Articles Posted in Business Start Ups

photo-IP-negotiations-300x200If you’re trying to sell your business it’s always good news to hear that a party is interested in buying. But what’s the next step? What happens if after the party looks you, your business and your books over, they decide not to buy? How do you protect your business?

One way to do that is through a confidentiality agreement. Whatever your business, no matter the service or products you provide, one of the most valuable things you have is information. That can include your financial numbers, sales information, marketing plans, customer lists and strategic plans. A potential buyer will want to know that information before making the decision to buy or not.

Before opening yourself and your business to scrutiny, obtain confidentiality agreements from prospective buyers. Here are some issues to think about when deciding what contract language will be right for you.

• You may want your identity kept confidential. If word has leaked out your business is for sale you risk your customers looking elsewhere and your competitors spreading the news to their advantage. One possible way to reduce the number of people knowing about the fact your selling your business is to make yourself anonymous. You could hire an advisor, investment banker or broker to reach out to possible buyers on your behalf while the identity of your businesses remains unknown. Your identity need not be revealed until the potential purchaser signs a confidentiality agreement. Continue reading

I just got off the phone with one potential client, and we are talking about a business dealing without a written agreement. No judgment zone here, but I just think it’s not a good idea. I understand that a lot of times, because of cultural influences or because of our own insecurity, if I ask that person to sign a contract, they might not like me, they might cancel the deal, or they might not go with me for this particular transaction.

Hey, I want to impress this client, so you know I want to show them I’m a person of action, and if I do the work first, I can always go back for the written agreement. Well, that’s not a good idea. From my many, many years of law practice, I can tell you that when you have a serious client coming in and retaining your services, they are expecting you to have a written agreement. With a written agreement, they think you are more professional, more trustworthy, more organized; and most important of all, they want to know what kind of transaction they have entered into with you.

photo-employment-contracts-300x204A contract is a legally binding agreement that spells out the rights and responsibilities of both parties. Employment contracts are becoming more common, especially as employers become more concerned with protecting their intellectual property and seek to channel any employment related disputes away from the courts and towards arbitration.

How far your business wants to take this is up to you. You could have all or none or your employees sign contracts or you may just target management or those whose departure may be particularly damaging to your operation if they decide to work for a competitor or start their own competing business.

On the plus side,

The American civil legal system normally doesn’t allow for a successful party to recoup its legal costs, unless that’s spelled out by statute. Though in other countries a plaintiff brining a lawsuit runs the risk of paying the defendant’s lawyers’ bills, normally unless a claim is particularly groundless and “frivolous” the plaintiff need only cover his or her own costs. A recent Los Angeles County Court case is an exception to that rule, according to the Daily Journal.
Nancy Arambula Corona, a former on-site building manager, sued her ex-employer, Weiss Family Properties, LLC, (which owns apartment buildings in Los Angeles County) under the state’s Fair Employment and Housing Act and its Labor Code. According to the filings in the case,

• Corona suffered an injury on the job.
• Defendant states it reasonably accommodated her by having another employee clean her building.
• Weiss eventually fired Corona because she couldn’t perform her job and plaintiff’s physician stated her condition wouldn’t improve.
• Corona also claimed she was owed unpaid overtime pay while Weiss claimed they paid her for the hours she submitted on her time sheets.

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If your company has employees driving either company owned or employee owned vehicles in the course of their duties depending on the circumstances your firm may be held liable for their negligence. Given the potential damages of a catastrophic accident it’s important that your company has sufficient insurance to cover this situation. Without proper insurance your company could be responsible for paying for your legal defense, settlement amount or damages awarded at a trial.

If you have employees driving their own vehicles for company purposes you need to review your coverage. If such a company related errand or delivery is done in a vehicle not owned by your company and an accident occurs your insurance may not cover it. Most business owners have a general liability policy. It’s a common myth this policy will cover anything and everything that could result from business related negligence but most of these policies do not cover car accidents.

There are several potential causes of action that could be filed against you.

  • The legal doctrine of ‘respondeat superior’ means that an employer can be held responsible for the negligent acts of an employee if he or she is acting within the scope of his or her employment. The reasoning is the employer is exercising some control over the employee while the employee is doing his or her job. This can include actions taken by an employee driving his or her own vehicle or one owned by the company.
  • Another legal doctrine impacting such a situation is that an employer has an obligation to defend legal claims against an employee who is acting within the scope of his or her job. If the employer fails to do so the employer can be sued by the employee to get a court order mandating the defense or to pay the employee’s legal bills.

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photo - warrantiesHow many times have your purchased some consumer good and in the box is a copy of the warranty in print so small it made you squint? Now thanks to a recent change in the law if a consumer good has a warranty a copy need not be provided in the packaging. It can now be posted online and the print can be enlarged as much as you want on the screen. If you make or market consumer goods this should cut your costs and eliminate another piece of paper to put in the box.

The E-Warranty Act of 2015 amends the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act. The changes allow manufacturers and sellers the option posting written warranties online instead of on or with the consumer product as was required under the law. The Congressional intent of the law is to provide,

  • An environmentally-friendly means to give consumers access to product information, and
  • Flexibility in terms of complying with labeling and warranty requirements.

Supporters of the law see it as a way to bring warranty publishing laws into the digital age, increasing access to warranty information while reducing waste. Consumers need not keep track of papers they can see warranty terms on computers, tablets or smartphones.

Under the law written warranties aren’t required but if they are offered the Magnuson-Moss Warranty Act and its Federal Trade Commission (FTC) regulations require sellers and makers of products costing more than $15 at retail to,

  • Show the text of the warranty to consumers, and
  • Make the warranty available to potential buyers prior to the sale.

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photo - new franchise lawA new state franchise law goes into effect on January 1 which is much more favorable to franchisees. It makes it more costly for franchisors to pull out of agreements and gives franchisees more time to correct any alleged breach of a franchise agreement.

The new California Franchise Relations Act will cover any franchise agreement signed or renewed after January 1 as well as any franchise agreements that have an indefinite duration which may be terminated by the franchisee or franchisor without cause.

The part of the new law that should have the biggest effect on franchisor/franchisee relations are the new repurchase requirements.

photo - jammin java pump and dumpBob Marley is the world’s most recognized reggae superstar even 34 years after his death. His socially conscious music touched people across the globe and we can only imagine what he might think of his family name being associated with possible shareholder fraud.

The former chief executive of Jammin’ Java Corporation, which sells Marley Coffee, Shane Whittle been charged by the Securities and Exchange Commission (SEC) with fraud in November, according to the Los Angeles Times. Whittle is accused of running a “pump-and-dump” stock scheme that resulted in $78 million in illegal trading profits.

A “pump-and-dump” scheme, according to the SEC, normally involves positive and false publicity about the stock and the company which can drive up the number of people buying the stock, increasing its price.

  • False claims are often made on social media, internet bulletin boards and chat rooms. People are urged to buy the stock early then sell it before the price drops. The party making the statements often claims to have inside information about some future development or skills in picking stocks.
  • Those “pumping” the stock price often are actually company insiders or people paid to promote the stock and/or they will profit by selling their shares due to increased interest in the stock created by bogus claims.
  • Once those involved in the scheme “dump” their shares and the hype stops, the price drops and investors find they’ve invested in a company worth much less than they believed.

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photo - ex-employeesThis can happen in many ways but a recent Inc. magazine article brings up the fact that statements and opinions of former employees can damage your company’s reputation and make it more difficult to attract good job candidates. Just as online reviews of products and services (even lawyers) have multiplied across the internet, so have reviews of employers.

In the article J.T. O’Donnell describes a business owner having a hard time finding candidates for job openings, with three people backing out of interviews. With openings unfilled he was having a hard time meeting his clients’ needs. O’Donnell learned his company had restructured two years earlier resulting lay offs. Some of those let go used social media to blast the company and its management.

Just as you may do online research on people you’re considering hiring, those looking for work also may do online research of possible employers. These job seekers, especially ones whose skills are in high demand, may be very picky if they read things they don’t like. The job candidate may discount one or two truly negative reviews as being written by malcontents, but if multiple, consistent negative statements about your company or management are found they may be given some weight.

Creative accounting is photo -Toshibaone thing, creativity to the point of fraud is something else. Fraud is never a good idea, no matter how dire your company’s financial situation may be. Whatever short term benefit a company may obtain because of it, it’s just a matter of time before the truth is known. Depending on the circumstances civil lawsuits and criminal charges may result.

Japanese corporate giant Toshiba Corp. is suing five former corporate executives involved in a massive accounting scandal rocking the multi-national high tech company, Bloomberg reports. Toshiba is working to recover from overly creative accounting that resulted in profit write downs of more than $1.2 billion over nearly seven years.

Defendants are three former presidents and two former chief financial officers. The company is seeking the equivalent of $2.4 million in damages. Three defendants resigned in July to take responsibility for the scandal.

Fortune reports the company had overstated profits by about $2 billion. It states the cause was Toshiba management set profit targets so aggressively the only way subordinates could meet them was through inflating actual results. An independent investigation concluded that the five men failed stop the accounting irregularities Continue reading