In the business world, contracts make up the bedrock of nearly all business relationships, whether those are with vendors, partners, customers, or employees. Contracts create a framework within which the relationship will function. They governs these relationships, and provide the necessary legal and other protections for all parties that business requires. A contract that is well written can help a relationship prosper. It can also prevent the need for litigation or even help a business win in a situation where disputes do end up going to court.
But what happens when a contract is unethically or inaccurately written? While a bad, or poorly written contract cannot provide a healthy framework for a business relationship, it also leaves the parties involved exposed both legally and financially in the eventuality of a dispute. Such contracts may be deemed unenforceable in a court of law. Therefore, the prudent businessperson considers his or her contracts and ensures they are legally binding in all circumstances.
As you review your own contracts and negotiation process, here’s a quick list of questions to keep in mind:
• Is the contract fair? – If there are terms anywhere in the contract that a judge may construe as grossly unfair, they can determine it unenforceable. Any time one party has a considerable advantage in a contract, a judge may indeed be likely to find it unconscionable, which voids the contract.
• Was there any misrepresentation? – Any misrepresentation during the negotiation process can result in a judge declaring a contract invalid.
• Was there coercion or duress involved in the negotiation process? – Though it may seem quite ethically clear, determining coercion or duress in a courtroom can be complex and can result in the invalidation of the contract. Shrewd businessperson ask if their business is doing everything it can to protect itself from having such claims brought against it.
• Is the contract error free? – It may seem like a small thing, but even unintentional errors could have meaningful impact on the enforceability of the contract in a court of law. This is true for both parties, so to protect yourself, carefully review the entire contract to ensure it is error free.
• Is the contract even possible to enforce? – Events may take place or circumstances may change that make it impossible for one or both parties to fulfill the terms of the contract. This would legally render it unenforceable as well. Common examples of this are natural disasters.
• Do all parties have the capacity to understand the terms of the contract? – If it becomes clear that one or more parties involved does not understand what they are agreeing to, the contract can be found invalid due to a lack of capacity. This could be the mental capacity of one or more parties, or simply their inability to understand the actual language of the contract.
• Was there a failure to disclose? – If any parties to a contract withhold important information that is determined as misrepresentation in a court, the judge can use this as grounds to nullify the contract.
• Were any parties influenced or pressured into signing the contract? – If a judge determines that one side was pressured into signing a contract, they can and will invalidate the contract. Examples of this are threats to a person’s livelihood or reputation.
• Were there any breaches of public policy? – If any part of the contract requires either party to behave in any manner that is illegal to full its terms, or if they are required to forfeit any legally guaranteed rights, the contract cannot legally be enforced.
While the subject of IP law is often met with hesitancy or even disdain by business owners for fear of its complexities and their risk to having their ideas being stolen without being able to prevent it, understanding these laws in order to better protect your business is not actually as hard as many business owners make it out to be.
Don’t fall into the trap of thinking this topic doesn’t apply to you either. If you are successful in business long enough, the chances are someone is going to try to steal your ideas. If you aren’t properly prepared before something like this happens, the consequences to your business could be utterly devastating.
So let’s get started right here and now by going over some of the basic things every business owner should know about intellectual property law in order to better protect themselves from the theft of their intellectual properties.
To start, the legal language of intellectual property law requires understanding a few terms:
· Trademark: A trademark is any design that is tied to or identifies a specific product.
· Copyright: A legal claim of creative ownership to protect those who produce books, music, art, etc.
· Patent: A group of limited-time rights granted, in the US, by the US Patent and Trademark Office. These are given to inventors or assignees of inventions to protect it from being copied without consent.
· Service Mark: This is a specific kind of trademark that service providers use to identify themselves.
· Collective Membership Mark: Such a mark is an indicator of membership in a particular organization.
So what actually constitutes “intellectual property?”
The first step as a business owner is to take stock of the intellectual property you already have. Due to the rapidly changing nature of technology and our dependence upon it, the definition of intellectual property has also evolved rapidly prompting the need for businesses to assess or reassess their stock of intellectual properties and the patents, copyrights, or trademarks they need to protect themselves.
Here are common examples of intellectual properties any business needs to protect:
· Company Name and Logo: Brand recognition is huge and your name and logo are essential to this. They must be protected.
· Your Company Website and URL: While such things were unimaginable as IP even 25 years ago, they are some of the most essential things businesses should protect today.
· Proprietary Technology and Software: Attaining patents for any technology or software your company develops is an essential step of protecting your intellectual property.
· Think Globally: Traditionally, businesses only had to adhere to one nation’s set of laws about intellectual property rights. If your business is international or thinking about going international do the research to protect your IPs on a global scale.
While some parts of intellectual property law have been around for hundreds of years, the dramatic evolution in technology and business over the past quarter of a century has redefined how such traditional pieces of IP law are seen and utilized to protect business assets. Keeping up with current IP trends, therefore, is essential as well.
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7/3/2015 0 Comments
For any number of reasons the owner of a business may find him or herself in a position where they want to sell the business. This is not always a reflection of the business being in bad shape. Rather, owners often sell to make a profit off of their hard work. In other cases, it’s simply time to retire or hand off the family business to the next person in line.
No matter what the reason you may have for wanting to sell your business, there are a few things you should keep in mind about the different options you have when it comes to transfer of ownership.
What type of business is it?
As with all other legal matters concerning your business, the type of business you own is central to making the right decision on how to transfer ownership. A partnership requires a different process than an LLC or a corporation as well as different tax procedures and implications. So before going any further, seek out sound legal advice on the steps your specific type of business needs to go through to transfer ownership. In almost all cases, there are enough unique situational contexts that speaking with a lawyer an extremely prudent idea.
Is it a family business?
Because of the unique status of family businesses with the IRS and most states, there are often more tax issues and responsibilities associated with a transfer of ownership than with a simple sale. It’s essential to seek out the advice of a business lawyer to ensure things like gift and estate taxes are handled properly to limit liability. Anytime you know you are going to hand off your business to a child or family member when you retire, it is highly recommended to get a business lawyer involved early to begin planning for the succession. A lawyer can help you plan to minimize tax obligations and ensure a hassle-free transfer when it comes time to hand off the family business.
Selling the business outright
Selling a business outright is often the best option when you need cash quickly. Typically a scenario where a business is underperforming and an owner knows they have neither the time nor the resources needed to correct the direction the business is headed would be ideal for an outright sale. It would be prudent to locate a buyer who does have the time and resources needed to help the business and conclude the sale as quickly as possible. In this case, ownership of the business and all assets would transfer immediately upon receiving payments.
Selling the business on a payment plan
Sometimes the buyer, the seller, or both need a bit more flexibility in order to close out a sale. In such cases, a gradual sale remains a strong option. While the day-to-day running of the business would be transferred, the original owner would retain part of the assets that would be paid off on a monthly basis. This provides the advantage to the seller of a continual monthly income without having to work all the time anymore. It also provides the buyer the advantage of being able to get into the business without having to have all the money up front. Every sale is situational, but this remains a strong option for many owners looking to sell.
Using a lease agreement
There are situations where a business owner may need to leave the business for an extended period of time and find it’s best to turn it over to someone else during that absence. In such cases, the owner could lease the business to a new temporary owner. This would provide the seller with income while away from the business while retaining the freedom to return when they are able. To the buyer, this offers a great and inexpensive way to earn income and experience running a business without the long-term commitment most business owners must take on.
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If you own or operate a business, you are likely already aware of the reasons you want to avoid litigation. First, litigation is very expensive, and beyond that, it can sap a lot of time and resources away from the day-to-day business of making a profit and meeting your customer’s needs. One of the most common of all types of litigation cases businesses have to deal with is a lawsuit from an employee. Therefore, shrewd businessmen take precautions to avoid such lawsuits ever happening in the first place.
Here’s a list of few quick tips to help your business mitigate the risk of an employee lawsuit:
1. Ensure nonexempt employees are treated as such. Non-exempt employees are mostly always entitled to overtime pay if they work more than 40 hours a week as stipulated in the Fair Labor Standards Act. In most cases, the majority of a business’s employees are nonexempt. Ensuring they receive overtime pay when they do work over 40 hours can eliminate one of the major causes of employee litigation.
2. Ensure exempt employees are treated as such. Conversely, if an employee is an exempt employee (on salary), they do not earn overtime when working over 40 hours a week. However, they cannot be docked for showing up late or working less than 40 hours a week either. If an exempt employee has their pay docked, their status may legally become nonexempt. Avoiding such complexities is another way to steer clear of a common cause of employee lawsuits.
3. Prevent Discrimination. Another very common source of employee lawsuits is discrimination based upon something like disability, pregnancy, religion, nation of origin, race, age, gender, or, in some states, sexual orientation. Actively working to prevent any cases of such discrimination can be an essential proactive step in minimizing your business’s litigation risk.
4. Equal pay for equal work. This has continually been a hot-button issue over the past few decades, but to protect yourself as an employer, make sure that two employees doing roughly the same job make roughly the same wage. Keep in mind that it’s fair and appropriate to make allowances in cases where one employee performs better or has more experience. Additionally, wages should be set upon market standards instead of individual variables. Doing so shows your intent to provide fair wages to all employees which severely limits your exposure to litigation over such incidents.
5. Ensure all workplace rules are fair and reasonable. Focus workplace rules on things that directly affect workplace performance and standards. Having too many rules is just asking for a discrimination case, but having too few also puts the company at risk for not doing enough to prevent a hostile environment. Carefully consider all rules and possible litigations that could result from them to help minimize risk in this area.
6. Don’t let employees work when they are off the clock. Though this happens at many disreputable companies, it puts them at extreme risk of litigation. It’s important to note that even if you don’t ask an hourly employee to work off the clock, you still owe them for it if they do. So actively educating your staff to prevent such situations can greatly limit your liability.