet-mustafa-this-former-refugee-is-using-food-and-conversation-to-build-community-in-lancaster-pa

experiencebridge.com

Entrepreneurs: Accept the In-Between

By: Rachel Tunney

Dickinson Law’s Operational Issues class students, taught by Professor Prince, had the pleasure of hearing from our February Entrepreneur of the Month, Matt Fiedler, during one of their classes. Matt Fiedler is the CEO and Co-Founder of Vinyl Me, Please. More information about Matt Fiedler and his entrepreneurial journey can be found by viewing our previous post here.

Law students who desire careers that involve businesses and entrepreneurs benefit from hearing voices like Matt’s; the voices of actual entrepreneurs who lack legal training and live in an entrepreneurial world. Matt’s presentation allowed the students to understand operational issues from the viewpoint of the entrepreneur and included lessons that any entrepreneur may want to hear as well.

growth is not linear

Matt told the students that if anyone were to hear about Vinyl Me, Please for the first time, now almost seven years since its formation, they would believe that Matt was an overnight success. Matt reminded us, and it’s worth entrepreneurs taking note, that any outsider to a company has no idea about, what he calls, the “in-between.” To demonstrate Matt’s point, he asked the class to look at where he was standing and to close their eyes. A few moments later, Matt asked everyone to open their eyes once more. And, as the students did, they noticed Matt was standing in a different place in the room. He says that outsiders only see the new position of the company. But that only those intimate with the company understand the turns and twists, the ups and downs, that were “in-between” those two positions. Matt refers to this crucial part of company growth as the “in-between.”

Most people, Matt said, believe that growth should be up and to the right. A company is supposed to be born, sell a product, and generate money. Over time, the company sells more and creates even more revenue. But, Matt says, the truth is that growth is not linear; It is not up and to the right, and there is no perfect mathematical equation for any business to fit in. He calls this delusion of how a company should operate over time the “fictional belief of growth.”

almost anything (and everything) happens in the in-between 

Matt presented a visual to the class that drove home his point. On the screen, was a typical up-and-to-the-right thought of growth. But then Matt clicked a button, and suddenly that perfect line turned into what looked like a three-year-old’s craft drawing: loops and turns and ups and downs replaced the perfectly straight line that had been there just seconds before. (See above.) Matt pointed to different parts of the loop. He indicated that different points represented different moments of the business. One moment was the launch of the website. Another was a forced employee firing. Another was the attainment of a revenue goal. Another was an influx of cash from raising capital. The next was a data breach. Matt said this pattern repeats itself throughout the business’s life. It can occur over a year or take place in as little as one day. Up and down. An entrepreneur must be comfortable with waking up every day and heading to work despite not knowing what might happen.

“The mark of an entrepreneur is someone that is willing to go through that adversity and force the reflection, learn from it, and grow.”

To further explain Matt’s point, Matt shared an operational issue that recently impacted Vinyl Me, Please:

Back in November, Vinyl Me, Please was undergoing a technology migration for its platform. The team was trying to work with its current system, which had been custom-built by a CTOO who resigned. The work was undocumented, and the team did not understand how to handle the system. At the time, the goal was to maintain the design of the system even though there was only one developer at the time who could attempt to do that. Matt wanted to take on more customers to drive up business. He understood that the membership platform system needed to be upgraded. But, he said, the “architect” behind the system, who had all the system’s detailed workings in his head, had already left the company. The team then decided to migrate to a new system at the best (worst?) time of the year: Black Friday and Thanksgiving. Typically Vinyl Me, Please, like most businesses, receive an upsurge in sales during this time. But, unfortunately, during system migration, a ton of things went wrong. The team had decided to, in addition to the membership system, upgrade the warehouse system as well. Now, information that had been stored concerning customer accounts and the system in charge of receiving and shipping orders were compromised. Everything that could have gone wrong did.

Matt Fiedler, in addition to his CEO and Co-Founder hat, possessed a third one: Manager of the Customer Service Team. Matt told the class that at one time, his company of about twenty employees was facing thousands of emails.

“And it was just like, how are we ever going to get through this?”

Matt said that willingness to fight is what marks an entrepreneur, makes them different from the average individual.

“There’s some inevitability with failure. There’s obviously an inevitability with adversity, and the only way to get through it is to continue to fight the fight. But at the same time, it forces the process of reflection.”

Matt Fiedler with Dean Conway

Matt said to succeed in the world of entrepreneurship, you have to understand what went wrong, why it went wrong, and what you are going to do to make the situation better. He says inevitability, in your journey, you are going to take another downswing. He says the only hope you have is that you will have learned well enough that you don’t make the same mistake twice.


This post was authored on February 24, 2020.


Rachel Tunney, at the time of this post, is a 2L at Penn State Dickinson Law. Formerly a professional New York City dancer/singer, Rachel is now interested in pursuing a career in corporate litigation. Rachel currently serves as the Dickinson Law Student Representative for the Pennsylvania Bar Association and is an Associate Editor of the Dickinson Law Review.

An Employer’s Responsibility for Diversity in the Workplace

By: Ashli Lyric Jones

As the world becomes more diverse, employers are now responsible for providing employees with a fair and safe work environment. In today’s society, diversity can have multiple meanings.  However, workplace diversity is commonly composed of employees with varying characteristics, such as different sex, gender, race, ethnicity, and sexual orientation. Employers need to have the proper training and management for a diverse workplace. Without diversity in the workplace, there can be grounds for actions and behavior that rise to unlawful and unfair employment practices. Employers have the responsibility to promote and enforce diversity in the workplace. The following should serve as a guide for employers trying to comply with diversity in the workplace.

check state and federal law

Both state and federal governments have passed legislation to prevent unlawful and unfair employment practices.  Title VII of the Civil Rights Act of 1964 is a federal law that prohibits employers from discriminating against employees on the basis of sex, race, color, national origin, and religion. Typically it applies to employers with 15 or more employees, including federal, state, and local governments. Under Title VII, an employer may not discriminate with regard to any term, condition, or privilege of employment.

This law is just one of the many laws enacted to prevent unfair employment practices. Some of the other laws in place are the Equal Pay Act (1963), Age Discrimination in Employment Act (1969), Rehabilitation Act (1973),  Americans with Disabilities Act (1990), Civil Rights Act (1991), Pregnancy Discrimination Act, Genetic Information Nondiscrimination Act of 2008, and the ADA Amendments Act. Employers must also check the state laws where their company is located. It is important to always stay up to date on legislation passed that enforces diversity in the workplace. Employers must comply with these laws, and failure to do so could lead to lawsuits, fines, or other civil and criminal causes of action for unfair and unlawful employment practices.

implement a strong equal employment policy

Employers should implement a strong equal employment opportunity policy enforced throughout all levels of the company. A strong equal employment opportunity policy should include a clear explanation of the prohibited conduct. Additionally, it should include transparent and credible assurances that if employees make complaints or provide information related to those complaints, the employer will protect employees from retaliationThe employee must have the confidence that the employer will take immediate and appropriate corrective action when it determines that discrimination has occurred. Once this policy is in place, employers should train managers, supervisors, and employees on its contents to enforce the policy. Having a strong policy in place will set the standard and expectations that employers have for their employees.

make sure to train managers and employees

The U.S. Equal Employment Opportunity Commission (EEOC) is responsible for enforcing federal laws that make it illegal to discriminate against a job applicant or an employee because of that person’s race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, age (40 or older), disability or genetic information. The EEOC recommends that Human Resources managers and all employees are trained on equal employment opportunity laws.  Training and mentoring programs provide workers of all backgrounds the opportunity, skill, experience, and information necessary to perform well and increases diversity in the workplace. During the diversity training for all employees, it is important to remind employees of the company’s policies that are in place. All employees must be held accountable for their actions, and immediate and appropriate corrective action should be taken if there are any violations of the company policy.

promote an inclusive culture

Employers have a responsibility to practice inclusivity in the workplace. A diverse staff represents a variety of life experiences and unique skill sets. All of these people need to be valued and welcomed into the company. Inclusion doesn’t happen solely because diverse individuals are present, but it requires an effort to create an inclusive workplace. Inclusivity can be achieved by interacting with different people, creating employee resource groups, placing importance on inclusion, and appropriately connecting with employees.

conclusion

As the world is constantly changing, workplace diversity is something that employers should take seriously. There are many benefits of having a diverse workplace, such as:

  • Higher innovation
  • Better decision making
  • Variety of different prospectives
  • Increased profits
  • Faster problem solving
  • Increased creativity

Employers need to check the state and federal laws to make sure they are complying with all equal employment opportunity legislation. After checking the legislation, employers must implement a strong policy that explains the standards of the company and the actions that will be taken if there is a violation of company policy. All employees and managers must be trained on the diversity policy and must be held accountable. Finally, employers must promote an inclusive environment that also allows employees to feel safe and valued. By promoting an inclusive culture in the workplace, employers will foster an environment of professionalism and respect for personal differences.

This post was originally posted here on February 9, 2020 and has been reprinted with the author’s permission.


Ashli Jones, at the time of this post, is a second-year law student at Penn State Dickinson Law. She is from Long Island, New York and is a graduate of Spelman College in Atlanta, Georgia. Ashli is pursuing a certificate in Entrepreneurship with an Intellectual Property and Technology concentration. She interested in intellectual property within the entertainment law field. Ashli is the President of the Sports & Entertainment Law Society, Mentorship Chair for the Women’s Law Caucus, and Social Chair for the Black Law Students Association.

Sources:

https://www.eeoc.gov/eeoc/

https://www.eeoc.gov//eeoc/initiatives/e-race/bestpractices-employers.cfm

https://www.fcc.gov/general/office-workplace-diversity-functions

https://www.eeoc.gov/laws/statutes/index.cfm

 

Whose Charge is it Anyway?: Changes to Fees for Medical Records Requests Under HIPAA

By: Anahita Anvari

Changes are underway for the Health Insurance Portability and Accountability Act of 1996 (HIPAA). Following a recent court ruling in Ciox Health, LLC v. Alex Azar, et al. (the “Ciox Case”) and a subsequent Department of Health and Human Services (HHS) notice, the Patient Rate fee limitation no longer applies when patients request the delivery of their medical records to third parties.

This post provides an overview of the past and present legal framework and discusses how HIPAA covered entities and business associates should move forward.

Overview of the Pre-CIOX Case Legal Framework

HIPAA governs the privacy and security of protected health information (“PHI”). Specifically, the Privacy Rule establishes the patient’s right to access their PHI. Pursuant to the Privacy Rule, a covered entity may only charge a “reasonable, cost-based fee” (the “Patient Rate”) for providing a copy of PHI to a patient. The Privacy Rule defines what costs the Patient Rate may include and how it may be calculated.

 It is necessary to understand the Patient Rate in three circumstances:

1 – When a patient requests PHI for their own use,

2 – When a patient requests the delivery of PHI to a third party, and

3 – When a third party requests PHI at the direction of the patient.

Originally, the Privacy Rule only applied the Patient Rate to PHI requested by the patient for their own use. A 2016 Guidance by HHS changed this rule to apply the Patient Rate to any patient request to deliver PHI. Therefore, the Patient Rate also applied where the patient requested the delivery of PHI to a third party. The patient rate did not apply where a third party directly requested the PHI at the direction of the patient.

For example, consider a situation where a law firm needs a patient’s medical records to represent the patient in a lawsuit. The fee for the request for PHI would be limited to the Patient Rate if the patient requested the PHI for their own use or for delivery to the law firm. The Patient Rate did not apply if the law firm itself requested the PHI at the patient’s direction.

The Ciox Case and the Patient Rate Rule

The Ciox Case challenged the legality of the Patient Rate.[1]Ciox Health LLC is a medical record company (a business associate) that contracts with health care providers (covered entities) to maintain and produce PHI. Ciox sued HHS after patients complained that Ciox was overcharging for PHI considering the Patient Rate. Ciox argued that the Patient Rate fee limitation harmed business operations and caused the loss of millions of dollars in potential revenue.

The United States District Court for the District of Columbia sided with Ciox. The Court ruled that HHS overreached its authority regarding the extension of the Patient Rate, because this was essentially a legislative act that should have gone through notice and comment. After the ruling, HHS announced the Patient Rate will apply only to patient requests for medical records for their own use. The Patient Rate will not apply when a patient requests the delivery of PHI to a third party or when a third-party requests PHI at the patient’s direction.

Consider again law firm example. Under the new rules, a covered entity or business associate may charge a fee higher than the Patient Rate if the patient requests the records for delivery to the law firm or if the law firm requests the records at the direction of the patient. The Patient Rate will apply when the patient requests the records for their own use.

The chart below summarizes the past and present state of the Patient Rate rule:

Patient Rate Under HIPAA Privacy Rule: Patient Rate Following the 2016 Guidance: Patient Rate Following the Ciox Case:
Patient Rate only applied to PHI requested by the patient for their own use. Patient Rate applied to PHI requested by the patient for their own use and for delivery to a third party.

The Patient Rate did not apply to requests for PHI made directly by a third party at the direction of the patient.

Patient Rate applies only to PHI requested for a patient’s own use.

The Patient Rate does not apply when patients request delivery of PHI to a third party or where a third party directly requests PHI at the direction of the patient.

Next Steps for HIPAA Covered Entities and Business Associates

Covered entities and business associates should take steps to reevaluate their compliance with HIPAA following the Ciox Case. Click here to determine if your business qualifies as a covered entity or a business associate.

To reiterate, the Patient Rate fee limitations no longer apply when a patient requests the delivery of their medical records to a third party. Therefore, you should reexamine what fee you charge for these requests. Consult with an attorney to determine whether your state law imposes any fee limitations and assess whether you need to renegotiate any existing contracts to accommodate for the change.

For more information about HIPAA in general, click here.

[1]This post does not address the portions of the Ciox Case concerning Third-Party Directives, what costs may be included in the Patient Rate or the possible methods for calculating the Patient Rate.

This post was originally posted here on February 9, 2020 and has been reprinted with the author’s permission.


Anahita (Ana) Anvari, at the time of this post, is a third-year law student at Penn State’s Dickinson Law. She is from Southern California and is interested in health care and business law. Ana founded the Health Law and Policy Society and is currently serving as a Senior Editor of the Dickinson Law Review.

 

Sources

45 C.F.R. §164.524

HIPAA: Combined Regulation Text of All Rules

Ciox Health, LLC v. Azar, et al., No. 18-cv-0040 (D.D.C. January 23, 2020)

Individuals’ Right under HIPAA to Access their Health Information 45 CFR § 164.524

Important Notice Regarding Individuals’ Right of Access to Health Records

How can covered entities calculate the limited fee that can be charged to individuals to provide them with a copy of their PHI?

Standards for Privacy of Individually Identifiable Health Information, 65 Fed. Reg. 82, 462 (Dec. 28, 2000) (codified at 45 C.F.R. § 164.599 et seq.)

The Health Care Entrepreneur’s Quick Guide to Important Laws: Part 2

Gov: Covered Entities

Photo Sources

https://www.jotform.com/what-is-hipaa-compliance/

https://students-residents.aamc.org/applying-medical-school/article/8-tips-completing-fee-assistance/

https://compliancy-group.com/hipaa/

Matt Fiedler | Entrepreneur of the Month | February 2020

By: Rachel Tunney

When Matt Fiedler first moved to Chicago, he wasn’t focused on grabbing the best deep dish pizza or taking photos by The Bean. Instead, Matt concentrated on trying to create an apartment that reflected his personality and life-long devotion to music. But he wondered how he could do that.

Then, it dawned on him: vinyl records.  Records: with detailed covers of colors and patterns, could surely brighten up an apartment, even one that would see darkness and snow half of the year.  Records: that could work!  With the joy of creating a space that reflected his musical taste, Matt spent his free time browsing through record stores but quickly realized how the thousands of albums could be overwhelming for the average music junky. He found that it was near impossible to walk in and purchase just one album. Matt wished someone could just pick a selection for him, knowing his specific taste, his likes, and dislikes. It is this experience that led to a series of questions:

What if we did that?   Is there a sort of record club for people who want to build a record collection?  Does that exist?

 It didn’t.

“We were young enough and naïve enough to try.” – Matt Fiedler 

And so, on January 1, 2013, with maxed-out credit cards and fingers crossed, Matt and his Co-Founder, Tyler Barstow, launched Vinyl Me, Please: a music company and record of the month club connecting people with music through experience. What might have started as a hobby in Chicago, sowed the seeds of a journey with a subscription-based-vinyl service that would drastically change the way people listened to music as much as it would change Matt’s future.

from drums to degrees

Matt + Music have been an item since day one. His father played the guitar, and he was self-taught on drums, good enough to play in bands during his school years. He chose Belmont University for a degree in music and thought nothing of the fact that music can be an unpredictable field and rarely provides a clear career trajectory.  It excited him.  Matt studied under Belmont’s music business program and added an entrepreneurship major to it when he realized he would like to work for himself one day.

After graduation, Matt struggled to find a job that put music front and center.  He worked at a tech company, writing their business plan, the financial model, and leading projects for rebranding. It was here that he shared a very small office with Tyler Barstow. To pass the time, the two talked music.

In the interview, Matt mentioned that during this time, Spotify was starting to become popular in the United States. He credits the music-streaming site as a catalyst in changing the way the average music consumer listens and shares music; the consumer model was changing from paying for ownership to paying for access. Matt jokes that the ten-year-old in him realized that a certain level of music experience was missing from this model- an almost tactical connection with music.

And so, in 2013, Vinyl Me, Please was born as a record-of-the-month club, and now includes an online record shop and a music magazine. It was designed to offer its customers a record each month, along with custom art prints and a cocktail recipe. The company has since grown to have over 30,000 subscribers across more than 40 countries and offers one-of-a-kind vinyl pressings, events, and diverse content. See the company’s FAQs here for more information.

After the launch of this “passion project,” pursued on nights and weekends, Vinyl Me, Please got too big to ignore. Matt quit his job and took on the company full-time.

the entrepreneurial mindset: always ask 

Matt credits his success to his comfort in asking questions.  At any given point, Matt has twenty mentors. Though not originally a necessity he envisioned as a CEO, Matt understands that time for tactical and high-level abstract conversations with those who have gone before him is necessary to further the success of Vinyl Me, Please.  An entrepreneur must check the ego at the door. Matt stated that regardless of how smart you are, your training or degree, if you appear closed off, you will be closed-minded to potential improvements in both your company and your leadership.

“I’m smart enough to ask the questions and willing to be curious…I’m smart enough to know that I don’t know everything and take other people’s insights and do something with them.” – Matt Fiedler

Eventually, Matt stated, even successful business models will miss something, and what once worked,  will not forever.  An entrepreneur must always be prepared to reinvent. 

Advice: “Every time you double, everything breaks.”

This nugget of wisdom has resonated the most with Matt recently. He said it is one of the truest rules he has learned, and it applies to all aspects of the company: when business, budget, team, revenue or customers double- there is a reality of collapse.  Matt loves this mantra because it solidifies an understanding of the inevitable:  even for a successful entrepreneur, things will break.  He said there are two ways to respond:

1 – Accept the statement as true;

2 – Keep a watchful eye on what is most likely to break

CEO/Co-founder: the ever-changing role

Matt has had about four or five different re-creations of his role in Vinyl Me, Please. He’s had to get comfortable with handing duties and obligations to people who are more passionate and more qualified, in his words. Matt has had to accept that though he feels he is losing control by being forced into a more high-level and strategic position, it is the natural evolution of his role. And that CEO and Founder are not always the same.

“You need to give up certain parts of your job so that other people can do them. And hopefully do them better than you can.” – Matt Fiedler

Work & Family: Separate but one

“I don’t do it perfectly. I’ll be the first one to say.”

When I asked Matt about his work and family balance, Matt Fiedler was honest. He says there is no perfect way to separate the two (work and family). Entrepreneurs must live with the reality that they will be pulled in both directions at times. For Matt, that juggling act of work and family is less daunting because of Ester Mellado Fiedler, his wife. Matt’s voice took on a slight softness as he described a very strong relationship, and their mutual understanding of the support each one needs, whether it be with the company or their three children.

I had the opportunity to hear from Ester as well. And much as Matt indicates, her perspective is necessary to understand the magical beast that is Vinyl Me, Please. Ester feels just as connected to the business as her husband. And she admires Matt’s ability never to stop questioning.

“Seven years of sacrifices and joy and fear and success and kids and criticism and praise and on and on and on…I’m thankful for it. And also, so tired.” – Ester Fiedler

To further explain how his business and family are one-in-the-same, Matt offered an illuminating analogy:

Vinyl Me, Please, Matt said, will always be his first child. And like a child, the company has to grow up. But, he mentions, the “growing up” process can hurt- both parent and child, company and co-founder. When a baby falls and hurts itself, the pain can physically hurt you too. And Ester echo’s the feelings. She said she has a hard time not taking things personally, be it the comments on social media or Reddit threads because she knows how much care the company has for its customers.

“Our first month, we carried eight boxes to UPS in downtown Chicago in massive IKEA bags. Eight people paid Vinyl Me, Please that month for a curated album, and we were so giddy about that fact. Every month since, Matt has never taken a customer for granted. Every glitch, delay, etc. hits Matt hard.” -Ester Fiedler

Matt said it is hard to feel that pain and watch the struggle, even when he knows the process is necessary for growth. Like a parent watching their child on a playground, Matt knows that Vinyl Me, Please has to learn to get up after a fall. It doesn’t mean that the struggle is easy to watch. But, as any good parent knows, the child will wipe their tears, take a breath, and try to land the jump one more time.

Recommended Reading: (Matt has chosen memoirs because he thinks it is necessary to know the stories of others.)

Shoe Dog: (Matt has made it a habit to read every year) An inspirational story of overcoming challenges to grow a company as fast as possible by Nike’s own founder, Phil Knight.

The Ride of a Lifetime: A book about Robert Iger’s journey as the CEO of Disney, including lessons of leadership learned along the way of leading 200,000 employees.


The Hard Thing About Hard Things : A book on Ben Horowitz, co-founder of Andressen Horotwitz, and his entrepreneurial experience in Silicon Valley of founding running,  managing, and investing in technology companies


This post was authored on February 1, 2020.

Rachel Tunney, at the time of this post, is a 2L at Penn State Dickinson Law. Formerly a professional New York City dancer/singer, Rachel is now interested in pursuing a career in corporate litigation. Rachel currently serves as the Dickinson Law Student Representative for the Pennsylvania Bar Association and is an Associate Editor of the Dickinson Law Review.

 

Sources:

https://www.vinylmeplease.com/

https://www.forbes.com/sites/markbeech/2018/09/14/how-this-ceo-30-grew-his-10-million-business-in-five-years-from-vinyl-records/#57768e29763e

Photo Sources:

https://www.vinylmeplease.com/

https://amazon.com

Staying in the Loop: Using the Right Resources to Get the Latest Information

By: Sarah Phillips

When you are busy starting and running your own business, you do not always have the time (or extra funds) to invest in publications or sources that provide you and your business with the latest industry news. Luckily for many entrepreneurs, especially agricultural entrepreneurs, there are several free resources available that provide timely, relevant, and succinct information that can help develop a young company. These news sources explain changes in the marketplace, explore technological resources, and highlight upcoming seminars or conferences.

The American Agriculturist does just this for agricultural entrepreneurs in the United States, including providing a daily distribution of region-specific information. American Agriculturist has 18,000 subscribers and over 3,000 regular readers across the United States. In addition to delivering a variety of weekly and monthly subsector specific newsletters to subscribers’ inboxes, the publication’s website shares updates on the markets for five different sectors. It also has an entire section dedicated to conservation practices, safety tips, regulatory updates, and general business advice. For example, in November 2019, the special features section of the publication focused on insurance and finance advice for agricultural business operators.

As a young entrepreneur, it can also be invaluable to learn from both the successes and failures of others. American Agriculturist recognizes this and is currently in the process of developing a podcast that shares discussions with young farmers about their challenges, struggles, and successes in the early years of business. Hopefully, aspiring agricultural entrepreneurs will be able to apply others’ stories to their start-up businesses and experience success. Agricultural entrepreneurs who are interested in following these stories should subscribe to the weekly newsletters.

For additional resources, agricultural entrepreneurs should view:

1. Hoard’s Dairyman Intel

2. Beef Magazine – Management, Tactics and Tools Used to Operate a Farm Business

3. University of California’s Agricultural Sustainability Institute

4. Farm Credit Midatlantic – Newsroom


This post was authored on January 16, 2020.

Sarah Phillips, at the time of this blog post, is a third-year law student at Penn State’s Dickinson Law. She is from West Amwell, New Jersey and has interests in agricultural, land use and business transactional law. She is currently serving as an Honor Code Representative and a Law Lion Ambassador. Sarah is the Editor-in-Chief of the Dickinson Law Review.

Picture Source:

https://marketing.farmprogress.com/brands/state-regional/american-agriculturalist/

Sources:

https://www.farmprogress.com/farm-business/farm-operations

https://www.forbes.com/sites/theyec/2017/06/29/five-lessons-learned-from-failing-in-business/#2d2446ab2bd7

 

 

How to Choose an Attorney for your Small Business

By: Greg Archibald

Entrepreneurs need to run their business while also navigating an endless maze of laws. Finding an attorney for a small business, whether at the start-up stage or during the business’s life, can be a daunting task. Along with an accountant, an attorney is one of the most important professionals a small business needs during a number of key moments in the business’s early life. A good attorney can assist entrepreneurs in almost all aspects of their businesses, including contract drafting, regulatory compliance (tax, intellectual property, healthcare, etc.), employee handbooks, and many concerns that are unique to individual businesses. This post will seek to answer common questions entrepreneurs ask regarding how to locate legal assistance for their small businesses.

When should I consult with an attorney?

The answer to this question could be simple: the sooner, the better. A good attorney will seek to preemptively solve problems before they actually occur. This is accomplished in multiple ways, including drafting start-up documents that are tailored for each individual business or updating an employee handbook to be in compliance with ever-changing employment laws. Obtaining legal assistance in the early stages of a business is one of the best ways to set up an entrepreneur for success. In contrast, legal issues are much more difficult, time-consuming, and expensive to resolve after the problem occurs.

That being said, if you are having a legal issue, finding an attorney who is specialized in the problem area is a high priority. If you are starting up your company, try to find a “start-up” or “small business” attorney. If you received a letter from the IRS or other taxing authority, you perhaps should seek a tax attorney. Another example: if you have intellectual property, you will want to seek an attorney’s advice to ensure that you don’t give up rights or violate the rights of others.

If you are just starting out, it is possible that you may be able to find free assistance for the creation of your business. Contacting your local Economic Development offices is a good start in finding this information. Also, some law schools have clinics and some local incubators have attorneys who assist entrepreneurs.

How do I find the right attorney?

There is no simple answer to this question, however, good legal assistance can be located by a variety of methods. First, and likely most obvious, is the internet. Searching “[type of law] lawyer near me” will bring up a broad array of local attorneys. From this, an entrepreneur has the opportunity to review the attorney or firm’s website, and possibly even locate online reviews of the individual attorney (but a word to the wise, reviews cannot always be considered reliable).

Second, word-of-mouth is an often reliable method to locate attorneys. This method is especially useful if the entrepreneur is able to contact other businesses similar to their own and request a recommendation for legal assistance. Accountants can also be a source of referral. However, it is important to remember that just because a particular attorney is popular in a given area does not necessarily mean he or she is the best fit for an individual business.

It’s a good idea to shop for an attorney by requesting face-to-face meetings with individual attorneys. This way you can see if you feel the attorney is a good fit with your business culture. Many law firms and sole practitioners offer free consultations for this very purpose. An in-person meeting allows the entrepreneur to discuss their unique needs. A good working relationship with a business’s attorney is crucial, and though signing an attorney’s retainer does not mean that the relationship lasts forever, the business will likely function much more efficiently if the entrepreneur and attorney get along.

How much will an attorney cost?

Unfortunately, it is very difficult to answer this question, as each attorney or firm likely has their own unique fee structures. If cost is a concern, as it almost always is, this is an important discussion to have with an attorney during a consultation. Many may be willing to adjust their fee schedules to meet an individual client’s needs. However, it is important to remember that legal assistance is significantly cheaper before a legal issue arises. As the saying goes, an ounce of prevention is worth a pound of cure.

What questions should I ask an attorney during a consultation?

One question to ask is if the attorney represents other businesses in your industry. Familiarity with your industry can be very helpful. Next, you will want to determine the attorney’s experience level in the particular area of law the business you are seeking assistance for. For example, if an attorney is retained by numerous LLC clients, is a managing member of two different LLCs, and works on liquidation dispute cases throughout the year, it is a safe bet that this attorney has the knowledge to draft an operating agreement for a new LLC.

Next, it is perfectly appropriate to discuss the attorney’s fees before you have signed a retainer. If a business cannot afford an attorney’s normal hourly rates, the attorney may be willing to create a fee structure specifically designed for the business. Ask about flat rates so that you can budget for it. Also, ask how communications will be billed.

On the topic of “communication,” ask how the attorney can be contacted, and how often they intend to provide the business with updates. Communication is a critical part of any business relationship, and legal relationships are no different. An attorney should be willing to remain in reasonably frequent contact with their clients, though the frequency of this contact obviously depends on both the client’s preferences and the type of legal matter.

Though the above is not an exclusive list of answers, they will hopefully prove useful to small businesses struggling to find legal assistance. It may be an overwhelming task, but locating a skilled attorney is one of the most important steps required to set an entrepreneur up for success.


This post was authored on January 12, 2020.

Greg Archibald, at the time of this post, is a third-year law student at Penn State Dickinson Law. He is from Central Pennsylvania and is interested in corporate litigation. Greg is the President of the Business Law Society and is currently a Comments Editor of the Dickinson Law Review.