Most small and medium sized companies make many common mistakes that easily with little effort and only a little effort could be avoided. However, the companies making the same mistakes again and again. This article, based on Georgia law, be identified nine common legal mistakes and take the steps that companies can avoid them. Although this article will help you identify and understand some important points, you must contact an attorney in your jurisdiction in relation to the consultationlaw in your jurisdiction, and also about the particular factual circumstances that affect your business. This article is based on a presentation the author recently gave to a business.
Mistake No. 1: Failure to follow the prime directive. What is the prime directive? It is a nearly universal rule regarding legal issues and can be stated as follows: It is almost always cheaper to address a legal issue on the front end (such as by preparing a proper contract) than to address it on the back stop (eg litigation). Many entrepreneurs know that they should pay more attention to the legal issues, but they decide instead to ignore the questions, or try to get with homemade solutions. In cases in litigation over twenty-five years, I can not even speculate how many times disputes could have been avoided if there is a problem just mentioned, before it became a controversy. If you do something in this article, remember the Prime Directive.
Error No. 2:Know Failing to Protect company with limited liability. Most of the entrepreneurs that they should form a partnership or a limited liability company ( "LLC") for their business and know that offers this protection for their personal wealth. It is true that the "corporate veil" is the personal assets of many types of liability to protect (do not forget, however, also have a good insurance program). However, many entrepreneurs are not aware that in certainCircumstances will, courts "pierce the corporate veil", ie it will search through the responsibilities of companies, Shell and other shareholders and, subject to personal liability. This occurs when a court determines that the Company or LLC, used for "fraud has been." However, from the perspective of a business person, a better explanation is that the veil can be pierced if the business is not right as a separate legal entity be held.
Courts look for certain clueswhen considering whether the corporate veil to penetrate to pay, including (1) of the company for personal debts and liabilities, (2) not maintaining separate personal and company bank accounts, (3) not maintaining proper corporate records such as meeting minutes or unanimous decisions (this happens all the time), not documented (4) shareholder loans to the Company, (5) Not maintaining proper accounting records, (6) Signing company documents (letters, etc.) in apersonal, rather than a business capacity (ie, not as an officer of the signing of an undertaking) and (7) not the full name in shops (ie not with "Inc." or "Ltd." on letterhead, business cards, purchase orders, and business forms). I am not saying that will guide you through the waiver of any of these things in piercing the corporate veil. In fact, piercing the corporate veil is a little difficult. However, the point is that it not involve a need for this risk. ProperCompliance with these formalities may also be important to potential investors or potential merger and acquisition partners.
Error No. 3: No understanding of the impact of the sales discussion. Most business people understand a guarantee of a written undertaking, in either a contract or a product that says what the manufacturer or seller if it will do a problem with a product made available. It is true that these documents are guarantees. However, the law continues.Your Sales people make statements in the context of the sale also provide guarantees.
Sales people love lawyers, because sales staff have many children placed lawyers helped by the school! Here is how the problem can occur: Sales people are trained in general, think of themselves as consultants. Sales staff can make recommendations, they can make very specific statements about the capabilities of the product, and can even prepare custom 'repay' reports or otherwritten reports on the benefits of the product for the customer. Although this approach is quite successful in generating sales, it may be unintentional explicit guarantees.
Under the Uniform Commercial Code (UCC), a confirmation of the fact about the goods that are part of the basis for the purchase may be an express warranty. Descriptions and samples of the product, part of the basis for the acquisition may also express warranties.There is probably no way to avoid this risk completely. However, there are some common sense steps that are being made to reduce the risk that can not reduce this turnover. First, if a seller a repayment analysis or similar document, no statements regarding the performance should be appreciated as "" or "exemplary" and that the actual experience can be described vary creates. Of course, it is also very important to backup data and experience have made estimates! Second, all efforts should be made in order toThe customer must sign a written contract or conditions which state that the only guarantee is a written guarantee in the contract or the terms are explained and that the contract or replace all prior discussions, negotiations and agreements. It is best to have an experienced lawyer to review your sales of both techniques and prepare a model contract and terms.
Error No. 4: Non-hostile implied warranties. The UCC provides for an implied warrantyRequired for the sale by the dealer. The implied warranty of merchantability provides, in essence, that is goods, fair and average quality, and would pass without objection in the trade. The implied warranty of fitness for a particular purpose comes into play, if a seller has reason to know that a buyer is to purchase goods for a particular purpose, and is based on the expertise of the seller to deliver the appropriate goods. When these factors come into play (which they often are, given theTendency to act as a consultant, the seller), then there is an implied warranty that the goods are fit for purpose.
Implied warranties can create a lot of problems for the seller. Implied warranties come into play only when there is a dispute. Moreover, implied warranties are described in very vague terms in the UCC. This means as a practical matter, that what is implicit guarantee "actually means" is only the counsel for the plaintiff, shall be there after a quarrel. Based onmany years of experience, there are few creatures more creative than a plaintiff's lawyer!
Fortunately, however, the UCC also generally allows implied warranties to be disclaimed. This can be easily done, but there are some "magic words" that need to be used. It is best to have a proper disclaimer in your written contract or terms and conditions. It is again a good idea for counsel to prepare or review the contract or the terms and conditions. Please note that there are additional Questions, if you sell consumer goods, so be sure your lawyer will address these issues.
Error No. 5: Not the protection of trade secrets and confidential information. Many entrepreneurs think of "intellectual property" such as patents, copyrights and trademarks. It is true that patents, copyrights and trademarks are important forms of intellectual property. However, trafficking, especially for small and medium enterprises, the main forms of intellectual property oftenTrade secrets and confidential information. But many small businesses do not take adequate steps to protect them.
What is a trade secret? Under Georgia law, many kinds of information can qualify as trade secrets, including business plans, secret formulas, computer programs, customer lists, and other information. The Georgia Trade Secrets Act, there are many types of information that may charge the quality, and this list is not exhaustive. In general, the information must meet threeElements that qualify as trade secrets: (1) it must not become generally known (that is, there must be a secret), (2) it must be in actual or potential economic value was not known, and (3) it must be subject to adequate efforts to maintain its secrecy.
Other confidential information may not rise quite to the level of a trade secret, but can also provide information that a company wants to think of the competition. The boundary between a trade secret and other confidential information is a gray, butboth trade secrets and other confidential information should be protected. Unfortunately, many companies have no protection of trade secrets and confidential information appropriately.
What measures should be taken? First, staff consultants, actual and potential suppliers, the actual and potential customers, and perhaps others, should be subject to access to trade secrets or confidential information, trade Non-Disclosure Agreements ( "NDA"). NDAs are also known as confidentiality agreements. Itis very important that NDAs are made for special circumstances, "because" no one size does not fit all. "Furthermore, it is important that other security measures in force, such as limiting the disclosure of trade secrets and confidential information to those who really need it will have to set the access to keep printed documents under seal, and with password protection for electronically stored information. There are many other steps that could be taken. trade secrets, confidentialInformation and NDAs are very important issues.
More information is available on a three-part podcast series, which can be accessed on the website of our office are available. But with the implementation of a program in force, and especially in preparing NDAs, it is very important to include advice, for there are many things that are not readily apparent to an untrained person.
Thus, Part I of this Article. In Part II we will cover additional issues.
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