Business Owners: Plan Ahead to Avoid Unnecessary Stress & Costly Litigation

ROB BRANDT – BUSINESS ATTORNEY

Let’s face it, a phone call to your business attorney is typically an afterthought, not a before thought. As in, before you find yourself on the wrong end of a civil lawsuit.

Hiring an experienced business lawyer early in the game helps to ensure you still have a business come the ninth inning.

Even small business operations are complicated, with a plethora of decisions to be made and plenty of hand-wringing and second guessing. You will want, and need, the advice and involvement of an experienced corporate attorney to advise on important decisions, interpret contracts and draft critical documents. Bottom line, acting in your best behalf and helping you to understand the hidden risk in each situation or agreement.

Structuring Your Business – Choosing a Business Entity

Your business structure is more than the difference between a dba or LLC on your business card. How you structure your business affects the amount of tax you pay, your ability to raise capital, determining necessary paperwork to file, your personal liability, your freedom to operate and more.

What are your business entity choices? Sole Proprietorship, Partnership, limited partnership, Limited Liability Company (LLC), C Corporation, S Corporation, Limited Liability Limited Partnership (LLP), Close Corporation or a Not-for-profit.

This is your first step. Choose wisely.

Shareholders’ Agreements

Many a business venture has ended on a sour note by the mere utterance of this simple phrase: “Let’s shake on it.” Stop right there. Even the best of friends, or once-upon-a-time like-minded partners can, and often do, develop opposing visions of the company’s future.

In many instances, the owners will disagree as to a major corporate action, such as the appropriate time to dissolve or sell the business.

By entering into a solid shareholders’ agreement, operating agreement or partnership agreement (as applicable) from the outset, you can make quick work of resolving these issues. Again, the strategy is to minimize or eliminate litigation. If the owner’s rights are clearly spelled out in the agreements from the outset, then there is often no need to litigate.

Preempting a Common Employee Issue

You do your best to hire the right people. And with each new hire there is a sense of accomplishment and hope. But this time, it was a “bad” hire. For a number of reasons. It happens.

If termination is the only option, make sure your business attorney has drafted a termination and release agreement for the soon-to-be-exiting employee to sign, clearly setting forth the post-termination obligations of both employer and employee. Dismissing an employee without doing so can leave you vulnerable to litigation and soon you’ll be searching for a litigation employment lawyer.

It is important that all employees sign written agreements at the outset of their employment addressing such issues as confidentiality, post-employment restrictive covenants such as non-solicitation of employees and customers and IP Assignment.

Intellectual Property Licensing

For some companies, intellectual property holds more value than tangible, real property. No surprise the high-tech industry is becoming a driving force in Intellectual Property Licensing.

If your business model involves licensing rights, make sure you know the difference between Assignment Agreements and Intellectual Property Licensing. And you’ll also need to brush up on the differences between Exclusive License, Non-Exclusive License, Revocable versus Irrevocable and fully paid licenses.

These documents are complex and require careful consideration and negotiation.

Protecting your business, and yourself, from debilitating and costly legal matters means thinking and planning ahead. Before making your final decision, or inking that piece of paper, pick up the phone.

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Robert Brandt is a business transactional attorney with Clayton-based Blitz, Bardgett & Deutsch. He has been advising business owners, from small operations to major corporate brands, for more than two decades. A recognized Super Lawyer® in Missouri & Illinois, he can be reached at: rbrandt@bbdlc.com, or 314-881-4833.

Over the last two decades Blitz, Bardgett and Deutsch has earned a respected reputation in the legal community as a top-flight litigation, real estate and business transactional firm based in St. Louis, Missouri, 120 S. Central Ave., 63105, with offices in Jefferson City and Columbia. BBD’s team of seasoned attorneys and notable up-and-coming associates are also recognized standouts in matters of Employment Law, Regulatory Work, Tax & Estate Planning and Alternative Dispute Resolution.