Rocco E. Cozza • October 15, 2019

Many people search “how to set up an LLC” online, thinking that it is something that is simple to do.  They may have a small business and someone told them they should be protected.  They perform a little research and determine that an LLC is the right entity for them.  (I won’t get into the detail of why it is important to speak with a professional about entity choice, but trust me it is).  Once they make the determination to set up an LLC, they go ahead and do it themselves.  See, in all honesty, most of the state filings to set up an LLC are very simple and take less than 20-30 minutes to complete. But that is the smallest piece to an LLC.

How to Set Up an LLC – What you need to know.

On top of your state filings (articles or a certificate of organization), there are quite a few other documents one needs to have to ensure the LLC provides adequate protection.  Just filing your state paperwork to create the entity doesn’t cut it.  Yes, in theory, you have a limited liability company.  But without the other pieces, it is like a house of cards.  It can crumble at any time.  And it will.

Problem 1 – Poor or No Operating Agreement

For example, a small business owner that formed their LLC online without an attorney got sued.  Not just the business, but the owner as an individual as well.  The owner thought that the LLC will protect him from the claim brought against him as an individual.  When he submitted the claim to his insurance carrier, the carrier asked to see the operating agreement.  The owner, feeling good, sent the carrier his operating agreement.  This was a document that he downloaded off some website thinking that he was covered.  Sadly, the insurance company denied coverage of the individual claim.  This denial cost this person over $10,000 in legal fees to defend the individual claim.

The reason the claim was denied:  the operating agreement was missing key language needed for an insurance policy for the business to cover claims against an owner.  Unfortunately, this business owner, like many others out there, was pennywise and pound foolish.  The owner had spoken to a few attorneys on how to set up an LLC and was quoted around $800-$1,000 to do so.  Because he didn’t want to spend that amount of money for something he felt and was told, he could do himself, he decided to play lawyer.  That attempt to save $1,000 led to a $10,000+ loss.  All because he did not have the expertise to know what he needed.

Problem 2 – Lack of Proper Financial Advice

Another problem I have seen with people setting up an LLC without the help of a qualified attorney is that they don’t get the advice they need.  There are certain things an LLC owner must do to ensure the legal protection shield remains intact.  When I meet with a client to hand over their new created entity, I spend a decent amount of time outlining the compliance items they need to have in place.  Owning an LLC is not as set it and forget it.  There are ongoing obligations to ensure adequate protection.  From creating a wall between personal and business finances to having an organizational and annual meeting, these are just a few of the things one must do.

Let’s take the finances for example.  Comingling finances is one of the biggest reasons a court will “pierce the corporate veil” and allow a plaintiff to get the assets of an individual owner of an LLC.  One transaction can do it.  One inadvertent transaction.  But you need to understand how the money needs to flow in and out of an LLC to make sure that you are putting yourself in the best position.  This is why working with a skilled attorney to set up your LLC is crucial.  They will be able to provide you the advice you need when it comes to finances.

Problem 3 – Lack of Documentation

Another common misconception people have that set their LLC up themselves is there is no requirement for annual maintenance.  They believe that their articles of organization are all they need.  Unfortunately, they are greatly mistaken.  Banks, future partners/investors, landlords, and even the IRS will request organizational and annual meeting minutes to ensure the organization is not a sham entity.

We have talked about the importance of an operating agreement, but let’s now discuss the ongoing documentation an LLC should have.  Because the LLC needs to be treated as an entity separate from you the owner, certain decisions and acts of the organization should be documented.  This process shows that you are maintaining the entity and respecting the separation you must have from it.  This documentation includes:

  1. Meeting minutes, which should be done at least annually if not quarterly
  2. Resolutions authorizing certain transaction in accordance with your operating agreement
  3. Any ongoing state or local business filings an LLC is required to make in the jurisdiction in which it is located

Beware of Doing it Yourself

As you can see, an LLC is not just a set it and forget it entity.  When searching how to set up an LLC, you won’t find a lot of this information out there.  A lot of the do-it-yourself websites want you to feel that it is easy to set-up and you can do it without a lawyer.  Unfortunately, that is not the case and doing so is an extremely risky move for a business owner.  This article is not meant to frighten or scare you into using an attorney.  I am aware that a lot of you out there will not.  I want to merely educate you on the risks involved with the improper set up of an LLC.  Despite “how to set up an LLC” being a topic frequently written about, that doesn’t mean it is something you should do yourself.

But if you decide to do so after learning how to set up an LLC, I still want to help.  I have created a LLC compliance checklist that is available for free download.  Now understand that the checklist is merely educational in nature and in no way establishes an attorney-client relationship.  You should always seek the advice of your own counsel.  But if you would like to download the checklist, just click here.

Cozza Law Group Business Law Blog

How Restrictive Covenants And Non-Compete Agreements Are Enforced

By Rocco Cozza • August 22, 2026
The enforceability of restrictive covenants and non-compete agreements depends on various factors, including how and when the employee/contractor initially signed the document. A company or employer may find it easier to enforce these agreements if they work with business law attorneys in Pittsburgh during the initial drafting and signing processes. If a company can steer clear of common mistakes from the very beginning, it can protect its competitiveness and avoid issues caused by former employees/contractors. Pennsylvania Only Enforces Non-Compete Agreements That Meet Five Requirements While Pennsylvania does not have a clear statute governing non-compete agreements, past cases have established a three-part test for their enforceability. First, a non-compete agreement must clearly define a timeframe in order to be enforceable. In other words, it must have an expiry date. You cannot stop an employee or contractor from competing indefinitely. Case law also suggests that non-compete agreements with the strongest enforceability are only valid for a few years (and not decades). A Pennsylvania court is also likely to reject a non-compete agreement with an ill-defined scope. In other words, the contract must describe exactly what the employee or contractor is prohibited from doing. The scope must also be reasonable, meaning you can only prevent employees from joining clear competitors. If a company is only distantly related to your industry or field, a non-compete probably can’t prevent your former employee from joining that organization. Scope also encompasses the type of company information that the employee uses to compete in the future. You cannot stop a former employee from using their own inherent skills and knowledge to set up a competing business. The only way you can legitimately curb competition from a former employee is by limiting the way they use your company’s “confidential information.” You might be surprised to learn that your former employees have every right to use company information that you consider to be confidential. As long as that information is publicly available, your employees can use it freely. This includes price lists, your suppliers' contact information, and general business practices well-known in your industry. One example of “confidential information” in this context is a list of your customers, complete with their email addresses and telephone numbers. Although this information might be publicly available, a normal person would not be able to recreate the finished list without spending years building a business (as you have). Intellectual property is another example of protected, confidential business information. If you have gone through the trouble of obtaining a patent or a copyright, your employee has no right to steal this information and use it to set up a competing business. The same logic applies to “trade secrets,” which may include confidential formulas or recipes. That said, it is important to remember that these violations are governed by intellectual property law, and not necessarily non-compete agreements. Non-compete agreements in Pennsylvania must also clearly define their geographical “reach.” You can only prevent an employee from competing with you in your geographical area, such as the City of Pittsburgh or Allegheny County. Even if your employee signs a non-compete agreement, they could theoretically travel to another state or country before starting a competing business. Finally, companies in Pennsylvania generally need to offer employees or contractors something in return for signing non-compete agreements. If the penalties for violating the agreement represent the “stick,” then the reward represents the “carrot.” In business law, this reward is called “consideration.” A common type of consideration is a job offer. With the job offer on the table, there is a clear reward for signing the non-compete agreement. On the other hand, the potential employee could always walk away from the job offer without excessive penalties. Another type of consideration is career advancement. This might be a raise or a promotion. An employee may decide to sign a non-compete agreement in order to access these career benefits. If they reject the offer, they would presumably keep their current position in the company without any other consequences. Pennsylvania courts may deem unenforceable a non-compete agreement that lacks these promised rewards. In the eyes of the court, an employee faces a difficult situation if they could lose their job by not signing a non-compete agreement. As with all contracts, duress or undue influence can make non-compete agreements unenforceable. Penalties Help Enforce Valid Non-Compete Agreements Assuming a non-compete agreement is valid, what exactly stops an employee from violating it? Without effective penalties, a non-compete agreement is useless. You can enforce your non-compete agreements with “injunctions.” These are court orders that require your former employee or contractor to immediately stop working for the competing business. If they have set up their own business, a court order could force them to shut down operations. Penalties may also include damages. The court can order the competing employee or contractor to pay compensation for your losses. For example, an employee might have stolen all of your customers by offering the same services for a lower price. In this situation, you could recover all of the profit you would have earned if those customers had remained loyal. Negotiation Is Often the First Step of Enforcement While taking your former employee or contractor to court can lead to positive results, most parties attempt to resolve their disputes through negotiation first. Indeed, mandatory “arbitration clauses” are often built into non-compete agreements. A business law attorney can represent your best interests during these negotiations, ensuring positive outcomes without an expensive, time-consuming trial. Can a Business Law Attorney in Pittsburgh Help Me? A b usiness law attorney in Pittsburgh may be able to help if you are serious about making your restrictive covenants and non-compete agreements as enforceable as possible. Legal assistance with drafting and negotiating these agreements from the outset may improve their enforceability if a dispute arises later. That said, lawyers can also help resolve disputes over restrictive covenants signed long in the past. To explore this topic further, consider contacting Cozza Law Group, PLLC at (412) 790-2789. You can also find us online .

Understanding Shareholder Disputes and How They are Resolved

By Rocco Cozza • June 8, 2026
Shareholders set corporations apart from other types of businesses, and they often help companies achieve considerable levels of success. On the other hand, executives and directors often forget that each shareholder is a part owner. With so many owners, it is easy to see how complex shareholder disputes can become. The first step is to understand why and how these shareholder disputes arise. The second step is to resolve the dispute, potentially with guidance from an experienced business litigation attorney in Pennsylvania . Shareholder Disputes Arise Because of Shareholder Rights To understand shareholder disputes, you first have to understand shareholder rights. Common shareholders have voting privileges, which means they can control the trajectory of the company. Although some shareholders never bother to vote, others take these rights very seriously. The more shares you have, the more power you have to control major decisions. Shareholders also have the right to profit from the success of a company. Because of this, they have a financial incentive to oversee the company’s trajectory. If the company leadership starts to make mistakes or intentionally act against the interests of the shareholders, disputes naturally arise. Finally, shareholders rely on the accuracy of records and corporate books to make their investment decisions. For example, they might choose to sell or hold their stocks depending on the published earnings of a company. If these records are inaccurate or intentionally altered, the shareholders may make poor investment choices as a result. Now that you understand shareholder rights, it is easy to see how shareholder disputes might arise. Shareholders might sue if they feel that the company is making major decisions without bothering to hold votes. They might also sue if they feel that the leadership is acting against their best interests. Another type of lawsuit might involve shareholders suing a company for inflating their earnings and releasing inaccurate data. Shareholder Disputes Often Begin With Alternative Dispute Resolution Most lawsuits, including shareholder disputes, go through a process of alternative dispute resolution (ADR) before parties actually proceed to the courtroom. ADR may involve mediation or arbitration, and it takes the form of private negotiations. The shareholders may select legal counsel to negotiate on their behalf, as it would be impractical for thousands of individuals to sit at the negotiation table. In other situations, an individual shareholder might file a lawsuit on their own. In this situation, that individual might be present at the negotiation table alongside their legal counsel. ADR often serves everyone’s best interests, helping to resolve disputes without resorting to expensive and time-consuming litigation. Public trials are not good for business, and shareholders might be just as willing to resolve these issues in private as the executive suite. Arbitration clauses are often “built in” to the corporate bylaws or charter. In other words, parties may have no choice but to attempt mediation/arbitration before proceeding to a trial. That said, parties are under no obligation to successfully complete the arbitration process. One party could refuse to negotiate, and a trial would subsequently become inevitable. What are Some Common Types of Shareholder Disputes? Shareholder disputes may take various forms. All of these lawsuits fall into four main categories, however. An individual shareholder might file a direct lawsuit against the company. Another type of lawsuit might be a “derivative suit,” which involves the shareholders suing on behalf of the corporation. This type of lawsuit often targets a specific bad actor within the company, such as a self-dealing CEO. Class actions are also relatively common. In this type of lawsuit, numerous shareholders join forces to file a single lawsuit against the corporation, often under federal securities law. Finally, a dispute might take the form of an “appraisal proceeding,” which focuses on whether the company has received a fair valuation before a merger. How Does Pennsylvania Law Affect Shareholder Disputes? Pennsylvania law is quite deferential to the board of directors, granting it considerable control and authority. A common source of conflict in a corporation is the contrast between the “democracy” of the shareholders and the authority of the board of directors. Pennsylvania tilts the scales in favor of the board. First, Pennsylvania requires a shareholder to make a written demand to the board before they can file a derivative lawsuit. The board can then appoint a “Special Litigation Committee” to investigate the shareholders' claims and demands. If the committee determines that a lawsuit would go against the best interests of the company, courts in Pennsylvania may not allow it to continue. It is difficult to circumvent these requirements for derivative lawsuits in the Keystone State because of strict limits on direct lawsuits. Finally, Pennsylvania has no rule that states a board must place its shareholders’ interests above those of other relevant parties. These parties might include employees, customers, suppliers, and even the greater community or environment. This is not the same in other jurisdictions, making the Keystone State a “board-friendly” state that repels takeovers. In fact, it is considered by many to be the most management-friendly state in the country and one of the toughest places for shareholder plaintiffs to sue. While this is good news for boards facing shareholder lawsuits, the Keystone State’s protections are not infinite. Effective legal representation is necessary to take advantage of the jurisdiction’s legal safeguards. On the other hand, plaintiff shareholders can still achieve success in Pennsylvania, but they may need to rely on innovative, experienced business litigation lawyers in the face of strong regulatory barriers. Contact Cozza Law Group PLLC to Learn More About Shareholder Disputes While online research can provide plenty of insights into shareholder disputes, each case is slightly different. Given the varied nature of shareholder disputes, it may help to discuss your specific circumstances with a business litigation attorney in Pennsylvania . Cozza Law Group PLLC serves enterprises of all sizes, offering a fractional counsel model that provides legal guidance that fits your company’s unique needs. Continue this dialogue by contacting us at 412-453-8673 or visiting us online .