Corporate Legal Advisors ^SM

BUSINESS PRACTICES AUDIT TOP TEN LIST Use the following as a very brief legal audit of your business practices: Lease/Ownership of Facilities: There is a whole lot of money at stake. If you lease your facility, the total dollar amount at stake, let alone the very ability to continue conducting the business of business, makes these transactions as substantial as any transaction involving your business. If "you" own your facility, the first question is who the "you" should be. For example, a separate LLP or LLC may be the better answer for several good reasons. And, if "you" own your own building and lease some space to a third party - another set of issues arises. Intellectual Property: Key employees and consultants can do great good and great harm to your business. Selective use of reasonable non-compete and confidentiality agreements can mean the different between success and failure. But there are strict rules that have to be followed.       And then there is the list: Trademarks, Service Marks, Trade Names, Copyrights, Patents, Software, Trade Secrets, Domain Names, Etc. Too often we ignore or undervalue these forms of intellectual property until we lose rights to exclusive or even any use of this valuable property. Corporate Organization and Governance: It may be paperwork but it is important paperwork. Corporation, Limited Liability Company, Limited Liability Partnership or whatever, it is critical to comply with the legal formalities. If there are multiple owners, up to date records of director/equity owner meetings and decisions are a must. Co-mingling personal and business assets is a very dangerous activity. A creditor can convince a judge to ignore the limited liability protection you think you have.       Then there is the question of whether you are doing business through your business entity or, in fact, are personally liable by failing to properly sign documents, etc.       Failure to make annual or more frequent filings with the Secretary of State happens. Failure to make filings in other states where you are "doing business" is easy to ignore. The penalty can be loss of the liability protection you had by doing business through your corporation, fines, etc. Raising Capital/Outside Investors: So what can go wrong? Accepting money from investors without considering federal and state securities laws is a dangerous action. The problem arises when the investor becomes dissatisfied for any reason and consults an attorney. Treble damages is the standard remedy if the investor can show a violation of the securities laws. And, there is the possibility of personal liability. Employment Law Matters: Pay me now or pay more later. Failure to pay appropriate overtime wages, labeling an employee as an independent contractor, failing to properly investigate discrimination claims and working conditions claims, and on and on. Ignoring this area of your business can cause great expense. Many claims in this area catch the owner by complete surprise. Lame as it may sound, my best advice is to call your attorney as soon as the problem surfaces. Litigation: : It is better to mediate than litigate. The time to deal with litigation is now. Once you are in litigation, it, too often, takes on a life of its own devouring your time, emotions and money. There are better ways to resolve differences. For example, including cost effective mediation/arbitration provisions in agreements/contracts is one approach. Seeking and following legal advice before making important/expensive decisions is the simplest but often most ignored approach. Employee Agreements: There is a reason they are called key employees. Compensation (including commissions and bonuses), rights to inventions, copyrights, customer lists, limitations on competing with you, confidentiality, etc. are all subjects that need to be addressed on an individual basis. But unless you get it in writing, you cannot expect to enforce this mutual understanding.       Although the legal requirements are different, both new and current employees can be held to express written standards both during and after employment. Business Contract Essentials: It's all boilerplate until it's too late. "Standard Form" contracts/terms of sale or purchase are useful. However, it is not easy for the average business owner to tell good forms from bad forms. And, harder still is figuring out what is missing from a particular form. Excellent reading comprehension skills do not translate into excellent legal comprehension. The trick here is to balance your healthy aversion to spending money on lawyers with your need to understand the significance of and need for certain contract terms. Owners' Agreements: Better to agree up front than fight later. For the most part, business owners enter into business together with shared goals and effort. Things happen, however. Priorities change, divorces occur, an owner dies, friendships falter, disagreements increase, one owner works harder and longer than the others, etc. As mentioned above, litigation is about the worse solution possible in these situations. Addressing as many of these issues as possible in an owners' agreement is a much better solution. Planning For The Exit: The time to plan is now. "Buy/Sell" agreements generally only address one form of exit from the business - death. And "Buy/Sell" agreements only exist if there are multiple owners. Succession Planning is about a lot more. And, it takes time and thought. Far better to work through a business succession plan early on and modify it as time goes by. Waiting until you are ready to exit the business is too late. "An ounce of prevention is worth a pound of cure." Spend time and money now or wait and see what happens.