Beitchman & Zekian Blog

Legal Information in Plain English

Archive for partnerships

Hindsight is 20/20

I had the pleasure of sitting in conference room with a client yesterday for 4 hours trying to settle a case during court ordered mediation.

While sitting waiting for the mediator to come back with the counter offer on the settlement, I looked at the “contract” that started the whole mess again.  It was clearly written by a non-lawyer and, since I had time to kill, I had to ask him why, if he’s got a firm of lawyers who he calls on a various other inconsequential matters, did he not call us to review this piece of paper. His response was that they were in too much of a hurry to get the deal done and start working with the Plaintiff and didn’t what to put the brakes on the deal by getting lawyers involved.

Now, I realize that time is sometimes a factor and businesses don’t want to invoice lawyers because we start nitpicking and arguing over whether it should be “and” or “or” in the sentence. Believe it or not, sometimes it DOES make a difference.  In this case, the difference between that document and the one I would have written would have protected them as opposed to opened them up to litigation.

Other times I’m told that they didn’t want to pay our hourly fee to have the deal reviewed because they thought it was fine. Well, it is until someone breaches the agreement, which is what happened in this case.  Before I could start my lecture, the client admitted that he should have had us look at that agreement, regardless of how much he would have paid.  Because now, it cost him more than $20,000 PLUS our hourly litigation fees to settle this case that could have been avoided had the agreement been drafted properly in the first place.

So, whether you are a multi-million dollar company or a small mom & pop shop, you should have an attorney review all documents you sign.  Sure there is a cost involved, but if you do your research, you’ll be able to find an attorney that suits your needs, both legal and financial.


Get it in Writing

A lot of people go into business with family and/or friends.  A majority of people enter into these business relationships with a shake of the hand, maybe a couple emails back and forth, and an oral agreement.  People think it’s uncouth to request that everyone sign a contract; the excuse I hear most often is that it shows that you don’t trust the other person.  And really, who can you trust if you can’t trust family or a life-long friend, right?

Well, business and money and debt do strange things to people.  Business decisions that were once easy to make become points of contention and reasons for arguments.  One party may have invested more money that the other, but is expected to share in the proceeds equally.  We have seen brothers sue each other over small sums of money, marriages fall apart, and 20 year friendships go by the wayside.  Whatever the issue, you can be sure that at least one argument will come up that could have been avoided if there was some kind of agreement in place.

I tell people who are hesitant in asking their business partners to sign agreements and concerned with the cost that it is better to spend some money now to ensure that the original terms of the agreement are documented in order to protect both parties.  This will avoid the problems, headaches, heartaches, and costs later because you will have a document, which spells out the original intentions of the parties, to refer back to if there is a problem or dispute.

If you would like more information, or would like to discuss your business transaction needs, please contact our office at (818) 986-9100.

An Ounce of Prevention is Worth a Pound of Cure

That’s the way the saying goes and it is true with respect to business formation regardless of the size of your business.  As an attorney who works with people in structuring their business entities as well as advising them with regards to the legal, day to day operations, I see too many clients taken in by DIY legal companies the creation of too many shoddy Limited Liability Companies (LLCs) and corporations.

Sure it costs $395.00 including the state filing fees to set up a corporation or LLC using DIY forms, but you miss out on the discussion about what kind of entity is best for your business purpose.  You also do not get the follow-up by an attorney to ensure that you have all the necessary corporate documents needed to do simple things like open a bank account, issue shares or interest in the company, or lease an office and/or equipment.

It may be a bit of an expense to hire an attorney to file and document your company properly, but even if the attorney’s fees are 3 times the amount of the DIY fees, it is preventative in nature.  When clients walk in with a DIY LLC/Corporation I have to tell them that it will cost them about twice as much to redo and/or fix everything that was done incorrectly (plus any late fees or penalties) as they would have paid me at the outset to set up their company.

When it is something this important, it is worth spending a little more at the start to get it done right.  If you’d like to discuss the organization of your corporation or LLC, please contact our office at (818) 986-9100.