B2B Contracts Don’t Work in a B2C World

“Rabo Bank” by bertknot from Flickr (Creative Commons License)

Over the years, I’ve seen a number of entrepreneurs try to adapt a B2B contract template to use in their B2C business.* This is like using a hammer to tune a piano – they’re using the wrong tool for the job. I just doesn’t work. Entrepreneurs who have B2B clients or B2C clients have similar needs when it comes to their service contracts, but the nature of the relationships are drastically different. (The reverse is also true – don’t try to adapt a B2C contract for use with B2B clients.) There are several reasons to not use a B2B contract with B2C clients:

You’re Going to Scare Your Clients
If your clients are Joe Average people, not entrepreneurs, a heavy-duty business contract is going to scare the bejezus out of them. I would be worried that they will be intimidated or confused by the verbiage.

A contract is a relationship management document. The purpose is to put everyone involved on the same page. Ideally, your contract will have all terms outlined in a single document so that either side can refer to it when they have a question. And contracts don’t have to be in legalese to be effective; I recommend using plain English and keeping the terms short and simple whenever possible. The goal is to prevent confusion, not create it.

A well-written contract can build rapport with your client. An effective contract will lay out the value you’re giving them and provide security in regards to how you perform the scope of work. A poorly-written or confusing contract may make a client apprehensive about hiring you.

Unnecessary Provisions
There are provisions that may be essential in a B2B contract that would be absurd to include in a B2C contract template, such as an independent contractor provision. I’m pretty sure the Smith family knows when they hired you to take their portrait, that they knew they weren’t hiring you as an employee. Likewise, non-solicitation and non-compete agreement would be bizarre in a contract for consumers. The nature of the relationship often doesn’t warrant provisions like this.

When I write a contract template (B2B or B2C), I start by trying to envision the full relationship between the parties, how they’re going to interact, what each side is giving and receiving from the relationship, and what my client’s pain points and concerns are. That gives me a starting point for writing an effective contract that fits their needs and addresses common problems in advance.

The Value of B2B Contracts for B2C Companies
There’s nothing wrong with an entrepreneur using a B2B contract as part of their research for what they might need for their business. It can provide ideas for what terms or phrasing they may want to use. Additionally, there are some terms that are frequently found in B2B and B2C contracts, such as scope of work, payment, intellectual property, and dispute resolution. Note: even when the headings in the contracts are similar, how the provisions are written may vary vastly based on the needs of the situation where they are used.

If you need a contract for your business, don’t just use a contract from a fellow entrepreneur. Instead, if you get a template, have a lawyer review it to make sure its suitable for your needs. They can also fill in gaps in your provisions and ask questions you didn’t think to consider. And if you have business that does B2B and B2C work, consider using different contract templates to suit the needs of your clients.

A contract template is an investment in your business. If you sign a contract and later regret it, you may be stuck in that situation. If you have questions about your contract needs, you can contact me directly or connect with me on TwitterFacebookYouTube, or LinkedIn. You can also get access to more exclusive content that is available only to people on my mailing list, by subscribing here.

*B2B = Business to Business
B2C = Business to Consumer

How To Trademark Your Own Name

0688 Pittsburgh - Senator John Heinz History Center by Klaus Nahr from Flickr (Creative Commons License)

0688 Pittsburgh – Senator John Heinz History Center by Klaus Nahr from Flickr (Creative Commons License)

Recently a friend posted on my Facebook page, “I’m considering trademarking my name. Can I do that?”

Yes you can, but it’s a little complicated. Let’s start with some trademark basics.

There are five ways to describe a potential trademark: fanciful, arbitrary, suggestive, descriptive or generic. Fanciful, arbitrary, and suggestive marks can be registered on what’s called the primary registry of the U.S. Patent and Trademark Office (USPTO) as soon as you’re using them in commerce. When yo have a registered trademark, no one can enter the market in your industry and use your trademark or something confusingly similar to it. Generic marks can never be registered. Descriptive marks fall in between these two groups.

Descriptive trademarks describe the product they’re attached to. If you have a descriptive mark, you can put on the USPTO’s secondary registry when you start using it in commerce, but you can’t bump it to the primary registry until have “acquired distinctiveness,” which typically happens after five years of continuous use.

When you name your business after yourself – i.e., John Smith Graphic Design (and your name is John Smith), you have a descriptive trademark. If you’ve only been in business for a short time, the USPTO doesn’t want to give you the exclusive rights to your name in your industry – thus all the other John Smiths who are graphic designers couldn’t call their companies, “John Smith Graphic Design” or something similar to it. They make you wait until you’ve been in business for five years before giving you nationwide exclusivity over your company name in your industry.

So can my friend register a trademark for her name? Probably, but I’d have to take a closer look at her situation to determine how long she’s been using it as a trademark and whether someone else has already registered the same name in the same industry.

If you have any questions about whether you can register your desired trademark, feel free to connect with me on Twitter, Facebook, LinkedIn, Google+, YouTube, or send me an email. You can also subscribe to the firm’s monthly newsletter. If you want more information about Carter Law Firm, please visit the homepage.

Arizona Fantasy Gaming Bill Fails

Fantasy Football League 1 Draft by Jay Thompson from Flickr

Fantasy Football League 1 Draft by Jay Thompson from Flickr

Arizona lawmakers have, once again, shown how lame they are. Earlier this year they approved the anti-gay SB 1062 which was thankfully vetoed by soon-to-be-former Governor Brewer. This time they killed SB 1468, which would have legalized fantasy sports.

Arizona is one of a handful of states where fantasy sports are illegal. Sometimes this means that Arizonans can’t participate in fantasy sports if they admit their true location or they’re allowed to play but they can’t accept prizes if they win – even if there’s no fee to play or the prize is as simple as a t-shirt.

Here’s what’s super lame – Under federal law, fantasy sports are legal!  Under the Unlawful Internet Gambling and Enforcement Act of 2006 (UIGEA) fantasy sports aren’t gambling because each participant’s team is made up of players from multiple teams and the results are based on the participant’s knowledge and skill. I can speak from my limited experience playing in the Deadliest Catch fantasy game that it definitely takes knowledge and skills. Unfortunately fantasy gaming is regulated at the state level so each state has the option to say that fantasy games are illegal.

Apparently SB 1468 was killed due to the influence of the Arizona Indian Gaming Association. They were afraid that legalizing fantasy games would negatively impact the tribal gaming compacts. I can understand that the tribal casinos want to have a monopoly on gambling in the state but I don’t see how fantasy sports would hurt them. I doubt that people will give up black jack and slot machines for a fantasy league. I think they’re afraid that people would start fantasy gaming businesses that could create competition for the casinos but I have serious doubts that people who love to hang out in casinos will give that up for fantasy gaming.

Technically fantasy gaming is a Class 5 felony in Arizona, and anyone convicted could face at least 6 months in jail and up to a $150,000 fine. As far as I know no one has been charged or convicted of violating this law and law enforcement isn’t concerned with pursuing these “criminals.” So it’s a law on paper, but in reality it’s just lame. Hopefully lawmakers will legalize fantasy games next session.

If you want to chat more about this issue, 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.

Fantasy Football = Felony in Arizona

 

Fantasy Draft by Chimpanz APe from Flickr (Creative Commons License)

Fantasy Draft by Chimpanz APe from Flickr (Creative Commons License)

Fantasy football is a Class 5 felony in Arizona. That’s right a felony.

Yeah, I’m with you – What the fuck?!?!

Fantasy football leagues are legal in 45 of the 50 states, but not Arizona. Arizona considers it a “game of chance,” therefore gambling, therefore illegal.

Under federal law, fantasy sports are legal under the Unlawful Internet Gambling and Enforcement Act of 2006 (UIGEA) because each participant’s team is made up of players from multiple teams and the results “reflect the relative knowledge and skill of the participants and are determined predominantly by accumulated statistical results of the performance of individuals.” Making predictions based on your knowledge of the players’ past performances and making strategic decisions in managing your fantasy football team appears to be sufficient knowledge and skill to comply with the law.

The other big rules are the prizes have to be determined in advance – they can’t be something like a percentage of the total money people paid into the league to play, and the winner cannot be chosen based on a score, point-spread, or any performance or performances of any single real-world team or any combination of such teams or solely based on one athlete’s performance in one event.

So what’s wrong with Arizona? In Arizona, amusement gambling is not illegal. Here’s the state’s four-part definition of “amusement gambling.”

(1) The player actively participates in the contest.
(2) The outcome is not in the control to any material degree of any person other than the player.
(3) The prizes are not offered as a lure to separate the player from their money.
(4) Any of the following:

(i) No benefit is given to the player other than an immediate and unrecorded right to replay which is not exchangeable for value.
(ii) The gambling is an athletic event and no person other than the player derives a profit or chance of a profit from the money paid to gamble by the player.
(iii) The gambling is an intellectual contest, the money paid to gamble is part of an established purchase price for a product, no increment has been added to the price in connection with the gambling event and no drawing or lottery is held to determine the winner.
(iv) Skill and not chance is clearly the predominant factor in the game and the odds of winning the game based upon chance cannot be altered, no benefit for a single win is given to the player or players other than a merchandise prize which has a wholesale fair market value of less than $4 or coupons which are redeemable only at the place of play and only for a merchandise prize which has a fair market value of less than $4 and, regardless of the number of wins, no aggregate of coupons may be redeemed for a merchandise prize with a wholesale fair market value of greater than $35.

Fantasy Football Hell by Dave Parker from Flickr (Creative Commons License)

Fantasy Football Hell by Dave Parker from Flickr (Creative Commons License)

Based on this definition, you would think that fantasy sports are a type of amusement gambling, but no, Arizona is backwards and says that fantasy sports are based on chance, not skill, so all fantasy football leagues are illegal.

I’ve never played fantasy football, but I did participate in the Deadliest Catch Fantasy Game this past season. Each week I picked my boat and assembled my crew to maximize my points predicting what was going to happen on the show that week. I will say my knowledge of the show, the crew members, and my training as a former mental health professional helped me predict what was going to happen each week. There was definitely skill involved. (And since I didn’t have to pay-to-play, it wasn’t gambling so don’t waste your time investigating me Arizona.)

This appears to be a low-priority issue in Arizona because I have lots of friends who play fantasy football and none of them have been arrested or know of anyone who has been arrested for participating in a fantasy league. (But they get caught they could be facing at least 6 months in jail and up to a $150,000 fine.)

What Happens to your LLC when you Die

Headstone View by Augapfel from Flickr (Creative Commons License)

Headstone View by Augapfel from Flickr (Creative Commons License)

When you own an LLC or part of an LLC, you own property. This is property that will be part of your estate when you die. If someone came to me and said their business partner just died and they’re not sure what that means for the business, I would initially have two questions.

  • What does your operating agreement say in regards to this situation?
  • What does the deceased’s estate plan say happens to their portion of the business?

Hopefully both of these documents exist and give clear instructions. If you don’t have an operating agreement and the person didn’t have an estate plan, their portion of the business will pass to their relatives like the rest of their estate per that state’s law. Most likely, if the person was married, their portion of the business would go to their spouse. If they didn’t have a spouse, it would go to their kids. If they didn’t have a spouse or kids, it would go to their parents.

When I draft an operating agreement for LLC owners, I make them answer the hard questions like what happens if an owner dies or gets disabled and document their plans for addressing those situations at the beginning of their business relationship so they won’t be scrambling when they find themselves facing these issues.

If you are a sole LLC owner, you don’t need an operating agreement that tells you how you’re going to run the business, but you may want one to thoroughly document what you want to happen to the business when you become disabled or die. Make sure you document the pertinent information like where keys, passwords, and bank accounts are so your employees or loved ones can take over or wind up the business.

Once you have your estate plan and operating agreement in place, make sure you tell your family and whoever else may need to know where you put it so they can carry out your wishes. My Wills and Estates professor (who is a brilliant estate planning attorney) suggests you put them in a fire-proof and waterproof safe with the door unlocked (or the key in the lock). That way the documents are safe but if a thief gets into your business or house, they will quickly see that it doesn’t contain anything of value to them and leave it.

It’s hard to think about what should happen to your business if you die. If you work in an industry (like law) where a person needs a specific credential to be an owner, you may not be able to keep the business in the family but they could be charged with closing down your operation. Otherwise you will have to decide if you want the business to go to a family member, an employee, or a combination of people. You ultimately won’t have control over whether the business continues to exist, but you can put the documents in place to try to make it happen.

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.

Ask the Hard Questions Before Starting a Business

dock at dusk by Scott Ellis from Flickr

dock at dusk by Scott Ellis from Flickr

When business owners are launching their new venture, they can get so excited about launching the business that they don’t put the energy into making sure they have the structure of their business relationship laid out. Why would they want to do that? That sounds really boring and kind of a downer when you think about it.

Even though it might seem boring or superfluous, people who are going into business need to have a meeting of the minds and address some of the hard questions that come with owning a business. It might be the first stressful conversation you have to have and it’s a good way to gauge how well your partner(s) communicate under stress. You might learn that they’re an irrational nutball when things aren’t smooth sailing and you don’t want to go into business with them.

When I’m working with new business owners, here are some of the questions I throw at them to see how well they’ve thought through their plans.

  • When and how much will each owner get paid?
  • What happens if an owner gets divorced? Becomes disabled? Dies?
  • What are each person’s responsibilities? How much can each owner spend without getting the other owner(s) approval?
  • If the owners are deadlocked on a decision, how will you resolve it?
  • What should happen if an owner isn’t performing up to par?
  • What will happen if an owner wants out?
  • Under what circumstances can an owner kick another owner out of the company? What will the process be?
  • What’s the goal of the business, including the exit strategy?

Ideally, these answers should be a part of the owners’ operating agreement if they have an LLC or otherwise documented in a master plan so everyone’s on the same page. Business divorces can be as messy as family divorces, especially when the owners didn’t figure some of these things out in advance.

It’s much easier to deal with these questions when everyone’s happy and thinking about what’s fair and what’s best for the business than to wait until everyone’s pissed off at each other and looking for ways to get ahead or screw over the other owner(s).

Before you start a new business, talk about the hard questions with your potential partners before you launch your venture and consider meeting with a business mentor and/or a business attorney to make sure that you’re setting yourselves up to be a success from all angles from the beginning.

You can connect with me on Twitter, Google+, Facebook, YouTube, LinkedIn, 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 Avoid Screaming Matches in Coffee Shops

Office Cleaning Prank Played On Janitor In Frederick Md from Flickr

Office Cleaning Prank Played On Janitor In Frederick Md from Flickr

When you and a friend have a great idea for a new business, you create an LLC.

When you create an LLC, you get super-excited about your new venture.

When you get super-excited about your new venture, you forget to put in the business infrastructure behind the scenes.

When you forget to put in the business infrastructure behind the scenes, you and your partner may have different ideas about how you’re going to run the business.

When you and your partner have different ideas about how you’re going to run the business, you get frustrated with each other.

When you get frustrated with each other, you get into screaming matches at coffee shops.

Don’t get into screaming matches at coffee shops.

Get an operating agreement at the beginning of your business relationship.
This will make sure that everyone is on the same page and you can predetermine how you’re going to address certain problems before they arise.

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.