dec seminar session 3 contracts
DESCRIPTION
TRANSCRIPT
Drafting Contracts & Agreements
What You Should Know…Important Agreements & Provisions
Primary Legal Objectives When
Representing Entrepreneurs
Protect business assets Protect business owner from personal liability
Get Your Contracts in Writing!
With written contracts, no “he said, she said”
Get something in writing! Ohio courts have recently held that Email
communications can constitute contracts. Clearly define all terms
Get Contracts in Writing, cont.
State performance to be provided by parties Payment amount and timing of payment Disclaimers and limitation of liability Termination and Default Indemnification Confidentiality provision Choice of law provision Warranties
Commercial Contracts: Business to Business
Additional provisions to Include: Attorney Fees Costs of Collection Liquidated Damages
Get Contracts in Writing, cont.
Contracts should be dated
AND Signed by all Parties involved in transaction
How to Execute Contracts
Execute contracts in the name of your business entity to protect you from personal liability.
Example:
Worley Law, LLC
By:_______________
Caroline Worley
Its: Sole Member/Member
Collecting on Your Invoices
4 steps to collect payments Attempt to collect on your own
Send a short letter from an attorney File lawsuit Negotiate with customer for some payment Example
Specific Agreements: LLC Multi-Member Operating Agreement & Corporate Bylaws
Multi-Member Operating Agreement & Corporate Bylaws* How will the Company be managed?
* Will the Majority rule? What happens if deadlock?
* Who will manage the company?
* Capitalization and funding of company and issuance of
ownership certificates
* How are profits and losses to be allocated among owners – in
proportion to capital contribution or membership interest?
Take time at beginning or inception of business to determine these issues to avoid costly litigation later!
Buy-Sell Agreements
Purpose: In the event that an owner of a company wishes to voluntarily dissociate from the company or in the events of death, disability, bankruptcy, or other defined events, a Buy-Sell Agreement dictates how that person’s ownership is valued.
Buy-Sell Agreements, cont.
Buy-Sell determines the amount a business owner is to be compensated for ownership in the business
Agreement sets forth how value to be determined – i.e., average of 3 appraisers OR value can set at time business created
Right of first refusal if third party offer to purchase* To Company or its Members proportionately* To Heirs – management issue arises – assignee* Husband-Wife owned companies –reversion
Examples
Work for Hire
If hired to complete work for another, make sure it is clear in your Agreement who owns the work product and how it can be used after created.
Define ownership in the event of non-payment
Example – Software code creation
Does the Home Solicitation Sales Act Apply to Your Business?
Definitions & Who the Act Applies to: “Home Solicitation Sale” is a sale of consumer
goods or services in which the seller engages in a personal solicitation at a buyer’s residence, including solicitations in response to an invitation by the buyer.
“Consumer Goods or Services” goods or services purchased primarily for personal, family, or household purposes.
Does the Home Solicitation Sales Act Apply to Your Business?
This Act does not apply to: Contracts for less than $25 Transactions conducted entirely by mail or telephone if
initiated by the buyer The buyer initiates the contact and the seller has a business
establishment at a fixed location where the goods or services are regularly offered or exhibited for sale.
The buyer initiates the contact by specifically requesting seller to visit buyer’s home for the purpose of repairing or performing maintenance on personal property.
Sales of real property with a licensed broker
If the Home Solicitation Sales Act Applies to Your Business
Must comply with Act if your business falls within the confines of the law – 3 day right of rescission
See the Ohio Attorney General Website http://www.ag.state.oh.us/ Handouts Example Inbar Designs Penalties for non-compliance
Protecting your Trade Secrets:
The Value of your Company
Definition: A trade secret is information that derives independent economic value from not being generally known or readily ascertainable by proper means to others and are the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
i.e., client lists, business processes, marketing strategies, etc.
If protected, cannot be used by others in competition Example
Ways to Protect Trade Secrets
Confidentiality Agreement Non-Solicitation Agreement Non-Competition Agreement Work Place Policies & Employee Handbook Passwords and locks/access
Commercial Leases
Tenant Market – Deals Plentiful due to high vacancy A badly negotiated lease can cripple a business Key issues to address:
Tenant Improvements Default and Termination provisions Negotiate low option rates long term No personal guarantee Landlord Maintenance of HVAC and other systems Caps on CAM – avoid hidden “additional rent”
Example
Purchasing Real Estate
Buyer’s Market Key issues to address:
Due diligence – timing and deposits – make refundable Allow for Extensions Default and Termination provisions Title Search for Defects Appraisal should at least equal purchase price Put contract in name of Company Allow for Attorney Review Inspections & Financing Contingency
The Most Important “Legal” Issues a Small Business in
Ohio Must Address
Contact Info
Caroline Z. Worley, Esq.Worley Law, LLC
28 Westerview Drive
Westerville, Ohio 43081
614.670.9458
www.WorleyLawllc.com
www.OhioWomenInBusiness.com
Questions?