As experienced general practice attorneys, we advocate strongly for preparation and prevention for privately business owners. With the proper foresight in place, conflicts, disputes and emergencies are preventable. As an additional resource for you, we have provided a Business owner checklist of common legal oversights to consider.
Common Legal Oversights
1. Not paying close enough attention to contract terms.
Contracts and terms and conditions contain significant provisions that may not be considered much when a business relationship is going well or the parties want to close a deal. When problems arise the contract language is central to a positive or negative outcome. Warranties, disclaimers, indemnities, jurisdiction clauses, fee shifting provisions and user provisions greatly affect the outcome.
2. Not having key personnel execute noncompetition agreements.
Noncompetition agreements are alive and well, with recent Wisconsin case law favoring enforceability by allowing severance of unlawful provisions from valid restrictions. Noncompetition agreements should be considered when an employee or independent contractor is in a position to move clients should he or she go to work in competition with your business.
3. Not protecting confidential information.
Practices in day to day operations are essential to protect confidential information and enforce confidentiality agreements.
4. Not maintaining corporate and shareholder records.
Corporate records need to be kept up to date to maintain both liability and personal protection and create a record of approved actions. Shareholders records establish ownership, control and tax basis.
5. Not protecting trademarks, service marks and brand names.
Trademarks, service marks and brand names that are being used to distinguish the company or its products should be protected. Registering a mark confers greater rights to a mark — there are presumptions of ownership, validity and greater legal recourse in a registered mark.
6. Not executing succession plan agreements.
Buy-sell and shareholder succession plan agreements are important business planning documents. Most business owners do not want non-active persons or the heirs of their business partners as co-owners. Agreements must be formalized to be enforceable against the spouse or heirs of a business partner.
7. Ignoring business disputes.
Time can work against a person’s standing or rights. No action suggests acquiescence. It is generally always best to deal with problems as soon as they occur. Statutes of limitations and filing deadlines need to be met.
8. Losing track of bank guarantees
— and continuing to guarantee a loan when you are no longer a principal. Banks typically require personal guarantees on corporate bank loans for companies until the company reaches a certain asset level. When a bank is refinancing a corporate loan, often there are no new personal guarantee documents that are executed, as the bank is continuing to rely on earlier personal guarantees. A person may be surprised to find that he or she is still guaranteeing a corporate loan.
9. Not establishing a long term relationship with a business lawyer.
A successful business will have ongoing legal needs. Best practices are implemented in the normal course of business, not after the fact or in an emergency. Knowing a business, its history and culture is significant for effective legal counsel.