The Beck Law Firm, LLC Blog

Business Lessons from the TV

I'm a fan of The Big Bang Theory on tv.  I think it is the most well-written show on tv these days, and I always get a good laugh at something on every episode.  The actors are also superb at their craft, having no trouble with the sometimes complex dialogue of the script.  I watched an older episode yesterday night, and it dawned on me that Sheldon, one of the main characters, can teach us a lot about business.

In the episode rerun I saw last night, Sheldon was presenting the "relationship agreement" he had drafted to Amy.  This complex document - and it was certainly complex - would govern their blossoming boyfriend/girlfriend relationship, and covered such critical issues as when hand-holding would be acceptable (and since the specific times when such conduct was deemed acceptable, that tells us that it is not acceptable at all other times).  And, fans of the show no doubt are also aware of the roommate agreement between Sheldon and Leonard that govern their roommate relationship and responsibilities to each other and to the apartment.  Although Sheldon is a complex and interesting character, his penchant for written agreements makes him a pretty wise businessman.

Why?  I'm glad you asked.  It's simple.  Written agreements let everyone involved know of the expected duties, responsibilities and obligations of the folks involved.  Written agreements help avoid confusion. And, I think, can help avoid hurt feelings and resentment among the parties as well.  Importantly, written agreements help avoid misunderstanding as to, for example, the scope of work to be performed or goods to be delivered, and the fees and costs for such goods and services.  And, in relationships among partners, they can spell out each person's role and responsibilities, and also guide how the business relationship will terminate and under what circumstances.  

In my view, clear written agreements are necessary in your business when services are to be provided to clients, and when goods are to be sold/delivered at a later date, among other things.  Setting out the basic terms of the engagement or sale of goods, the costs and manner/date of payment can help businesses operate and hopefully reduce the need for expensive litigation and collection efforts.  And, or course, whenever two or more folks go into business together, written "relationship agreements" are crucial.  They might not have a section in them covering "hand holding" but they'll be full of other, important terms.  Yep, we can learn a lot from the tv, sometimes.

Fireproof? Is Your Business Ready for Disaster?

Yesterday morning the sounds of sirens filled the air around the office here.  Fire trucks were racing down the street, followed by police and other emergency workers.  They were responding to a fire in a business about a block and a half down the street. 

Soon after the news helicopters were circling downtown Lawrenceville picking up some footage for the evening news.  The fire department seemed to quickly get the situation under control, doused the hot spots, and then finished their jobs and left when their work was done.

I don't know the folks who owned the affected businesses or worked there, but I imagine that their real work just started after the fire department and other emergency workers cleared the scene.  And my thoughts turned to whether my business was prepared for a disaster like this.

Just like you need an evacuation plan to get everyone out safe, business owners need to make sure that they have a contingency plan in place to help get back to work after the situation is over. Critical to this plan is that important data can be accessed from off-site in the event of a disaster.  Files must be continuously backed up, systems must be tested, and emergency contact information should be kept current.  Make a plan, and make sure that folks know how to access it and what to do when it's time to get back to work.

Photo credit:  stock.exchng: linder6580.

 

Georgia Businesses: Deadline for Annual Registrations Extended

Georgia Secretary of State Brian Kemp's office recently announced that Secretary Kemp granted an extension of time for Georgia businesses (such as corporations, LLC, etc.) to file their annual registration statement for 2013.  The filings are required by April 1st of each year.  This year, however, due to implementation of a new web-based filing system, and some delays associated with that, the deadline has been extended to May 31, 2013.  

I still recommend getting these done early, and not waiting until the last minute.  But, I think that the additional time is welcome relief and appropriate given some of the issues we have experienced with the site so far this year.  Businesses should make sure that they make their annual filing by the deadline each year, and that they also complete their internal corporate records as necessary under their governing documents, to help maintain the entity and the limited liability protections that may be afforded under law.  

Is YOUR Business Ready for A Disaster?

Hurricane Sandy brought devastation wherever it went, it seems, causing damage and problems for which many people and businesses likely were not prepared (and in many instances, could not have prepared for) The impact of a disaster will usually be long-lasting, can cause great expense, and can leave businesses with lost or destroyed records, ruined inventory and equipment, the inability to conduct business due to inabilities to occupy the office, store or warehouse, as well as the inability to communicate and work due to power supply issues, telephone problems, internet connectivity, and more.

So, an event like we've seen (and some people have experienced) this week, naturally begs the question: "Is your business ready for a disaster?"  

Disaster planning is a good idea for businesses small and large.  After you survive the disaster, check on employees and their families and decide it is time to try to get back to work, what can you do to ensure that data and important business records can be recovered and utilized?  What will be done to relocate an office temporarily and get people back to work with phones, email, internet, and records so that clients can be served by selling your services or goods?  How will you let your employees, vendors and customers know how to reach your business after a disaster?  How will you communicate your planning and train employees for what to do after they insure their safety after a disaster?  These are just a few questions that should be considered, and addressed in a written business disaster plan.  From there, wise businesses will communicate with their staff and train on what to do when, and how to access information and the disaster plan.  Remember, a major key to getting back to business following a disaster is having a plan in place outlining what to do.  

 

Socia Media Used To Investigate Crimes and Violations

A report by InformationWeek Government last week shows that a majority of law enforcement agencies turn to social media sites such as Facebook and Youtube as part of their investigative efforts.  The survey had more than 1,200 law enforcement professionals respond and found that 83% reported using social media in the context of their investigations.  And, according to the report, for those that aren't doing it, nearly 75% reported an intention to start doing so.  

We already know that social media use is highly monitored and scrutinized in certain segments, such as the broker-dealer industry.  There, regulators are very wary, it seems, about social media use and the ability to properly monitor its use and maintain compliance with standards relating to communications with the public.  Further, we've also seen regulatory actions based on tweeting inappropriate information, along other things.  And finally, we know that social media can be a gold mine in certain civil litigation, including family law and divorce matters, among other types of cases.  Given these factors, folks should be aware of the high-level of scrutiny that social media postings and activity could receive, whether from criminal justice agencies in connection with criminal investigations, or by regulators reviewing compliance with civil rules and standards that apply to particular industries.  

For all these reasons, folks should understand, and consider applying, some common sense tips when it comes to social media use:

* First, don't implicate yourself in criminal conduct via social media.  This means don't brag about your latest crime, and don't post videos of it, on facebook, youtube, twitter, or other sites. (Of course an even better step to avoid problem is don't commit crimes in the first place).

*Second, remember the old newspaper front page test.  I think that can still be a good one.  If you wouldn't want your post, tweet, or whatever, appearing on the front page of the paper (yep, some folks still read an actual paper version of the newspaper), think long and hard about whether you want to post it, tweet it ot whatever.

* Finally, understand that in this day and age, things that you think are private, aren't really all that private.  So tread carefully.

 

The Red Flag Series: Small Business Issues

I'm continuing in the red flag series today, highlighting red flag issues for small businesses (for an overview of the red flag series, see this introductory post).  Whether you started a corporation or a LLC, formed a partnership with someone else, or even if you operate your business as a sole proprietor, there are some legal red flags of which you should be aware.  Through proper planning and risk management, businesses can work to reduce their exposure to legal liabilities, and can reduce the personal liabilities of the owners.  These are basic steps that an attorney can assist a business owner with, but business owners should also be aware of other red flag issues that might arise from time to time.  This list is not exhaustive or complete, and there are other issues that certainly do arise from time to time.

First, if you are in business with another person or persons, the structure of that business and the contractual relationship between the owners is very important.  A big red flag I often see is where folks have gone into business together but have failed to plan and not have put in place an owners' agreement (often called a shareholders' agreement for corporations, a members' agreement for an LLC, and a partnership agreement for partnerships).  These documents plan for what happens when an owner wants out, when other owners want one owner out, when someone dies or becomes disabled, or when folks effectively stop working for the business. It is easier to put these agreements together and in place early on when everyone likes each other and still gets along.  When something bad happens to fracture the relationship among the owners, it is very difficult to put agreements in place.  In my view, it's not a question of whether these documents will be needed, it's a question of when they'll be needed.

A second red flag is inattention to business record keeping.  If you have formed a corporation or LLC, the organizing documents and applicable law may require annual meetings of owners or members and regular director or manager meetings, etc.  These requirements need to be satisfied, and they need to be documented.  It is important to maintain the separate existence of the business entity and make sure it is not an alter ego of the owner(s), as failing to maintain proper business records may result in the expected limited liability protections not being effective to shield owners from personal liability.

Third, along the lines of business record keeping, business accounting is critical.  Every business should have a relationship with a CPA from whom they can get tax and accounting advice, ensure that the accounting system and internal controls are set up properly, are functioning well for the business and are maintained in good order.  Your CPA can also help with tax returns, payroll issues, and the numerous regulations relating to tax and accounting.

Fourth, business owners should understand the separate existence of their business and the of owners as individuals. To that end, when the business enters contracts, business owners need to understand how to bind the company, and not themselves individually, to the liabilities.  Further, managers and owners who sign agreements and contracts on behalf of the company need to ensure that they have a good understanding of what those documents mean, and have them reviewed by the company's counsel when appropriate.  

Finally, other red flags might be non-compliance with sales tax and other tax issues, business licensing issues, foreign corporation registrations where needed when doing business in other states, etc.  Keep watching for more posts in the Georgia Business Law category for future, related posts in this area.

The Red Flag Series: An Introduction

Last week was our annual family vacation to the beach.  We go to Seagrove Beach, Florida each summer with a large group of friends.  And while I'm more of a mountains guy than a beach guy, the trip is always fun. While I now need a vacation from my vacation, I'm back in the office today working to get caught up on things, including the blog.

We had great weather this year.  Seagrove was a little cooler than Atlanta was, we had a good breeze and the rain held off, too, raining on us just briefly on Thursday.  The white sand was nice and the pool was cool and refreshing, but the ocean was rough at times.  Many days the red flag was flying warning folks to be careful of rougher waves and currents.  I heeded the warnings, teaching the kids about water safety and the flag system, and we made sure to be safe while playing around in the water.  One of the local newspapers had an article about recent rough waves and currents in the area that had closed many beaches a week earlier or so, and detailing a large number of rescues by the lifeguards and fire department.  The reporter had also interviewed several vacationers out on the beach and it turned out that many folks there simply had no clue about the flag system, and what the different flags meant, or even to look out for them.  As I thought about that, I drew a parallel that many folks don't know what to look for in terms of metaphorical "red flags" in their own lives as it relates to legal situations.  So a new blog series was born.

In the next several posts, I'll talk about "red flags" in various situations from broker-dealer and stockbroker compliance, estate planning issues, small business law, and criminal defense issues.  I hope that this series will help folks recognize the red flags waving in their own situation, and then prompt them to respond to those flags.  Stay tuned over the next few weeks for the red flag posts.  

Picture: Joel Beck, Seagrove Beach, June 2012.

 

Stockbrokers and the Partnership or Team Approach

Yesterday I ran a post aimed at businesses in general, on the potential dangers in partnerships, whether folks "partner up" through an actual partnership, as co-owners of a corporation, or members of a LLC. Today, my south Florida lawyer buddy Marc Dobin posted about this same topic, highlighting some other issues for stockbrokers on his blog (if you're in the securities industry, you should also follow Marc's blog (in addition to BDLawBlog.com), so go ahead and put it in your reader or RSS feed).  

Marc's comments are spot on, as he raises some good points for brokers to consider when they team up, either through going into business together, or just forming a joint rep. code with their broker-dealer. Broker teams break up all the time, just like other businesses do, and proper planning can save a lot of time and money down the road.  Brokers considering these options should look at the issues identified in my earlier post, as well as those raised by Marc.  And, they should also consider and plan for regulatory issues that might affect their ability to continue on in practice (state registrations, regulatory actions, etc.) as well as for whether brokers will be able to continue to run business under their own individual rep. number, and if so, how, when and why.  The final point I'll make here is that a boilerplate agreement for a joint rep. code that your firm uses might not be enough for your situation, and that might be something you need to discuss with your broker-dealer and with your lawyer.  Be sure to supplement that document with an additional written agreement where appropriate.

" Hey, Let's be Partners!" or "The Dangers in Business Partnerships"

For business and entrepreneurial types, it's probably come up some time in conversation with a friend of colleague.  "Hey, we could do that together.  Let's be partners" someone might say, as you kick around a new business idea.  "I'll handle the marketing and the sales, and you can handle the operational side.  It will be great."  But will it?   Folks go into business with others all the time.  And there is nothing wrong with that, if done properly.  But businesses fall apart and break up all the time, too. By failing to plan for the high probability of problems that can arise within a partnership, business folks can set themselves up for a significant amount of frustration, as well as costly legal fees and expenses.

Whether they are forming a partnership, a corporation or a LLC with others, I tell my clients that it is not a question of "if" there will be a problem among co-owners or partners, it is simply a matter of "when." With that in mind, some proper planning is in order - while everyone still gets along - to avoid more complicated and costly problems down the road.

Those going into business together need to think through several issues, such as:

* How will we own the business?  50/50, or 1/3 each with three owners, or some other arrangement?

* What will the roles of each owner be?  Will everyone be responsible for different areas, or will areas of responsibility overlap?  Will each partner devote their full time and attention to the business? 

* What will we do when we can't agree?  What if one partner wants to move the business in one direction, but the other is opposed? How will you decide what to do - whether it is to enter or leave a market, a location, make a distribution of profits, close up shop, or something else?  Is one person vested with ultimate authority, or do we resolve disputes in another way?

* What will happen if one co-owner becomes disabled - either temporarily or permanently?  What about if someone dies - are the reamining owners then in business with the deceased partner's spouse that no one likes?  What do we do when one owner wants to get out of the business and sell his ownership interest - or even more challenging - the other owners want to force someone out?

These aren't pie-in-the-sky questions about things that never happen.  These are practical questions based on events that happen all the time in the life of a small business.  They can be difficult to resolve.  But, when these events are planned for in advance, resolving these situations is much easier.

In many situations, the key to these issues is a good buy-sell agreement, sometimes also called a shareholders' agreement (for corporations) or a members' agreement (for LLCs) or a partnership agreement (for unincorporated partnerships).  This document, combined with the corporation's by-laws or the LLC's operating agreement (if applicable) can set forth procedures to resolve disputes, articulate duties and responsibilities, and deal with situations such as death, disability, or inattention to the business.  The good thing about them is that they can be customized for your business, to the needs and whims of the owners.

In my experience, many folks will forgo this planning, thinking that everything will work out fine, or that they can do it later if needed, and save a little bit on attorney's fee at start-up.  But many times, when "later" comes it is simply too late, as the owners are in the midst of a disagreement and are far less likely to agree to terms for an owners' agreement that cover how to resolve disputes and run the business.  The result is that it is harder to reach agreement on what to do, legal fees may become much larger than they ought to be when everyone lawyers up and looks out only for themselves, and relationships among the parties can be significantly damaged or destroyed.  That's why I suggest proper planning either before the business commences operation or right after during the "honeymoon" period when everyone gets along.

 

The Danger of Social Media and Your Legal Matters

Social media is not new.  And I don't think it is going away any time soon.  I like social media and am an avid user (you can find both me and my law firm on facebook, follow me on twitter, connect with me on linkedin, and even view my firm channel on youtube).  But if you use social media, you must take precautions especially when you are dealing with a legal matter, because social media is becoming much more relevant in litigation or in other legal matters, and can be very useful, or detrimental evidence in your matter.  Here's a few things to think through:

First, understand that your opponent (meaning the other party in a civil suit, or the government or a regulatory organization in criminal or regulatory matters, etc.) in a legal matter may attempt to check your postings on social media, or that you may be required to produce them in discovery or pursuant to a subpoena or regulatory request.  Assume that anything you post online - regardless of the privacy settings posted under - may be viewed by your opponent or adversary.  Also, know that it is possible that someone in your social media world (a friend, a connection, a criminal informant with social media ties to you, or whatever) may provide others with access to information about your social media postings.  

With that in mind, take every precaution to avoid making postings or comments, whether in the form of a status update, a blog post, a picture, a video, or whatever, about your legal matter that could in any way be used to discredit  you.  If you wouldn't want the judge and jury to see or read it, don't post it.  And, if the matter directly relates to your legal matter, consult your attorney before you make the posting and stick something out there for the world to see (and see forever - because not everything can be deleted!).

Additionally, you should remember - and parents should teach their children about - the dangers of social media, in that what you post may very well be used against you.  Many people nowadays routinely carry cell phones with cameras and video recorders, and often use these to record an event as it unfolds before them. I've seen stories lately of crimes being solved (thefts, assaults, fights, etc.) and folks being arrested because of social media posts, including videos on youtube.  A recent international news story about the theft of Dirk the penguin in Australia recently highlighted this fact: after commenting about their activities on facebook, three young men were arrested and charged with crimes.  So be careful, and don't make admissions of wrongdoing through social media as such admissions can be used effectively against you.

I'm not advocating against the use of social media.  Used properly, it can be a great way to connect with others, among other things.  Used improperly, however, the results can be devastating, especially as it pertains to legal matters.