Pay attention to legal issues now or pay a lawyer later
Chances are your attorney isn't high on the list of people you want to talk with these days. Representing another view, Marc Silver thinks it's "shortsighted" for a small business to avoid its attorney - or, worse, not to have one at all.
Yes, Silver is an attorney, a partner in the Chicago office of Barnes & Thornburg, LLP, an Indiana law firm with offices here, there, and in Michigan and Washington, D.C.
Silver emphasizes that planning ahead can keep most smaller businesses out of legal trouble.
The issues include protective clauses in your contracts, the business' structure, and when you can and cannot gain the protections that come with non-competes.
Contracts first. "Suppose you sell widgets," Silver begins, "and one of your customers says 'I don't like the widgets you sent, and I don't want to pay.'
"The typical reaction is 'Marc, I want to sue - and I want him to pay attorney's fees.'"
That's all well and good, Silver says, but the contract you have with your customer needs an attorney's fees clause if you hope to get the other party to pay those expenses. There's more, too.
"If you're selling on the Internet, you're selling all over the country," Silver says. "Suppose you have a dispute with a buyer in South Dakota. Do you really want to go there for a court case? The plane fare may be more than you'll collect."
The answer is to have a venue clause in your contract. Our contracts at 121 Marketing Resources, for example, clearly state that all court-related disputes will fall under ". . .the exclusive jurisdiction and the exclusive venue of the state courts located in DuPage County and the federal courts located in Cook County, State of Illinois."
The contract also stipulates that the winning party in a suit shall recover its costs, including attorneys' fees. In other words, the loser - which could be us - pays.
In fact, says Silver - FYI, neither he nor his firm represents my company - you really don't want to go to court.
"I'm a litigator, but litigation is essentially a loss for everyone. When problems get to me, they're expensive to solve."
Potential problems also include business structure.
"The tax setup is important," Silver says, "but so is a change in ownership. What if someone is hit by a bus? What if there's a divorce, and suddenly the daughter-in-law you don't like now has a stake in your company?"
Non-competes? Timing matters. You can make a noncompete part of a new employee's agreement, Silver says, but you can't slap a non-complete clause on an individual you already employ unless you compensate that person with additional pay.
A token check won't work either. Courts want to see "a material increase" when a noncompete is imposed on current employees, Silver says.
Questions, comments to Jim Kendall, JKendall@121MarketingResources.com.
© 2008 121 Marketing Resources, Inc.