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An Ounce of Prevention

ounce-of-prevention-1As Benjamin Franklin famously said, “an ounce of prevention is worth a pound of cure.”  As we continually emphasize to our clients, the best time to establish written agreements and procedures is before disputes arise. Given the fact that many business owners embark on new business ventures with family members, close friends, and other familiar business associates, it is not surprising that they frequently operate with the attitude of getting the business off the ground while “figuring everything else out later.”

Of course, we understand this perspective, and can appreciate that time and resources may be limited. Yet, succumbing to this trap often leads to significant unintended, negative consequences.  The results frequently include loss of valuable time and money, and the uncertainty of unwanted litigation. The cost of cleaning up mistakes is exponentially higher than hiring a good transactional lawyer from the beginning. Sadly, we have seen the closest of friends and family members end up in court, something that could easily have been avoided through thoughtful, proactive planning.

The following are some common pitfalls that could cause issues or disputes later on: operating without written agreements among business owners; failing to document key business transactions; inadequate corporate governance; disorganized management structure; tardiness in state or federal filings resulting in fines and penalties; and commingling of business and personal funds. To be sure, these are just a sampling: there are an endless array of traps for the unwary, uninformed business owner.

Having appropriate agreements and business structure in place is crucial for many situations:  the onset of catastrophic events; preparation for a business acquisition or merger; or the smooth transition of a business triggered by a founder’s disability, death or retirement.

As experienced business lawyers, we strategize with our clients on how to best resolve issues and disputes when they arise. However, we much prefer working closely with our clients to proactively plan and prevent these types of issues from ever arising. And frankly, it’s easier, less costly, and more effective. Our clients are grateful in either scenario – coming to us before or after a dispute – but the before has much less headache.  

We look forward to speaking with any business owners who feel that they could benefit from this type of proactive approach.   

Business Succession Planning Article

Oakland Business Review: Business Succession Planning

We are proud to announce that the Oakland Metropolitan Chamber of Commerce recently featured us in the September issue of the Oakland Business Review special section entitled, Law Offices of Oakland.

The article highlights how business owners often overlook succession planning when they first start out their businesses.  The reality is you can’t plan your path without first determining your ultimate destination. Are you building a company to pass down to your children or employees? Are you creating a business to be sold to a stranger? Without understanding your intention, you can’t develop or implement strategies and actions necessary to reach your goals. Nearly 80% of business owners say they want their businesses to survive them. And yet less than 25% have any type of written succession plan or “exit strategy”.  The all too frequent result is that businesses devolve into conflict and chaos when a founder dies, becomes disabled, or when business partners fail to share the same vision. Decades of blood, sweat and sacrifice go quickly down the drain, all for want of a simple plan.

A well crafted succession plan is as important as determining the type of entity best suited for the company; utilizing contracts and agreements that accurately reflect and protect business decisions; and understanding the legal requirements and procedures necessary to retain the financial and legal protections a business entity provides.

By preparing for the ‘What Ifs’ before they happen, business succession planning improves the likelihood of your company weathering the storms and quakes of an uncertain world. […] Click here to read more.

Employers’ Right to Require Arbitration Restricted in 2015

Effective January 1, 2015, employers will face tighter restrictions on their ability to impose arbitration of employment claims.

Assembly Bill 2617, recently signed by Governor Brown, reverses prevailing legal trends that have expanded the use of arbitration clauses in many types of contracts. Presently, many companies require new employees to sign agreements waiving their rights to file claims in court or with government agencies. Applicants who decline to sign these agreements are frequently denied employment.

The new law prohibits employers from requiring employment candidates to sign such broad arbitration agreements and further prohibits businesses from refusing employment to individuals who refuse to waive their legal rights to file a lawsuit or governmental complaint.

The bill is “prospective” only, meaning it applies to contracts entered into, modified or extended after January 1, 2015.

If you are uncertain whether your current employment contracts comply with the new law, contact our office for a review.

Does Your Business Showcase Your Passion?

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On a visit to Mexico City last month, I saw first-hand a stunning example of the danger of focusing on style over substance. It illustrated to me an important lesson for business owners: your ability to attract the clients and customers you want is directly tied whether you connect them emotionally with your company’s vision and mission. No amount of money can overcome your failure to make this connection.

The Mexican billionaire Carlos Slim is often cited as the wealthiest man in the world. Known as the Warren Buffet of Mexico, his business holdings include telecommunications, banks, hotels, airlines, and even a significant stake in the New York Times. He has also amassed a personal art collection estimated to be worth $700 million, and recently commissioned Latin America’s largest museum in memory of his wife to showcase those works.

With its aluminum-clad exterior, the museum looks like an alien spaceship come to rest amidst the tony retailers of Neuvo Polanco, Mexico City’s Rodeo Drive. So it was with high expectations that I entered the gleaming edifice. Unfortunately, those expectations were dashed.

Rather than a celebration of art and color, the interior of the Museo Soumaya is stark and sterile. In truth, I couldn’t leave fast enough, definitely not the reaction I’d hope for or anticipated. Those who know me know of my deep passion for art, yet Slim’s creation left me feeling cold and surprisingly uninspired.

Earlier that same day, I’d visited the infinitely more modest quarters of the Museo de Arte Popular. Located in a building so unobtrusive I nearly missed it, the museum is home to the most comprehensive collection of folk art is all of Mexico.

To say I was dazzled is an understatement. Inside the humble exterior is a riot of color and fantasy that left me grinning from ear to ear. Simply stated, this place has soul, soul, and more soul. Indeed, it personifies the glorious, beating heart that is Mexico. Make no mistake: I will be back, again and again.

So what does any of this have to do with business? In a word: everything.

The reaction I had to these two different cultural experiences represents the spectrum of reaction people are having to you and your company. Ask yourself at which end of that spectrum do you reside?

Is your company all flash and dazzle on the outside, but lacking warmth and soul inside? Do your customers come away feeling uninspired, or are they thrilled at the opportunity do business with you again and again? Stated another way, do they connect to you emotionally, or does your lack of passion leave them cold?

As a business lawyer, I look counsel my clients to articulate a vision that speaks with heart and feeling. Nothing excites me more than working with businesses who excite their customers so much that they can’t wait to share their experiences. That excitement starts with an owner who has found her or his true reason for being – the “why” – and can’t wait to let the world know it. Many entrepreneurs resist making that type of emotional appeal, and yet it can – and often does – make the difference.

Ask yourself: would you rather be mediocre or extraordinary? Money has nothing to do with it.

What Machu Picchu Teaches About Business Success

Just as in construction, when building a business, one’s success depends on the time and energy spent establishing a solid foundation.

Those who know me are familiar with my love of international travel.  In particular, I am fascinated in understanding why certain structures have survived the tests of time whereas others are but a pile of rocks and rubble.

Recently a friend and I visited Machu Picchu, most famous of the Incan temples.  We were both amazed by how well preserved the buildings are, despite the fact the ancient city sits on a mountain top that has nearly 100 inches of annual rainfall in one of the most seismically active regions on earth.

Without question, Machu Picchu is an “engineering marvel.” The ancient builders invested as much effort into creating a stable infrastructure for Machu Picchu—underpinned by layers of topsoil, sandy gravel, and granite waste rock—as on the visible buildings. More than 700 terraces retained and channeled moisture and preserved soil, reducing erosion while providing space for agriculture.

I use this particularly vivid analogy to illustrate an important lesson: the more thought, time and planning one spends in constructing the foundation for a business, the more successful that business will be in weathering the storms and quakes of an uncertain and often volatile economic climate.

Over the 30+ years I have counseled business owners, the more passionate I have become in advocating these concepts.  Without exception, the businesses I have seen fail are those whose owners were so eager to “get out of the blocks” that they overlooked the key building blocks necessary to ensure their long-term viability and success.

When starting a business, it is essential to ask:

(1) Have we identified and evaluated all the potential risks involved in our particular type of business?

(2) Have we determined what type of business entity is best suited for our particular enterprise, and which will provide us the most legal protection and financial benefit?

(3)  Do we understand clearly the legal requirements and procedures we must follow in order to retain the financial benefits and legal protections the business entity can provide?

(4) Do we have a plan to protect the company and its owners in the event of a catastrophic event?

Certainly, there are a many other issues that must be considered.  If you’d like a list other questions you should be asking, email me at brian@brianaripley.com.