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Back to Basics: Where Can a Business Attorney Help Me Most?

Entrepreneurs should be savvy with their money, but they also shouldn’t cut off their noses to spite their faces.

Where does a business attorney provide the most bang for the buck?

1. Agreements Between the Owners

Just like nobody gets married with the expectation of divorce, nobody thinks their business partnership and working relationship will blow up. If this happens, a good up-front agreement (shareholders agreement, operating agreement, partnership agreement, buy-sell agreement) will lay out how an unhappy owner can get out or how to resolve a deadlock among owners. It will also lay out what happens upon the death, disability, incompetency or divorce of an owner.

Without this kind of up-front agreement, often the only remedy is a judicial dissolution of the business. If this happens, the assets are liquidated and each owner gets their percentage of what is left after debts.

2. Form Contracts

A form contract is one of the most cost-effective methods of protecting a business. It will contemplate the largest risks of the business and provide a mechanism for reducing or allocating the risk. This may include requiring the other party to have certain insurance, providing an early termination fee if necessary, or stating where and how disputes will be resolved. It may also involve a price adjustment for risks that can’t be shifted or otherwise lessened.

Many business owners are tempted to find contracts online or borrow from a friend. Don’t do this unless you understand warranties, disclaimers, indemnification, subrogation, severability, etc. Did you put in a choice of law or venue? Is the venue exclusive? (I don’t say this to make you feel dumb, but to point out contracts aren’t as simple as they seem.)

It can also be dangerous if you have a service business and you grab a product-oriented contract. What if you don’t notice the contract requires disputes to be settled in New York or to apply Michigan law? What if the contract overlooks a key element, such as a confidentiality provision or a license to use a work product? If you sell widgets, re-performing the service won’t remedy a


3. Intellectual Property

Identifying and protecting the intangible assets of the business can be daunting. It is important to make sure ownership of inventions, names, copyrights and trade secrets is properly with the company and not its founders. The business needs appropriate safeguards in place to protect its intellectual property, whether that is contractual, policing third parties or restraining employees with confidentiality, non-compete and non-solicitation agreements.

All of these areas require specific knowledge in an area of law that changes frequently. Messing up can have dire consequences from having to rebrand to paying triple damages for willful infringement.


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