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Common sense advice from a business lawyer

business lawyerThe latest installment of “business expert” interviews by Park Slope Business Coach Susan Martin.

I spoke with Daniel Ross, a local business lawyer located in my neck of the woods (Park Slope, Brooklyn, NY.) I love Dan’s down to earth, common sense approach, which I think is quite refreshing in our litigious world. Here are some highlights from our conversation:

Dealing with vendors:
It’s a good idea to engage in business with vendors on a continuing basis. Forging relationships rather than jumping around to save a little bit of money can pay off in the long run, especially if any issues crop up down the road.

If you’re a landlord:
If you own property and have a lease that stipulates stiff penalties (typically lease termination) for even small infractions, consider alternative remedies such as fines. If you have good tenants, you don’t want to evict them for minor wrongs. A long term relationship can often be more advantageous than a revolving door of new tenants.

Partnership/Stockholder Agreements:
The best time to develop partnership/operating or stockholder agreements is when you’re first starting a business, everyone is getting along and are feeling positive about the future. The terms will be more reasonable and it will be easier to come to an agreement when things are done early on. This agreement can also serve as a reference to stop future disputes. Make sure that your agreement includes an exit strategy. The last thing you want to do is go to court if someone dies, is unhappy or wants to leave the business; as litigation is extremely expensive, uncertain and time consuming.

Leasing property:
Leasing property is expensive, especially in NYC, and location is often important to retailers and other businesses who often meet with customers in the offices. A landlord can have a lot of power over a business. Before signing any lease, look at what you’re allowed to do in that space. Flexibility is key. Business can change rapidly and sometimes you have to alter what you provide in order to meet the needs of your clients. You don’t want to have a landlord say you can’t change with the times as needed.

If your business is heavily dependent upon your location, you might be better off with either a long term lease or a short term one with an extension clause. Beware of signing a lease as an individual. If you sign as an LLC or officer of a corporation your personal assets are better protected.

Deals and contracts:
As with partnership and stockholder agreements, one should always be concerned about the possibility of future problems when cementing a deal or signing a contract. Consider what will happen if things don’t work out. Make use of entities such as corporations or LLCs if at all possible. And if you have to be personally obligated, try to limit it to a short period of time in which you can prove yourself; such as having personal liability end once you’ve paid rent or bills on time for the first year.

With contracts, always make sure that you’re signing on behalf of the entity and list your title, rather than signing individually. Focus on the important points of the agreement, not just the money. It’s not always necessary to kill the other side, this can come back and bite you. If you can make a deal that‘s good for both sides, everyone will be engaged in its success.

Often business owners often operate under the assumption that when someone hands them a “standard” lease or contract form, that there is no need for an attorney to review it. This can be a big mistake. Standard leases and contracts favor the issuing party. Always have an attorney look over leases, deals and agreements to ensure that you completely understand what you’re signing and to uncover any hidden and/or potentially unfair clauses.

When you hire people, especially in the beginning stages of your business, hire them “at will” rather than signing an employment agreement or contract that holds you to a certain length of employment, in case things don’t work out.

If your employees have access to your clients and or trade secrets, you may also want to have a confidentiality agreement. In order to be protected by a confidentiality agreement you must be careful how you treat and refer to confidential materials. For example, make sure to stamp documents as confidential. If the employee has significant responsibilities and might leave your employ to start or join a competing business, consider a non competition agreement which will restrict the employees activities after leaving employment. But note: the terms of the non competition agreement must be reasonable or else you will have trouble enforcing it.

For startups:
Always make sure to form the entity best suited for the situation and type of business you’re starting. It’s not as difficult to do as you might think. Simply consult your accountant or lawyer regarding what type of entity will be in your best interest from both a business and tax perspective.

Realize that most businesses lose money initially. This is another important item to speak with your accountant about, as well as to figure in to your own business plan and cash flow projections.

And again, if you’re going into business or have business arrangements with others, make sure you develop a written agreement that covers what will happen if things don’t work out, someone needs or wants to leave the business, at the beginning stages.

What’s been your experience with business partnerships, agreements and deals? Join the conversation below.

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