Making It Legal:

You know . . . and I know . . . that faster is not always better, no matter how much the car companies try to push the “0 to 60 in 3.6 seconds” pitch. Think food, sex, rest, travel. You don’t necessarily want to rush these experiences. Quick, split-second decisions are not the best decisions. You want to take your time with certain issues, particularly those that have long-term ramifications: getting married, buying a home, forming a business.

This week’s query is from the “fast-is-better” department: What is the fastest way to get llc?”

A.: If you want fast, do it online. Can’t get faster than that.

But is a limited liability company (LLC) the right form of business for you, based on your goals and business plans? You won’t get that advice online.

Can an LLC give you the tax advantages you want, based on your personal situation? You won’t get that advice online.

Are there any state-specific formalities that need to be met in addition to the online filing? You may not get that advice online.

A client who filed her Delaware LLC through an online service was never told–as she wanted to do business in New York–that there were a whole set of other filing requirements and fees involved, amounting to an additional $2,000.

Yes, if you choose the “wrong” form of business, you can change it . . . but there may be significant tax implications, additional costs and legal paperwork to contend with. So why rush, when you can work with an advisor who will help you make a decision that’s right for you?

Because “one size does not fit all.” And because “you get what you pay for.”
In “a whopper of a sexual harrassment claim” (thanks to blog author Jon Hyman for the turn of phrase I couldn’t resist), the case of EEOC v. V & J Foods, Inc., a Burger King franchise had an employee manual that outlined the procedures to be followed in a sexual harassment grievance. However, the policy was written in a convoluted and confusing manner and–significantly–provided no way to bypass a harassing supervisor. When a part-time teenage employee ran into a problem with her supervisor, she didn’t follow the grievance procedure in the manual.

The Seventh Circuit Court of Appeals didn’t care that she didn’t follow the proper procedure. The employment manual wasn’t clear to the average employee (in this case the average employee would be a teenager or high school graduate). In fact, the court found that the complaint procedure was confusing even for adults and, as a result, the grievance process was unreasonable.

The issue for your employment manuals is that they need to be clear and easily understood. If you do download them from the internet, make sure you show them to your attorney in order to demystify the boilerplate and insert the right provisions for your business. Otherwise, you could end up with a document full of policies and procedures that no one is required to follow.

There are times when I start to sound like my mother, scolding my brother for messing about with other kids’ toys. “That doesn’t belong to you! No, you may not have it!” One of those times is when I’m asked, “Can I just take someone else’s product/stuff/idea/design and sell it?” The short answer is NO.

Q: I have an idea for the new use of an old product. I don’t need to make any changes to the old product, other than repackage it with a new name that identifies its new purpose. Do I need permission from the makers of the current product for its new use? Can I repackage it under a new name? As for advertising and distribution, I’m thinking infomercial since I work in television. My contacts and connections should help me save money, theoretically, at least! As for cost, it cost me nothing to produce because it’s already made. For pricing, I figure five times the price of the new packaging plus wholesale cost of pre-existing product. This might be sufficient to cover distribution cost as well.

The short of it Is this: By your own words, you want to “lift” someone else’s product and put it into your packaging.  Not kosher. Without knowing more about the product, your choices really are to make your own product or work out a licensing agreement.

Let’s say you wanted to take a Baby Bjorn carrier and use it for pets. You could make your own baby/pet carrier–nothing prevents you from making a product that’s already out in commerce (look at how many different kinds of sneakers there are). But you can’t take the labels off the Baby Bjorn, stick your own on, and say, “But hey–it’s for puppies!”  You’d need to contact the company, work out a license arrangement, and go from there. 

In terms of the costs, your first step is to do some preliminary digging and create a business plan. What the product is, how you choose to manufacture it, where you choose to sell it, how much you choose to charge for it, who your target market is . . . all affect the costs involved in getting this venture off the ground. It also affects the complexity of the legal work you may require.  Your numbers are very sketchy–I would strongly suggest that you take the time to really look at them and speak to contacts to determine the real feasibility of your idea first.  

Between paper and pixels, the amount of information that one company has to retain can become staggering. Plus, like Arthur Anderson, if you shred (or delete) information that you should have retained (or you’re destroying because you were just named in a lawsuit), that fact can be held against you in court.

There’s a way around that. You can implement a routine document retention (and destruction policy) that governs how and when you can destroy documents. If you set the policy and implement it routinely before there’s litigation on the horizon, you can protect your company.

For a free white paper that looks at what to retain and for how long, go to theHRSpecialist.com/

This week’s basic training deals with a situation becoming all too common these days: Business stinks, and you just want out. To close the door, turn the keys over to the landlord and just walk away.

Q.: How can I give keys back to landlord, and for them not to sue me? Small shop in a shopping center. Rent is all paid and there is no good-guy clause?

A.: Dear Out: Unless the lease permits your company to vacate the premises at any time (which I doubt), it’s on the hook for the lease payments until the lease runs out. If you signed a personal guaranty, you’ll be on the hook personally, as well. Such is the way of commercial leases.

You can try negotiating with the landlord (if the company is virtually out of business and you have no assets, it may not be worth the landlord’s time/expense to pay the attorney’s fees to start a lawsuit). You could also consider finding another tenant to take the space (although the landlord would have to approve of the swap) or filing for bankruptcy protection. To be clear about all your options, I’d recommend that you consult with a business attorney in your area who can review your lease and speak to your specific situation and options under local law.

A written contract doesn’t have to be filled with legal mumbo-jumbo in order to bind your business. That was a hard lesson learned by a Missouri company, in the case of Baum v. Helget Gas Products, Inc.

In the Baum case, the prospective employee (Baum) took copious notes during his interview, including descriptions of salary, benefits and the length of his contract. He wrote “Contract With Helget Gas Products St. Louis Mo. Market” across the top and handed it to the Helget manager, who signed it. When Helget fired Baum a year later, Baum sued and won, saying he had a three-year contract. The court agreed.

The moral of the story: Don’t sign anything employee-related without first running it by legal counsel or HR. What the Helget manager could have done is to make a copy of Baum’s notes and tell him that they’d be provided to corporate counsel, who would draw up the appropriate documents in accordance with company policy.

If I had a nickel for every time someone told me that he or she did something business-related with a friend/acquaintance and it ended disastrously, I’d be writing these blog posts from my trans-oceanic yacht.

The moral of the story (in case you’re pressed for time): Whenever you are hiring someone (or being hired) to perform any kind of creative task–writing any kind of document, drawing, photographing, painting, designing graphics/logos/websites–you must have a written agreement.

Here’s the story: Moira had kept a journal of her life story and needed someone to take the raw material and turn it into a book with a particular life lesson: how to find courage in difficult times and situations. Moira hired Andrew, an acquaintance, as a ghostwriter. He told her that they didn’t need an agreement, as it was a simple enough project. He’d just send her invoices as he worked on the project. $15,000.00 later (Moira paid each and every invoice), Andrew still wasn’t quite finished. In the meantime, Moira showed the work to an editor, who provided her with comments. Moira showed the comments to Andrew out of courtesy–and the berating began. Seems that Andrew had some underlying personal issues with being a ghostwriter (not enough recognition). He started to tear into Moira for not having “much of a story to work with” in the first place. And–this one makes my blood boil – he had the audacity to tell Moira that he had given her a discounted rate to begin with, and now wanted to recalculate what she owed him based on a higher hourly rate. In other words, she should pay him more than he originally invoiced for work that he had already done.

You can probably surmise that Moira has nary a sou to handle any litigation of this matter if it really sours. She’s in a very difficult position. Without a written agreement stating that the ghostwriting was done as a “work for hire,” she’s running the risk that the copyright rights in the work will not be properly transferred to her. What does that mean? It means that 1. She might not own the work, even though she paid for it, or 2. She could be saddled with Andrew as a “co-author” of the work. Either way, it stinks.

A project may well be “simple,” but not properly transferring the rights can turn it into a hornet’s nest. Next time you do business with friends, treat it like doing business with a stranger . . . you’ll protect both your rights and your friendship.

Well, employees are people, too. And they may have some of your company equipment at home (laptop, cell phone, etc.).If they damage the equipment, do they have to pay for it? Can you dock their paycheck?

The answer, generally, is no. Many states prohibit companies from making deductions from an employee’s paycheck, other than those required by law (e.g., FICA and Medicare deductions), or authorized in writing by the employee and for the employee’s benefit (e.g., paying into the company’s health insurance plan). However, you might be able to set off damages if you have a clear (written) employee policy about intentional damage and if your state permits it. If you have a reason to be concerned about employees trashing your stuff (especially if they’re on the way out the door after being terminated), speak to your employment attorney.