Monday, August 31, 2009

How to Build Your Team of Trusted Advisors

As a legal blogger, I am a fan of other lawyers who write about my practice area. Twitter is a wonderful tool to connect with other like minded lawyers. One of my favorite Business Law bloggers is Scott F. Gibson out of Phoenix, Arizona (which happens to also be one of my favorite towns.) Scott believes in educating the business owner and those general practitioner lawyers who advise them. Scott recently posted a blog entitled "Avoid the Hidden Hazard and Lurking Liabilities" wherein he discusses the importance of putting together a team of trusted advisors. The subject matter is something that I discuss with all my clients and with Scott's permission, I am re-posting his piece on the Outhouse General Counsel Blog.

Your business is under attack from every side.

Your "To Do" list is long and detailed. It includes hiring, training, and motivating employees. You must pay your vendors, collect your accounts receivable, and price your goods or services competitively and profitably. If you do not obsess about marketing and client service, your business cannot survive. And don't get me started on the legal issues that business owners face every day.

If you dwell on all the ways you are under attack, you will start to feel overwhelmed. Eventually, you may feel like curling up in the fetal position and crying yourself to sleep. That strategy might provide you some temporary relief, but it will not lead to long-term success.

You need a comprehensive plan if you are going to avoid the hidden hazards and lurking liabilities that can destroy your success. As part of that plan, you must rely on trusted advisers who can help you successfully navigate your business. Your team should include the following advisers:

Look for a banker who will get to know you and your business. If you call your bank and ask to speak with the bank president, does he know who you are? Will he take your call? If not, you should consider moving to a different bank. I regularly recommend that my clients work with one of the excellent community banks in our area.

Accountant: Most business owners have a relationship with a bookkeeper or accountant who handles the company's books and records. When you start your business, it may be sufficient to let your neighbor keep your books in her off hours, but as your business grows, you will need a more sophisticated source of financial advice. Make sure that your business has not outgrown your financial adviser. You need competent, thoughtful financial advice.

Insurance Broker
If your business is not properly insured, you are asking for trouble. Depending on the nature of your business, you will need workers compensation insurance, health insurance, life insurance, general liability insurance, property insurance, auto insurance, and malpractice insurance. Your insurance broker can help you minimize your risks, protect your business, and save you money.

Payroll Service: One of the quickest ways to kill a business is to mishandle payroll or payroll taxes. For very few dollars a month, you can avoid the wrath of the IRS by using a payroll service. You cannot afford to handle payroll in house.

Legal Counsel
Your lawyer is a critical member of your team of advisers. Interview candidates and hire a lawyer before a legal crisis arises. Make sure he understands your business model, your target market, and your long-term goals. Develop a comprehensive plan that will promote your business objectives and take your business from where you currently are to where you want to be in five or ten years. Meet regularly with your lawyer to review the legal health of your business, compliance with employment standards, and efforts to protect your intangible assets. Set up and properly fund a buy-sell agreement with your business partner. Consult with your lawyer to avoid legal disputes before they arise.

Avoid the hidden hazards and lurking liabilities that cause many businesses to stumble. Choose the right team of advisers, and your business will boom.

The demands of owning a business can be overwhelming. You need an effective plan to grow and succeed. Learn how BizBuilder™ can help you systematically and continuously attack the most demanding legal challenges your Arizona business faces.

Who is Scott F. Gibson?
For 23 years, he has practiced business law in Arizona, the past ten as the managing partner of Gibson Ferrin & Riggs, PLC. They help businesses and their owners preserve, protect, and promote their their business and personal objectives. His practice focuses on the intersection between intellectual property law and employment law. He helps businesses prosper by properly managing their intangible assets.

While Scott's blog is focused on Arizona law, this piece is applicable wherever you decide to start a business. If you are in Arizona, I encourage you to contact Scott. I would like to thank him for allowing me to re-post his piece on the Outhouse General Counsel Blog.

As always, you can contact me at [email protected].

Friday, August 21, 2009

Virtual in Vermont

Although I am licensed in California and most of my clients are in California, I still keep my eye on business law trends across the country and the world. In it's September 2009 issue, Entrepreneur magazine reports on a recent change in Vermont state law that eliminates some of the time and expense associated with running a business and allows a Limited Liability Company (LLC) to operate virtually -- what is informally known as a Vermont Virtual Company, or VVC.

Of course, there are taxation issues: VVC owners may still be liable for a minimum partnership tax and personal income tax on money earned from Vermont sources. You should always consult a tax professional before you chose an entity for your business. Tax issues aside, VVCs can save business owners money. According to Entrepreneur, here is how:
  • Businesses created under the new law don't need a physical headquarters. Because many entrepreneurs work from wherever they can get wireless access to the internet, this change can save plenty of money.
  • The need for in-person board meetings is eliminated. Specifically, "an annual meeting may be conducted by means of any electronic or telecommunications mechanism." Allowing board members to meet via phone conference (or even text messaging) can save thousands of dollars in transportation and lodging costs annually.
  • And, expensive paper based filings are a thing of the past. All necessary paperwork can be filed and recorded electronically. Not only a cost saver, but it's GREEN.

Information about starting a virtual LLC in Vermont can be found at

To form an LLC in Vermont, you'll need to file LLC articles of organization. The LLC articles of organization form can be downloaded from

I would be interested to hear from people who operate under a virtual Vermont LLC. This sounds like it could be the wave of the future for new business entities. It will be interesting to see if other states follow suit. I shall keep you informed as I learn more about this most interesting subject. Again, if you have any additional information about this topic, please contact me at [email protected].

Saturday, August 15, 2009

Don't Pay to Train Young Lawyers

As a General Counsel, I am often asked to retain a law firm to perform legal work that is outside my scope of expertise. General Counsel, both in-house and out-house, have long complained that big law firms charge hundreds of dollars an hour for work performed by their most junior lawyers. I spent twelve (12) years in big firm practice and am familiar with this practice. According to Jeffrey Carr, general counsel at FMC Technologies, a Houston oil and gas equipment company, "it is one of the biggest problems today in the legal delivery system." I agree with Mr. Carr who states that clients are "saddled with the cost of training these novices."

In its August 24 & 31, 2009 issue, Businessweek recently wrote about this issue in an article entitled Junior Fees For Junior Lawyers. They report that this fall first year lawyers at Howrey, a Washington-based national firm that focuses on litigation and intellectual property, will enter a two-year training regimen that puts a cap on what they can charge clients. The young attorneys will be allowed to bill just 700 of the 2,000 hours they log per year. When they do bill, it will be at about half of Howrey's current rates, or roughly $150 an hour. (They can bill 1,000 hours in the second year.) The rest of the time, these new lawyers will be shadowing senior Howrey lawyers which will mean working on, but not billing clients, performing pro bono assignments, and/or serving externships with judges or in corporate client's law units.

Howrey began planning this program before the recession. Other firms appear to be starting similar programs as one way to cope with tighter times. Drinker Biddle & Reath, another national firm, announced in May that instead of deferring start dates, it will put new grads in a six-month apprenticeship-at reduced pay and billing rates. Law firm consultants agree that the way firms train, compensate, and charge for associates will be the most significant permanent change coming out of this downturn.

I applaud Howrey, Drinker and other big firms who are creating these programs to keep their clients from paying to train their young associates. I think it will also create better lawyers. The traditional big firm model is outdated and those firms who fail to adapt will not survive in the long run. If you are a business owner or a lawyer advising a business owner who needs to retain a law firm, make sure you are not paying to train that firm's young associates.

If you have any questions or concerns about any of the above, feel free to contact me at [email protected].

Thursday, August 13, 2009

Representing Your Business in Small Claims Court

If I am doing my job correctly, none of my clients should get sued in small claims or any court, but sometimes it happens. Sometimes businesses have to sue a customer or another business in small claims court. Recently I have received a lot of phone calls seeking counsel on how to proceed in small claims. While in most states you are not permitted to be represented by an attorney in small claims, you are allowed to consult an attorney outside of the small claims court and in preparing your case.

The key to success in small claims starts with the law and facts being on your side, but more importantly it is more about being organized and how you present your case. It is easy to snatch defeat out of the jaws of victory by being unorganized and ill prepared. The following are a few tips to help you successfully represent your business in small claims court.

  • WHO GOES TO COURT WHEN A BUSINESS IS SUED OR IS SUING – If you are the only owner of the business, you usually must go to court unless the claim can be provide by evidence of a business account in which case a regular employee with knowledge of the account may represent you. If you have a partner, one of you must go. If the business is a corporation, an employee, officer, or director must go to court. That person can’t be hired just to represent the corporation.
  • BE ORGANIZED – Just like an attorney, you need to present your case in an organized manner. Every judge knows that the parties in court are not lawyers and are usually nervous, if not terrified. However, having exhibits and documents organized makes the chances of success much higher because it makes the case go smoother, especially if you are trying to collect money on an account.
  • WITNESSES – Witnesses can appear in small claims court and can testify in front of the judge. Because witnesses are perceived as having the ability to be impartial, their testimony can be valuable for the judge as he or she conducts the hearing to gather evidence for the decision. Some states (but not all) allow witness statements to be presented to the judge; these statements have to be in writing and signed under “penalty of perjury.” Most judges prefer to have a witness physically present in the courtroom; it is easier to cross-examine a witness than it is to cross-examine a written statement.
  • LOOK AND ACT PROFESSIONAL – Despite the relative informality of small claims court, it is still a professional place. Being well dressed and professional makes a good impression on the Court. The courtroom employees, from the judge down to the court clerk, are all dressed in a professional manner. If you are appearing before the Court, you should also be dressed professionally. As a business owner you should dress in business attire. If you can’t afford a nice business suit, at least put on your “Sunday Best” outfit. Do not go to court in jeans, t-shirts, a hat and/or tennis shoes.
  • BE COURTEOUS – The Courtroom is not a place to pick fights with your opponent. It is also not the place to “talk over” anyone else. Most importantly, it is not a place to argue with the court. This is very difficult for people in emotional cases but a very important thing to remember. The Judge is there to resolve a dispute and it is difficult to do so then the parties are arguing in the middle of the case. All the court is interested in is the facts. Be prepared to go into court with the idea of presenting your cases and countering the other side in a respectful and dignified manner.
  • DO NOT OVERSTATE YOUR CASE – Make sure that your facts and damages fit what you are suing for. Never lie or “over exaggerate” anything. I have heard of instances where counterclaims were filed in breach of contract cases for “pain and suffering” just because they were sued. People have also padded their damages claims just to get back at the other side. Small claims cases are usually straightforward claims for compensation. Filing for extreme damages will weaken your case and your credibility. Also, adding irrelevant claims diminishes the effectiveness of the relevant claims. It is a very good idea to run your case by an attorney first to determine which claims you should file.
  • TRY TO SETTLE – Once a matter is heard in small claims court, you lose control of the outcome. Settlement is always an option up until the day of trial. In fact some courts encourage the parties to “mediate” the case on the day of trial. Sometimes this is a good option. Even if you get all of your damages from a Judge, you have to collect the judgment. If you work out a settlement before trial and the party pays you that day, you have the money in hand. The Judge may even do a settlement on the record for you.

Many states and counties have Small Claims Help Centers or websites that have specific information about their courts and procedures. I highly recommend that you avail yourself of these resources. If you can’t find any resources were you live feel free to contact me at [email protected] and I can help you out (for a nominal fee of course).

Thursday, August 6, 2009

Business Owners - Got Trust?

Business owners often don't spend all of time considering succession planning or the importance of having an estate plan. I have been working a lot with a premier estate planning attorney in Southern California. Her name is Shadi A'lai Shaffer. After talking to her about my own Estate Plan, I realized that I was doing my clients a disservice if I did not discuss estate planning with them. The following is a post Shadi recently posted on her blog. If you are a business owner you need an estate plan. If you are a lawyer who advises business owners, you need to have this discussion with your clients. GOT TRUST?

Business owners, partners, sole proprietors (and yes, you folks who "partner up" with others to buy properties)

Ok, so I get it. I am an Estate Planing Attorney. Of course I am going to tell you how important it is to have a COMPLETE AND UP TO DATE PLAN but really folks we are in CALIFORNIA, do you have any clue what torture you are putting yourself, your family, your partners and business in (when you don't Got Trust?).

It's not a matter of IF but WHEN.
You will experience excruciating pain and frustration if death happens but you will feel this even more so if you don't die but just become disabled or incapacitated (if unable to make decisions).
If you do not have an estate plan you are basically doing two things:
1) allowing Conservatorship to occur; and
2) allowing a Probate to occur
Both of which are time consuming and costly. As if that wasn't bad enough, you have now opened your business up to the court system and are at their mercy! Good luck with that man! you have now lost control and the ability to continue your business freely. You may now have to report every item to the courts AND you may not be able to buy, sell, transfer, or do some very basic or normal tasks related to your business.

Business owners work so hard and many do create a decent legal foundation for their business however if you do not have estate documents such as a trust, a will, power of attorney for finances, etc... you are truly harming your business in ways you can only understand once it is too late!!!!

I urge business owners to take the time to meet with an estate planning attorney for a consult to learn how an estate plan will protect you and help in the continued success of your business. What is the point of all your hard work if you do not dot all your "i's" and "t's"? Don't want to be "married" to the California court system or to your partner's spouse? Get your butt in gear and GET TRUST. Now is the time to take control of your business and your life. Tomorrow just may be too late.

As you can see, Shadi is very passionate about her work. If you have any questions about any of the above, please contact Shadi A'lai Shaffer at or 714-966-2646