Most small and medium-sized businesses make common flaws that could be easily avoided with little cost and just a couple of efforts. However, businesses make the same mistakes over and over. This information, which is based on Georgia laws, will identify nine widespread legal mistakes and the ways businesses can take to avoid these individuals. Although this article will help you discover and understand some tips, be sure to consult with a lawyer through your jurisdiction regarding the law in the jurisdiction and also about the specific factual circumstances that impact your business. This article is based on the author’s recent presentation to a business.
Mistake Number 1: Failure to follow the best directive. What is the prime enquête? It is a nearly universal guideline regarding legal issues. It can be mentioned as follows: It is almost always cheaper to deal with a legal issue on the top end (such as through preparing a proper contract) than to address it on the tailgate end (such as through litigation). Many business people know they should pay more attention to legal issues. However, they ignore the problems or try to get by with
homemade solutions. In litigating cases for over twenty-five years, I cannot even guess how many instances litigation could have been avoided if an issue had been addressed before there was some sort of dispute. If you take away everything from this article, remember the primary directive.
Mistake No. Only two: Failing to Protect Limited Burden. Most business people know that they must form a corporation or a LLC (“LLC”) for their business and that doing so offers security for their assets. It’s true that the “corporate veil” will protect personal possessions from many types of liability (do not forget, however, to have a good liability insurance program). However, many business people are not aware that, in certain circumstances, surfaces will “pierce the corporate veil”
meaning they will look at the corporate liability shell along with subject shareholders and others for you to personal liability. This develops when a court determines that this corporation or LLC continues to be used for “fraud. “However, from the business person’s standpoint, a much better explanation is that the veil might be pierced when the business is not adequately maintained as an individual legal entity.
Courts search for particular indicia in thinking about whether to pierce the organization veil, including (1) utilizing the corporation to pay personal financial obligations and obligations, (2) not maintaining separate personal as well as company bank accounts, (3) not maintaining proper corporate data, such as annual shareholder conference minutes or unanimous permission resolutions (this happens all of the time), (4) not recording shareholder loans to the organization, (5) not maintaining correct accounting records, (6) placing your signature to company documents (letters,
and so forth ) in a personal, instead of a business capacity (i. age., not signing as a policeman of a corporation), and (7) not using the complete company name in doing business (i. e., not using “Inc. ” or “LLC” about letterhead, business cards, purchase orders placed, and business forms). We are not suggesting that failing to do any of these points will result in piercing the corporate veil. Piercing the corporate veil is somewhat tricky. But the point is that there is no need to get that risk. Proper observation of these formalities may also be vital that your potential investors or possible merger and acquisition spouses.
Mistake No. 3: Not really Understanding the Consequences of Product sales Talk. Most business people comprehend a warranty as a written starting, either in a contract or even provided with a product, that states what the manufacturer or owner will do if there is a problem with a product. Such documents are indeed warranty information. However, the law goes further. Statements your salespeople help make in the sales process may also make warranties.
Lawyers love sales guys because salespeople have helped put a lot of lawyers’ young children through college! Here is how the condition can arise: Salespeople are usually trained to think of themselves while consultants. Salespeople may make selections, they may make exact statements regarding the capabilities of the product, and may even prepare custom-made “pay back” reports or maybe other written reports in connection with the benefits of the product for the buyer. Although this approach is undoubtedly influential in creating sales, it might result in unintended express warranties.
Within the Uniform Commercial Code (“UCC”), any affirmation of simple facts regarding the goods that are part of the basis for the great buy can create an express extended warranty. Descriptions and samples of the merchandise that become part of the base for the bargain can also make express warranties. There is probably no way to avoid this risk. However, some common sense measures can lower danger without lowering sales. Initially, suppose a salesperson is setting up a payback analysis or
identity document. In that case, any statements concerning performance should be described as a reasonable “estimate” or “illustrative, inch, and that experience can vary. Of course, it is also essential to possess data and experience copying any estimates! Second, every effort should be made to get the customer to sign off on the written contract or conditions and terms that state that the only guarantee is the written warranty set by the contract or the conditions and that the contract or conditions supersede all prior conversations, negotiations, and agreements. Having an experienced lawyer each review your sales techniques and preparing a standard contract or terms and conditions is advisable.
Mistake No. Four: Not Disclaiming Implied Guarantees. The UCC provides suggested warranties that apply to just about any sale by a merchant. Typically the implied warranty of merchantability provides, in essence, that merchandise will be of fair and average quality and would likely pass without objection from the trade. The implied extended warranty of fitness for a particular function comes into play when a seller possesses reason to know that a consumer is acquiring goods for that purpose and often relies on the seller’s expertise to create suitable goods. If these kinds of circumstances come into play (which they often can, given that salespeople see consultants), then there is an intended warranty that the goods fit the purpose.
Implied warranties can make a lot of problems for sellers. Intended warranties come into play only once there is a dispute. Further, intended warranties are very vaguely detailed in the UCC. This means, for a practical matter, that what strictly an implied warranty “really” means will be revealed solely by the plaintiff’s lawyer immediately after a dispute. Based on a great deal of experience, few critters are more creative than a complainant’s lawyer!
Fortunately, however, the UCC will often allow implied warranties to be disclaimed. This can be quickly done, although there are some “magic words” that really must be used. It is best to have the proper disclaimer in your written commitment or terms and conditions. It is a good idea for the council to organize or review the written agreement or the terms and conditions. Please note that you have additional issues if you offer consumer goods, so be sure your lawyer addresses these issues.
Mistake Number 5: Not Protecting Buy and sell Secrets and Confidential Details. Many business people think of “intellectual property” as patents, terme conseillé, and trademarks. It is genuine that patents, copyrights, and trademarks are essential forms of mental property. However, particularly for small and medium-sized businesses, the most critical kinds of intellectual property are buying and selling secrets and confidential details. However, many small businesses do not take adequate methods to protect them.
What is a buy-and-sell secret? Under Georgia regulation, many types of information may meet the criteria as a trade secret, which includes business plans, secret formulations, computer programs, the customer provides, and other information. The Ga Trade Secrets Act provides many types of information that may be top quality, and the list is not supposed to have been exhaustive. Generally, information needs to meet three elements to be approved as a trade secret: (1) it must not be generally identified (i. e., it must be any secret), (2) it must get actual or potential economical value from not being identified, and (3) it must be susceptible to reasonable efforts to maintain it is secrecy.
Other confidential details may not quite rise to the level of a trade magic formula but may be information that a business wants to keep from the competition. The line between a business secret and other confidential facts is gray, although both trade secrets and confidential information should be secured. Unfortunately, many businesses do not shield trade secrets and top-secret information adequately.
What ways should be taken? First, staff members, consultants, actual and likely suppliers, actual and potential clients, and perhaps others having access to business secrets or confidential facts should be subject to nondisclosure legal agreements (“NDAs”). NDAs are also often known as confidentiality agreements. These NDAs must be crafted for particular circumstances because “one size does not fit all. ” In addition, it is essential to fit other safeguards in place, including limiting the disclosure connected with trade secrets and top secret information to those who need to have access, maintaining complex form documents under lock in addition to the key, and using password safeguard for electronically stored facts. Many other steps could be taken. Trade secrets, top-secret information, and NDAs are undoubtedly essential subjects.
More information can be purchased on a three-part podcast set that can be accessed on our law firm’s website. However, in putting a program in place and drafting NDAs, it is essential to involve counsel since many issues are not commonly apparent to an untrained man.
This concludes Part partner and me of this article. Part II, below, cover additional issues.
Bob L. Watkins is a small business litigator and legal business representative for Chorey, Taylor, along with Feil, A Professional Corporation, profitable business litigation, and business lawyer in Atlanta. John provides businesses of all sizes and has now written and spoken generally on helping domestic and international business people understand and navigate the legal process. After practicing with a substantial law firm for over twenty years. Bob joined Chorey, Taylor, and Feil in 2007 for its high quality, smaller size (20 lawyers), and ability to give buyers more responsive and more
considerable touch service. John practices primarily within the education business litigation, handling situations involving trade secrets, insurance plans, shareholder and corporate disputes, business contracts, construction disputes, product or service liability, and other commercial concerns. John also negotiates, breezes, and reviews sales, nondisclosure agreements, and other deals. John is active in the global business and legal neighborhood and represents several international organizations or their U.
T. subsidiaries. He is also a signed-up mediator. John graduated 1st in his class from the College or university of Georgia Law University in 1982. John is scored AV by the Martindale-Hubbell Regulation Directory, its highest score, and is rated 10. zero by the AVVO website, which is the highest rating. John was named in 2008 and also 2009 to the list of Ga Super.
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