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My Business Partner and I Are Both Successful and Friends – Why Ruin it With an Agreement?

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If you are starting a business with your friend surely a written agreement defining your business relationship is unnecessary. After all he has watched your children, stood next to you at your wedding, sat up late with you through college finals, so what could possibly go wrong?

Not so fast.

Even though a partnership agreement, if that is the legal entity you decide to form, is not necessary to start a business, it is good advice to write down the parameters of your business relationship, even if that partner is your best friend.

Partnership agreements deal with numerous decisions upfront and help you and your new partner both think about and deal head on with the issues of a business relationship that may not have occurred to either of you as friends. You can decide, in writing, how all allocation of profits and losses will occur, how the partnership will make decisions, divide up management duties, discuss the possibility of admitting new partners in the future and lay out terms to wind up business if things do not go so well.

By deciding these issues before-hand, both members of a new venture will be fully aware of exactly what to expect, and how to handle the wide variety of issues that come at you every day in a new business. Having these decisions in writing also avoids the possibility of future disputes.

Agreements do not have to be complex, or expensive to craft.  It can be simple and clearly worded and include as much or as the little as you and your business partner want to address.  It is, of course, malleable and should be revised as both your circumstances and business opportunities change.

But partnership agreements and other business agreements not only preempt the possibility of litigation when disputes arise among business owners. In the sad event your partner dies, a pre-determined buyout or succession plan ensures the business will continue after your partner is gone. Not having to deal with these big decisions because you addressed them in advance will not only keep your doors open, but perhaps make dealing with the loss of your friend a bit easier.

So just because you trust your new partner- and trust them you must – and have a long and affectionate past with him doesn’t mean that a business agreement between you is frivolous. Quite to the contrary – it should be part of your business plan as you begin any new venture – rather than a negative or unpleasant conversation. In fact a written agreement between friends, now business partners, could end up saving not only your friendship, but keep the business alive for future generations!

Bergmann & Good is well positioned to both counsel you on the necessary terms for the form of entity best suited for you.  Call us if you would like to learn more.  It’s much less expensive to be structured correctly as you start your venture than calling because your former friend and partner has sued you and suddenly you need a lawyer.

My Company Has Been Sued – Now What?

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When your business is either sued, or simply faced with the prospect of litigation, your businesses records will likely come under scrutiny during the process. Most small to mid-sized businesses focus on the daily operations of their business, as they well should, but simple policies and procedures can protect you in the event the dreaded lawsuit arrives at your door. Think about the 4th generation business – a mid-sized company doing well with records going back to the 1970’s. If that business does not have a records retention and/or document destruction policy in place, and finds it easier to simply pile filing cabinet after filing cabinet in the “back room” the prospect of producing decades of documents can threaten the very health of such a company.

Once litigation is either threatened or has been initiated, both sides in any dispute must immediately cease the routine destruction of any documents that may be relevant to the issues at stake. This means employees cannot delete emails, clean out files, clear hard drives, or destroy paper documents. If you have a server that routinely cleans out archived documents and email, having a clear and simple document destruction policy in place for your business is just the first line of protection. It is likely that once litigation is commenced, your attorney and/or opposing counsel will send you a “litigation hold notice” which explains the obligations your business has to protect information relevant to the dispute. Failure to do so has a significant negative impact, such as the Court sanctioning the offending party including a presumption that what your business may have innocently and unknowingly destroyed contained documents proving your opponent’s case. This is, of course, fatal to your claims or defenses.

So now imagine that same 4th generation business is served with document requests including “all corporate minutes and financial information going back 10 years.” Unfortunately, you still have those records, which means your business will not only have to pay to have them copied and coded electronically, it will have to pay the company’s attorney to review them and properly produce relevant documents.

This task alone could mean this otherwise successful business will not make it to the 5th generation.

Now imagine that same business has a records retention policy requiring all financial information to be destroyed after 7 years, and all non-financial information be destroyed every 24 months. Once litigation is commenced all the record destruction would cease, regardless of the companies’ destruction policy, but it leaves a manageable mountain of information to sort through and resolve the dispute.

No small or mid-size business owner wants to think about litigation – but they should. Simple preventative measures can mean the difference in winning or losing your case. For most small businesses, even minor litigation can quickly become a “bet the company” case. Take precautions and have a document destruction policy in place. Educate your employees about the terms of your policy. Prevention is the best way for a business to survive litigation of any size. Bergmann & Good can craft a simple yet effective policy not only tailored to your business, but to your industry as well.

Call us if you would like more information

If You Are Shoulder Surfing Your Job Applicant’s Facebook Page, Read On…

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New Jersey is known as a state that is as friendly to its employee and job applicant inhabitants as the state is generally to its resident consumers.  Recent and pending restrictions further cement the state reputation by added more protections.  New Jersey employers and hiring managers need to be aware of the rapidly changing landscape.

 

For example, effective on December 1, 2014, New Jersey enacted social media password protection legislation.  This law forbids employers from asking job applicants to “provide or disclose any username or password, or in any way provide the employer access to, a personal account through an electronic communications device.” The law does not explicitly mention “shoulder surfing” — the practice of asking the interviewee to log into a social media account as the interviewer watches, but the language of the law hints that shoulder surfing — as well as other actions to gain more insight into an applicant’s private social media files — may be a violation of the law, resulting in penalties and civil liability.

 

Additionally, a new law that just took effect last month limits when employers may ask applicants about their criminal backgrounds.  Most employers are no longer permitted to ask about an applicant’s criminal record until after the employer has performed an interview and selected the applicant.  This includes job application forms.  Employers may inquire about the applicant’s criminal record immediately prior to making a formal offer, but not before.  Even then, there are certain restrictions for convictions over 5 years old.

 

Finally, employers should be aware there is movement in both the state and federal legislatures to restrict credit checks on potential applicants.  A bill currently in the New Jersey Assembly would prohibit credit checks except where the employee’s credit history is “an established bona fide occupational requirement of a particular position or employment classification.”  The bill has not yet passed, but it’s something to watch.

 

As seen above, major changes to New Jersey employment law have taken effect in just the last six months, with more changes possible on the horizon.  It is prudent for employers and hiring managers to be adequately informed about the rapidly changing practices in employment law in New Jersey and nationwide.

 

As experts in business law, Bergmann & Good is available to provide the consultation and support that hiring managers and employers need to navigate today’s business environment.