Business Law

The issues to consider from the employer’s side in a severance agreement

04-02426 Long-time Ryan employee Earl Prudden

Have you ever had to terminate an employee?

Did you know that offering some severance pay and getting a severance agreement can protect your business?

Employees are terminated. When it happens, both the employer and the employee need to know what issues to be thinking about.  One thing to consider is a severance agreement.

A severance agreement typically means that a terminated employee is going to receive money that they were not already entitled to receive in exchange for waiving claims they have against the employer.

This mind map covers some of the issues an employer should be thinking about when drafting and signing a severance agreement with an employee.

 

[gview file=”http://shawnjroberts.com/wp-content/uploads/2012/07/Preview-of-“Drafting-a-Severance-and-Release-Agreement-employer-side”.pdf”]

Posted by Shawn Roberts in Blogposts, Business Law

One piece of boilerplate language to watch out for in the written agreement

Maintenance man at the Combustion Engineering Co. working at the largest cold steel hydraulic press in the world, Chattanooga, Tenn. This press can shape steel plates several inches in thickness  (LOC)

Do you routinely cruise through the standard language that seems to appear in almost every form contract?

If you do, there is one piece of “boilerplate” you need to pay attention to.

It is called “boilerplate” because it is so standard in written agreements that people don’t even pay attention to it usually. This language is usually the last few sections of the contract, it is typically copied from contract to contract and are rarely reviewed or even paid attention to. But there is one clause in the standard boilerplate that you should always take a look at and consider:

The choice of law and the choice of forum.

The choice of law is the language in the contract through which the parties agree which states law is going to be applied to any disputes. The choice of form is the provision in the contract in which the parties agree where, and what state or city, any disputes will be heard.

If both parties to a contract are from the same state and the contract provides that the state’s law will control, it probably isn’t that big a deal. But when the parties are from different states the choice of law and choice of form can mean the difference between being able to legitimately pursue a dispute and being overwhelmed with cost and logistical issues effectively prevent you from being able to raise any defense.

Pay attention to these provisions and if you can try to have them line up with where you live and work.

Posted by Shawn Roberts in Blogposts, Business Law

5 critical elements to consider before signing a business contract

I have drafted, reviewed and analyzed hundreds of business contracts through working as an attorney with small business clients. Below are some of critical points which emerge time and again in my work.

1.  Is the compensation clearly defined? Not surprisingly, this is often the key element in a business contract.  Whether it is an employment agreement, creative design agreement or for shared services, each party is critically concerned about how it will be compensated.  A fuzzy definition or incomplete description of the compensation structure often leaps up to cause problem during the agreement.

2. How could this contract affect me or my business after it is over? Although the end may be far off, it will likely come at some point sooner or later. When it does, your business will need to continue to operate without the agreement in place and without the assistance of the party to the agreement. Clauses in a business contract that restrict the use of the  not sure of this word?, who you can contact, or that require your business to come up with a large sum of money at the end of the contract are often onerous. I have found it very valuable to run contract provisions through the filter of “how would this affect my business if I had to live with it for five years?” Will any fee be required from either party in the contract? Will property have to be returned by one party to another under the contract? Will there need to be services provided following the contract termination to allow a smooth transition?

3. Is the method to end the contract clear and subject to execution? If circumstances, other opportunities or simply the passage of time required that the contract end, it is critical for both parties to be clear about how the termination will occur.  The contract needs to contain clear standards for how it can be terminated and what the consequences of termination will be. I have seen far too many contractual relationships end up in court because there was not a clearly defined method of terminating the agreement when one side felt the need to do so.

4. Are you legally capable of doing what the contract requires? You would be amazed how often I have seen businesses or individuals run into contractual issues because they were required to do things they simply could not do. For instance, providing a certain product in a specific quantity, paying certain sums of money at certain times and completing design and development work in a fixed time frame. While the excitement of getting the “big contract” is understandable, take a few minutes before signing the agreement to make sure you can realistically perform the contractual obligations.

5.  Does the contract contain performance milestones that can be quantified and measured? Clear and specific milestones for what each party has to do to perform under a contract are essential. When obligations are not clear, it allows for a party with bad intentions to create trouble and also simply creates issues even with parties that have good intentions. In those situations where payment is conditional upon performance, it is critical that both performance and measurement of performance are written into the contract.   In construction contracts clear deadlines and performance milestones are generally included, however, it is my experience that these types of guidelines do not end up in many other contracts.

Do you have any good stories where one of these items played out in your business?

Posted by Shawn Roberts in Business Law

Why do I require a retainer fee?

Maceration of Money

Have you ever wondered why an attorney asks you to pay a retainer fee to get started? I lay out my reasons below. To learn more about the trust account, see *** at the end of this post.

1. It tells me I have a client.
Committing with your words and signature to me representing you is substantial. But more substantial is a commitment with your money. The retainer usually approximates one or two month’s billing. A person’s unwillingness to put up this amount of money is usually a sign of lack of committment on the case.

2. Its tells you you have an attorney.
Retainer money is not mine. It belongs to the client and it goes into my attorney trust account. That is a bank account required under Oklahoma law where attorneys have to put any money they receive that isn’t theirs. After I earn the money and in accordance with our written fee agreement, I can transfer money to my operating account and it becomes mine.
All this being said to make the point that taking a retainer is serious business. One of the quickest ways for an attorney to become an “ex-attorney” is to monkey around with trust account money. If I take your retainer money, I am compelled to be serious about your case.

3. It shows the sincerity of your belief in your case.
Actions speak as loud as words or a signature on a retainer agreement. You being willing to put up money, even money you might get back, tells me not only that I have a client, but that I have one who is serious about the case.

4. It increases the chances I am going to be paid for my work.
I can do a lot of work in a month. In some cases I may spend 40 hours or more working on a case. That is a lot of billable time. Since I only bill monthly, I will have done all the work, provided all the benefit to the client but not yet have received anything. Usually clients pay in this scenario. However, having the money to cover the bill in my trust account means that I will not be giving away a month of free work. Think of it like this at whatever your job is: Would it be okay if your employee skipped paying you for one period? Would that have any impact on your financial situation?

A couple of qualifiers. I don’t usually worry about retainer fees in estate planning work or general business matters. Litigation is the area where the retainer fee is most critical. Also, if I have successful track record of a client paying for my services, there is rarely a need for a retainer on new matters.

***What money goes into a trust account?***. Travis Pickens, the Ethics Counsel at the Oklahoma Bar Association, provided this answer:

Unearned legal fees, unincurred expenses, and third-party monies in connection with the representation. This typically means, for example, retainers (until the monies are earned), flat fees (until the monies are earned), filing fees, deposition and expert witness expenses. Settlement proceeds on a check to you and your client(s) or others may also go into the trust account for distribution.

Posted by Shawn Roberts in Blogposts, Business Law

3 reasons you need a buy-sell agreement in your Oklahoma small business

Would you want to be in business with your business partner’s spouse?

How about running your Oklahoma business with one or more of your business partner’s children?

If these situations concern you, read below to find out how to avoid them.

The phrase “buy-sell” is popular but often misunderstood.  A buy-sell agreement, or shareholder agreement as it is sometimes called, controls how ownership interests in a company are transferred.  A buy-sell agreement sets terms on how a business can sell her ownership interest if she leaves a company for any reason and protects the people who remain as owners.

It is particularly important for small Oklahoma companies to have written buy-sell agreements because often there is no independent way to value an ownership interest.  With a publicly traded company or actively traded privately-held company, there are some benchmarks, with a small company there is no standard.

1.  You should choose your business partners. You make plans to go into business with one or two other people.  You choose these people for many positive reasons.  What if one person leaves the company and sells her interest to a stranger who has money?  That stranger could become your business partner, for better or for worse.

2. The time when someone leaves a company is not the time to be hashing out value. Partings are rarely pleasant.  This holds true when one of a handful of business owners leaves the business.  Emotions may be running high and logic may be throttled.  Trying to determine a buy out strategy and value at this point is thorny and fraught with difficulty.  Don’t do it; set the strategy and mechanism for calculating the value while everything is peachy.

3. It protects your family. Death and disability are often reasons for needing to transfer a business interest.  The departing owner is often not capable of operating or negotiating at this point (obviously not capable in the case of a death).  The owner’s family both needs and deserves to be paid value for her interest.  If there is not a buy-sell agreement in place, my experience has been that the surviving owners are not overly eager to pay out compensation.  It’s not right, but far too often its reality.  You can prevent this by having a buy-sell agreement in place that dictates how a business compensates the family in case of death.

Take of advantage of the opportunity of good health and good relations to put a buy-sell agreement in place; this benefits all the owners.

 

 

Posted by Shawn Roberts in Blogposts, Business Law

The Oklahoma Non-Compete Agreement in 10 [simple] slides

Have you ever wanted to know the basics of Oklahoma non-compete law but didn’t want to read 20 blog posts?

Oklahoma non-compete agreements are a frequent topic on this blog. I have written thousands of words about non-competes and related issues.

It occurred to me that since not everyone has time to comb through thousands of words, I could distill the main non-compete issues into a simple presentation. Check out the slide show below.


Posted by Shawn Roberts in Blogposts, Business Law, Oklahoma non-compete

The difference between an Oklahoma asset purchase and a stock purchase

Two common agreements that are used in the sale of businesses are:

1. a Stock Purchase Agreement; and

2. an Asset Purchase Agreement.

While there are many similarities between these 2 agreements, there are some fundamental differences.

A Stock Purchase Agreement is used when the buyer is going to purchase all of the owners interest in the company that owns the business. For example, if you are buying a restaurant and the restaurant is owned by Smith Corporation, in a stock purchase you would buy all of the outstanding stock of Smith Corporation. By purchasing all of the outstanding stock, you end up stepping into the shoes of the previous owners. That means all assets and liabilities that the previous owners have, you now have except for anything that is expressly excluded in the asset purchase agreement.

An Asset Purchase Agreement is used when a buyer wants to only purchase specific assets of a business rather than the entire business. For example, to purchase the restaurant mentioned above through an asset purchase agreement would probably mean purchasing the physical location, the inventory and equipment, goodwill associated with the restaurant and perhaps other information related to customers. In an asset purchase agreement, the buyer is only responsible for the assets he purchases and the liabilities that come with those assets.

It is important to note not only the difference between an asset purchase agreement and a stock purchase agreement, but also when to use each type of agreement. If you have any questions about using asset purchase agreements or stock purchase agreements please feel free to contact me, I have worked on many.


Posted by Shawn Roberts in Blogposts, Business Law

The different ways to do business in Oklahoma

Have you ever wondered what the different ways you could do business are outside of just doing it yourself?

You need to wonder no longer, below is an entity chart which lists each form of business and a brief description of what it is.

Entity Diagram

Posted by Shawn Roberts in Blogposts, Business Law, Oklahoma limited liability company

How to file a Trade Name with the Oklahoma Secretary of State

Trade-Name-Report

A trade name is what many people refer to as a “DBA”. That is, any name that you or your business does business under other than the one registered with the Oklahoma Secretary of State. You can find out a bit more about trade names here.

I am going to show you how to register a trade name in Oklahoma. The only cost is the $25.00 fee you pay to the Oklahoma Secretary of State.

Step 1 – Download the Trade Name Report form here.

Step 2 – Trade Name under which the business is carried on. Insert the name which you use or want to use that is different than your business’s legal name.

Step 3 – Address. Insert your business address.

Step 4 – Legal name of the “business entity” doing business under the trade name. A business or person must claim ownership of the trade name. Insert the name of your business or your own name in this blank.

Step 4 – Brief description of the kind of business carried on under the trade name.

Step 5 – Type of business entity. Find the type of entity you have and check the appropriate box.

Step 6 – Signature Block. The choices here are either “Business Entity Acknowledgment” or “Corporation Acknowledgment” If you have a corporation, sign in the “Corporation” section, if you have anything else, including a limited liability company or you are signing as an individual, sign in the “Business Entity” section.

Step 7 – Send in Report. After the Trade Name Report is completed and signed, mail it to the Oklahoma Secretary of state with a check for $25.00. The mailing address for the Oklahoma Secretary of State is:

Business Filing Department
2300 N. Lincoln Blvd., Room 101
Oklahoma City OK 73105-4897

Posted by Shawn Roberts in Blogposts, Business Law

FAQ — How much does it cost to form an Oklahoma corporation?

Broder Canning Company, Lethbridge And Taber Operations

This is one of the questions I hear often, particularly because services like Legal Zoom make so much hay with pricing. So I thought to myself: Why not share my pricing, plus what you actually get for the price?

While this isn’t the price in every case because some cases are different, this scenario covers most situations.

My price for a forming an Oklahoma corporation is typically $800.00. What do you get for this price?

Certificate of Incorporation.    The Certificate of Incorporation contains the basic information about the corporation:  Name, Resident Agent, and the initial directors of the company and are filed with the Oklahoma Secretary of State.

By-laws. The By-laws are the most important document of the corporation.  They govern the management of the corporation, the allocation and distribution of profits, duties of officers, directors and shareholders, voting, procedures for transfers of stock and various tax related matters.  The by-laws can enhance the asset protection features of the corporation, or it can weaken them depending on the provisions.

Meeting Minutes. Meeting Minutes memorialize decisions made by the directors and shareholders of the corporation, both to get the company going and to maintain it each year.

Tax ID & Elections. In most circumstances, a corporation requires a Tax ID Number from the IRS.  Essentially, it is the equivalent of a social security number for the corporation.  Bank accounts should be opened with this Tax ID and all corporate business should be conducted under this Tax ID.

Stock Certificates/Transfer Ledger.   Stock Certificates manifest ownership in the corporation.  A corporation does not have shareholders until shares of stock are issued.  That means that there must be some manifestation of intent to issue the shares of stock, either in the Meeting Minutes or in the signing of the Certificates.

Standard Non-Disclosure Agreement. A fundamental necessity for any company seeking to protect its intellectually property, this battle-tested Non-Disclosure Agreement provides a foundation for protecting private and confidential information.

Standard Employment Agreement. It pays to have it in writing with your employees. This way, both the employer and the employee know what the deal is. You can do this with the Employment Agreement which has been tested and refined in many scenarios.

Standard Independent Contractor Agreement.  Most small businesses use the services of independent contractors.  As with the employment relationship, it is helpful to document the Independent Contractor relationship in writing.  You can achieve this with the simple Independent Contractor Agreement I provide.

Free Telephone Calls. As you get your business up and running, you need some more guidance on legal issues. I am happy to provide some help by talking to you on the telephone for no charge, for the first six months after we set up the company.

Posted by Shawn Roberts in Blogposts, Business Law