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 lawyer 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 are 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 a 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.

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.

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.

Thoughts About Effective Contracts

Signing Paperwork by Dan Moyle from Flickr (Creative Commons License)

Signing Paperwork by Dan Moyle from Flickr (Creative Commons License)

Some people think contracts are intimidating and others find them mind-numbingly boring. In general, I like working with contracts. I know this makes me sound like a big dork, but it’s true. I get to help my clients protect themselves and write for a living – two things I enjoy.

When it comes to contracts, some clients hire me to review an existing contract and some hire me to draft a contract from scratch. Here’s one thing I learned in law school and have verified to be true in practice: the person who writes the contract, does so in the best interest of their client. So when you read a contract, think about which side wrote the first draft because I will guarantee it’s biased in their favor.

For example, I’ve written plenty of contracts for situations where a business hires an independent contractor to work on a project. The contract verbiage can be very different when I’m representing the business than when I’m representing the contractor. This is why a lot of lawyers want to be the side that writes the first draft of a contract because they want to write in their client’s favor and negotiate from there.

Recently, I’ve worked on a few contracts that reminded me how important it is to still be reasonable when writing contracts. If your contract template is too biased in your favor, or doesn’t give the other side any sense of security in the relationship, you may have a hard time finding people who are willing to sign it.

I’ve seen this in particular to contract provisions about changing or terminating a contract. There are times, like when you’re a long-term service provider, where you need to be able to change the terms of the original agreement to reflect changes in the industry, your services, or your rates and it would be bad business practice to let the customer change the agreement. In some circumstances, the contract says that the provider can make any changes at any time and if the customer doesn’t like it, they can take their business elsewhere – very take it or leave it. Other times, it’s prudent to specify under what circumstances changes will be made, how much warning the customer will have prior to changes going into effect, and how that notification will be delivered.

I prefer to think about contracts as relationship management documents.   When you’re writing or reviewing a contract, think about the expected lifespan of your relationship with the other side and how you want to feel about that relationship at the end of the day. And remember that contracts are binding documents so it’s important that your contracts reflect your needs and protect your interests. This is one of the times where it’s important to make sure you have an accurate document before you sign it because you may not be able to change it later if you realize after the fact that you’ve made a mistake.

If you want to chat more about contracts, you can connect with me on TwitterFacebookYouTubeLinkedIn, or you can email me. You can also subscribe to the Carter Law Firm monthly newsletter.
Please visit my homepage for more information about Carter Law Firm.

Why You Have to Respond to Suspected IP Infringement

Cease and Desist by H.L.I.T. from Flickr (Creative Commons License)

Cease and Desist by H.L.I.T. from Flickr (Creative Commons License)

A few weeks ago we all had a good laugh when Jeff Briton, owner of Exit 6 Pub and Brewery in Cottleville, Missouri got a cease and desist letter from Starbucks when he named one of his craft beers “Frappicino.” Starbucks said this was too similar to their Frappuccino and even took the liberty of contacting the beer review website Untappd to get the Frappicino beer listing removed.

Briton responded with a letter and a check for $6 – the profit he made from selling the beer to the three people who reviewed it on Untappd. If you haven’t read this letter yet, go do it. It’s hilarious.

My hat’s off to Briton for writing such a brilliant response and turning this situation into an awesome opportunity to promote Exit 6. Some people might say that Starbucks’ lawyers were being jerks for sending a cease and desist letter to the little guy who wasn’t their competition anyway. But it was what Starbucks had to do to protect its intellectual property.

When you have a copyright or a trademark and you know that someone is using your intellectual property without your permission and you do nothing, you send a message that you don’t care about protecting your intellectual property rights. If you let the little guys get away with things like Frappicino beer and then one of your big competitors does something similar and you try to lay the smack down on them, your competitor will have an argument that your track record shows that you let others use your property without permission or penalty. By not protecting your intellectual property, you put yourself at risk of losing your intellectual property rights.

It’s because of this risk that Starbucks has to send cease and desist letters to Exit 6 Pub. This is why I tell clients to keep an eye out for other people using their intellectual property. In trademark situations, a cease and desist letter is usually the proper response, even in situations like Frappicino beer.

This is also why I tell bloggers and photographers to be diligent about who is using their work. If they find that someone’s using their copyrights without permission, even if they’re ok with it, I often recommend they contact the alleged infringer and grant them a license after the fact and request an attribution if the infringer didn’t give them one. If they’re not ok with what the alleged infringer did, we discuss whether the artist wants to send a cease and desist, a DMCA takedown notice, a licensing agreement with a bill, or sue for infringement. There should always be a response.

If you have questions about your intellectual property rights or your strategy to protect them, please contact an intellectual property attorney in your community. If you have questions related to copyright or trademark and blogging, please check out my book The Legal Side of Blogging: How Not to get Sued, Fired, Arrested, or Killed.

If you want to chat with me more about this topic, you can connected with me on TwitterGoogle+FacebookYouTubeLinkedIn, or you can email me. You can also subscribe to the Carter Law Firm monthly newsletter.
Please visit my homepage for more information about Carter Law Firm.

SMART Goal Setting for 2014

My "To Do" List: Yay for functional tattoos! by robstephaustralia from Flickr (Creative Commons License)

My “To Do” List: Yay for functional tattoos! by robstephaustralia from Flickr (Creative Commons License)

Happy New Year everyone! I hope everyone had a wonderful holiday season and is ready to hit the ground running in 2014. For a lot of people, a new year means new goals. I know I spent a few days in December looking back on 2013 and making plans for 2014.

I’m a big fan of writing goals for the year – personally and professionally. You can call them resolutions if you want but some people think that’s just setting yourself up to fail – use whatever term works for you.  I prefer to use the SMART method when I set a goal. SMART is a mnemonic for the criteria for what a goal must be:

S = Specific
M = Measurable
A = Action-based (Some variations says A stands for Attainable)
R = Realistic (Some variations say R stands for Results-focused)
T = Time-sensitive

I’ve found this method really works for me. To give you an example, one of my 2014 goals is to celebrate the law firm’s second anniversary and that I’ve moved into a brick and mortar office by throwing an open house event at my new office in January. What are your goals for 2014? Please share them in the comments below and if there’s anything I can do to help you achieve them. Apparently sharing your goals with others helps you achieve them too because people will be asking you about it and doing what they can to support you and your goals.

Sometimes my goal feels too big to be attainable all at once so I break it down into manageable pieces, and usually assign a specific deadline for each portion.

One thing I often ask myself as I’m setting SMART goals is how am I going to achieve it. If my goal involves meting more business contacts I have to figure out who I want to meet and where I’m going to meet them. If my goal is to make more money, I need to have a plan to either bring in more clients or make more money from each person I’m working with. So don’t just thing about the “what” but also the “how.”

I saw a fascinating video recently about why New Year’s resolutions are more successful than other goals. It’s pretty interesting and worth a few minutes of your time.

I look forward to helping you achieve your goals for 2014. Please share your goals in the comments below and feel free to connected with me on TwitterGoogle+FacebookYouTubeLinkedIn, or you can email me. You can also subscribe to the Carter Law Firm monthly newsletter.
Please visit my homepage for more information about Carter Law Firm.

Crazy Contract Clauses

M&M by madame.furie from Flickr (Creative Commons License)

M&M by madame.furie from Flickr (Creative Commons License)

I love contracts. I know this makes me a big legal dork, but I love writing them and reviewing them.

A contract is the documentation of how a relationship is going to work and as long as the provisions aren’t illegal, you can put in whatever you want. There’s a lot of room for creativity, and I wish more people would take advantage of it. I was tickled pink earlier this year when I got to use the phrase “sexy bitch” in a contract. Granted, this was a contract between another legal blogger and me, so we had more license to have fun with it once we got the essential verbiage down.

I worked with a woman earlier this year who was writing the terms of service for her website. She was overwhelmed and confused when she read other sites’ terms but relaxed when I explained what all the legalese meant and that she could write terms that were simple and in layman’s terms, similar to what Reddit does. A few months ago I walk talking with a business owner who was frustrated when his co-owner cancelled their meetings. Since they were both fans of craft beer, I suggested they put a provision in their operating agreement that the penalty for cancelling a meeting for a non-emergency would be a growler of beer.

I did some digging and here are some of my favorite crazy provisions I’ve heard about in other contracts.

  1. Michael Jordan’s contract with the Chicago Bulls said he could play basketball anytime anywhere. He could play in exhibitions, pick-up games, etc. Apparently, he is the only player general manager Jerry Krause gave this provision to. I suspect other professional athletes have a lot of limits put on their activities to prevent injuries.
  2. The Houston Astros promised pitcher Roy Oswalt a bulldozer if they won the 2005 National League Series. The Astros won and the team gave Oswalt a Caterpillar D6N XL as promised.
  3. Van Halen’s rider required concert venues to provide the band with a bowl of M&Ms but no brown ones. This provision was quite ingenious. Van Halen’s show was a huge production that used 850 par lamp lights and at the time most venues weren’t used to them. If the band arrived and there were brown M&Ms in the bowl, it showed that the venue may not have read the contract carefully enough and they would do an additional check to make sure everything for the show was put up properly.

I love drafting custom contracts and I encourage people to ask for what they really want and make them their own. If you want to chat with me about this or any other topic, you can connect with me on TwitterGoogle+FacebookYouTubeLinkedIn, or you can email me.
You can also subscribe to the Carter Law Firm monthly newsletter.
Please visit my homepage for more information about Carter Law Firm.

Networking Should Be Fun

The Other Side of the Trampoline by Peter Werkman from Flickr

The Other Side of the Trampoline by Peter Werkman from Flickr

If you’re a business owner, networking is part of your job. It’s a significant part of my job. I attend two to four events to shake hands and kiss babies every week. My goal at each of these events is to make connections and build relationships with other professionals in my community.

Because my goal is to create relationships, I prefer to network in smaller groups and one-on-one than at large networking events. Larger events tend to be loud, crowded, and you never know who you’re going to meet. You may meet some interesting people at these events but it also feels like it would be easier to find a needle in a haystack than to find the people you really want to meet. I prefer personalized introductions and specialized networking events like those geared towards entrepreneurs, social media professionals, local business owners, artists, and my fellow legal eagles.

Most of the time, a networking meeting involves meeting for coffee. Coffee is fine, especially from awesome independent shops like Luci’s and Lux. (The last cup of coffee I had at a Starbucks was so vile it made me never want to go there again.) I’ve networked so much that I’m a little coffeed out and I’m looking to change it up a bit.

I’m a big believer that if you don’t love your job, you should change it. In that spirit, I want to make networking more fun. Networking is really about making connections by sharing information and ideas between people. The location is simply the forum. So why not make it a fun-based experience?

I recently invited my email list to meet me for ice cream (ICE KREM!) instead of coffee this summer. Come on – it’s freakishly hot in Phoenix. We should have something refreshing. Besides ice cream, I’d love to network over a game of cards or Skip-Bo. For people who are a more adventurous we could go bowling or hit my favorite trampoline playground. I would be happy to meet with people before attending a book signing at Changing Hands or a movie screening by the AZ Tech Council or wander around the Phoenix Art Museum on a Wednesday night when it’s open to the public for free.

When the weather cools down, I think it would be fun to meet people while feeding the fish at the Japanese Friendship Garden, wandering around First Friday, or taking our dogs to the dog park.

So, if you are a professional networker who wants to kick the experience up a notch and you work in the same circles as me, drop me a line. Of course, if I find you unbearable or you hit me with a hard sell, I will assume you don’t understand the real purpose of networking and invoke the Law of Two Feet.

You can connect with me on TwitterGoogle+FacebookYouTubeLinkedIn, or you can email me. You can also subscribe to the Carter Law Firm monthly newsletter.
Please visit my homepage for more information about Carter Law Firm.

How To Trademark a Business Name

Can programming language names be trademarks? by opensourceway from Flickr

Can programming language names be trademarks? by opensourceway from Flickr

Last week a friend asked me if a business could trademark their name. Anyone who’s spent much time with me knows that the answer to every legal question is “It depends.” In this case it depends on whether your business name is trademarkable and if anyone else had claimed the same or a similar name for your category of goods or services.

When you start a business, check the U.S. Patent and Trademark Office (USPTO) database to see if anyone has registered the name you want to use (or a similar one) for selling the same goods and services as you. If someone’s already using the name you want, you will likely be infringing on their trademark rights if you use the name on your products. They could force you to change your name and rebrand if you use the name that someone’s already registered. If you were using the business name on your products and someone registers the name before you, you’ll be in the Burger King situation where you can keep using your name, but only in your established market.

Once you establish that your desired name hasn’t been registered by someone else, you have to look at whether the name you want is trademarkable. Not every business or product name can be a registered trademark. Here are the five types of trademarks.

1. Fanciful Marks: Fanciful marks are words that didn’t exist before you stuck it on your products. Examples include Exxon and Kodak. These marks can be registered with the USPTO main registry.

2. Arbitrary Marks: Arbitrary marks are words in real life, but they are stuck on a product that has no connection to the word. For example, the mark “Apple” for computers, cell phones, and digital music players is an arbitrary mark. The fruit has nothing to do with digital machines and gadgets. These marks can be registered with the USPTO main registry.

3. Suggestive Marks: Suggestive marks are marks where if you think about it, you can make a connection between the mark and the product. “Playboy” as a mark for a men’s magazine is a suggestive mark. These marks can be registered with the USPTO main registry. It’s sometimes hard to discern the difference between suggestive and descriptive marks.

4. Descriptive Marks: Descriptive marks merely describe the product. This includes businesses where the owner names the business after themselves. These marks can be registered on the USPTO main registry after they’ve established “acquired distinctiveness,” which usually means you’ve been using the mark for five years.

5. Generic Marks: Generic marks are the name of the products themselves. It would be if you had an apple orchard and wanted to sell your apples using the mark “Apples.” If the USPTO let you register that mark, no other apple farmers could call their apples “apples” without infringing on your trademark rights. Generic marks can never be registered with the USPTO.

This video may help. You can watch it below or see it here.

If you want to know if your business name can be your trademark and the risks and rewards surrounding registering your mark, contact a trademark attorney in your community.

You can connect with me on TwitterGoogle+FacebookYouTubeLinkedIn, or you can email me.
You can also subscribe to the Carter Law Firm monthly newsletter.
Please visit my homepage for more information about Carter Law Firm.