April 11, 2024 • 41 mins
In this episode we aim to address some of the common legal questions raised by the Hawaii agriculture producers we have met. We are grateful to Cat Taschner, co-founder of the nonprofit Business Law Corps in Hawaii. At a recent meeting with the University of Hawaii’s “AgConnect” course, she addressed questions she often hears and agreed to share an edited version here. She discusses topics like legal structure, liability waivers, contracts, online taxes, where webinars and templates for common legal documents are available, and how to sign up for free 30 minute calls to answer specific questions.
Brought to you by University of Hawaii College of Tropical Ag. and Human Resources (CTAHR), and the Seeds of Well-being (SOW) Project. This podcast is supported by the Farm and Ranch Stress Assistance Network (FRSAN) grant from the U.S. Department of Agriculture, National Institute of Food and Agriculture and Hawaii Department of Agriculture.
Resources:
- Business Law Corps
- Free Legal Consultations
- Restart Hawaii webinar series
- DPP guidance related to camper vans:
- Staying in a vacation van or recreation vehicle (RV) on a lot is considered camping.
- Camping is allowed as a part of outdoor recreation. (“Recreation Facilities, Outdoor” means permanent facilities for active outdoor sports and recreation, other than golf courses. Typical uses include: parks, playgrounds, botanical gardens, golf driving ranges, tennis courts, riding stables, academies and trails, and recreational camps.)
- Outdoor recreation requires a conditional use permit (except in the Resort District). CUP available only in the P-2, AG-2, Country, business and business mixed use districts. Outdoor recreation is not an allowable use in the residential, apartment or industrial uses.
- Food Truck Permit Resources:
- DCCA Hawaii Business Express
- US Federal Trademarks
- Contact Business Law Corps
- The YouTube version of this podcast with slides
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Thao (00:02):
The views, information or opinions expressed during the
Seeds of Wellbeing series aresolely those of the individuals
involved and do not necessarilyrepresent those of the
University of Hawaii College ofTropical Agriculture and Human
Resources, our funders, and anyaffiliated organizations
involved in this project.
(00:26):
Welcome to a Seeds of Wellbeing"Voices from the field" podcast
featuring voices of Hawaiiagriculture producers for Hawaii
agriculture producers. Thesepodcasts were made possible by a
grant from the University ofHawaii College of Tropical
Agriculture and Human Resources,also known as CTAHR, and the
Seeds of Wellbeing, or SOWproject, and is supported by
(00:49):
grant from the US Department ofAgriculture, National Institute
of Food and Agriculture, and theHawaii Department of
Agriculture.
Jim (00:56):
In this episode, we aim to address some of the common legal
questions raised by the Hawaiiag producers we have met. We are
grateful to Cat Taschnerco-founder of the nonprofit
Business Law Corps in Hawaii. Ata recent meeting with the
University of Hawaii's AgConnectcourse, she addressed a number
of questions she often hears andagreed to share an edited
(01:18):
version of that webinar here.
She discusses topics like legalstructure, liability waivers,
contracts, online taxes, wherewebinars and templates for
common legal questions areavailable for free, and how to
sign up for a free 30 minutecall to address specific
questions.
Cat Taschner (01:36):
My name is Cat Taschner, I'm the co-founder and
vice president of the BusinessLaw Corp. So we are a nonprofit
organization that provides freelegal services to small
businesses and entrepreneurs.
And so as you graduate out ofthe AgConnect program, as you
move into starting your ownbusinesses, think of us as a
resource, I put our website onthis slide. And so if you go to
(01:58):
our website, we have a bunch ofresources among them are free
legal forms. So if you decidethat, okay, you know, I'm ready
to start up on my venture, Ireally want to do an LLC, we
have LLC forms for you that youcan download. Obviously, we
recommend tailoring them, but itat least gives you a flavor for
what kinds of information youshould need. There's also
(02:18):
information on how you can applyfor free legal services. So
every week, we have four 30minute consultations. So you can
make an appointment througheither MCBL or HTDC. And I
dropped the links there. But youcan just talk to an attorney for
30 minutes about whateverquestion you have, like, you
(02:39):
know, "here's my specificsituation, do I want to be an
LLC? Why would I form in Hawaii,if I live in California?" you
know, whatever questions youmight have that are specific to
you, and you have a 30 minutewindow, just go nuts and ask
whatever you want. That'sprobably a good resource as you
start kind of feeling your waythrough choice of entity
drafting contracts. If afterthat 30 minute consultation, you
(03:04):
decide, okay, I actually needhelp drafting these documents, I
need more than just, you know, a30 minute phone call. We also
have an application for freelegal services on our website.
And so you can kind of say,"This is my business. This is my
idea. These are many people Iemploy, no, I can't pay for a
lawyer. But here's what I need."And then we can try to match you
with one of our volunteerattorneys. So those are
(03:25):
resources that I wanted to drawup and I'll again, I'll send a
copy of these slides so that youcan access the links after but a
good resource to have up front.
One more other resources Iwanted to share before I dive
into things. As part when COVIDhappened, a lot of businesses
had to stop. And so we wanted tocreate kind of a library of
(03:49):
resources for people who wantedto restart their business. So we
did eight different webinars.
And then we have forms attachedto each of the webinars, kind of
going over really classic smallbusiness questions, you know,
what do I how do I avoid taxes?
Or how do I minimize taxes? Howdo I hire people? Are they an
(04:09):
independent contractor? Are theyan employee? questions like that
we go through and so I droppedthe kind of eight topics that we
went through. But again, this isa good kind of online resource
that you can always access. Andthere are forums attached to it
if you actually need to take youknow the ideas into into into
reality. So resources for yourenjoyment later. So briefly what
(04:36):
I wanted to go over today, justfirst things first, I really
wanted to spend most of my timeon choice identity. And then a
couple of the other questionsthat Jim forwarded to me that
you guys might have about yourspecific issues.
Jim (04:48):
Question, just about the links and you mentioned there's
usually some template documentsthat are on the website. Is that
the same as the dropbox linkthat that I think Mike sent me
when you and I were on the call?
Cat Taschner (05:02):
I think so yeah.
The dropbox goes to theseresources, the free legal forms.
These, the YouTube ones areseparately accessible. And I
think the link is through thatYouTube account.
Jim (05:15):
Because I noticed in the Dropbox or a lot of forms,
right. So should we just focuson the ones that start with
Hawaii or reference Hawaii? Inthat whole list?
Cat Taschner (05:24):
I'll go over that.
Like, why would I pick Delaware?
Yeah, I'll go with that.
Jim (05:28):
Thank you.
Cat Taschner (05:30):
Okay, so any questions on the agenda or
anything that you want me todive into more before we go into
detail? Cool. Well, again, stopme if you if you want me to dive
in deeper. So first thingsfirst, this is kind of just a
typical slide, you guys arealready a little bit deeper into
business planning, and actuallylooking at the technical aspects
(05:52):
of your job. But you know, areyou ready to be an entrepreneur?
What is your idea and how areyou going to support it? So we
always like to frame thediscussion with those. But since
you have, you're a little bitmore mature than that we'll move
on to choice of entity. So Ilisted Why would you have a
separate legal entity? You know,I think a lot of small
businesses, it seems seen as ahumbug, right? Like, wow, I had
(06:16):
to do a separate tax return, Ihave to do all these filings
with the state what's in it forme? So the main reasons why
people like to have a separatebusiness entity is legal
protection, right? This isAmerica, people get sued. Having
a separate legal entity ensuresthat your personal finances are
safe. So that really istypically the primary reason why
(06:39):
you would want to have aseparate legal entity. Other key
factors that go into Okay, well,what type of legal entity should
I do? Is one of your goals toattract investors to you want to
have people investing capital onyou? If so, that might impact
what type of entity you choose?
What are the tax implications?
(07:00):
Some corporations requireseparate tax returns, some
entities don't. What makes sensefor you and for your personal
growth? Who makes the decisions.
In some cases, you want toentrust somebody else to run it
day to day, in some cases, youwant to be king in the castle,
which entity type is going toallow you the type of
flexibility and oversight thatyou want for your business? And
(07:22):
lastly, you know, Can thebusiness entity accommodate your
personal growth goals. If youwant to be you know, a mom and
pop that sells to people inHawaii, that's a very different
business growth goal, then Iwant to go public, I want to
have the next you know, I wantto have the next big thing I
(07:43):
want to do a big kind of techstartup, depending upon you
know, what your personal goalsare, that's going to impact your
choice of entity. So I put a, animage of these are not all of
the entity choices, but they'rethe ones that we typically see
most regularly. And for smallbusinesses, the LLC, the S corp,
and a C Corp really are the onesthat we see the most of. So I'm
(08:05):
going to focus today'sdiscussion on those three entity
types. If you want to talk aboutone of these other ones, your
partnerships or soleproprietorships, let me know and
we can go into it. But really, Ithink the the primary benefit is
going to be coming from an LLC,S corp or C Corp. LLCs are
probably the most common entitytype that we see with small
(08:30):
businesses, primarily becauseyou get to do pretty much
whatever you want. As a smallbusiness owner, you got to make
a lot of the decisions andcontrol how operations are run.
And so most businesses likethat, in the pros category, it's
a pass through entity, so it'snot separately taxed. That is
and especially if it's just you,if you're a single member
(08:52):
entity, it's even easier, youcan report it on your own
personal income tax reportreturns. So it's a it's a pass
through entity not subject toseparate taxation. The
flexibility is what most peoplelike you get to set the terms on
what voting looks like when youget paid how you make decisions.
And so a lot of small businessestend to like that. There are no
eligibility requirements. I'llgo more into that on the S corp,
(09:16):
which has a lot of eligibilityrequirements but here there are
none. And importantly you getthat personal liability shield.
So let's say you sell a productand you know maybe there's an
issue with it, maybe there'smold on it and somebody gets
sick. What you want with an LLC,you want them to sue the entity
right now you personally and sohaving that LLC means that the
(09:38):
entity will protect you. And aslong as you're treating the
entity like a separate legalentity, your personal finances,
you know, your house, your car,all of that is protected. So
that that's again that personalliability shield is really a an
important part of why you wantto have an entity on the cons is
not suitable for venture capventure capital financing. So I
(10:01):
mentioned earlier Do you want toget investors? LLCs aren't the
most popular vehicle for peopleto invest in. So if that is one
of your goals, maybe not theright entity choice. It's
difficult to issue equityawards. So to give away like
stock or ownership interests canbe challenging, not impossible,
but it just takes a lot of legallegwork. Complexity, because
(10:22):
it's flexible, it can becomplex, right? Because you get
to do whatever you want. It justtakes a lot to document that. So
that's why it can be complex.
And then there's no, you can'tgo public with it. But so again,
just kind of frame this with,you know, what are your personal
goals for growth, then thatshould help you to figure out
(10:44):
okay, do these pros and consapply to me? Any questions on
Jim (10:49):
I do. If no one else does.
LLCs?
Cat Taschner (10:53):
Yeah, go for it.
Jim (10:54):
Okay. So the personal liability shield is that, I
mean, I've heard the phrase overthe years, piercing the
corporate veil, right, as ifyou're a single member LLC, and
it's really you, and only you,and it's like, so you're really
just setting up an LLC in orderto shield yourself from
liability. Is that can that bepierced? Can that all go away?
(11:16):
Are there certain things thatyou need to make sure you
haven't placed like separatefinancials?
Cat Taschner (11:20):
Exactly. Yeah, I think the rule of thumb is if
you treat the business as thoughit's a separate legal entity,
the law will treat it as thoughit's separate. So for example,
as soon as you start your ownLLC, you should get your own LLC
bank account. Right? When itcommingling assets, you know,
like cashing a check on behalfof the company into your own
(11:42):
personal bank account. That's abig nono, right? You're not
really treating the entity asthough it's separate. And so
that's the perfect opportunityfor to pierce the corporate
veil. You can't, obviously,there are certain things that
the entity can't protect youfrom right, if you punch someone
in the face, you can't say,oops, it was the LLC that did
it. But as long as you areacting on behalf of the
(12:03):
business, so when you signcontracts, let's say you get
into a vendor agreement, makesure that the agreement is
between the LLC and the vendor,not you personally, and the
vendor, just treat the businessas though it's separate. And
then the law should followaccordingly.
Jim (12:20):
And maybe this is an accountant question, but I
believe that with an LLC, youcan still file under the one tax
return and do it as a separateschedule, and not have to do an
entirely new return for the LLC.
But
Cat Taschner (12:32):
Exactly, it's a pass through entity. So you
know, it doesn't get taxedseparately.
Jim (12:36):
So I'm not too horrible, either. Okay, thank you.
Cat Taschner (12:38):
Yeah, it's not it's not so cumbersome. I think,
you know, the we'll get into Ccorporations, that's when you
get that double layer oftaxation, which, for most
people, it's a deal killer. Anyother questions on LLC? Cool.
All right, let's move on. Ascorporations, again, it's a pass
through entity, but you get thatpersonal liability shield. S
(13:00):
corporations are a subcategoryof corporations. So they they
come with a lot of restrictions.
There are some benefits to them.
So it's a quid pro quo. Scorporations, actually all the
Corporations, but that'sprobably the oldest entity form
and they've been around for awhile. The S election is
something that you do when youcreate the entity and you agree
(13:22):
to abide by certain rules. Theeligibility requirements are
that you know, you're a naturalperson, there's a limitation on
how many stockholders you canhave. But the benefit is that
you get that pass throughentity. And that you can limit
some of the self employmenttaxes that are owed, and so that
And I think, yeah, it seems likeit's not kind of the scope of
it's a dance to do with youraccountant. But we see a lot of
(13:44):
LLCs. Let me back up. Sorry, letme let me let me back up to the
beginning. So when you create anentity, you form it under state
law, for purposes of federal taxlaw, however, you can elect to
be taxed as different things. Soyou can elect to be you can form
as an LLC and elect to be taxedas an S corporation. That is
what a lot of businesses chooseto do, because you can eliminate
(14:08):
some self employment taxes. AndI can go over that. When I go
over the taxes faze. Ascorporations because there are
stockholder eligibilityrequirements, investors don't
typically like it. And so again,it just it depends on what your
personal goals are for yourbusiness. Do you want to attract
financing? If so, the Scorporation is probably not the
(14:29):
right vehicle for you. That's incontrast to the C corporation,
investors love C corporations.
And so when you see bigcompanies, they often are C
corporations. It gives them theflexibility to do an IPO. And
for sophisticated investors.
It's like speaking English inthe business world. Everyone
speaks it and so it really iskind of the go to entity type.
(14:52):
If you are high growth, we cantalk about C corporations. But
for most small businessesbecause there's a double layer
of taxation, it's not aparticularly popular choice.
When I say double taxation, Imean that, so let's say the
corporation makes money, it'staxed at the corporate tax rate.
When a distribution is made toyou, as the owner, as a
(15:13):
stockholder, you also get taxed.
So there's two layers oftaxation at the company, and
then at your level. So becauseof that, it really isn't too
popular. So if there's someoneon this call that does want to
talk about C corporations, I'mthe small farmer group that we
tend to be. It's like, am Imore than happy to go into
details. But typically, the theright in saying that the
benefits to S&C corp are on thethreshold, the barrier to entry
is that double taxation. So iftax, like or investors level?
(15:35):
it's not of interest to youguys, I'm happy to skip over it
and kind of focus on what wouldbe more helpful for you.
(16:00):
Investors? Yeah, if you want tohave investors, it's definitely
something. I can go into what Imentioned earlier, so what we
see a lot with small businessesis we have they want to be an
LLC, for purposes for state law,gives them flexibility, and you
can kind of set the rules. Andthen for federal tax purposes,
(16:21):
they elect to be taxed as an Scorporation, then they can
eliminate some of the selfemployment taxes that might be
owed on profits of the company.
So again, my recommendation is,you know, get an appointment
with with an attorney, and wecan really talk through what
your issues are. And then we canmake a recommendation that's a
little bit more tailored thanyou know, I'm kind of keeping it
(16:42):
at the surface level.
Jim (16:45):
Someone was also asking about partnerships was that? Was
that another? That sounds likeanother potentially common one
for a small business?
Cat Taschner (16:55):
There are partnerships. Partnerships, in
some cases, don't give you thepersonal liability shield. So
because of that, and it's notsomething that we typically
recommend you want to protectyour personal finances, there
are ways to limit that. Butthere are also some limitations
on partnerships. So we can we,if that is something that
(17:17):
someone wants to, there are someindustries where partnerships
are kind of the go to, like Iwas a partner at my law firm,
right? There are industrieswhere partnerships do make
sense. So just schedule anappointment. And we can kind of
talk through the nuances as itapplies to your particular
business and what your partnersare, and what kind of exposure
(17:38):
and liability you're willing tohave.
That's a question that we oftenget is how do I, you know, how
do I have a nonprofit arm orshould I have a parent entity
with a bunch of different LLCsfor different businesses. I
mean, there are a lot ofbusinesses have a philanthropic
arm. Those generally have to bepretty carefully negotiated or
(18:00):
documented as a nonprofit.
Typically what you're going foris a tax exemption, right, and
so those tend to be a little bitmore regulated, because you're
getting these kind of freebieson tax. And so I think the
documentation for those tends tobe a little bit heavier, just
because you, you don't want tobe claiming non taxable
activities as non taxableevents. And so it's just a
(18:24):
little bit, but it certainly isa thing that can be structured.
And so again, it's really up tokind of what your operations
look like, you know, somebusinesses have, let's say, like
a, they have an operating farm,and then they have maybe a food
product. And sometimes they wantto keep it separate, just that
(18:45):
they keep the businessesseparate. And they have
different partners and differentdistributions. So we can talk
about the relationship betweenthe companies, if you guys get
schedule an additionalappointment.
Jim (18:57):
Well, I think that's a common theme we're seeing with a
lot of the folks in the cohortis, you know, produce and, and
selling ag products is the mainbusiness line, but then I think
many wants to do an educationalcomponent, right, which would be
workshops. And yeah, actually,I'd say half or more of the
(19:18):
cohort and it seems like atheme, right? A big part of its
trying to make sure you spreadthe word about the benefit of,
of local produce, but it's alsoand teaching some of the some of
those skills, but but I think inmost cases, folks are thinking
of doing that. So I think whatwe've been talking about with
the business team is, is theLLC, if you were just for
(19:41):
simplification, right, the LLCwould be the farm name, and then
there'd be a subsidiary thatwould, that subsidiary for the
educational component, thatwould apply for the 501
nonprofit status. Does thatseems pretty straightforward to
you, are as a starting point?,okay.
Cat Taschner (19:58):
Yep. As long as it's documented appropriately
that sounds appropriate.
Jim (20:02):
Thanks.
Cat Taschner (20:04):
It's also I, I feel like I feel like such a
lawyer like liability, but itreally is something that like
guides a lot of our decisionmaking. And when you have two
very discreet businessoperations, you know, the
operation of a farm and, youknow, selling a product, let's
say that you've justcatastrophic issue on the
product, they're allcontaminated, and you sell it
(20:25):
and everyone gets sick. Andthere's all these potential
losses. The benefit of having aseparate business for the food
product company is that the foodproduct company gets sued, and
maybe has all this liability.
But if the farm is under aseparate entity, it doesn't get
touched. If you have verydisparate products, and you want
to protect one from the other,for whatever reason, it doesn't
(20:46):
have to be, yeah, it createsthat separation, so you protect
the assets of each business,even if you're the one that's
ultimately running both of them.
So anyway, that's a reallygeneral overview of choice of
entity, please, you know, callus come talk to us. And we can,
you know, kind of walk throughsome of the nuances. And again,
(21:08):
if if you get to the point whereyou want to actually start
drafting documents, you know, wehave a bunch of LLC templates on
our website. Some of them areHawaii entities, we also have
Delaware entities, the onlyreason that's up there is that,
you know, this is our databasefor all small businesses,
particularly those that are highgrowth with a really want to go
(21:32):
public and get a bunch of, youknow, VC, venture capital
investment, Delaware entitiesmake its it facilitates that
type of investment. And so thoseare up there for them. But for I
think your purposes, the Hawaiientity probably makes the most
sense.
Other legal considerations? So Igot, I think some of the
(21:53):
questions that were posedrelated to like, what kind of
contracts and agreements do Ineed for my business? And I
listed some very typicalagreements, right? Vendor
customer partners,nondisclosure. As a small
business, you kind of have touse your discretion when
(22:14):
deciding, like, which contractsdo I really need to have? And
when I do have contracts, like,how serious are they? I've seen
small businesses, you know, justFrankenstein together a 20 page
document and give it to somebodyand like that, that's kind of
scary to be on the receivingend, or like, do I need to sign
this 20 page agreement, to kindof pick and choose what makes
sense to you, we have some formson our website, and we can help
(22:37):
you draft you know, if youconstantly get into vendor
agreements, maybe you want tohave one really good form that
you can, you know, plug and playthe different names of vendors
into it, so we can assist withthat. But it obviously helps to
you don't need to have a bigthick contract. But it does help
to have even just a back ofnapkin, high level, what are the
business terms? How much am Ipaying you? When am I paying you
(23:00):
want am I delivering those kindsof things, it's easier to pre
agree upon it, and have it inwriting versus fighting about it
after the fact. So if I if Icould make a recommendation,
just really high level isprobably a good starting point.
For those of you that are doingonline business, I think we have
some privacy policies, terms andconditions, legal disclaimers
(23:22):
that you can use. So those areon our website.
Jim (23:24):
So the ones that you list here should usually be a
template of some sort, on thewebsite?
Cat Taschner (23:32):
It helps, yeah, as a start. It's a start. We can
always help you tailor it, butthose are going to have. Taxes.
So all businesses are going tobe subject to certain taxes. You
know, all businesses except forpartnerships have to file an
income tax return, for example,right, depending upon what kind
(23:54):
of business you have, and whatkind of industry you're
operating in, it's going toimpact what kind of taxes you'd
have to pay. In addition, ifyou're doing online business, or
if you're selling products toother states, you might owe
taxes in that other state aswell. So unfortunately, each
state has its own set of rules.
Sometimes you owe taxes, ifyou... I put a graphic there,
double check in when youactually start doing business,
(24:17):
but it's at least a helpful kindof overview of when do I, when
do I have to start paying taxesin a different state. You know,
green is if you transact $100kor more, that's the threshold.
So if it's under $100k, withresidents of a state of the
people and of the states ingreen, then you probably don't
have to, if you exceed $100k,then you're going to be subject
(24:39):
to their their taxes. So justsomething to be aware of. Once
you start doing this once youstart doing business interstate,
Jim (24:51):
And looks like green is the lowest level right from, can't
quite read that...
Cat Taschner (24:54):
Green is the lowest level. Well green, that
green and then the blues are all$100k In the blue set a 200
transaction limit. So even ifyou have a bunch of little ones,
it's tricky. Okay.
Jim (25:06):
That's great. That's a pretty cool little graph.
Cat Taschner (25:09):
It's helpful. It's irritating that every state is
different. And it just, it justputs the burden on the person
doing business right to check,especially if you're doing
online business, you have toknow each state. So
Jim (25:21):
And if you get to that level, I guess that's a good
problem to have, right? Ifyou're
Cat Taschner (25:24):
Yeah, like oh, shucks, I'm doing $500k woth of
revenue in Texas, darn
Jim (25:29):
and I know there are there are outfits that will actually
take that on, and just you, yougive them your numbers, and they
roll the hassle of paperwork,state by state unique stuff.
Cat Taschner (25:38):
Yeah, it's on websites, like if you if you use
them as your platform have, youknow, this type of compliance
built into it. So it justdepends on if you're, you know,
if you guys are going to bedoing a lot of online business,
that might be something to justthink about, you know, which
platform you sign up with and ifthey're going to, if you can
unload this type of work ontothem, so that you can focus on
what you're really good at.
(26:00):
And then the last thing that Ihave to talk about are licenses
and permits. You know, so we'retalking about kind of the
business registration. When youset up your business, you know,
if you do it in Hawaii, they theDCCA. So the Department of
Commerce and Consumer Affairs isthe state agency that regulates
all businesses, they have, likea wizard, where when you set up
(26:23):
your business, you can also setup your tax accounts, and then
they're linked. And so that's apretty convenient tool to have.
Other licenses you might thinkabout or whether you want to
have a trade name, people oftenthink of that as like a DBA. So
do you want to have your farmbut doing business as you know,
farm XYZ or whatever. That'sanother thing that you can add
(26:44):
on when you're going throughthat wizard. If you are
employing people, you might needother licenses or need to comply
with other laws. That's why Iput employer requirements and
then any occupational licensesthat you might have. Again, if
you're doing business in othercountries, in other states, you
might have to qualify to dobusiness, there was a slightly
(27:05):
different analysis than the taxanalysis. But it's the same kind
of feel right? Do you have aphysical presence there? Should
you be qualified to do businessthere? For example, if you have
an employee that lives inCalifornia, probably best if
your company registers to dobusiness in California, same as
if you have like a warehouse,there are some kind of physical
(27:25):
nexus.
There were specific questionsthat about camper vans. And so I
actually, I in my day job, Iactually ran into DPP about
this. So I just cut and pastedtheir, their guidance as to when
you can do camper vans, whatkind of permit you need, what
area you have to be in. Andagain, I'll send copies of the
(27:46):
slides so that you guys canaccess this, but this was DPPs
guidance on camper vans andwhether or not you needed to get
a conditional use permit. Andwhether whether you were
eligible for one.
And then the last question thatI got from Jim in advance was
food trucks. So I listed some ofthe licenses and permits that
(28:06):
would be required. And then thecity and then the state
respectively, both haveresources on mobile food
establishments. So and you know,what permits would be needed, do
you need to be tied to acommercial kitchen for food
safety and all of that? So
Jim (28:23):
Yeah, and I think food trucks in particular might have
been like, if, if you, there'sso many food truck vendors,
right, these days, so it seemslike if you have a if you have
an arrangement - maybe maybe itshould be a contract based on
one of your previous slides -but if you have an arrangement
with a food truck, that comes toyour property for certain events
(28:44):
let's say, it sounds like theyneed to do all these things. You
don't need to but you need tomaybe your your contract with
them says that they need to.
Cat Taschner (28:53):
That they're responsible, because you don't
you don't want to be stuckcomplying for them. So just
being very clear aboutexpectations upfront is
generally a good thing.
Jim (29:04):
I did have one question back on, you know, related to
business registration and DBAquestion mark. So DBA, could you
just talk to that a little bitmore? I mean, a D, why would I
want, because I if I go on and Iregister my business, right, and
would I need a DBA on top ofthat, because,
Cat Taschner (29:23):
No
Jim (29:23):
no right, but
Cat Taschner (29:24):
You don't need it.
Some people like having aseparate DBA like, for example
for some reason,that's the name of a business
locally. They do business as because is
their trade name, but theiractual corporate name is
(29:45):
.
Jim (29:48):
So yes, and you don't have
Cat Taschner (29:50):
They have a bunch of different trade names that
they operate under. So it justgives you flexibility.
Jim (29:56):
Yeah, you don't need to use no like you need to register Um
, as a businessregistration because you've done
Cat Taschner (30:03):
If you were to register it as a business. So
the otherlet me let me actually share my
screen and I'll go to the DCCSwebsite. So this is the DCCS
website. For those of you whohaven't started up it, can you
see my screen? Yep. Okay, so forthose of you who haven't started
a business yet, I wouldrecommend going into this as a
(30:23):
database and checking to see ismy business name available. So
let's say I want to open up,. You search, and
it'll show you okay, somebodyhas already registered the name
,. When you click onit in Hawaii, right, you click
on it, and you see, okay, theregistrant is this company, you
(30:43):
can click on them. And then youcan see oh, they actually own a
bunch of different trade names,you can see who the owners are,
or the who the officers are alltheir different trade names. So
it's a really good resource foryou as you're trying to figure
out what should I name mybusiness. Then you'll find out
if there's any competingbusinesses. It's better to know
it upfront than to you know,spend a bunch of money branding
(31:05):
your business only to find outthat someone else already owns
it. So that this is a goodresource. This has all of the
state of Hawaii businesses andtrade names, if you are going to
operate on a national level,consider whether you need to get
(31:26):
a federal trademark. And so thisis the federal trademark
registration system, you can dothe same thing. You can search
to see if there are anycompeting marks, and you can do
the same. And then it'll pull upall of the registered
yeah, that across the nation.
(31:52):
Again, you can click on it andsee that it's much faster to the
same company. And this givesthem nationwide protection,
whereas the Hawaii registrationwill give you Hawaii
registration.
Jim (32:03):
And um tell me if you, if you agree, I feel like the the
setting up a trademark is afairly simple process. I mean,
it's not too horrible orexpensive. If you wanted to do
that.
Cat Taschner (32:13):
Yeah, no. That setting up a so trademark
registrations in the state ofHawaii, I think are $50 for five
years. So it's like a one or twopage form that you submit to
DCCA. It's prettystraightforward. And so if for
if that's really important toyour brand, that's your name, I
think it's a worthwhile stake toput in the ground to say this is
(32:35):
my name. Nobody else can stealit, I'm claiming it as my own.
And you could put that, Thefederal registration is a little
bit more expensive. I think it'slike $250 for every class of
goods or services. So it's alittle bit bigger of a bite, but
it does give you nationalprotection. And I think that was
for a period of 10 years.
Jim (32:53):
And you need to do both. If you want, like you have to do if
you do federal you need to doHawaii?
Cat Taschner (32:58):
It would it's a belt and suspenders method. It's
better to do both but federalwill give you nationwide
protection.
Jim (33:06):
If you want the R with a circle around it, right, Yeah.
for registered trademark, it hasto be federal, right? Correct.
Liability waivers, right? Like,just as an as a simple example,
everyone signs liability waiversto be part of this program. Are
they garbage?
Cat Taschner (33:22):
They're their contracts? They're legally
enforceable? .
Jim (33:25):
Yeah. So but...
Cat Taschner (33:29):
I mean, not if you're like twisting my arm and
making me sign it right, if Ican prove that I signed it under
duress or whatever. There areobviously exceptions, but as a
general rule, yes, they'reenforceable.
Jim (33:39):
But, again, don't punch anybody in the face.
Cat Taschner (33:44):
You know, I think it is this strength of the
liability waiver, particularlyif there's going to be like a
hazardous activity. Come on myfarm. And I'll teach you how to
use pesticides, right? Likethose kinds of activities. If
you can disclose in advance,like, Hey, this is the type of
activity that this is intendedto cover. You are accepting the
(34:04):
risk of that, that that mightstrengthen it, just so that it's
very explicit and very clear.
And it just closes the risksinvolved.
Jim (34:13):
I mean, because we're all on farms in Hawaii, right? And
it's uneven ground, we're on anactive volcano, you know, and on
this island. I mean, it's just,it's just not easy to get
around. So is that implied ifyou're doing a farm tour, or you
need to spell that all out andyour liability waiver?
Cat Taschner (34:28):
I mean, it's I would spell out at least some,
you know, you accept a certainamount of risk, like you know,
sprained your ankle because ofuneven ground or something like
that. Even if you havevolunteers coming on site to do
you know, an a work day orsomething i It's, yeah, I would
(34:48):
recommend getting a liabilitywaiver from each of your
attendees. If they're under age,having their parents sign off,
things like that. You know, Iwould probably look to see like,
what are other people in theindustry do doing particularly
like the larger entities. If youcan kind of piggyback off of the
research that they've done orthat the forms that they've
created, that's probably a goodfirst start versus, you know,
(35:10):
each of you doing a tremendousamount of legal research and
crafting your own craft craftingyour own forms. You don't what,
no point in reinventing thewheel for if you could,
particularly if there's a Hawaiientity that you're like, okay,
they're doing it right. Thatmight be someone to ask, because
state law might defer to,
Jim (35:32):
Yeah, I'm thinking like, some of the bigger up, it's
maybe I can try reaching out tosome of the bigger farms, right,
because it's, or ones that havemore people coming through, that
might be a good start and seewhat I can come up with there.
Cat Taschner (35:46):
If not, that might be a good, you know, something
that you know, UH and we, I am,that might be something that we
can collaborate on to throughthe Business Law Corp. And I
think we're always trying tofind a way to engage our
attorneys. And that might be aninteresting project for us to
work on. Can we do, you know,Hawaii state law research to
(36:06):
craft, you know, guidance andhelpful forms for you guys. So
that you're not stucklitigating, you know, something
that really isn't at the key ofyour core competency?
Jim (36:17):
Yeah, I mean, I think more and more from for a variety UH
things that are working on atalk to have talked to a lot of
ag producers on the islands,right? And I think, I think that
would be certainly valuable. Ithink more and more are moving
towards a couple of things totry to stay profitable state,
(36:37):
keep farming, and one is farmtours, workshops
Cat Taschner (36:41):
diversify commercial offerings,
Jim (36:44):
and also Airbnb kind of structures, right. and I think,
you know, some of the questionsyou saw, and that were asked
ahead of this, which are maybenot your kuleana are probably
zoning issues, right? More orless? Yeah,
Cat Taschner (36:57):
Yeah, if you have any legal questions that it can
be related to choice of entityor any kind of business
transactional issue, feel freeto raise it with us, we're happy
to help. We have a volunteercorps of, but mostly most of the
large firms. And so even if it'semployment or tax or business
related, hopefully, we'll beable to support you. And so the
(37:19):
HTDC one, we often have noappointments, I would call them
and see if we, you can get onthe schedule each. So there's a
rotation of maybe like eight or10 of us. So every week, it's a
different attorney, you actuallymight be a benefit to you to
have a different set of eyes.
And in particular, if you if youknow that you have like I have a
really tax heavy question, canyou try to schedule me on the
(37:39):
week that the tax specialist isthere, they usually try to be
accommodating. If you have anactual document that you want us
to review, send it to them. Someattorneys will review in advance
I'm at some of them won't, butat least maybe you can kind of
talk through the issues and theycan actually look at the wording
of the contract.
Jim (37:57):
It causes me to ask Cat, do you know anyone that's has any
experience with KamehamehaSchools, Bishop Estates
contracts? Because they'repretty common and complex.
Cat Taschner (38:06):
They're beasts aren't they? Almost every real
estate attorney has had to dealwith one of those at one point
in our career. We've all seenthem. Yeah, I what you want to
do is talk to someone whoregularly works with KS leases.
Jim (38:25):
If we connect to those websites and those 30 minute
sessions, is that the way to goor to start?
Cat Taschner (38:30):
Start there. I would start there. If you have
specific questions, just emailme, I generally do most of the
back of house stuff for BLC so Ican get you in contact with the
right people as well.
Jim (38:42):
For all of us, I really appreciate it. appreciate you
letting me record it. I know acouple people weren't able to
make it so. So they're reallygreat. There'll be really
grateful to have this as well.
Cat Taschner (38:50):
Yeah, hopefully they're good resources. It was
nice to meet you all good luck.
Good luck with everything.
You'll have a lot of hats towear. I really respect your
ability to jump from farm tooffice to okay, today I'm an
accountant, to today I'm an HRexpert. It's it's, it's a lot so
I have a lot of tremendousrespect for farmers and
entrepreneurs.
Jim (39:10):
This goes back to that. Do you want to be an entrepreneur
side that we skip past but yeah,I think we're all committed.
We thank Cat for sharing hermanao, and addressing some
common Hawaii agriculturalproducer legal questions and
concerns, as well as providingsome links to templates they can
use to address some of theirneeds. If you're only listening
to this, you may want to watchour video version on YouTube to
(39:33):
see some of the thingsreferenced, and be sure to check
the show notes. If you want toknow more about the University
of Hawaii's Connect program,then listen on for brief
description and use the link inthe show notes. Mahalo.
And this quick version is wehave we tried to match up post
farms and skilled ag techniciansto work together for eight weeks
(39:54):
or more 16 hours a week and thegoal of which is to kind of
figure out if they want to worktogether long term and what that
might look like. What they'veall submitted this morning is a
two year business plan thatshows, with Financials that
shows how that might look forthe next two years starting
January of 2024. And so, thosehave all been submitted. So
(40:18):
kinda in the last phase wherethose are being reviewed, and we
have people like Linus Tavarusand Erik from GoFarm and Mike
from Business Strategies inHilo. So people that are going
to have the strong financialbackground that are helping
review those, this final pieceand then we're kinda pau.
Thao (40:37):
The intention of these podcast series is to create a
safe space for respectful andinclusive dialogue. With people
from across a broad and diversespectrum involved in growing and
making accessible the food weshare together. A diversity of
voices, perspectives andexperiences can serve to deepen
(40:57):
mutual understanding, to sparkcreative problem solving and
provide insight into thecomplexities of our agricultural
system. If you, our listeners,have experiences with Hawaii
agricultural ecosystem fromindigenous methods, permaculture
smallholder farmers to largeincluding multinational
(41:18):
agricultural, industrialcompanies, and everywhere in
between, and you would like toshare your story, please contact
us. We welcome your voices andperspectives
The views, information or opinions expressed during the
Seeds of Wellbeing series aresolely those of the individuals
involved and do not necessarilyrepresent those of the
University of Hawaii College ofTropical Agriculture and Human
Resources, our funders, and anyaffiliated organizations
involved in this project.
(00:26):
Welcome to a Seeds of Wellbeing"Voices from the field" podcast
featuring voices of Hawaiiagriculture producers for Hawaii
agriculture producers. Thesepodcasts were made possible by a
grant from the University ofHawaii College of Tropical
Agriculture and Human Resources,also known as CTAHR, and the
Seeds of Wellbeing, or SOWproject, and is supported by
(00:49):
grant from the US Department ofAgriculture, National Institute
of Food and Agriculture, and theHawaii Department of
Agriculture.
Jim (00:56):
In this episode, we aim to address some of the common legal
questions raised by the Hawaiiag producers we have met. We are
grateful to Cat Taschnerco-founder of the nonprofit
Business Law Corps in Hawaii. Ata recent meeting with the
University of Hawaii's AgConnectcourse, she addressed a number
of questions she often hears andagreed to share an edited
(01:18):
version of that webinar here.
She discusses topics like legalstructure, liability waivers,
contracts, online taxes, wherewebinars and templates for
common legal questions areavailable for free, and how to
sign up for a free 30 minutecall to address specific
questions.
Cat Taschner (01:36):
My name is Cat Taschner, I'm the co-founder and
vice president of the BusinessLaw Corp. So we are a nonprofit
organization that provides freelegal services to small
businesses and entrepreneurs.
And so as you graduate out ofthe AgConnect program, as you
move into starting your ownbusinesses, think of us as a
resource, I put our website onthis slide. And so if you go to
(01:58):
our website, we have a bunch ofresources among them are free
legal forms. So if you decidethat, okay, you know, I'm ready
to start up on my venture, Ireally want to do an LLC, we
have LLC forms for you that youcan download. Obviously, we
recommend tailoring them, but itat least gives you a flavor for
what kinds of information youshould need. There's also
(02:18):
information on how you can applyfor free legal services. So
every week, we have four 30minute consultations. So you can
make an appointment througheither MCBL or HTDC. And I
dropped the links there. But youcan just talk to an attorney for
30 minutes about whateverquestion you have, like, you
(02:39):
know, "here's my specificsituation, do I want to be an
LLC? Why would I form in Hawaii,if I live in California?" you
know, whatever questions youmight have that are specific to
you, and you have a 30 minutewindow, just go nuts and ask
whatever you want. That'sprobably a good resource as you
start kind of feeling your waythrough choice of entity
drafting contracts. If afterthat 30 minute consultation, you
(03:04):
decide, okay, I actually needhelp drafting these documents, I
need more than just, you know, a30 minute phone call. We also
have an application for freelegal services on our website.
And so you can kind of say,"This is my business. This is my
idea. These are many people Iemploy, no, I can't pay for a
lawyer. But here's what I need."And then we can try to match you
with one of our volunteerattorneys. So those are
(03:25):
resources that I wanted to drawup and I'll again, I'll send a
copy of these slides so that youcan access the links after but a
good resource to have up front.
One more other resources Iwanted to share before I dive
into things. As part when COVIDhappened, a lot of businesses
had to stop. And so we wanted tocreate kind of a library of
(03:49):
resources for people who wantedto restart their business. So we
did eight different webinars.
And then we have forms attachedto each of the webinars, kind of
going over really classic smallbusiness questions, you know,
what do I how do I avoid taxes?
Or how do I minimize taxes? Howdo I hire people? Are they an
(04:09):
independent contractor? Are theyan employee? questions like that
we go through and so I droppedthe kind of eight topics that we
went through. But again, this isa good kind of online resource
that you can always access. Andthere are forums attached to it
if you actually need to take youknow the ideas into into into
reality. So resources for yourenjoyment later. So briefly what
(04:36):
I wanted to go over today, justfirst things first, I really
wanted to spend most of my timeon choice identity. And then a
couple of the other questionsthat Jim forwarded to me that
you guys might have about yourspecific issues.
Jim (04:48):
Question, just about the links and you mentioned there's
usually some template documentsthat are on the website. Is that
the same as the dropbox linkthat that I think Mike sent me
when you and I were on the call?
Cat Taschner (05:02):
I think so yeah.
The dropbox goes to theseresources, the free legal forms.
These, the YouTube ones areseparately accessible. And I
think the link is through thatYouTube account.
Jim (05:15):
Because I noticed in the Dropbox or a lot of forms,
right. So should we just focuson the ones that start with
Hawaii or reference Hawaii? Inthat whole list?
Cat Taschner (05:24):
I'll go over that.
Like, why would I pick Delaware?
Yeah, I'll go with that.
Jim (05:28):
Thank you.
Cat Taschner (05:30):
Okay, so any questions on the agenda or
anything that you want me todive into more before we go into
detail? Cool. Well, again, stopme if you if you want me to dive
in deeper. So first thingsfirst, this is kind of just a
typical slide, you guys arealready a little bit deeper into
business planning, and actuallylooking at the technical aspects
(05:52):
of your job. But you know, areyou ready to be an entrepreneur?
What is your idea and how areyou going to support it? So we
always like to frame thediscussion with those. But since
you have, you're a little bitmore mature than that we'll move
on to choice of entity. So Ilisted Why would you have a
separate legal entity? You know,I think a lot of small
businesses, it seems seen as ahumbug, right? Like, wow, I had
(06:16):
to do a separate tax return, Ihave to do all these filings
with the state what's in it forme? So the main reasons why
people like to have a separatebusiness entity is legal
protection, right? This isAmerica, people get sued. Having
a separate legal entity ensuresthat your personal finances are
safe. So that really istypically the primary reason why
(06:39):
you would want to have aseparate legal entity. Other key
factors that go into Okay, well,what type of legal entity should
I do? Is one of your goals toattract investors to you want to
have people investing capital onyou? If so, that might impact
what type of entity you choose?
What are the tax implications?
(07:00):
Some corporations requireseparate tax returns, some
entities don't. What makes sensefor you and for your personal
growth? Who makes the decisions.
In some cases, you want toentrust somebody else to run it
day to day, in some cases, youwant to be king in the castle,
which entity type is going toallow you the type of
flexibility and oversight thatyou want for your business? And
(07:22):
lastly, you know, Can thebusiness entity accommodate your
personal growth goals. If youwant to be you know, a mom and
pop that sells to people inHawaii, that's a very different
business growth goal, then Iwant to go public, I want to
have the next you know, I wantto have the next big thing I
(07:43):
want to do a big kind of techstartup, depending upon you
know, what your personal goalsare, that's going to impact your
choice of entity. So I put a, animage of these are not all of
the entity choices, but they'rethe ones that we typically see
most regularly. And for smallbusinesses, the LLC, the S corp,
and a C Corp really are the onesthat we see the most of. So I'm
(08:05):
going to focus today'sdiscussion on those three entity
types. If you want to talk aboutone of these other ones, your
partnerships or soleproprietorships, let me know and
we can go into it. But really, Ithink the the primary benefit is
going to be coming from an LLC,S corp or C Corp. LLCs are
probably the most common entitytype that we see with small
(08:30):
businesses, primarily becauseyou get to do pretty much
whatever you want. As a smallbusiness owner, you got to make
a lot of the decisions andcontrol how operations are run.
And so most businesses likethat, in the pros category, it's
a pass through entity, so it'snot separately taxed. That is
and especially if it's just you,if you're a single member
(08:52):
entity, it's even easier, youcan report it on your own
personal income tax reportreturns. So it's a it's a pass
through entity not subject toseparate taxation. The
flexibility is what most peoplelike you get to set the terms on
what voting looks like when youget paid how you make decisions.
And so a lot of small businessestend to like that. There are no
eligibility requirements. I'llgo more into that on the S corp,
(09:16):
which has a lot of eligibilityrequirements but here there are
none. And importantly you getthat personal liability shield.
So let's say you sell a productand you know maybe there's an
issue with it, maybe there'smold on it and somebody gets
sick. What you want with an LLC,you want them to sue the entity
right now you personally and sohaving that LLC means that the
(09:38):
entity will protect you. And aslong as you're treating the
entity like a separate legalentity, your personal finances,
you know, your house, your car,all of that is protected. So
that that's again that personalliability shield is really a an
important part of why you wantto have an entity on the cons is
not suitable for venture capventure capital financing. So I
(10:01):
mentioned earlier Do you want toget investors? LLCs aren't the
most popular vehicle for peopleto invest in. So if that is one
of your goals, maybe not theright entity choice. It's
difficult to issue equityawards. So to give away like
stock or ownership interests canbe challenging, not impossible,
but it just takes a lot of legallegwork. Complexity, because
(10:22):
it's flexible, it can becomplex, right? Because you get
to do whatever you want. It justtakes a lot to document that. So
that's why it can be complex.
And then there's no, you can'tgo public with it. But so again,
just kind of frame this with,you know, what are your personal
goals for growth, then thatshould help you to figure out
(10:44):
okay, do these pros and consapply to me? Any questions on
Jim (10:49):
I do. If no one else does.
LLCs?
Cat Taschner (10:53):
Yeah, go for it.
Jim (10:54):
Okay. So the personal liability shield is that, I
mean, I've heard the phrase overthe years, piercing the
corporate veil, right, as ifyou're a single member LLC, and
it's really you, and only you,and it's like, so you're really
just setting up an LLC in orderto shield yourself from
liability. Is that can that bepierced? Can that all go away?
(11:16):
Are there certain things thatyou need to make sure you
haven't placed like separatefinancials?
Cat Taschner (11:20):
Exactly. Yeah, I think the rule of thumb is if
you treat the business as thoughit's a separate legal entity,
the law will treat it as thoughit's separate. So for example,
as soon as you start your ownLLC, you should get your own LLC
bank account. Right? When itcommingling assets, you know,
like cashing a check on behalfof the company into your own
(11:42):
personal bank account. That's abig nono, right? You're not
really treating the entity asthough it's separate. And so
that's the perfect opportunityfor to pierce the corporate
veil. You can't, obviously,there are certain things that
the entity can't protect youfrom right, if you punch someone
in the face, you can't say,oops, it was the LLC that did
it. But as long as you areacting on behalf of the
(12:03):
business, so when you signcontracts, let's say you get
into a vendor agreement, makesure that the agreement is
between the LLC and the vendor,not you personally, and the
vendor, just treat the businessas though it's separate. And
then the law should followaccordingly.
Jim (12:20):
And maybe this is an accountant question, but I
believe that with an LLC, youcan still file under the one tax
return and do it as a separateschedule, and not have to do an
entirely new return for the LLC.
But
Cat Taschner (12:32):
Exactly, it's a pass through entity. So you
know, it doesn't get taxedseparately.
Jim (12:36):
So I'm not too horrible, either. Okay, thank you.
Cat Taschner (12:38):
Yeah, it's not it's not so cumbersome. I think,
you know, the we'll get into Ccorporations, that's when you
get that double layer oftaxation, which, for most
people, it's a deal killer. Anyother questions on LLC? Cool.
All right, let's move on. Ascorporations, again, it's a pass
through entity, but you get thatpersonal liability shield. S
(13:00):
corporations are a subcategoryof corporations. So they they
come with a lot of restrictions.
There are some benefits to them.
So it's a quid pro quo. Scorporations, actually all the
Corporations, but that'sprobably the oldest entity form
and they've been around for awhile. The S election is
something that you do when youcreate the entity and you agree
(13:22):
to abide by certain rules. Theeligibility requirements are
that you know, you're a naturalperson, there's a limitation on
how many stockholders you canhave. But the benefit is that
you get that pass throughentity. And that you can limit
some of the self employmenttaxes that are owed, and so that
And I think, yeah, it seems likeit's not kind of the scope of
it's a dance to do with youraccountant. But we see a lot of
(13:44):
LLCs. Let me back up. Sorry, letme let me let me back up to the
beginning. So when you create anentity, you form it under state
law, for purposes of federal taxlaw, however, you can elect to
be taxed as different things. Soyou can elect to be you can form
as an LLC and elect to be taxedas an S corporation. That is
what a lot of businesses chooseto do, because you can eliminate
(14:08):
some self employment taxes. AndI can go over that. When I go
over the taxes faze. Ascorporations because there are
stockholder eligibilityrequirements, investors don't
typically like it. And so again,it just it depends on what your
personal goals are for yourbusiness. Do you want to attract
financing? If so, the Scorporation is probably not the
(14:29):
right vehicle for you. That's incontrast to the C corporation,
investors love C corporations.
And so when you see bigcompanies, they often are C
corporations. It gives them theflexibility to do an IPO. And
for sophisticated investors.
It's like speaking English inthe business world. Everyone
speaks it and so it really iskind of the go to entity type.
(14:52):
If you are high growth, we cantalk about C corporations. But
for most small businessesbecause there's a double layer
of taxation, it's not aparticularly popular choice.
When I say double taxation, Imean that, so let's say the
corporation makes money, it'staxed at the corporate tax rate.
When a distribution is made toyou, as the owner, as a
(15:13):
stockholder, you also get taxed.
So there's two layers oftaxation at the company, and
then at your level. So becauseof that, it really isn't too
popular. So if there's someoneon this call that does want to
talk about C corporations, I'mthe small farmer group that we
tend to be. It's like, am Imore than happy to go into
details. But typically, the theright in saying that the
benefits to S&C corp are on thethreshold, the barrier to entry
is that double taxation. So iftax, like or investors level?
(15:35):
it's not of interest to youguys, I'm happy to skip over it
and kind of focus on what wouldbe more helpful for you.
(16:00):
Investors? Yeah, if you want tohave investors, it's definitely
something. I can go into what Imentioned earlier, so what we
see a lot with small businessesis we have they want to be an
LLC, for purposes for state law,gives them flexibility, and you
can kind of set the rules. Andthen for federal tax purposes,
(16:21):
they elect to be taxed as an Scorporation, then they can
eliminate some of the selfemployment taxes that might be
owed on profits of the company.
So again, my recommendation is,you know, get an appointment
with with an attorney, and wecan really talk through what
your issues are. And then we canmake a recommendation that's a
little bit more tailored thanyou know, I'm kind of keeping it
(16:42):
at the surface level.
Jim (16:45):
Someone was also asking about partnerships was that? Was
that another? That sounds likeanother potentially common one
for a small business?
Cat Taschner (16:55):
There are partnerships. Partnerships, in
some cases, don't give you thepersonal liability shield. So
because of that, and it's notsomething that we typically
recommend you want to protectyour personal finances, there
are ways to limit that. Butthere are also some limitations
on partnerships. So we can we,if that is something that
(17:17):
someone wants to, there are someindustries where partnerships
are kind of the go to, like Iwas a partner at my law firm,
right? There are industrieswhere partnerships do make
sense. So just schedule anappointment. And we can kind of
talk through the nuances as itapplies to your particular
business and what your partnersare, and what kind of exposure
(17:38):
and liability you're willing tohave.
That's a question that we oftenget is how do I, you know, how
do I have a nonprofit arm orshould I have a parent entity
with a bunch of different LLCsfor different businesses. I
mean, there are a lot ofbusinesses have a philanthropic
arm. Those generally have to bepretty carefully negotiated or
(18:00):
documented as a nonprofit.
Typically what you're going foris a tax exemption, right, and
so those tend to be a little bitmore regulated, because you're
getting these kind of freebieson tax. And so I think the
documentation for those tends tobe a little bit heavier, just
because you, you don't want tobe claiming non taxable
activities as non taxableevents. And so it's just a
(18:24):
little bit, but it certainly isa thing that can be structured.
And so again, it's really up tokind of what your operations
look like, you know, somebusinesses have, let's say, like
a, they have an operating farm,and then they have maybe a food
product. And sometimes they wantto keep it separate, just that
(18:45):
they keep the businessesseparate. And they have
different partners and differentdistributions. So we can talk
about the relationship betweenthe companies, if you guys get
schedule an additionalappointment.
Jim (18:57):
Well, I think that's a common theme we're seeing with a
lot of the folks in the cohortis, you know, produce and, and
selling ag products is the mainbusiness line, but then I think
many wants to do an educationalcomponent, right, which would be
workshops. And yeah, actually,I'd say half or more of the
(19:18):
cohort and it seems like atheme, right? A big part of its
trying to make sure you spreadthe word about the benefit of,
of local produce, but it's alsoand teaching some of the some of
those skills, but but I think inmost cases, folks are thinking
of doing that. So I think whatwe've been talking about with
the business team is, is theLLC, if you were just for
(19:41):
simplification, right, the LLCwould be the farm name, and then
there'd be a subsidiary thatwould, that subsidiary for the
educational component, thatwould apply for the 501
nonprofit status. Does thatseems pretty straightforward to
you, are as a starting point?,okay.
Cat Taschner (19:58):
Yep. As long as it's documented appropriately
that sounds appropriate.
Jim (20:02):
Thanks.
Cat Taschner (20:04):
It's also I, I feel like I feel like such a
lawyer like liability, but itreally is something that like
guides a lot of our decisionmaking. And when you have two
very discreet businessoperations, you know, the
operation of a farm and, youknow, selling a product, let's
say that you've justcatastrophic issue on the
product, they're allcontaminated, and you sell it
(20:25):
and everyone gets sick. Andthere's all these potential
losses. The benefit of having aseparate business for the food
product company is that the foodproduct company gets sued, and
maybe has all this liability.
But if the farm is under aseparate entity, it doesn't get
touched. If you have verydisparate products, and you want
to protect one from the other,for whatever reason, it doesn't
(20:46):
have to be, yeah, it createsthat separation, so you protect
the assets of each business,even if you're the one that's
ultimately running both of them.
So anyway, that's a reallygeneral overview of choice of
entity, please, you know, callus come talk to us. And we can,
you know, kind of walk throughsome of the nuances. And again,
(21:08):
if if you get to the point whereyou want to actually start
drafting documents, you know, wehave a bunch of LLC templates on
our website. Some of them areHawaii entities, we also have
Delaware entities, the onlyreason that's up there is that,
you know, this is our databasefor all small businesses,
particularly those that are highgrowth with a really want to go
(21:32):
public and get a bunch of, youknow, VC, venture capital
investment, Delaware entitiesmake its it facilitates that
type of investment. And so thoseare up there for them. But for I
think your purposes, the Hawaiientity probably makes the most
sense.
Other legal considerations? So Igot, I think some of the
(21:53):
questions that were posedrelated to like, what kind of
contracts and agreements do Ineed for my business? And I
listed some very typicalagreements, right? Vendor
customer partners,nondisclosure. As a small
business, you kind of have touse your discretion when
(22:14):
deciding, like, which contractsdo I really need to have? And
when I do have contracts, like,how serious are they? I've seen
small businesses, you know, justFrankenstein together a 20 page
document and give it to somebodyand like that, that's kind of
scary to be on the receivingend, or like, do I need to sign
this 20 page agreement, to kindof pick and choose what makes
sense to you, we have some formson our website, and we can help
(22:37):
you draft you know, if youconstantly get into vendor
agreements, maybe you want tohave one really good form that
you can, you know, plug and playthe different names of vendors
into it, so we can assist withthat. But it obviously helps to
you don't need to have a bigthick contract. But it does help
to have even just a back ofnapkin, high level, what are the
business terms? How much am Ipaying you? When am I paying you
(23:00):
want am I delivering those kindsof things, it's easier to pre
agree upon it, and have it inwriting versus fighting about it
after the fact. So if I if Icould make a recommendation,
just really high level isprobably a good starting point.
For those of you that are doingonline business, I think we have
some privacy policies, terms andconditions, legal disclaimers
(23:22):
that you can use. So those areon our website.
Jim (23:24):
So the ones that you list here should usually be a
template of some sort, on thewebsite?
Cat Taschner (23:32):
It helps, yeah, as a start. It's a start. We can
always help you tailor it, butthose are going to have. Taxes.
So all businesses are going tobe subject to certain taxes. You
know, all businesses except forpartnerships have to file an
income tax return, for example,right, depending upon what kind
(23:54):
of business you have, and whatkind of industry you're
operating in, it's going toimpact what kind of taxes you'd
have to pay. In addition, ifyou're doing online business, or
if you're selling products toother states, you might owe
taxes in that other state aswell. So unfortunately, each
state has its own set of rules.
Sometimes you owe taxes, ifyou... I put a graphic there,
double check in when youactually start doing business,
(24:17):
but it's at least a helpful kindof overview of when do I, when
do I have to start paying taxesin a different state. You know,
green is if you transact $100kor more, that's the threshold.
So if it's under $100k, withresidents of a state of the
people and of the states ingreen, then you probably don't
have to, if you exceed $100k,then you're going to be subject
(24:39):
to their their taxes. So justsomething to be aware of. Once
you start doing this once youstart doing business interstate,
Jim (24:51):
And looks like green is the lowest level right from, can't
quite read that...
Cat Taschner (24:54):
Green is the lowest level. Well green, that
green and then the blues are all$100k In the blue set a 200
transaction limit. So even ifyou have a bunch of little ones,
it's tricky. Okay.
Jim (25:06):
That's great. That's a pretty cool little graph.
Cat Taschner (25:09):
It's helpful. It's irritating that every state is
different. And it just, it justputs the burden on the person
doing business right to check,especially if you're doing
online business, you have toknow each state. So
Jim (25:21):
And if you get to that level, I guess that's a good
problem to have, right? Ifyou're
Cat Taschner (25:24):
Yeah, like oh, shucks, I'm doing $500k woth of
revenue in Texas, darn
Jim (25:29):
and I know there are there are outfits that will actually
take that on, and just you, yougive them your numbers, and they
roll the hassle of paperwork,state by state unique stuff.
Cat Taschner (25:38):
Yeah, it's on websites, like if you if you use
them as your platform have, youknow, this type of compliance
built into it. So it justdepends on if you're, you know,
if you guys are going to bedoing a lot of online business,
that might be something to justthink about, you know, which
platform you sign up with and ifthey're going to, if you can
unload this type of work ontothem, so that you can focus on
what you're really good at.
(26:00):
And then the last thing that Ihave to talk about are licenses
and permits. You know, so we'retalking about kind of the
business registration. When youset up your business, you know,
if you do it in Hawaii, they theDCCA. So the Department of
Commerce and Consumer Affairs isthe state agency that regulates
all businesses, they have, likea wizard, where when you set up
(26:23):
your business, you can also setup your tax accounts, and then
they're linked. And so that's apretty convenient tool to have.
Other licenses you might thinkabout or whether you want to
have a trade name, people oftenthink of that as like a DBA. So
do you want to have your farmbut doing business as you know,
farm XYZ or whatever. That'sanother thing that you can add
(26:44):
on when you're going throughthat wizard. If you are
employing people, you might needother licenses or need to comply
with other laws. That's why Iput employer requirements and
then any occupational licensesthat you might have. Again, if
you're doing business in othercountries, in other states, you
might have to qualify to dobusiness, there was a slightly
(27:05):
different analysis than the taxanalysis. But it's the same kind
of feel right? Do you have aphysical presence there? Should
you be qualified to do businessthere? For example, if you have
an employee that lives inCalifornia, probably best if
your company registers to dobusiness in California, same as
if you have like a warehouse,there are some kind of physical
(27:25):
nexus.
There were specific questionsthat about camper vans. And so I
actually, I in my day job, Iactually ran into DPP about
this. So I just cut and pastedtheir, their guidance as to when
you can do camper vans, whatkind of permit you need, what
area you have to be in. Andagain, I'll send copies of the
(27:46):
slides so that you guys canaccess this, but this was DPPs
guidance on camper vans andwhether or not you needed to get
a conditional use permit. Andwhether whether you were
eligible for one.
And then the last question thatI got from Jim in advance was
food trucks. So I listed some ofthe licenses and permits that
(28:06):
would be required. And then thecity and then the state
respectively, both haveresources on mobile food
establishments. So and you know,what permits would be needed, do
you need to be tied to acommercial kitchen for food
safety and all of that? So
Jim (28:23):
Yeah, and I think food trucks in particular might have
been like, if, if you, there'sso many food truck vendors,
right, these days, so it seemslike if you have a if you have
an arrangement - maybe maybe itshould be a contract based on
one of your previous slides -but if you have an arrangement
with a food truck, that comes toyour property for certain events
(28:44):
let's say, it sounds like theyneed to do all these things. You
don't need to but you need tomaybe your your contract with
them says that they need to.
Cat Taschner (28:53):
That they're responsible, because you don't
you don't want to be stuckcomplying for them. So just
being very clear aboutexpectations upfront is
generally a good thing.
Jim (29:04):
I did have one question back on, you know, related to
business registration and DBAquestion mark. So DBA, could you
just talk to that a little bitmore? I mean, a D, why would I
want, because I if I go on and Iregister my business, right, and
would I need a DBA on top ofthat, because,
Cat Taschner (29:23):
No
Jim (29:23):
no right, but
Cat Taschner (29:24):
You don't need it.
Some people like having aseparate DBA like, for example
for some reason
locally. They do business as
their trade name, but theiractual corporate name is
(29:45):
Jim (29:48):
So yes, and you don't have
Cat Taschner (29:50):
They have a bunch of different trade names that
they operate under. So it justgives you flexibility.
Jim (29:56):
Yeah, you don't need to use no like you need to register Um
Cat Taschner (30:03):
If you were to register it as a business. So
the otherlet me let me actually share my
screen and I'll go to the DCCSwebsite. So this is the DCCS
website. For those of you whohaven't started up it, can you
see my screen? Yep. Okay, so forthose of you who haven't started
a business yet, I wouldrecommend going into this as a
(30:23):
database and checking to see ismy business name available. So
let's say I want to open up
it'll show you okay, somebodyhas already registered the name
on it, and you see, okay, theregistrant is this company, you
(30:43):
can click on them. And then youcan see oh, they actually own a
bunch of different trade names,you can see who the owners are,
or the who the officers are alltheir different trade names. So
it's a really good resource foryou as you're trying to figure
out what should I name mybusiness. Then you'll find out
if there's any competingbusinesses. It's better to know
it upfront than to you know,spend a bunch of money branding
(31:05):
your business only to find outthat someone else already owns
it. So that this is a goodresource. This has all of the
state of Hawaii businesses andtrade names, if you are going to
operate on a national level,consider whether you need to get
(31:26):
a federal trademark. And so thisis the federal trademark
registration system, you can dothe same thing. You can search
to see if there are anycompeting marks, and you can do
the same. And then it'll pull upall of the registered
yeah, that across the nation.
(31:52):
Again, you can click on it andsee that it's much faster to the
same company. And this givesthem nationwide protection,
whereas the Hawaii registrationwill give you Hawaii
registration.
Jim (32:03):
And um tell me if you, if you agree, I feel like the the
setting up a trademark is afairly simple process. I mean,
it's not too horrible orexpensive. If you wanted to do
that.
Cat Taschner (32:13):
Yeah, no. That setting up a so trademark
registrations in the state ofHawaii, I think are $50 for five
years. So it's like a one or twopage form that you submit to
DCCA. It's prettystraightforward. And so if for
if that's really important toyour brand, that's your name, I
think it's a worthwhile stake toput in the ground to say this is
(32:35):
my name. Nobody else can stealit, I'm claiming it as my own.
And you could put that, Thefederal registration is a little
bit more expensive. I think it'slike $250 for every class of
goods or services. So it's alittle bit bigger of a bite, but
it does give you nationalprotection. And I think that was
for a period of 10 years.
Jim (32:53):
And you need to do both. If you want, like you have to do if
you do federal you need to doHawaii?
Cat Taschner (32:58):
It would it's a belt and suspenders method. It's
better to do both but federalwill give you nationwide
protection.
Jim (33:06):
If you want the R with a circle around it, right, Yeah.
for registered trademark, it hasto be federal, right? Correct.
Liability waivers, right? Like,just as an as a simple example,
everyone signs liability waiversto be part of this program. Are
they garbage?
Cat Taschner (33:22):
They're their contracts? They're legally
enforceable? .
Jim (33:25):
Yeah. So but...
Cat Taschner (33:29):
I mean, not if you're like twisting my arm and
making me sign it right, if Ican prove that I signed it under
duress or whatever. There areobviously exceptions, but as a
general rule, yes, they'reenforceable.
Jim (33:39):
But, again, don't punch anybody in the face.
Cat Taschner (33:44):
You know, I think it is this strength of the
liability waiver, particularlyif there's going to be like a
hazardous activity. Come on myfarm. And I'll teach you how to
use pesticides, right? Likethose kinds of activities. If
you can disclose in advance,like, Hey, this is the type of
activity that this is intendedto cover. You are accepting the
(34:04):
risk of that, that that mightstrengthen it, just so that it's
very explicit and very clear.
And it just closes the risksinvolved.
Jim (34:13):
I mean, because we're all on farms in Hawaii, right? And
it's uneven ground, we're on anactive volcano, you know, and on
this island. I mean, it's just,it's just not easy to get
around. So is that implied ifyou're doing a farm tour, or you
need to spell that all out andyour liability waiver?
Cat Taschner (34:28):
I mean, it's I would spell out at least some,
you know, you accept a certainamount of risk, like you know,
sprained your ankle because ofuneven ground or something like
that. Even if you havevolunteers coming on site to do
you know, an a work day orsomething i It's, yeah, I would
(34:48):
recommend getting a liabilitywaiver from each of your
attendees. If they're under age,having their parents sign off,
things like that. You know, Iwould probably look to see like,
what are other people in theindustry do doing particularly
like the larger entities. If youcan kind of piggyback off of the
research that they've done orthat the forms that they've
created, that's probably a goodfirst start versus, you know,
(35:10):
each of you doing a tremendousamount of legal research and
crafting your own craft craftingyour own forms. You don't what,
no point in reinventing thewheel for if you could,
particularly if there's a Hawaiientity that you're like, okay,
they're doing it right. Thatmight be someone to ask, because
state law might defer to,
Jim (35:32):
Yeah, I'm thinking like, some of the bigger up, it's
maybe I can try reaching out tosome of the bigger farms, right,
because it's, or ones that havemore people coming through, that
might be a good start and seewhat I can come up with there.
Cat Taschner (35:46):
If not, that might be a good, you know, something
that you know, UH and we, I am,that might be something that we
can collaborate on to throughthe Business Law Corp. And I
think we're always trying tofind a way to engage our
attorneys. And that might be aninteresting project for us to
work on. Can we do, you know,Hawaii state law research to
(36:06):
craft, you know, guidance andhelpful forms for you guys. So
that you're not stucklitigating, you know, something
that really isn't at the key ofyour core competency?
Jim (36:17):
Yeah, I mean, I think more and more from for a variety UH
things that are working on atalk to have talked to a lot of
ag producers on the islands,right? And I think, I think that
would be certainly valuable. Ithink more and more are moving
towards a couple of things totry to stay profitable state,
(36:37):
keep farming, and one is farmtours, workshops
Cat Taschner (36:41):
diversify commercial offerings,
Jim (36:44):
and also Airbnb kind of structures, right. and I think,
you know, some of the questionsyou saw, and that were asked
ahead of this, which are maybenot your kuleana are probably
zoning issues, right? More orless? Yeah,
Cat Taschner (36:57):
Yeah, if you have any legal questions that it can
be related to choice of entityor any kind of business
transactional issue, feel freeto raise it with us, we're happy
to help. We have a volunteercorps of, but mostly most of the
large firms. And so even if it'semployment or tax or business
related, hopefully, we'll beable to support you. And so the
(37:19):
HTDC one, we often have noappointments, I would call them
and see if we, you can get onthe schedule each. So there's a
rotation of maybe like eight or10 of us. So every week, it's a
different attorney, you actuallymight be a benefit to you to
have a different set of eyes.
And in particular, if you if youknow that you have like I have a
really tax heavy question, canyou try to schedule me on the
(37:39):
week that the tax specialist isthere, they usually try to be
accommodating. If you have anactual document that you want us
to review, send it to them. Someattorneys will review in advance
I'm at some of them won't, butat least maybe you can kind of
talk through the issues and theycan actually look at the wording
of the contract.
Jim (37:57):
It causes me to ask Cat, do you know anyone that's has any
experience with KamehamehaSchools, Bishop Estates
contracts? Because they'repretty common and complex.
Cat Taschner (38:06):
They're beasts aren't they? Almost every real
estate attorney has had to dealwith one of those at one point
in our career. We've all seenthem. Yeah, I what you want to
do is talk to someone whoregularly works with KS leases.
Jim (38:25):
If we connect to those websites and those 30 minute
sessions, is that the way to goor to start?
Cat Taschner (38:30):
Start there. I would start there. If you have
specific questions, just emailme, I generally do most of the
back of house stuff for BLC so Ican get you in contact with the
right people as well.
Jim (38:42):
For all of us, I really appreciate it. appreciate you
letting me record it. I know acouple people weren't able to
make it so. So they're reallygreat. There'll be really
grateful to have this as well.
Cat Taschner (38:50):
Yeah, hopefully they're good resources. It was
nice to meet you all good luck.
Good luck with everything.
You'll have a lot of hats towear. I really respect your
ability to jump from farm tooffice to okay, today I'm an
accountant, to today I'm an HRexpert. It's it's, it's a lot so
I have a lot of tremendousrespect for farmers and
entrepreneurs.
Jim (39:10):
This goes back to that. Do you want to be an entrepreneur
side that we skip past but yeah,I think we're all committed.
We thank Cat for sharing hermanao, and addressing some
common Hawaii agriculturalproducer legal questions and
concerns, as well as providingsome links to templates they can
use to address some of theirneeds. If you're only listening
to this, you may want to watchour video version on YouTube to
(39:33):
see some of the thingsreferenced, and be sure to check
the show notes. If you want toknow more about the University
of Hawaii's Connect program,then listen on for brief
description and use the link inthe show notes. Mahalo.
And this quick version is wehave we tried to match up post
farms and skilled ag techniciansto work together for eight weeks
(39:54):
or more 16 hours a week and thegoal of which is to kind of
figure out if they want to worktogether long term and what that
might look like. What they'veall submitted this morning is a
two year business plan thatshows, with Financials that
shows how that might look forthe next two years starting
January of 2024. And so, thosehave all been submitted. So
(40:18):
kinda in the last phase wherethose are being reviewed, and we
have people like Linus Tavarusand Erik from GoFarm and Mike
from Business Strategies inHilo. So people that are going
to have the strong financialbackground that are helping
review those, this final pieceand then we're kinda pau.
Thao (40:37):
The intention of these podcast series is to create a
safe space for respectful andinclusive dialogue. With people
from across a broad and diversespectrum involved in growing and
making accessible the food weshare together. A diversity of
voices, perspectives andexperiences can serve to deepen
(40:57):
mutual understanding, to sparkcreative problem solving and
provide insight into thecomplexities of our agricultural
system. If you, our listeners,have experiences with Hawaii
agricultural ecosystem fromindigenous methods, permaculture
smallholder farmers to largeincluding multinational
(41:18):
agricultural, industrialcompanies, and everywhere in
between, and you would like toshare your story, please contact
us. We welcome your voices andperspectives
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Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.