People often ask what the "PLLC" in my company's name refers to -- it means "Professional Limited Liability Company" and there is an analogous corporate structure called a "Professional Services Corporation" (P.S.) or "Professional Corporation" (P.C.). These business structures exist to let customers and other third parties know that they are dealing with a group that is comprised of licensed professionals from a particular profession. You frequently see this structure for law practices, accounting firms, medical practices, architectural firms and other similarly licensed professionals. In order to create a "professional" entity, all of the owners must be licensed professionals in that particular profession and the company must maintain at least a $1 million professional liability insurance policy to cover the activities of the professionals in the firm. More information can be found at RCW 18.100 for Professional Services Corporations and RCW 25.15.045 for PLLCs. RCW 18.100 also lists the various professions to which these entity forms apply.
The Seattle Times printed an interesting article on the risks of hiring unpaid interns for businesses. It discussed and focused on the Federal Labor Standard Act's 6 pronged test used to determine whether hiring the intern as an unpaid worker is legal. The FLSA criteria are as follows:
1. It must be an educational experience, the equivalent of vocational school.
2. It must primarily benefit the trainee.
3. The intern cannot do work that would otherwise be done by a paid employee, and must work under the close supervision of a manager.
4. The employer cannot profit from the intern's work.
5. The employer must not promise upfront a paid job at the conclusion of the internship. It's OK to offer a job once the internship ends.
6. The intern and employer must agree if no wages are to be paid. It's best to put this understanding in writing, and have both parties sign the paper.
Importantly, though, it did not address the requirements imposed by Washington State that further limit a business's ability to hire an unpaid worker. In Washington, for-profit businesses cannot have volunteers as they are working in the interest of the employer in a profit-making capacity. Under RCW 49.46, "employees" are subject to minimum wage requirements. RCW 49.46.010 provides a number of exceptions to the definition of "employee" such as exempt "white collar" employees and volunteers in educational, charitable, religious, state or local governmental body or agency or non-profit organizations. Unpaid interns or volunteers in for-profit businesses are not exempt under the statute and, therefore, you must abide by the minimum wage laws.
One of the most critical aspects of buying a business is the due diligence process. This is the process of verifying that the statements made by the seller regarding the business and assets is accurate. When a buyer begins negotiations with a seller, certain general statements are made among the parties regarding the assets, contracts and financial state of the business. The buyer then has the opportunity, typically after a letter of intent and/or a non-disclosure agreement has been executed, to dig into the business and request all sorts of documents relating to licenses, financial statements, customer lists, contracts, employment arrangements, among many other things. Often I see transactions between trusting business partners, especially those that are not for substantial sums of money, where the buyer does not formally conduct due diligence with regard to the assets being purchased. The result is often the buyer paying too much for the business as the assets, contracts not being in place or assignable, or certain assets not in the condition asserted by the seller. In one case, the buyer did not verify whether the trademarks being purchased were in good standing. This was a good faith error on the part of the seller but the buyer really should have verified this prior to the closing. In another case, the buyer trusted the seller to perform under an executed Purchase and Sale Agreement and invested significant sums of money and time in advance of the closing, not realizing that the seller would take advantage of the buyer's trust to drag out the purchase process resulting in thousands of extra dollars in legal and operational costs to the buyer. It is impossible to extract the personal side of the purchase and sale of a business, but it is important to look objectively at the business and assets and make informed business decisions based on the facts uncovered in the due diligence process. Take advantage of it.
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