dec seminar session 3 contracts

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

czw@WorleyLawllc.com

www.WorleyLawllc.com

www.OhioWomenInBusiness.com

Questions?