Top 10 Tips for Small Business Owners

Top 10 Legal FAQ’s

By: Donata Kalnenaite, Esq.

It is very often that new businesses make legal mistakes. It is difficult to find clear answers to legal questions. Here are the top 10 legal FAQ's that will help you make the right decisions that will protect both you and your business.

Q: I am currently not getting sued, why do I still need a lawyer?

A: We have all heard the phrase “an ounce of prevention is worth a pound of cure.” This concept applies to having an attorney as well. Having an attorney write the contracts with your clients, form your legal entity, write your employment contracts and write your website contracts ensures that you are fully protected. This helps reduce disputes with employees and clients and makes sure that you are in compliance. Therefore, having an attorney helps prevent lawsuits from forming in the first place.

Q: Why can’t I just use a service like LegalZoom?

A: LegalZoom attempts to find an answer or a product for all businesses. In doing so, their contracts are generic and are not tailored to your business. Every single business is different and has different client and faces different risks. LegalZoom is just simply not sufficient to protect your business in particular. Furthermore, LegalZoom’s contracts often miss crucial provisions such as a non-compete for employees or how you will solve disputes between you and your client. Lastly, LegalZoom does not come with an explanation of the contract so you are on your own to figure out what it says and whether it says what you want it to say.

Q: Why do I need contracts with my clients?

A: Even if you do everything perfectly, there are a million opportunities for a dispute with your client. For example, you did the job and the client will not pay. Now what? Or, you are a graphic designer who made stunning designs only to have the client ask for revisions time and time again. Now what? The contract specifies what you are supposed to deliver to the client, that the client must pay and what happens if he or she doesn’t, the responsibilities of the client and the warranties you will be providing, just to name a few. The contract helps establish the ground rules at the very beginning of the project and serves to protect you in case of a dispute or in case of litigation. Having contracts with your clients is the best way to ensure a bright future for your business.

Q: How can I protect my trade secrets:

A: Here is a list of a few things that you can do today to protect them:

Have employee contracts that contain a non-disclosure provision.

Label all confidential documents as “confidential.”

Only give confidential information to those employees who need to know the information and to no one else.

Have every third party sign a Non-Disclosure Agreement before you give them the information.

Do not leave confidential information sitting out in the open. Have a clean desk policy.

Train your employees on how to protect confidential information.

Disallow USB’s in your computers.

Password-protect every computer.

Q: How do I protect the name of my business and my logo?

A: To fully protect the name and logo of your business, you should trademark them at www.uspto.gov.

Q: Should I form a legal entity?

A: If you want to protect your personal assets from the liabilities of your business, yes. If you have not formed a legal entity, you are operating your business as a sole proprietor or a partnership if you have partners. While these types of entities can be advantageous because you are saving yourself the costs of forming a legal entity, the drawback is very dangerous. If you are operating as a sole proprietor or a partnership, all of your personal assets are exposed, meaning that if you get sued and lose, the person who sued you could potentially take your home or car. It is always advised to form a legal entity because it shields your personal assets.

Q: Should I have a contract with my partners?

A: Even if you and your partners are best friends, you do need a contract between all of you. Friendships can sour quickly, especially when there is money involved. Having a contract helps determine what will happens if a partner wants to leave, who will manage the business and how and what to do in certain situations. A partnership contract also allows you to gain a deeper understanding on how your partners plan to solve problems in the future and can help you iron out certain details in your business, which will help prevent disputes in the future.

Q: Why should I have a contract with my employees?

A: Contracts with your employees are one of the best ways that you can ensure a bright future for your business. These contracts lay out what the employee is responsible for, so that there is no confusion on what the employee should be doing. Furthermore, it outlines what the employee cannot do, which means that if you do not want them to, employees cannot sign contracts on your company's behalf. In addition, it can help protect your trade secrets by informing your employee who he or she may share confidential information with and how to protect confidential information. Lastly, it shows that you are serious about your business and that your employees cannot take advantage of you.

Q: I have a corporation, what are the formalities that I must keep up with?

A: If you have a corporation, you should do the following:

          -Holding annual meetings of directors and shareholders;

          -Keeping accurate, detailed records (“minutes”) of decisions that are made in the meetings;

          -Having Bylaws; and

          -Ensuring that agents and officers abide by the Bylaws.

Q: What are some of the advantages of filing a legal entity in Delaware?

A: Filing in Delaware is the most popular choice for those filing an LLC or a Corporation. Delaware is known to be friendly to businesses and has low filing fees. Furthermore, Delaware does not tax out of state income. In addition, Delaware has a special cost that handles solely business matters and nothing else - the Chancery Court. This gives Delaware an advantage because business litigation is faster than in other states, thereby saving you time and money. Furthermore, the Chancery Court Judges are experienced and well-versed in business matters, a stark difference from the Judges elsewhere who handle every type of case. Finally, Delaware has hundreds of years of case law, which makes predicting the outcome of a lawsuit a little easier.

We hope that this has helped you to understand and explore the legal landscape. Having the proper protections for you and your business will help you build the right foundation and ensure a bright future.

Donata Kalnenaite, Esq.

Agency Attorneys

www.agencyattorneys.com

Bio: Donata Kalnenaite is a business attorney and owner of Agency Attorneys. Agency Attorneys is a Chicago-based law firm that helps protect business owners by offering services such as forming a business, contracts with clients, employment contracts and website contracts such as Privacy Policies and Terms and Conditions. She believes in taking a collaborative approach with her clients and ensures that they understand every single contract they sign.

Handles for social media: @agencyattorneys

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