Making It Legal:

Q: Is there is a way for one to tell whether or not one is personally liable for a business credit card?

A: If the card is in your name along with a company name and the credit card statements are addressed to the company, that c-o-u-l-d be an indication that the account is in the company name alone. But that still wouldn’t answer the question of whether there’s a personal guaranty underlying it.

The best way to check is just to call the credit card company and ask. And see if it will provide you with a copy of the initial credit agreement that you signed. In the future, make sure you keep a copy of all credit card applications so that you know for sure.

Are we taking whatever walks through the door because we’re afraid there won’t be another piece of business .  .  . ever? There’s an old adage, “You can’t make a silk purse out of a sow’s ear.” You could have the best possible systems in place for handling your clients and delivering your services. But if the raw materials you’re working with–the client–is substandard, you’re bound to run into serious hiccups along the way to getting paid.

Problem clients tend to have identifiable characteristics, as I mention in my article, “Profiles of the Top 5 Problem Clients.” From your first meeting with them, you sense that they are:

• Petulantly dissatisfied .  .  . with everything
• Looking for a deal .  .  . before you even mention your pricing
• Starting and stopping projects with a variety of service providers just like you
• In a crisis, with deadlines of .  .  . last week
• Hedging about your terms, and that collecting will be like grasping smoke

WANT TO KNOW MORE? You can, by checking out my downloadable program, “How to Train Your Clients to Pay You.”  You’ll get lots of valuable insights worth hundreds of dollars for a fraction of the cost!

 When the going gets tough, the tough take a close look at how they handle their clients and customers. Who’s generating a less-than-fair fee for you? Who makes you cringe when you hear their voice on the other end of the line? Who’s always finding a way to drag out the payments? Yes, there is something worse than having no work to do. It’s working your butt off for someone who doesn’t appreciate your talent and stiffs you for the fee.

But the problem isn’t just with the annoying client. As the old cartoon character Pogo famously said, “we have met the enemy and he is us.”  Where can we take some responsibility for how we’re handling our clients?

We can start by looking at where some of our client relationships went awry.  As I mention in my article, “Isn’t It Time You Kept 100% of Your Fee . . . Every Time?” on WomenandBiz.com, make the time to write down all the different causes of client dissatisfaction.  This could include:

• The price being higher expected
• The project becoming more involved than expected
• The client not getting the desired results
• Your lacking the right expertise for the assignment
• Snags in communication, as when dealing with more than one representative of a client
• Lack of clarity about the payment terms (e.g., if you are working on an hourly rate)

If you can identify what’s broken, you can take steps to fix it.  Yes, even in this economy.

I first met David Greer, angel investor and entrepreneur, when he weighed in on my Business Partnership Central blog on the importance of having a written shareholders’ agreement–and how that freed him up (when he sold out his interest) to sail the Mediterranean for two years (drool).

Now he offers some handy insights to follow up on my post, ”How to Speed-Read an NDA,” which I’m delighted to share with you.  David writes:

Thanks so much for the article on NDAs. As an angel investor and entrepreneur, I see those all the time, and I am often required to sign them.

Under the “Confidential Information” section, I also look for who is disclosing to whom. I have seen “one way” NDAs. That is, the information disclosed to me is confidential, but the information that I disclose is not. As I see so many technologies and companies, I am very careful about information I disclose and to whom, making sure that I do mark confidential information as confidential. That doesn’t help if I’ve signed an NDA where the other party isn’t going to keep my information confidential. One of those little “gotchas” that you can pick up in a quick reading of an NDA.

“Can I? Can I?” I hear you asking. Well, you’re asking the wrong question. The issue is not whether you can download your client contracts from the internet, it’s whether you should.  And once you do (because you know you’re going to do it, right?), how can you get the best use out of doing so?

Downloading agreements from the internet is good for starting to educate yourself about the kinds of terms you might want to include in agreements with your clients. But here are two significant things the online agreements (even the ones you pay for) can’t tell you:

• They can’t tell you whether there are any provisions in the contract that could hurt you.
• They can’t tell you whether there are any provisions that are missing that could help you.

Poke around the internet all you like; but in the end, only you can decide which business terms are best for you. What specific products or services will you provide to your clients? Within what time frame do you want to be paid? What happens if you’re not paid in a timely manner? Have a look at my program, How to Train Your Clients to Pay You, to get the lowdown on the important decisions you’ll need to make. And once you’ve made those decisions, have your attorney wrap them up in a nice, neat legal bow to protect you properly.

Non-disclosure agreements (NDAs) have many uses. You may have a fabulous idea and want to protect it as you share it with potential investors. Or you may be on the receiving end of one, as this article, “How to Speed Read an NDA,” anticipates.  Written by my colleague, IP attorney Terence Church, Esq., the article gives you a brief rundown of the top six issues you’ll want to see in any NDA you sign. 

Of course, this leaves aside the issue of whether you really should be doing business with someone who shoves an NDA under your nose 2 minutes before you’re about to begin a meeting with him or her and expects you to sign it without the benefit of discussing it with your legal counsel. If he or she won’t give you the time to review it carefully (assuming you’re an entrepreneur who takes her contract obligations seriously), you may want to take your business elsewhere. If you’re in a line–or at a stage–of business where NDAs are common, speak to your attorney to get guidance in advance about how best to handle these kinds of situations if they arise.

Your employees can become your next competitors if you don’t handle the relationship carefully . . . and by “carefully,” I mean having non-solicitation agreements and other understandings (in writing!) with your employees.

But some folks are “old-school,” or don’t want to spend the money.  As a result, their employees are considered working “at-will” and free to leave at any time.  From the perspective of the soon-to-be entrepreneur, can you take your employer’s clients?

Q:  We’ve been working for a company for more than a decade and have finally reached the point where we want to set up our own shop in the same industry. Most of the client relationships are with us, as the owner is very hands-off and many people don’t like him. We have no employment contracts. One of our concerns was transferring clients, specifically when is the earliest we could advisably do that? We’ve been moving forward with our plans, but we’ve realized that it would be far more practical for ourselves and for the clients, who otherwise could feel at sea, to be able to speak with them in advance.  How can we do so?

A:  While I appreciate your concerns about leaving clients “at sea,” employees do have a duty of loyalty to their employers in that you should not solicit clients, take files, etc., while still on the job (you can take your contact database), nor should you use “company property” (company phones, computers or make the announcement at a client  meeting or during your workday).

Best (safest) way to handle it is to get your ducks in a row, leave Friday afternoon, and contact everyone after you’ve left.  Do not use your work e-mail for these kinds of conversations. The longer the time delay between leaving your job and contacting the clients, the stronger your defense to a lawsuit that you took clients on company time.

Another way would be to contact clients on your own time (again, from your homes and not during workdays or hours) to let clients know you’re leaving and that you’ll be back in touch in a week or so to let them know where you’ve landed.  Two problems with that approach:  1. The client may want more information than it’s appropriate to give at that time . . . so if you’re concerned about their being “at sea,” that could leave them even more worried about how and when their needs will be handled; 2. There is a meaningful risk that if any of the clients lets the owner know (even inadvertently) that you’re leaving before you tell him, this could be bad for you and give the owner something to hang his hat on in litigation–whether or not you have an employment agreement).

A few more things to consider:

• Will your clients really be “at sea”–are they that fragile?–if they are notified after you leave?  It’s really so much cleaner if you can wait.

• Check the client agreements to make sure that there are no non-solicitation or exclusivity provisions in their contracts–for example, that if they are solicited by another agency (or by former employees of the agency), they’ll give the owner prior notice.

• Depending on the clients’ feelings of loyalty to the owner–if you tell them before you tell him, they might be put off in the sense of your not acting totally aboveboard and with integrity.  More of a character issue and their feeling of trust working with you going forward than a legal issue.

You may have plenty of opportunities to get it (legally) right . . . but not as many to hear me speak on the subject! 

For those of you near Brooklyn, N.Y., on July 15, stop by the Brooklyn Creative League, where I’ll be talking about everything you need to know about business law in 90 minutes.  (Well, not quite . . . but close!)  In this entertaining and lively session, I’ll provide entrepreneurs with an overview of the most common legal issues they will face as they start and build their businesses.  I’ll touch on:

• How to choose the right form of business
• Working with business partners
• What to look out for in your commercial leases
• How clear contracts make for happy clients/customers
• Intellectual property: what to protect and how to protect it
• Choosing the right attorney/advisory team

RSVP: Contact the Brooklyn Creative League at info@BrooklynCreativeLeague.com or (718) 576-2104.

Date:  Wednesday, July 15, 2009
Time:  9:30 to 11 a.m.
Location: Brooklyn Creative League, 540 President Street (between 3rd and 4th avenues)
(Take N/R Subway to Union Street)
Price:  Free for members; $10 non-members

As a lawyer, I’m always dealing with companies’ confidential information. So keeping secrets is a core part of my business. You may be surprised to find that it’s part of yours, too.  They may be buried in various places–or dug up by your employees or independent contractors.  And if exposed without permission, you can find yourself in hot water.

Consider including confidentiality provisions in the following kinds of scenarios:

• You use an independent graphic artist to help design a client’s annual report and provider her with sensitive client information.

• You don’t want an employee tweeting about a client product launch before its time.

• You want to avoid employee blogging about a company takeover.

• You’re sharing crucial market research with a strategic partner, but don’t want it to use the information for any purpose outside your partnership.

• You’ve hired a broker or finder for a business opportunity and don’t want your company information shared for an unauthorized purpose.

• You’ve taken on a business partner and don’t want her to misuse company information after she retires (or resigns).

And, of course, get it in writing.

I was asked recently in my Forbes.com Ask An Expert column whether you could copyright something you didn’t write.  The short answer is “no,” unless you’ve carved out a “work for hire” exception.  This is particularly relevant for entrepreneurs who outsource to freelancers for their projects.

When you hire a freelancer to do work for your company, the freelancer–not you–is the owner of the copyright.  In order for your company to become the owner of the rights, you need one of two things (preferably, both):

• A written agreement that states that the work being performed is done on your company’s behalf as a work for hire; and

• A written agreement transferring any rights that the freelancer may have to your company.

The second is important because your contract may come under scrutiny and not have the right language for a “work for hire” (it can happen, especially if you download contracts from the internet).  The first is important because, without the “work for hire” provisions, your freelancer can sell the work to someone else, make changes to it or use it in other ways . . . all of which you don’t want.  For more examples of how the lack of “work for hire” language in your written contracts can cause problems, read my article, Why Guns for Hire Should Scrutinize Work for Hire Provisions, available on my GreatBusinessLawTips.com site.

I hear a lot of complaints from business owners about not getting paid . . . cash flow is an issue . . . and they’re concerned about meeting their own obligations. But when we start to explore how they can protect themselves from slow payers, I find that they’ve often left themselves exposed. Here are just a few areas where a little protection can go a long way:

• Charging interest. If a customer pays you late, you’re losing not just the fee (or the price), but also the time value of having the money in your pocket. Charging interest or late fees on late invoices can supplement that lost time value.

• Attorney fees.  One of the big impediments to bringing a lawsuit is the cost of hiring an attorney to handle the matter. If the other side had to pay your attorney fees (assuming you were in the right, of course), you’d then have a huge bargaining chip to resolve the matter sooner.

• Venue. If you do business with out-of-state clients, the last thing you want is to have to schlep across the country to bring a lawsuit against them. You can agree in advance to bring disputes in the courts to your home turf. That can also add valuable leverage.

These are just a smattering of the terms you can put in your arrangements.  But you need to have them in writing–which is why written contracts are so important. You often see them in sections of contracts called “boilerplate” or “general” or “miscellaneous.”  In fact, why do contracts have to be so long? How does all this “fine print” help–or hurt–you?  To learn more, I’ve created a handy booklet, Guide to Fine Print: How Contract Boilerplate Can Benefit–Or Bite–You, available through my GreatBusinessLawResources.com site.

We entrepreneurs have certainly faced kinder, gentler economic climates in our day. Cash–and cash flow–are king (or queen–choose the sovereign of your choice).

Here are some of the top tips offered by Mike McDerment, founder and CEO of FreshBooks, an online invoicing and time-tracking service:

1. Bill clients early.
2. Make bill-paying simple.
3. Request partial payments earlier in the project.
4. Use online recurring invoices.
5. Create a system for automatic late-payment reminders.
6. Keep employee morale up.

Finally, a favorite tip of mine: Have a written agreement outlining your payment terms.