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Day: September 6, 2015

Separation Codes (SPN Codes) – The basics

Posted on by Gary Port

In another post, I have discussed the “hidden” part of the DD 214. Separation codes (or SPN code, pronounced “Spin codes”) are to be found on this hidden section. The separation codes state the reason for the separation. According to About.com (http://usmilitary.about.com/od/theorderlyroom/a/code2.html, the DoD will no longer allow the release of these codes to the public. However, most medium to large sized employers, as well as all government employers, know these codes. These separation codes are used by employers in determining whether to hire an employee. If you have a bad separation code, you may find it difficult if not impossible to get a job.

For example, I had a client who was given an entry level separation because he tested hot for marijuana when he reported for basic training. I was taught as a JAG that an entry level separation (ELS) is a “no-fault” separation and that the servicemember will not face any problems in the civilian world. This is, of course, wrong. His separation code was BLK – drug use. This prevented him from so much as getting a job with Metro-North cleaning trains.

I have run into a number of people who received Honorable or General discharges but were unable to find adequate employment, only to find out that they received a negative separation codes.

Although the DoD refuses to reveal the codes, there are various website where they are listed.
If you believe that the separation code is in error or is creating problems for you to get employed, you may want to consider making an application to change it.

RE Codes – The Basics

Posted on by Gary Port

Unknown to most soldiers, sailors, marines or airmen, is that the DD 214 is not an 8 1/2 by 11 inch pieces of paper. The DD 214 is actually 8 1/2 by 14 inches. That extra 3 inches of paper on the DD 214 contains critical information regarding how and why you were discharged. On the DD 214 is an section entitled “Special Additional Information.” Blocks 23 through 30 are found here.

Re-entry codes or “RE codes” are found in block 27.
The RE Code determines whether you can reenlist or not. But, it is more important than that. Prospective employers see the DD 214 with blocks 23 through 30. Even if you don’t want to reenlist an employer will see the RE codes. If you have an RE 4 code – which means do not allow to reenlist, then the employer will believe that you committed some offense and not hire you. Therefore, an adverse RE code could ruin your chances of getting a civilian job.

Starting a New Business – A Corporation or a Limited Liability Company (LLC)

Posted on by Gary Port

The big questions when starting a business is whether to incorporate or use a limited liability company.

From a legal stand point, a limited liability company, like a corporation is designed to protect the owner from lawsuits. Both structures do that job very well.

Until about twenty years ago when starting a new business people incorporated. However, within the last 20 years the new kid on the block, the Limited Liability Company or LLC has become increasingly more popular than a corporation.  You should not pick one or the other on popularity but on what fits your particular business needs.

The corporation has been around for over five hundred years. We have an entire body of laws and judicial decisions which tell us how the corporation works. Since the LLC is a relative newcomer the body of laws governing them are not as mature and this can lead to problems.

The two main types of corporate structure actually have more to do with tax law, not corporation law. These are the “S’ Corps and the “C” Corps. The S Corp is a structure which allows the profits from the corporate to flow directly to the shareholder. In the C Corp, the corporation takes the profit, pays a tax on it, and the money flows to the share holders where it is taxed again.

As a general principle small companies can be S Corps but larger companies may have to take the C Corp structure. We have seen people getting improper counseling and wrongly chose one form over the other, generally resulting in fines and penalties. It is critical to discuss the issues of your business fully with your attorney so that the right structure can be chosen.

While many shareholders don’t sign a shareholder’s agreement, we would recommend that they do. We’ll address the shareholder’s agreement in-depth in another article. The take away here, is that a shareholder’s agreement is a contract between the shareholders. In the case of a dispute, it governs the relationship. Think of it as prenuptial agreement for business partners.

A limited liability company has different, and more expensive filing requirements. Also, to be properly run, the limited liability company needs to have articles of organization and an operating agreement.

The articles of organization is a detailed document which sets up the structure of the limited liability company and how it is to be run. The operating agreement is generally used when there is more than one member of the limited liability company. This is also a detailed document which sets forth the obligations of the members to each other and to the company. It should also set forth each parties ownership share of the company,how much new members must pay to join, and what happens if the members reach a deadlock.

The main reason people chose the LLC over the corporation has to do with how income to the owners is taxed. If it comes down to a choice between and S Corp and an LLC, our advice is have the accountant and attorney consult to see which one will work better for the client.

Correction of Military Records

Posted on by Gary Port

Your military records determine whether you get promoted or discharged, and the type of benefits available upon discharge. Sometimes, whether through a mistake or an illegal or unlawful action a person is not promoted or is improperly discharged. Sometimes the military records do not accurately reflect a service related injury and, as a result, disability pay is not awarded.

Congress has made it possible for past and present military members and Coast Guards to correct their military records. By law, the Secretary of each branch has set up boards whose purpose is the correction of military records. These boards, one for each branch and another for Coast Guard, have the power to fix a variety of problems.
They can: upgrade a discharge, backdate a discharge, award a promotion, award back pay and benefits, void an administrative discharge, return a member back to active service, void OERs or NCOERs, explain gaps in the member’s records and correct records to award a higher disability rating.

The boards cannot overturn a court-martial conviction. However, in some special circumstances, boards have removed all references to the court-martial from a member’s records. In order to apply for a correction you need to submit a DD Form 149 within three years of the wrongful act. For example if a member was improperly discharged in 1997, he has until 2000 to file the DD 149. On the other hand, a member cannot complain that he was illegally passed over for promotion in 1990, since that was eight years ago.

Most cases heard before the boards are considered solely on the DD 149. The board can grant a formal in person hearing. However, these hearings take place in Washington and the military will not pay for travel and lodging. There is no cost to submit the DD 149. Also the board can only upgrade records, it cannot downgrade them.

Let’s look at some examples to see how the board operates and how it can correct records.

Example #1: A member is passed over for promotion due to poor evaluations. The member can prove that the evaluations should not have been in her records. The board, based upon documentary proof, can void the evaluations, remove them from the file, void the pass over, and place an explanation in the file for the gap in the evaluations.

Example #2: Instead of the member being passed over once, let’s assume she was passed over twice and was discharged. In addition to voiding the evaluations and the decision of the promotion boards, she can be returned to active duty, as if the discharge had never occurred. Additionally, she would be entitled to back pay.

Example #3: A member has 25 years of creditable service. However, records only reflect 20 years. The board can correct the records, adjust the retired pay and award back pay.

Example #4: A member retired based on time in service not a disability. Member proves that disability existed and it was service connected. The board can correct the member’s record to reflect a disability retirement.

Starting a New Business – Obeying the Formalties

Posted on by Gary Port

Frankly, most people starting a new business in New York do it wrong. Some don’t bother to incorporate or create a limited liability company (LLC) and instead just set up shop. Some do pay an attorney or accountant to set up a corporation or LLC but do nothing more once they get the corporate kit. Rarely, does anyone do it right from beginning to end.The reason most people fail when setting up a new business is that no one has adequately explained the hows and whys. The main reason you set up a corporation or LLC is to avoid being personally sued something the business did. If the company breaks a contract, you as the business owner don’t want to lose your house in the lawsuit.

But, and this is critical, you have to actually use the business structure and don’t let the corporate kit gather dust on the shelf.

If you do not obey the formalities a judge could find that the business is a “mere alter ego” of the owner. This is bad. What it means in English is that the owner can be held personally liable for the actions of the company. The business structure in this instance will not protect the owner.

Whether you have a corporation or an LLC you must obey what the law calls “the formalities.” For a corporation you need directors and officers. They can be the same people. You need to hold meetings and document the meetings. Finally, you cannot treat corporate assets as your own.

The last point is the one which is most often breached. As the owner, you view the money of the business as your own.  You should put yourself on salary and become a W-2 employee.  Can you have the business pay your mortgage or car note, without violating the corporate formalities? Talk to your accountant. He’ll tell you to take a shareholder’s loan, a shareholder’s draw or some other acceptable method.  If you drive a lot for your business, have a director’s resolution stating that in light of the fact that you need to drive for company business, the company will pay for your car. Just taking the money or having the company pay your personal bills directly could get you in trouble.

Just be careful. Anytime you take extra money you lay yourself open to the charge of treating the company as your wallet. When that happens, in a lawsuit a judge could disregard the corporate structure and hold you personally liable.

The take away is not merely to talk to a lawyer before starting a business, but see your attorney annually for a legal checkup to determine the legal health of  your business.

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