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SUMMARY OF 10 TIPS FOR SMALL BUSINESSES

I hope everyone has enjoyed my monthly tips over the last year for those who own, or want to own, a small business .  I thought as a closing for this series that I would summarize the tips in a one-page document that you can take with you and refer back to when you need a reminder.

First Tip: Create your corporate shield to “shield” you as an individual from liability by creating a corporation or a limited liability company for your business.

Second Tip: Get appropriate business insurance (worker’s compensation, unemployment, business liability, professional liability, health, etc.) and pay taxes.   

Third Tip: Do not misclassify your employees as independent contractors; do an analysis of the type of work, supervision, tools/equipment, control, etc. of your “independent contractors” to ensure they have not been misclassified.

Fourth Tip: Know the employment laws that affect your business such as Title VII, Equal Pay Act, Age Discrimination in Employment Act (ADEA), Americans with Disabilities Act (ADA), Family and Medical Leave Act (FMLA), worker’s compensation standards and Arizona state laws.

Fifth Tip: Set written employment policies in an employment handbook, consistently follow your own policies, and train your supervisors on how to implement your company policies.

Sixth Tip: Make sure you are promoting your employee benefits to your company’s advantage and do not forget the benefits that you can offer that do not cost you anything.

Seventh Tip: Make sure you have written contracts that lay out the true terms of the contract and avoid “handshake deals” which can create serious problems for your business if you end up in court.  

Eighth Tip: Integrate written social media policies into your workplace such as prohibiting employees’ use of social media at work, employees posting your company’s confidential material, trade secrets, or proprietary information, etc. 

Ninth Tip: Determine if you need a trademark or service mark for your business and if so, register your trademark or service mark with the United States Patent and Trademark Office (USPTO) to obtain exclusive nationwide ownership of the trademark and the presumption that the trademark is valid over others. 

Tenth Tip: Beware of personal guarantees because if you do sign a personal guarantee, you have to be willing to pay on the debt if the main borrower, whether it’s your business or your child, fails to pay. 

The information contained herein is general information not legal advice, and does NOT establish an attorney-client relationship with Lori Brown.

TENTH TIP; PERSONAL GUARANTEES

The next tip for those who own, or want to own, a small business: BEWARE OF PERSONAL GUARANTEES.

I have represented several individuals in the last year who signed personal guarantees and then were sued on that guarantee.  A personal guarantee can come up in several situations. 

The first situation that comes to mind is when a small business enters into a contract to lease office space and the landlord requires the business owner to personally guarantee payment of the lease.  Or, if a small business wants to set up an account with a new vendor, the vendor might require the business owner to personally guarantee payment for the products being provided. 

 In your personal life, a guarantee situation could arise where one family member signs a guarantee to secure payment for another family member.  Think of a parent co-signing on a car loan for an adult child.  

 One of the main reasons that lenders require personal guarantees is that if the main borrower does not pay, then the lender can go after the guarantor.  So in the office space lease situation, if there is a default on the lease, the landlord can sue the business who entered into the lease and also sue the owner of that business, i.e., the guarantor.  If the landlord wins that lawsuit, the landlord can then go after the business’ assets, and if the business no longer has any assets by that time, the landlord can also go after the business owner’s personal assets to obtain payment.  Or, in the parent co-signing for the child situation, the lender can go after the parent’s personal assets to secure payment for the loan.

 Moral of the story: consider the long term consequences before you sign a personal guarantee.  If you do sign a personal guarantee, you have to be willing to pay on the debt if the main borrower, whether it’s your business or your child, fails to pay.  And, be sure to read all of the terms of the contract and guarantee before you sign so you understand the terms and conditions of the loan. 

The information contained herein is general information not legal advice, and does NOT establish an attorney-client relationship with Lori Brown.

NINTH TIP: TRADEMARKS

The next tip for those who own, or want to own, a small business: DETERMINE IF YOU NEED A TRADEMARK OR SERVICE MARK FOR YOUR BUSINESS.

Business owners routinely ask questions about the names, logos and phrases they use to sell, advertise, and promote their goods and services.  This brings up the issue of what is a trademark/service mark and what can be trademarked.

A name, word, phrase, logo, symbol, design, image, or any combination thereof that a business associates with its goods and/or services can be projected as a trademark.  By way of example, McDonald’s, Inc. uses several trademarks that we are all familiar with.  The “golden arches” is a trademarked logo that is known worldwide.  The phrase “i’m lovin’ it”TM is also world-famous.

Trademarks perform a dual role for a business.  Trademarks add value to the business through branding, but they also protect the goodwill associated with the business.  Trademarks increase brand recognition by distinguishing the products or services of a business from those of its competitors and make it easier for customers to identify the source of the products or services.  Furthermore, trademarks and service marks are enforceable against competitors that try to encroach on the goodwill of the business and confuse customers by selling a competing product of lesser quality under the same brand name. If a business obtains a federal trademark with the United States Patent and Trademark Office (USPTO), then the owner of that mark has the exclusive nationwide ownership of the trademark and the presumption that the trademark is valid over others.  Once a trademark is registered, that mark will appear in trademark search reports which should discourage others from proceeding with the trademark registration of the same or similar trademark and the USPTO will refuse trademark registration to any trademark it deems confusingly similar to an already registetred trademark.

The information contained herein is a business advertisement with general information not legal advice, and does NOT establish an attorney-client relationship with Hymson Goldstein & Pantiliat, PLLC or Lori N. Brown.

EIGHTH TIP; SOCIAL MEDIA AND THE WORKPLACE

The next tip for those who own, or want to own, a small business: integrate social media policies into your workplace.  

This past year I learned how to use Facebook for business.  I had a personal Facebook page for several years but was not an avid user.  I heard people talk about using social media for business, but I didn’t understand what that meant.  About six months ago, I went to a basic social media class and started a Facebook business page.  I learned how to post, use pictures, tag, schedule future posts, use hashtags, etc.  Now I post legal tips everyday to my Facebook page and I am slowly building an audience.  The idea of a Facebook business page might be old news to some of you and new news to others.  The fact of the matter is that a growing business needs to use every avenue available to market and social media seems to be “the” tool to use at the present moment.  Social media is also being used to investigate potential employees.  It is not uncommon for companies to choose not to hire a potential employee after viewing information posted by or about the employee on social media outlets.  And, I am seeing more and more stories about employees being fired due to items posted via social media.  Think about what you would do if your employee was posting negative comments about your business while he was at work.  Being proactive and adopting and integrating social media polices in your workplace is one way to avoid social media problems.   

A lot of workplace rules about social media really are common sense, but they still should be put in writing and reviewed with your employees regularly.  Some possible policy considerations include:

  • Prohibiting employees’ use of social media at work
  • Prohibiting employees from posting messages or material that could damage your company’s image or  reputation
  • Prohibiting employees from posting your company’s confidential material, trade secrets, or proprietary information
  • Prohibiting employees from posting messages that defame or slander management and co-workers
  • Prohibiting employees from posting messages that disparage your company or another company

My rule of thumb is everything that is posted on the internet is public.  I tell employees and employers alike not to rely on “privacy” settings because those seem to change regularly.  One of the main reasons social media is used is to expand your “reach”.  You get your word out by posting and hoping that others “like” and “share” your posts.  But, that “reach” could quickly become your enemy if something is posted about your business that is less than favorable.  The old school version would be hitting the send button in an email and the next instant realizing that you sent the email to the wrong person, or worse, hit “reply all” when you wanted to only reply to the sender.  So go out and use social media to its fullest advantage.  But, you also need to keep a close eye on what you and others are posting about your business. And, of course, I invite you to check out and “like” my business page: https://www.facebook.com/BusinessLawyerLoriBrown and I hope the information you find there will be educational and entertaining. 

The information contained herein is a business advertisement with general information not legal advice, and does NOT establish an attorney-client relationship with Hymson Goldstein & Pantiliat, PLLC or Lori N. Brown.

SIXTH TIP: EMPLOYEE BENEFITS

The next tip for those who own, or want to own, a small business: make sure you are promoting your employee benefits to your company’s advantage.  

There are many types of benefits that employers can offer to employees.  Insurance is usually the first one that comes to mind, such as medical, dental, vision, life, short-term disability, and long-term disability.  There are other benefits as well, which include:  paid sick; vacation and/or personal days; paid holidays; 401(k) matching programs; etc.  A small business owner’s main concern when deciding on what benefits to offer to employees is:  “How much is it going to cost me?”  This is a valid concern that has to be considered in conjunction with obtaining and retaining employees.  For instance, if you offer no benefits at all, will you continually have turnover with your employees because they are taking jobs elsewhere with better benefits?

I think small business owners sometimes forget to consider the importance of “employee relations” or the “spin” that can be put on what they have to offer their employees.   I am a mother of three young children and have learned the importance of the “spin.”  If I tell my kids they can have a “little bit” of ice cream for dessert, they cry and scream.  But, if I tell my kids I am giving them “a lot” of ice cream (especially if I put the ice cream in a small bowl), even though it’s the same amount I would have given them in the first scenario, they happily eat their ice cream.  The same rule applies in the workplace.  It may sound simple, but if you have staff lunches and the company picks up the tab for everyone’s lunch, promote that event as a “company sponsored” or a “company paid for” event.  Or, if you offer health insurance to your employees, consider letting the employees know how much you are paying to offer that benefit to them. 

And, don’t forget the benefits you can offer that do not cost you anything!  For instance, some employers offer their employees short or long-term disability insurance or identity theft protection.  These “benefits” are fully paid for by the employee, but the employee gets the benefit at a cheaper rate through a group plan offered via the employer.  The employer’s obligation only comes in deducting the premiums from the employee’s paycheck and transferring that money to the vendor.

At Hymson Goldstein & Pantiliat, PLLC, we have experienced employment law attorneys who can help you review your benefit policies to ensure they meet the needs of your company and your staff.

The information contained herein is general information not legal advice, and does NOT establish an attorney-client relationship with Lori Brown or Hymson Goldstein & Pantiliat.

FIFTH TIP: EMPLOYMENT POLICIES

The next tip for those who own, or want to own, a small business: set written employment policies.

All companies, large and small, need a written employment handbook that describes the policies that must be followed.  When I talk to an employer or an employee about a legal issue, one of the first questions I ask is: is there an established policy that governs this issue?  This is the same question that the court is going to ask if a legal dispute turns into a lawsuit.  The answer should be found in the written handbook.

Also, employers tend to rely on their “policy” when a problem arises.  For instance, when an employee asks a small business owner for something the owner is not willing to give, the typical (and easy) response to the employee is: that’s not our policy.  The problem is that many times the “policy” is not in writing.  Another problem is that there tends to be more inconsistency in how employees are treated when a policy is not in writing.  Inconsistency leads to the appearance of discrimination which can lead to a lawsuit.

Many policies can be included in a company’s handbook.  Typical handbooks include descriptions of the policies governing: attendance, vacation, sick, pay, confidentiality, trade secrets, discrimination/harassment, discipline, etc.  One of the most important parts of the handbook is the at-will employment disclaimer which informs employees that the handbook does not create a contract of employment.  Another very important part of the handbook is the “acknowledgement of receipt” of the handbook.  Employees should be required to sign the acknowledgment and return the acknowledgment to the company.  The employer will be hard pressed to prove to a judge later that the employee was aware of the company’s policies if the employer never had the employee sign an acknowledgment of receipt of the handbook.

And, last, but not certainly not least, once the employment handbook is created, all supervisors must be trained on how to implement the company’s policies.  There is no protection for the company if supervisors do not know and consistently enforce the policy.

The information contained herein is general information not legal advice, and does NOT establish an attorney-client relationship with Lori Brown or Hymson Goldstein & Pantiliat.

FOURTH TIP; KNOW THE EMPLOYMENT LAWS THAT AFFECT YOUR BUSINESS

The next tip for those who own, or want to own, a small business: know the employment laws that affect your business. 

If you are in business, your purpose is to make money.  To make money, most companies need workers to run the business.  Last month we discussed the difference between an employee and an independent contractor.  If you decide that you are going to hire “employees”, then you need to know and comply with the various federal and state employment laws in effect. 

For instance, there are various federal laws that prohibit discrimination in employment. Those laws include: (1) Title VII which prohibits employment discrimination based on race, color, religion, sex, or national origin, (2) the Equal Pay Act which prohibits sex-based wage discrimination, (3) the Age Discrimination in Employment Act (ADEA) which protects individuals who are 40 years of age or older, (4) the Americans with Disabilities Act (ADA) which prohibits employment discrimination against qualified individuals with disabilities, etc.  There are also similar state laws in Arizona that protect employees against discrimination.  You also need to comply with federal and state laws that establish minimum wage, requirements for payment of overtime work, recordkeeping and child-labor standards.  And then there are medical leave laws such as the Family and Medical Leave Act (FMLA) and worker’s compensation standards as well.

Not all of these laws affect every business because some of them only apply to businesses with a minimum number of employees.  For example, FMLA only applies to employers with 50 or more employees.  Every responsible small business owner should become aware of and comply with the employment laws that affect his/her business.  You certainly do not want to first become aware of a law that affects your business when you get hit with a government agency complaint or lawsuit.     

The information contained herein is general information not legal advice, and does NOT establish an attorney-client relationship with Lori Brown or Hymson Goldstein & Pantiliat.

FIRST TIP: CREATE YOUR CORPORATE SHIELD

As promised, we begin with our first tip for those who own, or want to own, a small business. My first tip is to create your corporate shield.

The purpose of creating your corporate shield is to “shield” you as an individual from liability. This means that if a lawsuit later develops against your company, the lawsuit would be against the company and not you as an individual. For example, I had a client once that simply picked a name for his company and began operating as that company. That client was later sued as himself because the company he was operating as was not a true legal entity. In this situation, for example, the client is sued as: “Joe Smith doing business as ABC Company”. The big problem here is if Joe Smith loses his lawsuit and gets a judgment entered against him for any amount of money, the creditor on that judgment can lien any property Joe Smith owns, garnish his wages, garnish his bank accounts, etc. Bottom line, you want to avoid being sued as an individual for issues related to your business.

The way to create your corporate shield is usually by creating a corporation or a limited liability company. This is very formal process which requires, among many other things, a filing with the Arizona Corporation Commission. You need to be sure that your corporation or limited liability company is created properly with the appropriate documentation such as bylaws, issuance of stock, stockholder agreements, operating agreements, etc. There are also tax implications involved in the choice of entity and perhaps, tax elections to be timely made.

If you, your family members or friends need help with creating a corporate shield, our team of knowledgeable attorneys are here to help.

INTRO TO 10 TIPS FOR SMALL BUSINESSES

Many of my clients are individuals who own small businesses or are starting a small business.  Some of my clients have been sued and need an attorney to defend them in an action.  Other clients need an attorney to file a lawsuit, usually to collect money they are owed.  But, the best case scenario for a client is when the client has the ability to call me before they get served with a lawsuit or get into a situation where they want to file a lawsuit.  The reason this is the “best case scenario” is because then the client can hopefully avoid a lawsuit altogether.  Lawsuits are costly endeavors, in both money and time.  Keeping this in mind, I decided to write a series of monthly letters for those individuals out there who want to do their best to stay out of court and save money in 2013!

Over the next year, I will be sending out my monthly letter which will include a business/legal tip for those who own, or want to own, a small business.  A small business owner understandably wants to “focus on business” and not have to deal with issues that are outside their area of expertise or what can be seen as administrative-type work.  But, I have seen too many small business owners who wait until there’s a serious problem before calling for legal help.  Maybe they don’t want to “waste time” or money having an attorney involved.   For example, most small businesses don’t have an employee handbook.  What happens when you want to fire a “problem” employee? Or what about a contract you signed – just so you could “get the job done”, but you never spent the time to read the contract until it was too late?

As anyone who has started a business knows, there is so much more to a business than just a “great idea”.  You need to have all the nuts and bolts to make your business successful.

Stay tuned!

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