Small Business Corporate Legal Health Checklist

Twelve Steps to Better Corporate Legal Health

1. CONTRACTS

Have all contracts, even business credit card applications, reviewed by capable counsel. Yes, it will cost you $250 to $500 or more. But, it will save you tons of headaches, and money, down the road. Ambiguity can hurt you. It is far better to clear up the intent, when- ever possible, on the front end. Find a good lawyer, one who understands business, and trust his counsel.

2. GUARANTEES

Never, never personally guarantee supplier credit applications. They will all ask for one, but will do business without it. If you sign a supplier guarantee, you become personally obligated, even though the expense was all for business purposes.

3. CORPORATE FORM

All too often small business translates this as "corporate formality." It is not! If your company does not treat itself like a company, neither will those who seek a claim against you. The protection you have by functioning as a corporation will be lost and thereby expose you to personal liability if you do not follow proper corporate form. Hold board and shareholder meetings at least annually. Record the minutes. Provide proper corporate resolutions. Sign documents in your representative capacitysalways!

4. COVENANTS NOT TO COMPETE

Do you have your employees sign employment contracts? Do you want to protect your proprietary information and business trade secrets? Is your customer list protectable? This is a tricky area of the law and must be addressed carefully. Nonetheless, if done properly you can provide your company with the most protection which the law allows.

5. AVOID THE COURTROOM

No small business can afford to litigate. It is costly, not just in attorney's fees, but in lost managerial time as well. In the overwhelming majority of matters, going to the courtroom is totally unproductive. Do your contracts contain arbitration or mediation clauses? They should.

6. DRUG TESTING

Drugs are everywhere. Do you have your employees tested? You should. Such testing should be a requirement of all new employees and part of the annual review for current employees. An employment policy which provides for suspension and termination for the use of illegal drugs or alcohol is a must in today's environments. Implementing such a policy can be difficult. Get good legal advice.

7. SEXUAL HARASSMENT

Allegations, real or false, are easy to make. Once made it then becomes incumbent upon the employer to defend. If you do not have the right policy in place and enforce it, you will spend thousands and regret every penny. Additionally, there are provisions which may be inserted in the initial employment agreement which can and do offer further protection against specious claims.

8. SUCCESSION & BUY/SELL AGREEMENTS

What happens to your business if you die? Who will get the stock? Will your business partners want your spouse as their new partner? Does your shareholder agreement address alternative provisions? What if you want to sell out? These questions are always on the mind of the small business owner. All too often, however, this most neglected area of business planning takes a second seat to focusing on cash flow. However, addressing these questions up front and reviewing them periodically thereafter is the best course of action.

9. WAGE & HOUR

More than before, state wage and hour laws are creeping into the business motif. Disgruntled former employees have learned that they can inflict pain on the former employer by claiming that they did not receive their pay or were not informed of the company's policy regarding vacations--they "thought is was with pay." Many dollars and much headache can be saved by having the essential matters in writing and inserted in every personnel file.

10. HIRING & FIRING

As most employers know, the rules have changed. Hiring and firing employees is now tricky business. Asking the wrong question can expose you to a discrimination lawsuit on the front end. And, failing to properly document the employee's file can expose you to one when you decide to terminate the relationship. Although North Carolina is a right to work state, recent court opinions have altered the employment relationship in important ways.

11. WORKER'S COMPENSATION

Injuries happen; but are you prepared for a legal point of view when they do? In fact, you must start before the employee gets injured. Have you identified those processes which reasonably could be expected to cause substantial injury? Additionally, care must be taken when you decide to terminate the employment of a worker who has been injured. Otherwise, you can plan on a retaliatory discharge lawsuit.

12. INTELLECTUAL PROPERTY

Does your business have intellectual property which can or should be protected? Is your logo valuable? Is it unique? Do you know the difference between trademarks, service marks, copyrights and patents? These are just some of the questions which confront many businesses. Understanding how unique aspects of your business can be protected may give it the competitive edge that it needs.

CONTACT

ANDRESEN & ASSOCIATES
2319 Crescent Ave.
Charlotte, NC 28207
Phone: (704) 377-8881
Fax: (704) 377-8880