So, You Want to Own Your Own Business in Nevada? The Nevada Business Law Blog’s Primer on Types of Business Formations

So, You Want to Own Your Own Business in Nevada? The Nevada Business Law Blog's Primer on Nevada Business Law
So, You Want to Own Your Own Business in Nevada? The Nevada Business Law Blog’s Primer on Nevada Business Law

A Review of Nevada’s Corporate Law

Original Publication Date: 3.11.15

This article explores the advantages and disadvantages of various types of business entities in Nevada.  Generally, the main advantage of a corporate entity is to shield its owners from placing their personal assets in jeopardy for the obligations of the business.  If you are unsure which entity is right for you, call today 702.667.4828 for a consultation with one of our business attorneys.

Continue reading So, You Want to Own Your Own Business in Nevada? The Nevada Business Law Blog’s Primer on Types of Business Formations

Corporate Actions Requiring Shareholder Approval in Nevada

In Nevada, the following actions require shareholder approval in the manner designated by the corporation’s governing documents or by a majority of shares if the documents are silent on the issue. The acts are required by Nevada’s corporate statutes linked below:

  1. Amending the corporation’s articles of incorporation;
  2. Election of directors;
  3. Removal of a director;
  4. Granting voting rights to “control shares” acquired by an “acquiring person” under the “acquisition of controlling interest” statutes;
  5. Merger, conversion, or exchange;
  6. The sale of all of the corporation’s property and assets; and
  7. Dissolution of the corporation.

    Corporate Actions Requiring Shareholder Approval in Nevada
    Corporate Actions Requiring Shareholder Approval in Nevada

Officers and Directors Owe Fiduciary Duties to the Corporation

Officers and Directors Owe Fiduciary Duties to the Corporation
Officers and Directors Owe Fiduciary Duties to the Corporation

In Nevada, both the officers and directors of a corporation owe it fiduciary duties.  NRS 78.138.  Those duties include the duty of care and the duty of loyalty.  A fiduciary is a “person who is required to act for the benefit of another person on all matters within the scope of their relationship; one who owes to another the duties of good faith, trust, confidence, and candor” and loyalty.  Black’s Law Dictionary (8th ed.2004).  NRS 78.138 and 78.139 declare the duties specifically owed by a corporation’s fiduciaries.   Continue reading Officers and Directors Owe Fiduciary Duties to the Corporation

Election for Directors of a Corporation

Elections for Directors of a Corporation
Elections for Directors of a Corporation

The election of directors of a corporation must be held at the annual shareholders meeting by a “plurality of the votes cast at the election” unless the corporation’s articles of incorporation or bylaws require more than a plurality. NRS 78.330.  If for any reason directors are not elected pursuant to NRS 78.320 or at the annual meeting, they may be elected at any fairly noticed special meeting of the shareholders. NRS 78.330(1).    Moreover, shareholders owning at least 15% of the voting power may apply to the district court to order the election of directors if a corporation fails to hold a meeting within 18 months of its last meeting.  NRS 78.345(1). Continue reading Election for Directors of a Corporation

Corporate Annual Meetings: What They are and Why You Must Hold and Document Them Correctly

What Are They and Why You Must Hold and Document Them Correctly
Corporate Annual Meetings: What Are They and Why You Must Hold and Document Them Correctly?

Corporate Annual Meetings: What They are and How to Hold and Document Them Correctly            

A corporation in Nevada is recommended to hold an annual meeting of its shareholders or members.  The meeting may be held anywhere, but must be held in the location and manner provided for in the articles of incorporation and/or bylaws of the corporation.  Unless otherwise provided in the articles of incorporation or bylaws, the entire board of directors, any two directors, or the president may call annual and special meetings of the shareholders and directors.  NRS 78.310. Continue reading Corporate Annual Meetings: What They are and Why You Must Hold and Document Them Correctly

Initial List of Officers and Directors

Business Entities: Initial List of Officers and Directors and State Business License.
Business Entities: Initial List of Officers and Directors and State Business License.

One of the requirements to start a new corporation in Nevada is to complete and file an Annual List of Officers, Directors, and Resident Agent with the Secretary of State’s office “on or before the last day of the first month after filing the articles of incorporation.”  NRS 78.150. Continue reading Initial List of Officers and Directors

Business Entities: What is a Registered Agent in Nevada?

Business Entities: What is a Registered Agent in Nevada?
Business Entities: What is a Registered Agent in Nevada?

In legal terms, a Registered Agent (“RA”) is a person or business who is designated by a business entity registered with the state to receive service of process when that entity is sued.  Service of process is the formal procedure for informing a company that legal action has been filed against it and requiring it to file a response to the same.  NRS Chapter 77.

Since a business such as a corporation or limited liability company is not a person, the law requires that a single person be named to accept service of process.  A business must therefore designate its RA by filing a form with the Secretary of State.  Thereafter, once the RA is served with process papers, the entity is deemed to have received the same and its obligation to respond is triggered.

Joint Venture versus Partnership: What is the Difference?

            A joint venture is a contractual relationship in the nature of an informal partnership wherein two or more persons conduct some business enterprise, agreeing to share jointly, or in proportion to capital contributed, in profits and losses.  A prime example we see often is a venture for the development of land.  In this example, one venturer may own real property and may agree to allow a second venturer to build improvements (an office building, for instance) on the real property and that the venture will sell the real property with the improvements and share in the profits at an agreed-upon rate. Continue reading Joint Venture versus Partnership: What is the Difference?

Nevada Partnership Formation and Law

Nevada Partnership Formation and Law
Nevada Partnership Formation and Law

I hear people refer to those with whom they do business as their “partners” frequently.  I even hear this from people who are really shareholders in a corporation or members in a limited liability company.  I am fairly certain that if most of them understood the potential liability of forming a true partnership, they would never call themselves someone’s partner ever again.  Partnerships are relatively easy to form (beware: some court decisions and Nevada’s statutes have held that a partnership can be formed just by telling those with whom you are doing business that you and another person are “partners”), requiring simply an association of two or more persons doing business together for a profit.  NRS 87.060(1).  Every partner is a fiduciary to the other partner(s).  That means the partner has a legal duty to act in the best interests of his or her partners and of the partnership rather than acting in his or her own interest.  NRS 87.210. Continue reading Nevada Partnership Formation and Law

Misappropriation of Trade Secrets in Nevada

How Does a Party Prosecute an Action for Misappropriation of Trade Secrets?

NRS 600A.030(2) defines “misappropriation” as:

(a) Acquisition of the trade secret of another by a person by improper means;

(b) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

(c) Disclosure or use of a trade secret of another without express or implied consent by a person who:

(1)  Used improper means to acquire knowledge of the trade secret;

(2)  At the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was:

(I) Derived from or through a person who had used improper means to acquire it;

(II)  Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or

(III)  Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or

(3)  Before a material change of his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

NRS 600A.040 provides injunctive relief for the actual or threatened misappropriation of trade secrets, stating;

  1. Actual or threatened misappropriation may be enjoined. Upon application to the court, an injunction must be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional reasonable period of time to eliminate commercial or other advantage that otherwise would be derived from the misappropriation.

* * *

  1. In appropriate circumstances, the court may order affirmative acts to protect a trade secret. As used in this subsection, “affirmative acts” includes, without limitation, issuing an injunction or order requiring that a trade secret which has been misappropriated and posted, displayed or otherwise disseminated on the Internet be removed from the Internet immediately.

In Frantz, the Nevada Supreme Court found misappropriation of trade secrets based on the fact that: (l) lists containing information were missing after the former employee left the job; (2) the former employee contacted the plaintiff’s customers to offer “more competitive pricing;” and (3) the former employee’s phone records and other evidence indicated calls to plaintiff’s customers.  As a result, the former employee was liable for misappropriation of trade secrets.   The Court further found that the competitor had misappropriated trade secrets when the competitor hired the former employee, announced that competitor intended to compete against plaintiff by taking all of plaintiff’s customers, and the competitor hired employees from other competitive companies and asked them to use their knowledge about their former employers’ pricing structure and customer base.  Id.

To prove misappropriation under NUTSA, a plaintiff must plead and prove: (1) the existence of a valuable trade secret as defined by the statute; (2) misappropriation through use, disclosure, or nondisclosure of use of the trade secret; and (3) the misappropriation was wrongful because it was made in breach of an express or implied contract or by a party with a duty not to disclose.  Frantz, 116 Nev. at 466, 999 P.2d at 358.  The Court has wide discretion in calculating damages, subject only to a review for abuse of discretion.  Id. (citing Diamond Enters., Inc. v. Lau, 113 Nev. 1376, 1379, 951 P.2d 73, 74 (1997) (citations omitted)).

The Business Owner’s Toolbox

Business Owner’s Toolbox

How to Start Your Business

Business Owner’s Toolbox

So, You Want to Own Your Own Business in Nevada?
A Primer on Types of Business Formations In Nevada
Three Popular Nevada Business Entities and How to Structure Them
Thinking of Opening a Nevada Business?  Here Are Some Things You Should Know About Licensing
Why You Should Never Refer to Someone as Your Partner
Nevada Partnership Formation and Law
Types of Partnerships Under Nevada Law
Joint Venture versus Partnership: What is the Difference? Continue reading The Business Owner’s Toolbox

Nevada Revised Statutes Chapter 78: Private Corporations



NRS 78.010             Definitions; construction.

NRS 78.015             Applicability of chapter; effect on corporations existing before April 1, 1925.

NRS 78.020             Limitations on incorporation under chapter; compliance with other laws.

NRS 78.025             Reserved power of State to amend or repeal chapter; chapter part of corporation’s charter. Continue reading Nevada Revised Statutes Chapter 78: Private Corporations

Nevada Revised Statutes, Chapter 33: Injunctions



NRS 33.010             Cases in which injunction may be granted.

NRS 33.015             Injunction to restrain unlawful act against witness or victim of crime.

Nevada Revised Statutes, Chapter 32: Receivers


NRS 32.010             Cases in which receiver may be appointed.

NRS 32.015             Additional cases in which receiver may be appointed.

NRS 32.020             Reversion and disposition of unclaimed dividends in receivership.

How Do I Name My Corporation?

In Nevada, there are very few restrictions on what name can be given to a corporation.  First, a corporation may not be the name or initials of a natural person unless it also contains and additional designation such as “Incorporated,” “Limited,” “Inc.,” “Ltd.,” “Company,” “Co.,” “Corporation,” “Corp.,” or other word which identifies it as not being a natural person.  NRS 78.035.  Second, the name “must be distinguishable . . . from the names of all other” companies registered with the Nevada Secretary of State.  NRS 78.039. Finally, the name may not insinuate that the corporation is a “bank” or “trust,” associated with a regulated industry unless it has approval to do so by the appropriate state agency which regulates that industry.  NRS 78.045.

A more practical concern is whether a chosen name infringes on the trademark of another business.  A prudent business owner will determine that the proposed business name does not infringe on that of another.  There are both state and federal trademarks to consider.

What are Bylaws for a Nevada Corporation?

In our last post, we discussed Articles of Incorporation.  In this post, we discuss a corporation’s bylaws.  A corporation’s bylaws are written rules by which the corporation, its officers, directors, and shareholders must abide.  They establish how the company is ruled and what are the duties and obligations of its officers, directors, and shareholders.  Unlike the articles of incorporation, there is no obligation to file the bylaws with the Nevada Secretary of State.

Most bylaws will contain (remembering that the officers and directors will be legally required to adhere to the standards.  Importantly, if they are sued, the bylaws are the standard against which their actions will be judged): Continue reading What are Bylaws for a Nevada Corporation?

Nevada Jury Instructions

Nevada Jury Instructions

Note:  these are not official Nevada jury instructions.  Many of them pre-date the 2011 official instructions and are a mix of internally-crafted instructions and those in the pre-2011 set.  Use with caution.

NEV. J.I. 1.0               DUTY OF JUDGE AND JURY
NEV. J.I. 1.01             USE OF INSTRUCTIONS
NEV. J.I.1.03             WHAT IS AND WHAT IS NOT EVIDENCE  Continue reading Nevada Jury Instructions

What are Articles of Incorporation for a Nevada Corporation?

In Nevada, a corporation is formed when one or more persons, called “incorporators”, sign and file articles of incorporation with the Nevada Secretary of State.  Roughly stated, the articles of incorporation state the intention of the incorporators to transact business as a separate legal entity

A corporation may be formed to conduct any lawful business, or to promote or conduct any legitimate object or purpose NRS 78.030(1).  The articles must contain the following information:

Continue reading What are Articles of Incorporation for a Nevada Corporation?

The Nevada Legislature Defines “Arbitrator”

Nevada Revised Statutes, NRS 38.209  “Arbitrator” defined.  “Arbitrator” means an individual appointed to render an award, alone or with others, in a controversy that is subject to an agreement to arbitrate.

(Added to NRS by 2001, 1274)

Continue reading The Nevada Legislature Defines “Arbitrator”

Want to Better Control Your Arbitrations? 10 Steps to Writing a Better Arbitration Agreement.

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Jay Young is a Las Vegas, Nevada arbitrator and mediator with a successful neutrals practice.  His mediator, arbitrator, and ADR training include: 36 hour ADR certification in 1994.  40 hour mediator training.  Appointed by the Nevada Supreme Court as a Nevada Supreme Court Settlement Judge.  Appointed by the Nevada Supreme Court as an Arbitrator (2003-Present) in the 8th Judicial District Court (Las Vegas, Clark County, Nevada).  Judge Pro Tem (2011-present).  Appointed Special Master to the Business Court, 8th Judicial District Court (Las Vegas, Clark County, Nevada).  Arbitrator and Mediator for American Arbitration Association (Complex Commercial Litigation Arbitration and Mediation National Panel Member); Better Business Bureau Arbitrator.  Arbitrated and/or mediated over 250 disputes.  Training courses include:  Supreme Court of Nevada: “Impasse Prevention & Communication”;  Supreme Court of Nevada: “Implied Bias”; Supreme Court of Nevada: “Breaking Impasse”; Supreme Court of Nevada: “Ethics, Comprehensive Review”; AAA Arbitrator Subpoenas: Are They Worth the Paper They’re Printed On?, 2015; AAA Roundtable – Las Vegas, 2015; AAA Essential Mediation Skills for the New Mediator, 2015; AAA  Fundamentals of Effective Mediation Advocacy, 2015; AAA Confronting Arbitrability & Jurisdiction in Arbitration, 2015; AAA  Award Writing, 2014;  AAA Arbitration Fundamentals and Best Practices for New AAA Arbitrators, 2013; AAA “Arbitrator’s Role, Authority, and Responsibility”; AAA “Arbitrator’s Ethics, Practice Standards and Disclosures”; AAA “Preparing for and Conducting a Preliminary Hearing”; AAA: “Managing Issues Involving Self-Represented Parties”; AAA: “Managing Evidentiary Hearing Issues”; AAA: “Managing Panel Dynamics”; AAA: “Preparing for and Writing the Award”; AAA: “Managing Post-Hearing Issues”;  Better Business Bureau, Arbitrator Training, 2006;  “Succeeding In Mediation,” AAA, 2003; “Mediation and Arbitration Advocacy”; AAA, 2002, “Cutting Edge Negotiation Strategies for Lawyers”; Negotiation Strategy Institute, 2002; “Arbitrator Training,” Supreme Court of Nevada, State Bar of Nevada, 2000; “Arbitration 101”, Clark County Bar Association, 1994.

Elements for the Claim of Usurpation of Corporate Opportunity in Nevada

In Nevada, the elements for a claim usurpation of corporate opportunity are:

  1. Defendant is a fiduciary to a company;
  2. Defendant appropriates for her own use, an opportunity that should belong to the company;
  3. The competing business is operated to the detriment of the Plaintiff company;
  4. Defendant has an interest or expectancy in the competing business’s opportunity; and
  5. Causation and damages.

Simply stated, a company’s fiduciary is forbidden from appropriating a business opportunity belonging to the company for her own personal gain.  19 Am. Jur. 2d, Corporations, § 1311.  The Doctrine is recognized in Nevada.  Leavitt v. Leisure Sports, Inc., 103 Nev. 81, 87-88, 734 P.2d 1221 (1987) (“it is generally recognized that a corporate fiduciary cannot exploit an opportunity that belongs to the corporation.”).

The central questions presented to courts in most Corporate Opportunity Doctrine situations are whether the company has an expectancy interest in the opportunity and whether the opportunity, in all fairness, belongs to the Company.  Id.  Under this view, the existence of a protectable opportunity is tested by determining  whether the company has an “expectancy or interest” therein.  If the company has a legal or even equitable interest or expectancy growing out of a pre-existing right or relationship, the fiduciary may not keep the opportunity for herself.  Am. Jur. Proof of Facts 2d 291 Corporate Opportunity Doctrine – Fairness of Corporate Official’s Acquisition of Business Opportunity § 2 (2003).  Stated another way, any proposed activity developed through the company’s assets that is reasonably incident to the business is a protected opportunity.  See Anest v. Audino, 773 N.E.2d 202, 210-11 (Ill. App.  2d  2002).

In such a situation, if a fiduciary takes the opportunity for herself, the Company may elect to claim all benefits therefrom for itself, and the law will impress a trust in favor of the company on the opportunity and its profits.  McLinden v. Coco, 764 N.E.2d 606, 616 (Ind. App. 2002); I.P. Homeowners, Inc. v. Radtke, 558 N.W.2d 582, 288 (Neb. Ct. App. 1997); Bank of Amer. v. Ryan, 207 Cal. App. 2d 698, 24 Cal. Rptr. 739 (1962) (recognizing that the implied trust is imposed not only on the property and its profits, but also imposes liability for interest at the legal rate from the receipt of profits, rents, etc.).


See elements for other claims at the Nevada Law Library


Jay Young Client Reviews

The following are actual client reviews found on Avvo, Google, Yelp, and Facebook for Jay Young

New Business Setup 5.0 stars

Posted by Kristina

Jay Young is an outstanding attorney. He is very informative and takes time out to teach his clients. I recently changed the legal structure of my business. Jay took the time to assess my business and gave me his recommendation. I was very pleased with his team. I definitely recommend using an attorney for any business set up. Jay is prompt, kind, and such a pleasure to work with.

Continue reading Jay Young Client Reviews

The Upside of Federal Trademark Registration


I have seen it many times.  A company grows from the kitchen table to a storefront and builds a successful enterprise.  The owner sweats and toils for years to build brand awareness and goodwill.  Things are finally gaining momentum for the once struggling business and they feel they are about to “make it”.  Then they get a registered letter from a law firm in a different state demanding that they stop using their own business name, tear down their signs, rip up their business cards, and start over.  The law firm claims that another business actually owns the right to the name and demands that the small company cease and desist using their name immediately, and that they might sue for damage!  Can they do that?

Yes, they can in certain circumstances if they have a priority trademark registration.  And you should make sure that you are on the side of the one sending the letter, not the one receiving it.  Read more from this article by one of my partners on how a Federal Trademark Registration may help your business.

A Primer On Nevada Business Formation: Three Popular Entities And How To Structure Them


What Type of Entity Should You Form?

Some of the most frequent questions that we receive from clients revolve around entity selection for conducting different types of businesses.  One aspect involves governance and authority.  The issue of governance and authority is important because it determines who has the legal authority to bind the company to contracts and to act on behalf of the company.

The three most popular types of entities are corporations, limited liability companies, and limited partnerships. There are others, however, that might be better suited to your needs. Continue reading A Primer On Nevada Business Formation: Three Popular Entities And How To Structure Them

Thinking of Forming Your Business Using an Online Service? Is it Tantamount to Playing Russian Roulette?


Litigators are fairly well known to be the scourge of the civilized world. After all, they are responsible for the number of lawsuits as well as the enormous costs associated with them, right? The truth is that I know litigators like that, but the majority of business attorneys I know do their best to keep their business clients from getting into legal battles. Saving the client from their own mistakes is sometimes difficult. It is made exponentially more difficult when the business owner decides it is cheaper to form the business using one of the various online services or legal software. They might as well be stamped with a warning that in case of a dispute, they almost guarantee full employment for litigators. Continue reading Thinking of Forming Your Business Using an Online Service? Is it Tantamount to Playing Russian Roulette?

Buying A Business:  Are The Assets Free And Clear Of Liens?

When buying a business, the buyer should ensure that all assets must be free and clear of liens.  As a reminder, when purchasing a business, you can purchase either the ownership (the stock or the membership interest, for example) or the assets.  Either or both can be subject to liens.  Therefore, it is imperative that a lien search be conducted. Continue reading Buying A Business:  Are The Assets Free And Clear Of Liens?

5 Reasons A Business Owner Should Consider Long Term Care Insurance


Long term care insurance covers you for the expense of a in-home nursing care, nursing home, hospice care, assisted living, adult daycare, respite care, and Alzheimer’s facilities. As with any other insurance plan, long term care insurance seeks to protect you against a major loss that you can ill afford. When you think of it, the odds of needing nursing home care are a lot higher than

losing your house to fire. Yet, we don’t think of being without homeowners insurance. It is something to consider for yourself or for an aging loved one.

There are five major reasons why people buy long term care insurance:

  1. It allows you to maintain your independence so you won’t have to rely on family members;
  2. It helps to protect your assets against the high costs of long term care;
  3. It will help preserve wealth and/or your children’s inheritance;
  4. It helps make long term care services affordable, such as home health care and custodial care; and
  5. It will help provide you with more options than just nursing home care, and to pay for nursing home care if it’s needed.

As with any insurance product, you will need to perform a risk/benefit analysis to determine if this coverage is necessary for you. Take into consideration your current health, family history, your age, etc.

Due Diligence Checklist For Purchasing a Business

So, you are thinking of buying a business?  What types of documentation or information should you be seeking from the seller before you agree on a price, sign documents, or pay any money?  This list will get you started:

  • Seller entity information
  • Documents necessary to discover the seller’s full financial Information
  • Physical Assets of the seller
  • Real Estate (owned and leased)
  • Intellectual Property owned by the seller or to which the seller has rights
  • Employee contracts and employee benefits owed
  • Licenses and permits held by the seller
  • Environmental due diligence
  • Taxes (including verification) owed
  • Material contracts with the seller’s customers and suppliers
  • Customer information
  • Currently pending or threatened litigation
  • Insurance coverage

Are They Employees or Independent Contractors?

Are They Employees or Independent Contractors?
Are They Employees or Independent Contractors?

With challenges to the economy, companies are looking for every way possible to save money. A potential risk for employers is to mischaracterize an employee as an independent contractor, which may save payroll taxes in the short term but may lead to penalties on such taxes as well as other inadvertent violations of worker’s compensation laws, FMLA, etc, which each hold separate penalties for violation.

There are also state law implications, which vary by state so you may want to consult an attorney in your particular state as to that state’s definitions. Focusing purely on federal issues, the IRS previously had a 20-part test to evaluate whether a worker is an employee or independent contractor.

However, the new and improved IRS test focuses on three areas: (1) behavioral control, (2) financial control, and (3) the type of relationship.

1.  Behavior control addresses the amount of instruction given to a worker, such as work hours, specific job duties, and training.

2.  Financial control addresses the extent to which a worker can realize a profit or loss or seek reimbursement of business expenses.

3.  The third type of control is the type of relationship. Factors include the presence or absence of a written agreement and the permanency of the relationship.

Call today to speak with someone in our employment law department representing businesses and business owners and can answer specific questions in more detail concerning your business. They can also document employment agreements or properly document independent contractor agreements should the workers qualify as independent contractors.




Considering Cashing a Customer’s Check Marked “Paid In Full”?  Think Again!


While you may be tempted to cash any check received these days, with a memo noted “paid in full”, the cashing of that check may modify your earlier agreement and extinguish your contract.

For example, say you had an agreement to provide goods or services for $5,000.  You invoice the client.  The client sends you a check for $3,500 with a note marked “paid in full”.  If you cash the check, you may be held to effectively amend the agreement to accept the contract price of $3,500.

So, you ask, what are you to do when you get a check for less than the full amount?  Under the Uniform Commercial Code (UCC), you are not required to return the check; therefore, you could simply destroy the check.  As a business point, and this is not in the UCC, you can negotiate a payment plan or other settlement. Continue reading Considering Cashing a Customer’s Check Marked “Paid In Full”?  Think Again!

The Business Judgment Rule

Officers and directors have a fiduciary duty to protect the interests of the corporation and act in the best interests of its shareholders.  Guth v. Loft. fuc., 5 A.2d 503, 510 (Del. 1939).  Where a director is charged with breach of his or her fiduciary obligations, the ‘business judgment’ rule is utilized.  Horowitz v. Southwest Forest Indus., 604 F. Supp. 1130, 1134 (D. Nev. 1985)  The business judgment rule applies to protect managers of limited liability companies just as it does to protect directors of corporations.  Froelich v. Erickson, 96 F. Supp. 2d 507, 520 (D. Md. 2000).

Simply stated, the business judgment rule “bars judicial inquiry into the actions of corporate directors taken in good faith and in the exercise of honest judgment in lawful furtherance of corporate purposes.”  Id.  However misguided the business decision may be, the rule protects directors from judicial review of the wisdom of that decision.  See Citron v. Fairchild Camera & Instrument Corp., 569 A.2d 53, 64 (Del. 1989) (protecting Board decision for an arguably lower offer for the company). Continue reading The Business Judgment Rule

The Elements for a Claim of Business Disparagement

In Nevada, the elements for a claim of business disparagement are:

  1. A false and disparaging statement that interferes with the plaintiff’s business or are aimed at the business’s goods or services;
  2. The statement is not privileged;
  3. The statement is made with malice; and
  4. Proof of special damages.

Clark County School District v. Virtual Educ. Software, Inc., 125 Nev. 374, 213 P.3d 496 (Nev. 2009).


See elements for other claims, including extensive research on defamation at the Nevada Law Library


Everything You Wanted to Know But Were Afraid to Ask About the DOL’s Proposed Overtime Regulation Changes


By: Michael R. Lied, guest blogger

Employers everywhere are seeking ways to understand the U.S. Department of Labor’s proposed changes to overtime regulations under the Fair Labor Standards Act (FLSA) announced this week. The revisions could impact millions of workers and businesses large and small when the final ruling possibly becomes effective next year. This article attempts to address how the proposed changes would impact businesses.

While the statute, regulations, and court interpretations of the Fair Labor Standards Act (“FLSA”) are complex, there are some basic principles.  Generally, employees must be paid at least the applicable minimum wage for all hours worked; in some states, the minimum wage is currently greater than the federal minimum wage.  There are a number of exemptions in the Fair Labor Standards Act, including for certain types of businesses, and certain employees.

The so called “white collar” exemptions are applicable to individuals who have primary duties which qualify them as an executive, administrative, professional, or certain computer professionals.  In addition, in order to be exempt from the FLSA’s overtime requirements, the employee must be paid on a salary basis of at least $455.00 per week.

The Department of Labor proposes to amend the regulations dealing with white collar exemptions to require that an employee be compensated on a salary basis at not less than $920.00 per week in order to maintain the exemption.  Additionally, the proposed regulations would provide for annual updated salary rates to be published in the Federal Register.

The regulations currently contain a separate exemption for highly compensated employees who customarily and regularly perform one or more of the duties of an executive, administrative or professional employee.  The proposed regulations would increase the required total annual compensation of such a highly compensated employee to $122,148.00, again to be adjusted annually.

While many people anticipated the Department of Labor would also amend the regulations to address the duties which must be performed by employees who fall under the white collar exemptions, that is not a part of the proposed regulation.

However, the Notice of Proposed Rulemaking requests comments on the current duties test and inclusion of non-discretionary bonuses for purposes of the salary basis test.  Thus, changes in these areas may be proposed latter. The proposed regulation will be subject to a period of public comment, and it is expected that any final rule may not be issued until some time in 2016.

Basic Rules

If in any workweek a nonexempt employee is covered by the FLSA, the employer must total all the hours worked by the employee in that workweek (even though two or more unrelated job assignments may have been performed), and pay overtime compensation for each hour worked in excess of the maximum hours applicable under section 7(a) of the Act—40 hours in a work week.


The FLSA takes a single workweek as its standard and does not permit averaging of hours over 2 or more weeks. Thus, if an employee works 30 hours one week and 50 hours the next, he must receive overtime compensation for the overtime hours worked beyond the applicable maximum in the second week, even though the average number of hours worked in the 2 weeks is 40. This is true regardless of whether the employee works on a standard or swing-shift schedule and regardless of whether he is paid on a daily, weekly, biweekly, monthly or other basis. The rule is also applicable to pieceworkers and employees paid on a commission basis. It is therefore necessary to determine the hours worked and the compensation earned by pieceworkers and commission employees on a weekly basis.

An employee’s workweek is a fixed and regularly recurring period of 168 hours—seven consecutive 24-hour periods. It need not coincide with the calendar week but may begin on any day and at any hour of the day. For purposes of computing pay due under the FLSA, a single workweek may be established for a plant or other establishment as a whole or different workweeks may be established for different employees or groups of employees. Once the beginning time of an employee’s workweek is established, it remains fixed regardless of the schedule of hours worked by him. The beginning of the workweek may be changed if the change is intended to be permanent and is not designed to evade the overtime requirements of the FLSA.

Time to Pay Overtime

There is no requirement in the FLSA that overtime compensation be paid weekly. The general rule is that overtime compensation earned in a particular workweek must be paid on the regular pay day for the period in which such workweek ends. When the correct amount of overtime compensation cannot be determined until some time after the regular pay period, however, the requirements of the FLSA will be satisfied if the employer pays the excess overtime compensation as soon after the regular pay period as is practicable. Payment may not be delayed for a period longer than is reasonably necessary for the employer to compute and arrange for payment of the amount due and in no event may payment be delayed beyond the next payday after such computation can be made.

Regular Rate

The “regular rate” under the FLSA is a rate per hour. The FLSA does not require employers to compensate employees on an hourly rate basis; their earnings may be determined on a piece-rate, salary, commission, or other basis, but in such case the overtime compensation due must be computed on the basis of the hourly rate completed.  Therefore, it is necessary to compute the regular hourly rate of such employees during each workweek, with certain statutory exceptions. The regular hourly rate of pay of an employee is determined by dividing his total remuneration for employment (except exclusions discussed below) in any workweek by the total number of hours actually worked by him in that workweek.

(a)        Earnings at hourly rate exclusively.

If the employee is employed solely on the basis of a single hourly rate, the hourly rate is the “regular rate.” For overtime hours of work the employee must be paid, in addition to the straight time hourly earnings, a sum determined by multiplying one-half the hourly rate by the number of hours worked in excess of 40 in the week. Thus a $12 hourly rate will bring, for an employee who works 46 hours, a total weekly wage of $588 (46 hours at $12 plus 6 at $6). In other words, the employee is entitled to be paid an amount equal to $ 12 an hour for 40 hours and $18 an hour for the 6 hours of overtime, or a total of $588.

(b)        Hourly rate and bonus.

If the employee receives, in addition to the earnings computed at the $12 hourly rate, a production bonus of $46 for the week, the regular hourly rate of pay is $13 an hour (46 hours at $12 yields $552; the addition of the $46 bonus makes a total of $598; this total divided by 46 hours yields a regular rate of $13). The employee is then entitled to be paid a total wage of $637 for 46 hours (46 hours at $13 plus 6 hours at $6.50, or 40 hours at $13 plus 6 hours at $19.50).

(c)        Weekly salary.

If the employee is employed solely on a weekly salary basis, the regular hourly rate of pay, on which time and a half must be paid, is computed by dividing the salary by the number of hours which the salary is intended to compensate. If an employee is hired at a salary of $350 and if it is understood that this salary is compensation for a regular workweek of 35 hours, the employee’s regular rate of pay is $350 divided by 35 hours, or $10 an hour, and when the employee works overtime the employee is entitled to receive $ 10 for each of the first 40 hours and $15 (one and one-half times $10) for each hour thereafter. If an employee is hired at a salary of $375 for a 40-hour week the regular rate is $9.38 an hour.

(d)       Salary for periods other than workweek.

Where the salary covers a period longer than a workweek, such as a month, it must be reduced to its workweek equivalent. A monthly salary is subject to translation to its equivalent weekly wage by multiplying by 12 (the number of months) and dividing by 52 (the number of weeks). A semimonthly salary is translated into its equivalent weekly wage by multiplying by 24 and dividing by 52. Once the weekly wage is arrived at, the regular hourly rate of pay will be calculated as indicated above. The regular rate of an employee who is paid a regular monthly salary of $1,560, or a regular semimonthly salary of $780 for 40 hours a week, is thus found to be $9 per hour. The parties may provide that the regular rates shall be determined by dividing the monthly salary by the number of working days in the month and then by the number of hours of the normal or regular workday. Of course, the resultant rate in such a case must not be less than the statutory minimum wage.

(e)        Fluctuating workweek.

An employee employed on a salary basis may have hours of work which fluctuate from week to week and the salary may be paid him pursuant to an understanding with his employer that he will receive such fixed amount as straight time pay for whatever hours he is called upon to work in a workweek, whether few or many. Where there is a clear mutual understanding of the parties that the fixed salary is compensation (apart from overtime premiums) for the hours worked each workweek, whatever their number, rather than for working 40 hours or some other fixed weekly work period, such a salary arrangement is permitted by the FLSA if the amount of the salary is sufficient to provide compensation to the employee at a rate not less than the applicable minimum wage rate for every hour worked in those workweeks in which the number of hours he works is greatest, and if he receives extra compensation, in addition to such salary, for all overtime hours worked at a rate not less than one-half his regular rate of pay. Since the salary in such a situation is intended to compensate the employee at straight time rates for whatever hours are worked in the workweek, the regular rate of the employee will vary from week to week and is determined by dividing the number of hours worked in the workweek into the amount of the salary to obtain the applicable hourly rate for the week. Payment for overtime hours at one-half such rate in addition to the salary satisfies the overtime pay requirement because such hours have already been compensated at the straight time regular rate, under the salary arrangement.

Example: Assume an employee whose hours of work do not customarily follow a regular schedule but vary from week to week, whose total weekly hours of work never exceed 50 hours in a workweek, and whose salary of $600 a week is paid with the understanding that it constitutes the employee’s compensation, except for overtime premiums, for whatever hours are worked in the workweek. If during the course of 4 weeks this employee works 40, 37.5, 50, and 48 hours, the regular hourly rate of pay in each of these weeks is $15.00, $16.00, $12.00, and $12.50, respectively. Since the employee has already received straight-time compensation on a salary basis for all hours worked, only additional half-time pay is due. For the first week the employee is entitled to be paid $600; for the second week $600.00; for the third week $660 ($600 plus 10 hours at $6,00 or 40 hours at $12.00 plus 10 hours at $18.00); for the fourth week $650 ($600 plus 8 hours at $6.25, or 40 hours at $12.50 plus 8 hours at $18.75).

The “fluctuating workweek” method of overtime payment may not be used unless the salary is sufficiently large to assure that no workweek will be worked in which the employee’s average hourly earnings from the salary fall below the minimum hourly wage rate applicable under the Act, and unless the employee clearly understands that the salary covers whatever hours the job may demand in a particular workweek and the employer pays the salary even though the workweek is one in which a full schedule of hours is not worked.

Typically, such salaries are paid to employees who do not customarily work a regular schedule of hours and are in amounts agreed on by the parties as adequate straight- time compensation for long workweeks as well as short ones, under the circumstances of the employment as a whole. Where all the legal prerequisites for use of the “fluctuating workweek” method of overtime payment are present, the FLSA, does not prohibit paying more. On the other hand, where all the facts indicate that an employee is being paid for his overtime hours at a rate no greater than that which he receives for non-overtime hours, the fluctuating workweek overtime formula cannot be used.

Exclusions From Regular Rate.

The “regular rate” includes all remuneration for employment paid to, or on behalf of, the employee, but does not include:

  • Sums paid as gifts; payments in the nature of gifts made at Christmas time or on other special occasions, as a reward for service, the amounts of which are not measured by or dependent on hours worked, production, or efficiency.
  • Payments made for occasional periods when no work is performed due to vacation, holiday, illness, failure of the employer to provide sufficient work, or other similar cause; reasonable payments for traveling expense, or other expenses, incurred by an employee in the furtherance of his employer’s interests and properly reimbursable by the employer; and other similar payments to an employee which are not made as compensation for his hours of employment.
  • Sums paid in recognition of services performed during a given period if either, (1) both the fact that payment is to be made and the amount of the payment are determined at the sole discretion of the employer at or near the end of the period and not pursuant to any prior contract, agreement, or promise causing the employee to expect such payments regularly; or (2) the payments are made pursuant to a bona fide profit-sharing plan or trust or bona fide thrift or savings plan.


Bonuses which do not qualify for exclusion from the regular rate as one of these types must be totaled in with other earnings to determine the regular rate on which overtime pay must be based.  Bonus payments are payments made in addition to the regular earnings of an employee.

(a)  General rules.

Where a bonus payment is considered a part of the regular rate at which an employee is employed, it must be included in computing his regular hourly rate of pay and overtime compensation.  No difficulty arises in computing overtime compensation if the bonus covers only one weekly pay period.  The amount of the bonus is merely added to the other earnings of the employee and the total divided by total hours worked.  Under many bonus plans, however, calculations of the bonus may necessarily be deferred over a period of time longer than a workweek.  In such a case the employer may disregard the bonus in computing the regular hourly rate until such time as the amount of the bonus can be ascertained.  Until that is done the employer may pay compensation for overtime at one and one-half times the hourly rate paid by the employer, exclusive of the bonus.  When the amount of the bonus can be ascertained, it must be apportioned back over the workweeks of the period during which it may be said to have been earned.  The employee must then receive an additional amount of compensation for each workweek that he worked overtime during the period equal to one-half of the hourly rate of pay allocable to the bonus for that week multiplied by the number of statutory overtime hours worked during the week.

(b)  Allocation of bonus where bonus earnings cannot be identified with particular workweeks.

If it is impossible to allocate the bonus among the workweeks of the period in proportion to the amount of the bonus actually earned each week, some other reasonable equitable method of allocations must be adopted.  For example, it may be reasonable and equitable to assume that the employee earned an equal amount of bonus each week of the period to which the bonus relates, and if the facts support this assumption additional compensation for each overtime week of the period may be computed and paid in an amount equal to one-half of the average hourly increase in pay resulting from bonus allocated to the week, multiplied by the number of statutory overtime hours worked in that week.  Or, if there are facts which make it inappropriate to assume equal bonus earnings for each workweek, it may be reasonable and equitable to assume that the employee earned an equal amount of bonus each hour of the pay period and the resultant hourly increase may be determined by dividing the total bonus by the number of hours worked by the employee during the period for which it is paid.  The additional compensation due for the overtime workweeks in the period may then be computed by multiplying the total number of statutory overtime hours worked in each such workweek during the period by one-half this hourly increase.

(c)  Discretionary character of excluded bonus.

In order for a bonus to qualify for exclusion as a discretionary bonus, the employer must retain discretion both as to the fact of payment and as to the amount until a time quite close to the end of the period for which the bonus is paid.  The sum, if any, to be paid as a bonus is determined by the employer without prior promise or agreement.  The employee has no contract right, express or implied, to any amount.  If the employer promises in advance to pay a bonus, he has abandoned his discretion with regard to it.  Thus, if an employer announces to his employees in January that he intends to pay them a bonus in June, he has thereby abandoned his discretion regarding the fact of payment by promising a bonus to his employees.  Such a bonus would not be excluded from the regular rate.  Similarly, an employer who promises to sales employees that they will receive a monthly bonus computed on the basis of allocating 1 cent for each item sold whenever, is his discretion, the financial condition of the firm warrants such payments, has abandoned discretion with regard to the amount of the bonus though not with regard to the fact of payment.  Such a bonus would not be excluded from the regular rate.  On the other hand, if a bonus such as the one just described were paid without prior contract, promise or announcement and the decision as to the fact and amount of payment lay in the employer’s sole discretion, the bonus would be properly excluded from the regular rate.

(d)  Promised bonuses not excluded.

The bonus, to be excluded, must not be paid “pursuant to any prior contract, agreement, or promise.”  For example, any bonus which is promised to employees upon hiring or which is the result of collective bargaining would not be excluded from the regular rate under the FLSA.  Bonuses which are announced to employees to induce them to work more steadily or more rapidly or more efficiently or to remain with the firm are regarded as part of the regular rate of pay.  Attendance bonuses, individual or group production bonuses, bonuses for quality and accuracy of work, bonuses contingent upon the employee’s continuing in employment until the time the payment is to be made and the like are in this category.  They must be included in the regular rate of pay.

If you have any questions about these proposed changes, you may contact Mr. Leid at

One Technology Plaza, Suite 600
211 Fulton Street
Peoria, IL 61602-1350
Office: (309) 999-6311
Cell: (309) 696-0604
Fax: (309) 672-1568

Thinking About Opening a Business in Nevada? Here are Some Things You Should Know About Licensing


There are state and local licensing requirements to do business in Nevada.

Effective October 1, 2009, the Nevada Legislature transferred the authority for issuance and collection of fees for a Nevada Business License from the Department of Taxation to the Secretary of State.  This step prevented the renewal of company charters by the filing of the “annual list” (whether an LLC, corporation, partnership, etc.) without paying the state business license.

All entities, except nonprofit corporations, movie companies, companies run from home (with certain income limitations), and certain religious organizations, are required to file a State Business License application or renewal at the time their annual list is due (whether they are a Nevada entity or qualifying as a foreign entity).

The business license fee is $200 annually, which may be prorated if your current business license expiration date falls after your annual list due date.  See the Nevada Secretary of State’s website at:  Nevada Secretary of State for more information.

Additionally, there are local business licensing requirements that vary widely depending on your jurisdiction (Clark County, City of Las Vegas, City of Henderson, City of North Las Vegas, etc.).  Before contacting the local jurisdiction, you will need to have organized or qualified your entity with the Secretary of State and have obtained a state business license.


By: Guest Blogger Mary Drury, Esq.

Elements for a Claim of Breach of the Implied Covenant of Good Faith and Fair Dealing — Contract

In Nevada, the elements for a contract claim of breach of the covenant of good faith and fair dealing are:

  1. Existence of a valid contract;
  2. Every contract in Nevada contains an implied covenant to act in good faith in performance and enforcement of the contract;
  3. Justifiable expectation by the plaintiff to receive certain benefits consistent with the spirit of the agreement;
  4. Defendant performed in a manner that was in violation of or unfaithful to the spirit of the contract (the terms of the contract are complied with in a literal sense, but the spirit of the contract is breached);
  5. Unfaithful actions by the defendant were deliberate; and
  6. Causation and damages.

Continue reading Elements for a Claim of Breach of the Implied Covenant of Good Faith and Fair Dealing — Contract

The Buy-Sell Agreement is Arguably The Most Important and Most Overlooked Business Agreement

The Buy-Sell Agreement is Arguably The Most Important and Most Overlooked Business Agreement
The Buy-Sell Agreement is Arguably The Most Important and Most Overlooked Business Agreement

Buy-sell agreements can alleviate disputes that can arise between or among owners and can provide for payments to buy out an owner’s interest in the business at an owner’s death or disability without disrupting the ongoing business.   It can avoid family fights, fights between surviving owners and the deceased owner’s spouse, while maintaining the integrity of the company’s goodwill and liquidity. They are an essential part of proper corporate governance for any closely held business. If an owner is unable to continue in the business, the agreement triggers the sale of that owner’s portion of the company at a price designated in the agreement. Continue reading The Buy-Sell Agreement is Arguably The Most Important and Most Overlooked Business Agreement

The Elements for a Claim of Breach of the Duty of Loyalty

In Nevada, the elements for a claim of breach of the duty of loyalty are:

  1. Defendant is a fiduciary to Plaintiff company;
  2. Defendant owed plaintiff the duty of loyalty, requiring defendant to maintain, in good faith, the corporation’s and its shareholders’ best interests over anyone else’s interests;
  3. Defendant breached the duty of loyalty; and
  4. Causation and damages.

Shoen v. SAC Holding Corp., 122 Nev. 621, 632 (Nev. 2006); White Cap Indus., Inc. v. Ruppert, 119 Nev. 126, 67 P.3d 318 (2003); Rhine v. Miller, 94 Nev. 647, 649, 583 P.2d 458 (1978).


See elements for other claims at the Nevada Law Library

FAQ: What You Should Know About Selling Your Business

FAQ: What You Should Know About Selling Your Business
FAQ: What You Should Know About Selling Your Business

Why are you building a business?

In addition to providing yourself employment together with the flexibility, control and responsibility of business ownership, most people build businesses to sell them at a gain in order to retire or to build another business.


How should you document the sale of your business?

There are primary two ways to sell your business. You can sell the assets or you can sell the equity (typically stock, LLC membership interests, or partnership interests).   These are documented quite differently and can have completely different tax benefits to the parties.  Additionally, a question that needs resolved is whether continuing liabilities of the business remain with the seller or become the obligation of buyer (typically documented by an indemnity from seller). Continue reading FAQ: What You Should Know About Selling Your Business

Should I Sign This Letter of Intent?

Should I Sign This Letter of Intent?
Should I Sign This Letter of Intent?

What is a Letter of Intent?

Letters of Intent (“LOI”) can be very useful in setting forth the basic deal points of a transaction, but if they are construed as binding, the parties may get more (or less) than they bargained for.   Surprisingly, it may not be enough to say only once in a LOI that it is not a binding agreement.

In the famous case of Pennzoil v. Texaco, 729 S.W. 2d 768 (1987), the Texas court held that the LOI in that case contained enough terms that the billion plus dollar deal was enforced despite the fact that the LOI specifically said it was non-binding.  The parties were bound to their short form term sheet instead of a deal that contained bargained for and terms with all of the I’s dotted and T’s crossed. Continue reading Should I Sign This Letter of Intent?

Beware of Dabbling Franchise Attorneys! Part 1: Franchisee Counsel

If you are a businessperson, sooner or later you will have to deal with a lawyer. In the franchise world, it helps – tremendously – to deal with attorneys who understand franchising and franchise law. It doesn’t matter whether you are a franchisor or a franchisee; no matter which side of the transaction you happen to be on, you will want an experienced franchise attorney to be on the other side.

Surprisingly, the level of franchise law knowledge among attorneys who actually get involved in franchise transactions varies considerably. The majority of the time, lawyers who are knowledgeable in franchise law are on both sides of the transaction. But that is not always the case. Sometimes, the attorney on the other side is inexperienced, and “dabbling,” in franchise law.

This is the first of a two-part piece on why these dabbling attorneys can hinder a transaction, or worse, do harm to their clients.

This part one looks at it from the point of view of the franchisor, which is negotiating with a prospective franchise purchaser. Let’s assume this prospective franchisee is the party represented by a lawyer without franchise law experience. This situation is much more common than the reverse – where it is the franchisor, and not the franchisee, that has inexperienced counsel.

Why Franchise Agreements are Different from other Business Contracts

Some, but not all, franchise agreements are negotiable. The most significant problem involving  inexperienced counsel occurs when the franchisor is otherwise willing to negotiate with the prospective franchisee.

If a prospective franchisee seeks legal counsel, s/he will typically seek out that person’s usual business attorney, if there is one. If the prospective franchisee doesn’t have or know an attorney, that person will ask friends and family for referrals. Frequently, the referral is to a business attorney who has little or no experience in franchise law.

The business attorney may be tempted to do the work, instead of referring it to another lawyer. After all, the terms in franchise agreements look a lot like the ones you might find in other types of business contracts. But the problem is that the franchise relationship isn’t a typical business relationship. It is critical for the attorneys on either side of a negotiation to understand what makes franchising different.

Specifically, franchise agreements are (on the whole) much more one-sided than other business contracts. This is for a good reason: the provisions are there (in one way or another) to protect the health and integrity of the system as a whole, including its intellectual property and goodwill. Protecting the system is paramount, because if the system fails, all of its franchisees lose.

An attorney representing either side of the franchise transaction needs to understand this basic truth at the core of franchising. When s/he has experience in franchise law, counsel will understand which provisions are typical or atypical. They will also understand which terms may be negotiable and whether, taken as a whole, the franchise contract is more or less one-sided than is typical for those agreements. Having this experience will make the negotiation more productive and efficient. A more efficient negotiation will typically result in lower attorney fees.

Continue reading Beware of Dabbling Franchise Attorneys! Part 1: Franchisee Counsel