Lawyers Protect you during a Business Divorce

Pareja (Couple) by Daniel Lobo from Flickr (Creative Commons License)

Pareja (Couple) by Daniel Lobo from Flickr (Creative Commons License)

Over the last six months I’ve worked with a handful of companies that were experiencing major changes in regards to how the company is operating and who the owners are – usually resulting in one or more owners buying another one out. Sometimes the owners realize that they no longer have a shared vision and can work together amicably to resolve the situation so they can each move forward in their professional lives and sometimes it’s quite contentious. I often call the situations “business divorces.”

When these situations happen, it’s helpful to get a business lawyer involved early in the process. You may only need in our consultation to discuss the situation in your proposed plan of action. Your employer can act as a neutral third party who doesn’t have invested ego in the outcome of the situation. Invite your lawyer to review your company’s operating agreement or bylaws (hopefully you have these) and remind you of what courses of action you previously agreed upon in this type of conflict (assuming you made these decisions when you started the company) and how to change the status of your business with your state’s corporation commission.

Most business owners I know don’t want to think about the worst case scenario when their businesses just getting off the ground and everyone is optimistic about the future; however, this is the best time to have this conversation and document it because this is when you are most likely to be thinking about what is fair and what is in the best interests of the company. If you wait until there is a conflict to try to have this conversation, you’re more likely to get into a battle of wills where people are more interested in what they want and/or hurting the other person.

Additionally, if you are going through a “business divorce” expect it to take longer than you’d like. There may be valuations that need to be performed on the company, documents that need to be reviewed by your lawyer or accountant, and a custom contract drafted between you and your future-former-co-owner. This may involve a significant amount of negotiation and revisions.

I actually enjoy drafting these documents to shift the ownership of the company, especially when both sides are represented by counsel. Each lawyer is an advocate for their client’s concerns without it having to be a combative situation. And we can shield our clients from the tribulations that would likely result if they tried to reach a resolution on their own. Ultimately we both want the same thing – a change in business ownership and clients who are satisfied with the outcome.

If you are in a situation where the arrangement with your fellow business owners is no longer effective, please contact me or of business lawyer in your community. If you want to connect with me on social media, you can find me on Twitter, Facebook, YouTube, or LinkedIn.

Does Your Business Need Cyber Liability Insurance?

Guilty Viewing Pleasures: Hackers by Ingrid Richter from Flickr (Creative Commons License)

Guilty Viewing Pleasures: Hackers by Ingrid Richter from Flickr (Creative Commons License)

Anthem Health Insurance was victim the latest cyber attack to hit the news. Approximately 80 million customers’ health records were compromised by this security breach. When you hear about these hacking stories, do they make you wonder about your company’s security system? Do you assume that you probably have nothing to worry about because hackers are only interested in big companies like Target?

I attended a workshop last month about cyber liability insurance where the presenter said that a 2011 study revealed that 95% of all credit card breaches were against small businesses. We only tend to hear about the security breaches involving bigger companies but any size company could be at risk. Data breaches can occur through hacking, theft by unauthorized access , employee errors, and stolen or lost paper or electronic files, laptops, smartphones, flash drives.

Any business that handles or stores private business, customer, or employee data should consider getting insurance to cover them if a data breach occurs. This data includes social security numbers, bank account information, credit card numbers, driver’s license numbers, and email address. Additionally, you should take a look at your company’s policies and procedures related to data security. Are you taking the following precautions?

  • Secure sensitive data
  • Restrict access to data
  • Dispose of data properly – i.e., wipe laptops before donating them, shred paper files
  • Use effective passwords
  • Use encryption and secure remote access
  • Make sure your employees understand how to protect data and why it’s important

There are many benefits of having cyber liability insurance. Your provider should offer risk management services to help prevent a data breach from occurring. If a breach occurs, they will can professional assistance for damage control and regulatory compliance as well as cover the response expenses for mailing notification letters, credit monitoring services, and public relations. Your cyber liability insurance policy can also cover your defense and liability expenses if you are sued because of the breach.

This is a serious issue that can affect any company that uses the internet for business or commerce. If you have a traditional business liability insurance policy, read the terms carefully; it may not cover cyber liability. If you need a cyber liability insurance policy, contact a cyber liability insurance specialist to discuss your needs and options.

If you have questions or want to chat more about these issues, feel free to connect with me on TwitterFacebookLinkedIn, or you can send me an email.

Bloggers & Vloggers: Register your Trademarks!

Registered by tup wanders from Flickr (Creative Commons License)

Registered by tup wanders from Flickr (Creative Commons License)

Ever since I heard about the Turner Barr story in 2013, I’ve been on everyone I know – including recreational bloggers and the vloggers – to register their trademarks in at least their sites’ names with the U.S. Patent and Trademark Office (USPTO). If this isn’t on your to-do list for this year, take a break from reading this post and go add it right now.

For those of you who don’t know or don’t remember, Turner Barr started an awesome blog called Around the World in 80 Jobs where he writes and creates videos about his travel adventurers and how he works from place to place. It was a simple but brilliant idea. He didn’t register his trademark. I bet the thought never crossed his mind. I bet he never thought that another company would register the trademark “Around the World in 80 Jobs” and essentially shut down his site. Thankfully, Turner was able to resolve the situation in part by publicly calling out the people he suspected stole his idea. He has since registered the trademark for his blog.

When I saw this situation where it looked like another company ripped off an individual blogger’s idea and name for themselves and basically (temporarily) stole it out from under him by registering the trademark, I became scared for every person I know who has an amazing blog or vlog. I don’t want to see them in the same predicament. It also reminded me to be a diligent about reminding and re-reminding my clients who are startup entrepreneurs about the importance or registering their trademarks so they don’t end up in the Burger King situation.

This is the type of situation potentially where someone can steal your idea and you will have to fight to try to get it back. And it’s the type of situation that is easily prevented by registering your trademark first. Once you have a registered trademark with the USPTO, you can stop other people and companies from using a name that is confusingly similar to yours in your industry.

Compared to the heartache, headaches, and what you will pay a lawyer if you end up in a situation like Turner Barr did, filing at trademark application is cheap. The USPTO recently lowered their filing fees so if you did your application yourself (which I don’t recommend) it may cost you only $275. If you’ve never filed the trademark application before, I suggest you at least consult a trademark attorney in advance just so you understand the trademark process including what information you have to give the examining attorney to prove that you’re using your trademark. It may not be as expensive as you fear.

And just to show that I put my money were my mouth is and that the shoemaker’s children have shoes in this situation, I recently submitted a trademark application myself for my personal blog, The Undeniable Ruth. I want to be able to call myself “undeniable” for the rest of my life and this is the first step to ensuring that.

If you have questions or want to talk about your trademark needs, feel free to connect with me on TwitterFacebookLinkedIn, or you can send me an email.

Starting a Business in Arizona

Little Waitrose - Birmingham Snow Hill - Colmore Row - Now open - sign by Elliott Brown from Flickr (Creative Commons License)

Little Waitrose – Birmingham Snow Hill – Colmore Row – Now open – sign by Elliott Brown from Flickr (Creative Commons License)

Starting a business is exciting and can be overwhelming at times with everything that has to get done. I wish more business owners put more energy into creating structure within their business when they contemplate and launch their endeavors. It will save a lot of pain and frustration in the long run. If your plans for 2015 include starting a business, make sure these steps are on your to-do list in the first month or two of starting your company.

Discuss with your accountant what type of entity you should form. Every company needs an accountant. In Arizona, you have the option to create a C corporation, an S corporation, a B corporation, or an LLC. I tell all my clients to meet with their accountant to make sure they select the right entity and understand the corresponding tax implications and other responsibilities.

Check with the Arizona Corporation Commission and the U.S. Patent and Trademark Office to ensure that the name you want for your business is available. Many companies make the mistake of assuming that just because the website domain they want is available that their desired company or product name hasn’t been registered as a trademark for another company. If you use a name that has already been registered by someone else in the same or similar industry, they can make you rebrand.

Submit the necessary paperwork and fee with the Arizona Corporation Commission. Consider filing your trade name with the Secretary of State’s Office as well. The forms to file your Articles of Incorporation or your Articles of Organization are on the Arizona Corporation Commission’s website. Make sure you get all the supplemental forms you need. The standard filing fee is $60 for a corporation and $50 for an LLC. The filing fee to register a trade name with the Secretary of State is $10. (Registering a trade name prevents other companies in Arizona from using the same name. It is not a substitute for filing a federal trademark.)

Create a separate bank account for your business and set up your accounting system. It’s imperative that you keep your company’s corporate veil intact. I strongly recommend using an accounting system like QuickBooks. It makes life so much easier when you’re reviewing your books and preparing for taxes.

If your LLC has more than one owner, create an operating agreement. If you have a corporation, write your bylaws. These documents will dictate how you will run your business, including how you will divide responsibilities and how you will address problems when they occur. They will help you decide in advance how you will address situations that are likely to occur.

Create the contract templates you will need for your business. If applicable, write the terms of service for your website. If you are going to be hire to provide a product or service by multiple customers, you will want to have contract templates for those interactions. This creates consistency and uniformity which will help you build your reputation as well as be more efficient. You can customize your templates to suit your needs. I encourage business owners to look at others’ templates for ideas of what they might want to include but be leery of using someone’s template unless it’s been reviewed by your lawyer.

Discuss what intellectual property your business will or might create and what strategies you will use to protect it. Every business has intellectual property: copyrights, trademarks, patents, and trade secrets. It’s often the company’s most valuable asset. It is important you understand what you have and the best ways to protect it.

Ideally, you would have a lawyer involved from the beginning of your business, if only to tell you what you should do and when you’re better off hiring a lawyer to work for you. Even if you’re on a shoestring budget, you can find a reasonably priced business lawyer or resources for startups to assist you. It’s also prudent to schedule an annual consultation with your lawyer to educate yourself about what legal issues might be on the horizon and to get advice about what more you should do to protect your business as you have the ability to afford it. It’s easier and cheaper to prevent problems than to clean up the mess when something bad happens.

If you want to chat with me about starting a business in Arizona, feel free to connect with me on TwitterFacebookYouTubeLinkedIn, or you can email me.

Please visit my homepage for more information about Carter Law Firm.

Now Available – B Corporations in Arizona

Welcome to Arizona! by Fred Miller from Flickr (Creative Commons License)

Welcome to Arizona! by Fred Miller from Flickr (Creative Commons License)

One of the awesome developments in the Arizona business community for 2015 is that businesses are allowed to form benefit corporations (B corporations) in this state. These are for-profit corporations that have other motives for being in business besides maximizing profits, and their shareholders are aware and accept that the company has dual motives. This motive must be to at least provide a “general public benefit,” meaning the business has a “material positive impact on society and the environment, taken as a whole, as assessed against a third-party standard, from the business and operations of a benefit corporation.” This option became available in Arizona at the beginning of the year.

Given that this is a new type of business entity in this state, I looked to the Arizona Corporation Commission (ACC) to get answers to my questions about B corporations.

What information does a company have to provide to the ACC in the Articles of Incorporation?
To create a B corporation, the incorporators must fill out the same Articles of Incorporation as other corporations in Arizona and pay a $60 filing fee ($95 for expedited processing). Every corporation is required to file an annual report with the ACC. B corporations must file an annual report and an annual benefit report where the company describes what general public benefit it provided. Each report has a separate filing fee.

Can an existing Arizona corporation be converted to a B Corporation? If so, how? Please include information about the associated fee(s).
Yes. An existing Arizona corporation can be converted to a B corporation by filing an Articles of Amendment with the ACC and paying a $25 filing fee ($60 for expedited processing). An Arizona LLC can also be converted into a B corporation under the Arizona Entity Restructuring Act.

Is a B corporation taxed like a C corporation? If so, can a company be a B corporation and file as an S corporation with the IRS?
Traditional corporations are C corporations, and they have double taxation where the corporation pays taxes on its income and the shareholders pay taxes. If the company qualifies, it may elect to be taxed as an S corporation where there is pass-through taxation so only the shareholders pay taxes on the income. Based on my research, a B corporation is taxed as a C corporation, but it has the option, if it qualifies, to be taxed as an S corporation.

I tell all clients to talk to their accountant before starting their business to determine which type of business entity is right for them and to make sure they understand the tax implications. And yes, every business needs an accountant.

Where can people go for more information about B corporations in Arizona?
The ACC created a legislative update that is filled with information and links about B corporations in Arizona. This is a great resource if you’re interested in starting a B corporation or converting your business to a B corporation. If you still have questions after reading this, contact the ACC or a business attorney in your community.

If you’re interested in B corporations but are unsure you want to create or convert your business to one at this time, you can look into being “B Corp. Certified” by B Lab.

If you want to chat with me about this topic, feel free to connect with me on TwitterFacebookYouTubeLinkedIn, or you can email me.

Please visit my homepage for more information about Carter Law Firm.

Make Your New Year’s Resolution Legally Binding

Resolving to Write More - a Worthy Thought by Carol VanHook from Flickr (Creative Commons License)

Resolving to Write More – a Worthy Thought by Carol VanHook from Flickr (Creative Commons License)

As I was reading my Twitter feed the other day, I saw a post that said only 8% of people keep their New Year’s Resolutions. I don’t know if that statistic is accurate but I believe the number is low. If you want help keeping your New Year’s Resolution, make it legally binding with a contract.

Here’s what I suggest: get a friend who also has a New Year’s resolution and write a simple agreement with benefits for sticking to your resolution and penalties if you don’t. The penalty has to be painful enough that it motivates you to want to avoid it. And it helps if your friend is kind of a jerk who will hold you to it.

If I were writing this type of contract, it would be something like this:

Joe and Mike’s Resolution Agreement

Parties.  The Parties to this Agreement are Joe Smith and Mike Jones.

Consideration. In consideration of mutual desires to improve our lives and ourselves, we have created this binding agreement to stay motivated to stick to our New Year’s Resolutions.

Joe’s Resolution. Joe currently weighs 250 pounds. Joe resolves to weigh 220 pounds or less on December 31, 2015. If Joe fails to do this, Joe will donate $1,000 to the charity of Mike’s choice on that day.

Mike’s Resolution. Mike currently smokes a pack of cigarettes per day. Mike resolves to be a non-smoker by December 31, 2015. If Mike fails to do this, Mike will donate $1,000 to the charity of Joe’s choice on that day.

The Celebration. If both of us are successful in keeping our resolutions, we will celebrate by getting opening day tickets for the Arizona Diamondbacks.

This is a real contract. This contract is governed by Arizona law. All disputes will be resolved in litigation in Maricopa County.  The non-prevailing Party will be responsible for the prevailing Party’s attorneys’ fees. The Parties can modify this Agreement only in writing that’s signed by both Parties (but you better have a good reason to ask to change this Agreement).

Signed by:

 

Joe Smith                    Date                                       Mike Jones                 Date

 

Witnessed by:

 

Friend Name #1           Date                                    Friend Name #2             Date

 

I threw in a celebration clause so both sides would have a reason to encourage their friend to keep their resolution, plus it’s always good to celebrate successes. I added in witnesses so there would be more people holding them accountable.  I’d tell both sides to put a copy of the contract on their refrigerator so they’d see it every day and remember the promises they made.

Contracts are fun, and they can be simple and personalized and still be valid. Good luck to everyone who making resolutions for the next year. I hope you’re successful. If you want to chat with me about this topic, feel free to connect with me on TwitterFacebookYouTubeLinkedIn, or you can email me.

Please visit my homepage for more information about Carter Law Firm.

Hat tip to my friend Jeff Moriarty for suggesting this as a topic.

Be Wary of Downloading Contract Templates

Copy Taste by Maik Meid from Flickr (Creative Commons License)

Copy Taste by Maik Meid from Flickr (Creative Commons License)

One of the questions I frequently get at my speaking gigs is where can people go to find good contract templates online. This question makes me simultaneously happy and nervous. On one hand, I’m happy that the person is asking about their contract needs; however, I’m nervous that they think there might be an acceptable resource online that could replace proper legal advice.

I usually tell these people that contract templates from the internet are a good place to start when doing research on a type of contract and the types of provisions they should include in their agreement. It should be the beginning of their search, not the end. When you look at a contract template online you can never know for sure who wrote it, where it came from, or whether it would be suitable for your needs. There have been many times when I’ve seen someone using a contract for their business that had provisions that made no sense – like a 2-person business that had an operating agreement that required a 2/3 vote to make changes and an Arizona-based business that was using a contract that said the agreement was governed by New Jersey law.

Instead of looking on the internet for a template, you might be better off asking your colleagues in your industry if they would be willing to share their contract templates, depending on where they got them. You are more likely to find provisions that are applicable to your business and the practices of your industry.

Regardless of where you get your templates, it’s always a good idea to have a business lawyer review them before you use them for your company. Otherwise you may find yourself using a contract that is bad for your business, and as long as the provisions of the contract are legal, you could be stuck with it. It may not be as expensive as you think to have a lawyer review your contract in advance. I’ve always said it’s cheaper to hire a lawyer in the beginning to prevent problems than to have to hire one after the fact the clean up the mess.

If you don’t already have a contract template you’re considering using, talk with your lawyer about whether it would be more cost effective for you to find or create your own contract draft for them to review or simply hire a lawyer to create your contract from scratch.

And be equally leery of contract templates created and sold by lawyers. Some of these are good and some of these are crap. I saw an operating agreement this year that was created by a law firm that sells start-up packages for businesses. My client asked me to review the contract to help him resolve a problem with one of the owners. This contract was dozens of pages long, was filled with excessive legalese, and did not address all of my client’s needs; hence, he needed a hire me to help him fix his problem.

Best of luck to everyone whose plans for 2015 include starting a new business. Creating contracts to suit the needs of your business should be one of the many things on your to-do list. If you want to chat with me about your business plans for 2015, feel free to connect with me on TwitterFacebookYouTubeLinkedIn, or you can email me.

Please visit my homepage for more information about Carter Law Firm.

What is a Statutory Agent?

FW Pomeroy's statue of Justice atop the Old Bailey by Ben Sutherland from Flickr (Creative Commons License)

FW Pomeroy’s statue of Justice atop the Old Bailey by Ben Sutherland from Flickr (Creative Commons License)

If your plans for 2015 include starting a business, you need to understand what a statutory agent is.

Starting a business usually begins with filing paperwork with your state’s corporation commission to create an LLC or a corporation and paying a fee. (Talk with your accountant to determine which entity is right for you. And yes, every business owner needs an accountant.)

Filling out the paperwork is a fairly straight forward process, and part of that will be designating a statutory agent for the business. A business can be sued just like a person. In the event that the business gets sued, the process server will need to know how to serve the business. They can’t serve a building – they need to serve a person. Your statutory agent is the person who will accept service (notice that you’re being sued) on behalf of the company. You have to provide a name and a street address.

As long as you live in Arizona, you can be your own statutory agent. Most business owners I work with choose this option. The only thing I remind them about is this information is publicly available on the corporation commission website, so if you’re running a home-based business, you’ll be using your home address. For people who live out of state or who don’t want to be their own statutory agent, there are companies who will provide this service for you. You pay a monthly or annual fee and they agree to accept service on your behalf. Many of these companies will also provide your business address as well.

In the event you are in a position where you want to sue a company, you’ll have to look up that company’s statutory agent to determine where to have them served. It’s an important part of beginning a lawsuit.

A gentleman called me a few weeks ago asking me to explain what a statutory agent is. The phrase “statutory agent” can sound scary to some, but the scope of the position’s responsibility is very narrow.

If you want to chat with me about your business plans for 2015, feel free to connect with me on TwitterFacebookYouTubeLinkedIn, or you can email me.

Please visit my homepage for more information about Carter Law Firm.

End of the Year To-Do List for Entrepreneurs

5/4/2010: To-Do List by john.schultz (Creative Commons License)

5/4/2010: To-Do List by john.schultz (Creative Commons License)

We’ve made it to December 2014! It’s hard to believe another year has flown by. I don’t know aobut your industry but most people stop calling their lawyers around the 15th or 20th of the month. (Exception: DUI attorneys.) That will give me almost two weeks to review and tie up loose ends from 2014 and get ready to hit the ground running in 2015. There are certain things I do as an entrepreneur during this time and I think they’re things all entrepreneurs should do.

1.  See your Accountant
I’ve said it before and I’ll say it again: a good business accountant is worth their weight in gold. I see my accountant twice a year – when I’m getting ready to do my taxes in February or March and every December. Every December he looks at my books to give me an estimate regarding my taxes for the next year and tell me if I should do a spend down before the year ends. We also talk about my plans for the next year and what financial implications might be on the horizon.

If your accountant advises you to do a spend down, buy quality things for your business – like new software or equipment or pre-pay for legal projects you want your attorney to tackle. Don’t buy a ton of pens and sticky notes that will take you a decade to use.

2.  Fund your Retirement Account
If you’re an entrepreneur, there’s a good chance you don’t have a 401(k) through your company. When you are your own boss, it’s your responsibility to prepare for your financial future, including getting a retirement account. If you don’t have one yet, start one. If you have one, give the maximum contribution if you can. The more you can put away when you’re younger, the faster it will grow.

3.  Review your Progress from 2014
I hope you had a list of goals for this year. Now is a great time to get that out and review all that you’ve done this year. Celebrate your victories and successes, and when you came up short, ask yourself what happened. Was it an unobtainable goal? Was there a shift in the company that made it a lower priority? Did you forget that it was your goal? Take some time to reflect on how you personally and how the business has changed in the last 12 months.

4.  Write Down your Goals for 2015
Think about the year ahead. What do you want to be able to say you did a year from now? Think about what you want to accomplish in the next 12 months and write down your goals. Try to make your goals measureable, tangible, and specific so it’s easier to determine if you’ve achieved them. Really take some time to think about what you want to do in 2015 and start laying the foundation to make it happen.

I hope you’ve have a productive year and that you’re excited for what’s to come. I know I am – there are many projects in the works for 2015. If you want to chat with me about this topic, feel free to connect with me on TwitterFacebookYouTubeLinkedIn, or you can email me.

Please visit my homepage for more information about Carter Law Firm.

What Should You Do If Someone Steals Your Work

Attention - Man Stealing White Stripe by Julian Mason from Flickr (Creative Commons License)

Attention – Man Stealing White Stripe by Julian Mason from Flickr (Creative Commons License)

Copyright infringement appears to be rampant on the internet. Some people don’t understand that they can’t use anything they find online. They don’t understand that the law lets the copyright holder dictate where their work is displayed and distributed. Some people get defensive when they get caught and say you should be happy that you’re giving them exposure.  Others know it’s illegal and take the gamble that you won’t notice or that you won’t object if you see what they’ve done.

Make Sure It’s Your Work They Copied
People don’t always own what they think they own. Check your contracts to verify that you are the copyright owner and not just the creator of a work. Remember – employees don’t own the copyright in anything they create within the scope of their job but independent contractors retain the copyright in anything they create unless there’s a written copyright assignment or work made for hire contract. Additionally, two artists can independently come up with similar ideas for original works and it may not be problematic so long as they’re only claiming rights in what they created.

How Do You Want This To End?
This is the question I ask all my clients who are in a suspected intellectual property infringement situation. Their goal determines my course of action. Ideally you should determine how you want to react to infringement before it occurs so you can lay the foundation in advance for your desired outcome.

If you just want the infringer to take down your work, you can respond with one of the following:

If you want the alleged infringer to pay you for using your work you can send a bill or sue them for infringement. If you want to pursue one of these options, you definitely want to use a lawyer to contact the alleged infringer on your behalf or through the court.

If you’re OK with the person using your work, you should send them a notice that gives them permission and requests they ask permission before using your work in the future. You always want to respond when you suspect someone is using your work without consent. Otherwise you could create the impression that you’ve attached a blanket license for anyone to use your work which could hurt your chances of going after other suspected infringers in the future.

Please note – you can send a notice without being a jerk about it. Jack Daniel’s sent what’s been referred to as the nicest cease and desist letter when an author copied Jack Daniel’s label on his book cover.  You could write or ask your attorney to do something similar

If you need a legal resource about how to avoid problems related to copyright and trademark infringement online, I recommend my book, The Legal Side of Blogging: How Not to get Sued, Fired, Arrested, or Killed. It covers a lot of the major issues that apply to intellectual property and the internet. If you want to chat more about this topic, feel free to connect with me on TwitterFacebookYouTubeLinkedIn, or you can email me.

Please visit my homepage for more information about Carter Law Firm.