Joe Fulwiler
Today we are back in Austin, Texas, and what a lovely day it is to be back. We head to a local law firm to meet Joe Fulwiler, a Texan lawyer who specializes in small business law.
He gives us a quick beginners guide to American law and how it affects someone who’s moving their business over to the states.
From minimum wage increases to litigation and intellectual property rights, he gives us a great rundown on the crucial legal matters that you need to know.
”People are sometimes surprised at how complex the legal system is.” - Joe Fulwiler
Time Stamps:
1:41 - What you need from a lawyer when moving a business to America.
3:15 - The differences between state and federal law
5:19 - Benefits that running a business in Texas has compared to other states.
8:25 - The possibility of the minimum wage rising in Austin.
9:30 - The differences in setting up a business in Delaware compared to Austin.
11:03 - How litigious America really is and the possibility of getting sued.
15:33 - How it works if you’re sued by someone in another state.
16:40 - How large legal firms are set up in America.
17:27 - The type of law that Joe specializes in.
19:43 - The advantages Joe has from his experience of being a CPA.
20:40 - The most common legal form to use in America.
22:27 - The intellectual property rights and laws within Texas.
24:20 - What taxes businesses need to pay in the States.
25:37 - The first legal issues you need to consider when moving your business to America.
Resources:
Connect with Kevin Turley: Website
Connect with Sebastian Sauerborn: LinkedIn
Episode Transcript
Episode 12: Joe Fulwiler
America, it is the best place to go, to seek opportunity.
Back to couple of base, came to Austin, within two weeks I’ve fallen in love with the place. I mean-
You’re listening to Move Your Business to the United States with me, your host, Kevin Turley.
Within two weeks I’ve been offered a job, funny enough for one of the local TV stations, to do a little bit of Andy in Austin-
Order, order in court.
The United States is notorious for its litigious nature. From Europe at times is seen that everyone is suing everyone else. Or so it seems. Well today Sebastian is taking me to meet a Texan lawyer, Joe Fulwiler, take a listen to what I found out when Joe spoke to us about the reality and the myth behind life as a US lawyer.
Order, order.
Kevin: So today on Move Your Business to the United States, we are in a law firm here in Run Rock, Texas, meeting Joe Fulwiler. Joe, welcome to Move Your Business to the United States.
Joe: Thank you very much, thanks for having me.
Kevin: Joe, we deal with European entrepreneurs and Sebastian advises them on their moves from successful startups and successful ventures in Europe to operating in the United States. Looking across the Atlantic it’s a huge leap, with all sorts of pitfalls, all sorts of worries and all sorts of possibilities as well. What does a European entrepreneur need from an American lawyer, in terms of that transition fields Joseph in your experience?
Joe: The first thing that they typically need is to create some sort of business entity. It could be a corporation, it could be an LLC, which stands for Limited Liability Company, some sort of entity to hold the assets of their business, and to give them some limited liability for their personal assets, company liabilities that arise in the business. Usually the second question they have is around accounting, bookkeeping and taxes, payroll taxes. Number three is usually contracts, with their customers, or with their employees, so those are, usually the first three things that I end up consulting on.
Kevin: Sebastian in your experience starting companies in the United States, have lawyers been pivotal to their success?
Sebastian: Absolutely, yeah, I mean, we work with a number of US attorneys and check- to get things right at the beginning is incredibly important and the steps that Joe mentioned are also in my experience, vital steps that all entrepreneurs need to have definitely.
Kevin: So, Joe, there’s the kind of positive side which is helping the structure in the building of a company, you know in terms of deployment of laws and making sure that their employment regulations are here too. And can you give us a little bit of oversight though for our worldwide audience, because America, we tend to think- but you’ve got federal laws, state law, I don’t even know if you got city law, I mean, how does it actually work? Can you give us sort of beginner’s guide to the US legal system?
Joe: Yes, so, the national level laws refer to as federal law. And it tends not to come into play as much as the state laws do. So, usually, when analyzing steps you need to take to start your business you usually want to start with state law. Because the state law is really much more pervasive and much more applicable. There are some cities that have laws, New York City is a good example. But they tend to be pretty few and far between, there will be things like special tax rates that you have to pay if your business located inside that city. Restaurants tend to have city level laws. But for the most part businesses can ignore- but usually it’s not an issue, in a city level laws.
Kevin: So, what you’re saying Joe is that the federal law governs a lot of what some high business transacted in the United States.
Joe: Yes, state law is more impactful and more touches you, you end up dealing with it more. Federal law would impact things like certain employment regulations, certainly taxes, you have two kinds of taxes you have to pay, consider it separate sovereigns, you have to pay your taxes to the IRS which is the federal tax collection agency, but you also have to pay your taxes to the state, so the state of Texas that’s the state controller.
Sebastian: And I think, well our clients are typically coming to contact with the federal law early some of them is the whole immigration law, I mean this is more than they deal so immigration law as the federal law is the same throughout the United States. I think based on what you said, Joe, it would be really interesting because I mean Texas is kind of our hub, Austin is our hub and a lot of clients start their journey in the United States in Texas and in Austin. So could you point out some of the benefits maybe compared to other states that Texas has as a base for one’s business.
Joe: So a lot of people choose to start businesses in Texas because there is no state level income tax for individuals. That’s true for Florida as well, and a couple of others states. But that’s a big advantage for starting your business in Texas. Another thing that people cite frequently is the lower level of red tape and regulation that Texas has, Texas is very much known for that. Whenever you start any business let’s say you start a dog grooming business, well, first you start the business, in other words you create the LLCs and the bookkeeping you open a bank account, but you then have to comply with whatever training and licenses requirements dog groomers have to comply with or whatever the grooming business or whatever the grooming business is. And in Texas those requirements those licenses in training and those kinds of requirements typically are much less onerous than in other states.
Kevin: What about the city jurisdiction, you know I hear about city ordinances and that sort of thing, how does that fit into all of this?
Joe: Well, if there are city ordinances that apply, certainly you have to comply with them, but they tend to not be a whole lot of city ordinance unless you are dealing with something very local like restaurants.
Kevin: So is there any example would you give us in Austin here of a city ordinance that would impact on small business?
Joe: Well, it depends on the small business but for example, there is a sound ordinance in Austin, gets litigated a lot, because we have a lot of bars and restaurants, it’s the live music capital of the world, it’s a college town, and the limit is I believe 80 decibels, and any time you open a bar, just expect to get sued by your neighbors and get the police go out there with these you know noise meters. And so those are the kinds of very local things that could impact your business.
What’s happening at the defense table? The most terrible thing or at least I think it’s terrible or maybe listen, well listen, would you come help me with Miss Gream? Besides this, well, I do think there is something that the court should know. Well, getting the Carlos lying testimony has forced Barry Mason into a daring and desperate plan of action that would need a much needed delay if successful but certain conviction for his client as well as possible disbarment and ruing for himself if a single step failed.
Sebastian: I think that one of the conversations that has been quite a lot and I think that has also been in discussion, Austin is the minimum wage level, which, I think this kind of increasing, similar to Seattle to 15 dollars an hour, right? I mean typically, for our clientele that wouldn’t be, I guess a massive issue because most of the employees they will hire software developers, that’s sort of thing, where they put a higher salary any way. Could you comment on that?
Joe: Yeah, I’ve heard some talk about that, I don’t think it’s passed yet as far as I know, but if it does pass, then, I suppose, all the business will have to comply with it. If you’re moving from Europe, presumably, if that’s a big problem for your business, you can just locate, just outside the State’s limits in one of the sovereigns like Round Rock like where we are sitting now or northern suburb of Austin but there are cities all the way around some of them are very nice and you can move your business there I suppose if it’s a big problem.
Sebastian: Yeah, that makes a little sense. And I think another thing which is quite interesting, so, when you’re outside the United States and you’re thinking of setting up a corporation or a limited liability company, what is promoted by heavily in Europe is Delaware as a jurisdiction. Not necessarily as a place to set up a presence for a business but at least to use it as a place to incorporate. Is that really any serious advantage about setting up a corporate corporation in Delaware compared to let’s say Texas?
Joe: Not really, Delaware law is helpful if you have a very large corporation and you want to implement a poison pill if you know what that means it’s mixed harder for people to take over your corporation by buying stock on the public markets. That isn’t applied to small businesses. The toughness of the corporate veil is also an issue, it’s very tough in Delaware but it’s very tough in Texas too. It’s hard to pierce the veil and get through the corporations and back into your personal pockets, so to speak, but I don’t think it’s worth the added complexity of, for most small businesses to create a Delaware corporation, because then you still have to register your business here in Texas and now, you’re subject to sue lawsuit in Delaware. So, if somebody wants to be clever, they can hire a lawyer in Delaware to sue you and you have to fly up there for all of your hearings, it’s just- it’s added complexity. I would say that Texas corporation and NLC are fine for small business.
Kevin: Joe, I had a conversation with a South American entrepreneur, he was very, very successful setting up his businesses across South America and Europe, and beyond, but I don’t know, when I said, are you going to the United States and he said no way. And he was working in a sort of healthcare department. I said why not and he said, too litigious. A lot of foreigners, especially Europeans see American society as extremely litigious, you know, everybody suing everybody all the time, is this for real?
Joe: Well, healthcare is an odd industry because it’s incredibly heavily regulated, litigiousness in general, I’m in two minds about that, on the one hand, in most daily life, most people just living their daily lives and most business just going through their daily lives. I don’t think that American society is really that much litigious from other societies from what I can tell, because it’s hard and expensive to start a lawsuit and prevail in it. There is one thing that we have which makes it a little easier for lawyers to take on cases on a contingency fee, that’s one thing that we have is the contingency fee system. We have the American rule for legal fees which means each side absorbed their own legal fees, as opposed to the British rule, where the winner gets their fees cover by the other side. And I don’t know how that works in other European countries but, there is a real possibility of large corporations that have deep pockets, if they put up a product that hurts someone, there are lawyers that will take that case with no money down, and try to go recovering million dollars. If it’s controversial thing I happen to think it’s a good thing because it keeps corporations from putting dangerous products out there. But I suppose it’s in the eye of the be
Sebastian: Yes, I mean I have to agree from personal experience, I guess, anecdotal evidence of living in the United States, that being in Texas for a number of years, I have never been sued, I know very few people, very few entrepreneurs, small business owners who have ever been sued. I mean, I guess the only case that I can remember is someone who runs a pizza shop and then his delivery driver had an accident with a company motorbike or something like this and then they tried the person who injured claim and then I think at the end they settled for a thousand dollars a sale I mean, a small amount. But I think the person injury is mainly where a litigious, you know, probably the American system is more litigious than other systems. Say for example in Germany, because in Germany they never pay high damages, it would be no point for that sort of thing.
Kevin: So would it be fair to say Joe in your practice, in your working experience that, this kind of malicious litigious nature is as rare a thing as it is in other countries?
Joe: In my experience, it’s incredibly rare because even in the cases where the lawyers taking the case on a contingency fee, the lawyer still has to invest his or her own time and money to pay for all the experts and all the discovery. And they don’t do that unless they think it’s a good case. I don’t think is that common for bad cases to be brought.
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Kevin: In terms of hard works organizationally for American lawyers, does each state kind of have its own kind of bar, are you licensed to practice only in Texas?
Joe: I’m licensed in New York, New Jersey and Texas, and yes each state has their own bar, any member of any bar of any state can automatically wave in to the DC bar in Washington DC you have to fill up forms and pay fees, I haven’t done that yet. But that is always available. Now in federal courts you don’t have to be admitted to the particular state. So for example, if I had a case in Iowa I could fly there, I would have to apply to that court, to become admitted to that particular court but that’s a formality and I don’t have to be a member in the Iowa state bar. So it’s a little complicated, but essentially it’s a very local thing most lawyers very very rarely we find a lawyer who is actively involved in more than one state.
Kevin: In terms of- the entrepreneurs that Sebastian is dealing with, they may set up their US headquarters in Austin, but they maybe trading across the fifty states. So if somebody in California decides to sue them and they are headquartered in Texas, how does that work practically?
Joe: So it comes down to whether California has jurisdiction over, either the person or the entity they’re trying to sue in California. That in terms of comes down to analysis of contacts, nexuses is often called so if you’ve never been to California and you never shipped any goods to California, and you don’t have an office there, you don’t have any employees there, you’ve got a pretty good case that you can’t be sued in California courts. But if you are, in fact, doing business in all fifty states and you have offices in all fifty states you shipping products to all fifty states or collecting taxes or pay any local taxes in all fifty states. Then you can be sued anywhere.
Kevin: Joe, law firms, I know they are vary in size, certainly in the UK you can have huge corporate law firms in the city of London, or you can have virtually one man operations or one woman operations, probably more dealing with criminal law, or- and some are mixed they did a little bit of civil and criminal, how does it work here? Do you have like a law firm that deals with civil and criminal and everything or does it just specialize in one thing? Do you know what I mean? Or business lawyer, how does it work?
Joe: Well it’s very similar to what you have described. There are large law firms, typically they have large corporate clients and they refer mostly internally, so if for example, I used to work at a big firm in New York and if I had a client that was coming to me for a corporate law, say, issuing another series of stock. And then somehow he got involved in litigation, that referral would go to another partner of my firm. If at all possible, so, that’s why those large law firms exist. Each partner really is running his or her little mini business they are not as monolithic as they seem from the outside.
Kevin: And just in your own practice I mean what do you have in your firm? Do you have a particular specialism?
Joe: Yeah, I do small business law and state planning and probate, those are mine specialty areas.
Kevin: So presumably you’ll be dealing with a lot of the type of people that’s Sebastian is talking about, those small entrepreneurs are coming either US based or coming from abroad setting up in the US.
Joe: Yes, I’ve done quite a bit of that.
Kevin: Do you find any particular kind of misconceptions about the legal structure here on their part especially coming people from abroad that you kind of educated or help? And reshaped?
Joe: I’ve seen two reactions, one is that people are sometimes surprised of how complex it is, depends where they’re coming from. But there are some places where you don’t do all of these things. You just start doing business and that’s it, you’re done. And I’ve also seen, I guess depended on where they’re coming from, I’ve seen people having more attitude about paying taxes or keeping the books properly and that does not work. It’s- you really need to do things correctly here or you will get popped by some taxing authority or regulator or some other governmental entity.
Kevin: And Joe do you do a lot of the interface between on behalf of business owners with federal or state authorities, I mean do you kind of take them through that kind of maze sometimes of bureaucracy or regulation and act on their behalf, is that a service that you would provide?
Joe: Well, if they get into an actual litigation, I no longer do that, but I have people that would refer them to, if it is more of an audit from the IRS, I certainly handle those, or for state controller. And the other thing you might be asking about is, you know, can I help, say for example, a new business that is a bar or a restaurant, navigate all the bar and restaurant laws in Austin. That’s not my area of expertise. So, it very much depends on exactly what they are doing but I’ve been practicing here long enough that if I don’t do it, I know someone who does.
Kevin: Sebastian does this sound familiar to you from your experience in Texas?
Sebastian: Yeah very, and Joe you were telling us the other day that you are not only an attorney you’re also CPA although you said you no longer practice? As a CPA how does being a CPA help you with dealing with your law firm clients?
Joe: Well, just being able to really understand from the bottom up, the accounting, the bookkeeping, and just the financials and economics behind the businesses, I found to be very helpful. Often times, people get frustrated because they are asking their lawyer a question and then they’re asking their accountant the same question or related question that they may be getting two different answers so, I try to be sensitive to the accounting side when giving legal answers.
Sebastian: Yeah, I think it’s extremely helpful especially for the type of clients we have to be dealing with because they have to be rap their head around not only the legal system but also the Texas system. So for someone to be able to understand even if later on they have to refer them to a specialist, you know. But to be that entry point and say, okay, this is setting them on the right track. And that is extremely helpful.
Kevin: What is the most common legal form in the United States, Joseph?
Joe: Well in Texas for small businesses I would say limited liability companies or LLCs are the way to go in most cases. They’re very simple set up, you can actually create them yourself on the Texas secretariat’s website for a small fee, 100 dollars, 150 I think it is, and you don’t even need a lawyer to create the entity, to get a sort of birth certificate, it’s called a birth certificate information. You probably need a lawyer after that though, because especially if you have business partners, you definitely going to need a company agreements that defines the relationships among the partners and what happens in case of the 4Ds, death, disability, disagreement, divorce, so if any of these things happen, any of the partners, you need to know how, who is going to remain in control and how disputes are going to be settled. So that’s a very important document, even that you can find forms on the internet, but, it’s a little dicy. But to answer your question I would say it’s an LLC. There’s still a question once you fill the form for LLC how you’re going to be paying tax for federal purposes, do you want to be taxed as a corporation. There is type of corporation called S corporation which has no entity level tax, you can choose that, or you can go with the default for LLC which is to be for tax as a partnership they also face no entity level taxation.
Sebastian: I think another common issue, question, that many of our clients have, is the whole protection of intellectual property. So, clients who, let’s say have already created some sort of software and now they want to use it in the United States, so how does Texas law apply with the intellectual property rights?
Joe: Intellectual property generally is governed at the federal level, it goes to the US patent and trademark office uspto.gov and technically you don’t have to file a trademark, or if you’re using the marked trade first it’s your mark but it’s always recommended to go out and do that filing. Same thing with other intellectual property. That is for referred in US as prosecuting a patent or prosecuting a trade mark that’s just the process of making that filing and getting that approval back from the US and market trade office. I don’t do that sort of work and in fact you don’t have to be a lawyer to do that sort of work but there are specialists who do.
Sebastian: So related to this question, is another question, because a lot of companies who deal with intellectual property are startups, who are also taking investment, sort of, PVCs or Angel investors. Do you know a little bit of the VC and Angel investors here in Austin?
Joe: Yes, some of them, am familiar with it and if the venture capitalist, especially sophisticated one makes an investment in your business, that changes everything, because they are going to have their own lawyers, their own forms, there are going to do Delaware corporations, because they are planning to hopefully go public one day and they are going to want to be a C corporation which is regular corporation that is taxed at the entity level, as opposed to the S corporation that I mentioned earlier. And the reason they are going to want to do that is because they want to have at least two different classes of stock they are going to want better stock that has more rights than what they are going to give you, as a founder. So, for a lot of reasons, all bets are off, everything I’ve said, changes, if you have a VC investor.
Kevin: Just quickly on that point, Joe, and I know you are talking about state tax and federal tax on an individual basis, do companies then have state and federal taxes as well?
Joe: Oh absolutely, and many cities, city tax as well. So yes they do but only C corporations as well. That shouldn’t be that broad. Among the commonly used entities C corporations actually pay taxes to the federal government, let’s keep it simple. The partnerships and S corporations don’t pay any entity level tax to the federal government.
Kevin: But they do to the state?
Joe: They do, it varies state by state, and it’s typically a much smaller amount but yes.
Kevin: So it’s true that in America is the only certainties are death and taxes?
Joe: Yeah [smiling] yes absolutely.
Sebastian: And I think one should add that local tax that have in Texas the franchise tax only applies to, I guess larger businesses once they have sealed an excess of moderate million-
Joe: Yeah, I forget the exact dollar amount but even when you pass that threshold it’s still not a terribly onerous tax.
Kevin: Just to sum up, really, I mean, Sebastian refers to, or refers a client to you who is an European business owner about to expand in the United States, obviously you would consult with him in the legal capacity and all the rest but what would be the kind of key piece of information from the get go that you would want to communicate to that person.
Joe: Well, it would depend on how large their large businesses if they have a large and existing business the first thing that we need to talk about is transferring all of those contracts, assets people into a US context and that can be very complicated and it’s very much a piece by piece sort of analysis. If there’s a small business, then the first thing to talk about is creating the entity, talking about limited liability, talking about how much money they are going to put in, and talking about the tax ramifications and all of the bookkeeping because behind that to make sure they can comply.
Kevin: It sounds like pretty good advice, wouldn’t you agree, Sebastian?
Sebastian: I totally agree, yeah, so, Joe, how can our listeners find more about you and your practice, and how to contact you?
Joe: My website is fulwilerlaw.com that’s- my last name is spelled, F as in Franck, U-L-W-I-L-E-R. Fulwiler and the word law L-A-W dot com
Kevin: Joe thank you very much for taking the time from your busy practice to speak to us, we really appreciate, it’s been a real eye opener for me and Sebastian to learn just how complex things are here and I think as with our doing in London and visas the thing I’m taking away is that you really do need a lawyer if you’re going to set up a business in the United States, wouldn’t you agree?
Sebastian: Oh yeah, totally, you know, when you plan without a lawyer you basically, I guess, you plan to fail, so basically is never good deal.
Next time on Move Your Business to the United States, entrepreneurial journey is one of the most unique things that you can do in life. It has the highest highs even express how great they are and some of the lowest lows and you can only to me, reach in to find your way through it if you really believe that in your DNA this is what I’m supposed to be here doing
You’re listening to Move Your Business to the United States with me Kevin Turley. A huge thanks to my producer, Emmett Glynn who produces this podcast for Mount Bonnell Media. To find out more, go to mtbonnell.com and remember, ‘Dream big, dream America’.
