Considerations Before Owning a Business with Your Spouse

Considerations Before Owning a Business with Your Spouse

Both running a successful business and having a successful marriage require commitment and hard work. Operating a business as a married couple can present its share of challenges, but being devoted to one another as spouses and as business partners can bring higher levels of accountability and trust to the business. If you and your […]

What Is the Difference between a Trust and an LLC?

What Is the Difference between a Trust and an LLC?

Trusts and limited liability companies (LLCs) are both legal vehicles that can be used to manage and protect assets, minimize taxation, and avoid probate. Whether a trust or an LLC is a better choice may depend on the type of asset, but you do not necessarily have to choose between the two. In fact, an […]

How Do I Change the Directors on My Corporate Board?

How Do I Change the Directors on My Corporate Board

Corporate directors act as the governing body of a corporation. They manage the corporation’s business on behalf of the individuals who own the corporation. Directors serve on a board, and the board acts as a group to exercise the corporation’s powers. The board of directors makes major business and policy decisions for the corporation that […]

Personal Guarantees: What They Are and When They Are Required?

Personal Guarantees: What They Are and When They Are Required?

Your new business needs a capital infusion to get off the ground. The only problem is that a new business is not established enough to have generated a business credit report. It may also be lacking assets that can be used as loan collateral. Without a business credit report or business assets, lenders cannot judge […]

What to Include In Your Service Agreement

Small businesses account for nearly half of the economic activity in the United States. To successfully compete with bigger competitors, small businesses are increasingly outsourcing to improve their efficiency and lower costs. Outsourcing allows companies to expand their competencies in key areas without taking on additional full-time, in-house employees. This is a growing trend among small businesses looking for professional yet cost-effective support. Outsourced business functions are governed by service agreements. These agreements are contracts between businesses and independent service providers. Like all business contracts, service agreements must be carefully written to ensure effectiveness, accountability, and legal protection. Service companies usually provide standard agreements, but since they tend to favor the provider, small businesses should review and modify an agreement with the assistance of their legal counsel before signing it. Common Areas for Outsourcing Small business owners often prefer to keep money inside their business and do things themselves. But economies of scale in a global marketplace have made it necessary for many small businesses to take a page from the playbook of larger companies and outsource some functions. Outsourcing statistics indicate that approximately two-thirds of companies with fifty or more employees outsource, as compared to around one-third of businesses with fewer than fifty employees. Roughly half of all small businesses say they plan to outsource business processes in the future. The most commonly cited reasons for small business outsourcing are increased efficiency, expert assistance, and freeing up employees to do other tasks. The functions most likely to be outsourced are noncore functions. Deloitte notes that small- to medium-sized companies lack the office space or budget for in-house departments that handle functions such as finance and payroll. Small businesses most often outsource technical tasks like accounting and information technology (IT) services. They may also choose to outsource the following roles: ● Marketing ● Human resources ● Customer service ● Recruitment ● Sales ● Invoices and billing ● Administration (i.e., virtual assistants) ● Shipping and logistics ● Manufacturing ● Property management ● Legal services ● Consulting services ● Large or complex projects that fall outside a company’s core functions Due to technology and the increased prevalence of remote work, almost any aspect of a business can be outsourced these days. It is even possible to outsource a company’s C-suite executives, such as a chief financial officer (CFO), chief marketing officer (CMO), and chief technology officer (CTO). Important Provisions in a Service Agreement A services partnership is only as strong as the agreement underlying it. Service agreements have much in common with standard business contracts. Among other points, they should identify the parties to the contract, the contract’s duration, the responsibilities of each party, and mechanisms for resolving disputes. The following additional provisions should also be addressed: ● A description of the work to be performed (as well as what is excluded) ● Duration of the contract ● Expected service levels ● Performance benchmarks ● Reporting processes and methodologies for verifying service levels ● Standards for each level of service (for example, an IT services provider may offer prime-time services with higher service levels during working hours and nonprime after-hours service with lower service levels) ● The compensation to be paid to the provider, the manner of payment, and the frequency of payment ● The circumstances that entitle either party to cancel the agreement ● Noncompete and nonsolicitation covenants ● Confidentiality and nondisclosure covenants ● Indemnification (i.e., the business is legally protected from the actions of the service provider); depending on the contract, this may be applicable to both parties ● Remedies and penalties for a breach of the contract ● Dispute resolution process (e.g., arbitration) ● Liability for attorney’s fees Other Considerations for Service Agreements Any contract you enter into with a service provider needs to be well thought out. Service agreements should align with your company’s broader business aims, set clear expectations and goals for contractors, and include precise definitions of key terms and concepts. Here are some points to keep in mind as you negotiate a service agreement: ● Be mindful of metrics. You should have standards and processes in place to measure a vendor’s performance. The service provider should make relevant statistics available to you. This is typically done through an online portal. Failure to meet service levels can entitle you to service credits or trigger a vendor penalty, depending on the contract’s terms. Performance metrics vary based on the services provided. Keep the metrics as simple as possible to make monitoring effective, and include a contractual protocol for adding and removing metrics. Examples of metrics include service availability, defect rates, security measures, and key performance indicators. ● Make sure to vet partners. A strong contract that protects your interests is essential, but if you get involved with a service provider that does not uphold their end of the bargain, you will still experience headaches. Working with a known and proven service provider—especially one that has a record of success in your industry—will go a long way. Awards or certificates are a good sign of trustworthiness, although you should also make sure they are a good fit for your business. Identify your requirements and expectations before entering into a contract and look for providers that check the boxes that are important to you. ● Leave room for changes. Your service contracts should be adequately flexible to accommodate changes that arise during the course of a business relationship. It is not necessary to scrap the entire contract and start over when the need for revisions crop up. You can facilitate changes to the contract by including a mechanism for making required updates. ● Employee or contractor. The flexibility and cost savings of hiring a contractor could be undermined if you get drawn into a dispute about whether the person you hire is actually a contractor. Federal and state rules about worker classification (employee or contractor) are complex. The bottom line is that if you dictate every aspect of how a provider renders services, it could cross the independent contractor line and enter employer-employee territory. You can avoid this by clearly establishing contractor status in your service agreement. Well-written service agreements set clear expectations for both parties and are the foundation of a strong business relationship. A service provider may have a standard contract, but you should not sign it without first reviewing it with a business attorney. Our law office helps small businesses with all aspects of business contracts, from reviewing and drafting to enforcement and dispute resolution. To schedule an appointment with our team, please contact us.

Small businesses account for nearly half of the economic activity in the United States. To successfully compete with bigger competitors, small businesses are increasingly outsourcing to improve their efficiency and lower costs. Outsourcing allows companies to expand their competencies in key areas without taking on additional full-time, in-house employees. This is a growing trend among […]

How Do I Prepare To Meet with a Business Lawyer?

How Do I Prepare To Meet with a Business Lawyer?

Businesses are governed by laws and regulations that affect nearly every aspect of their operation. From formation, hiring, and firing, to drafting contracts, resolving disputes, and dissolving or selling the company, there are numerous legal matters that arise during the lifetime of a business. As a small business owner, you are adept at handling challenges. […]

How to Resolve Deadlocks in Your LLC

How to Resolve Deadlocks in Your LLC

Membership in a limited liability company (LLC) may come with voting rights. Member voting rights are addressed in the LLC operating agreement, which typically provides that LLC members must vote on several issues that are material to the continuance of the business. A unanimous or majority vote may be required depending upon the nature of […]

Why You Might Want to Hire Someone to Be Your Registered Agent

If your business is registered with the state, you are required to name a registered agent at the time of registration or incorporation. A registered agent is the person who receives legal and tax documents on behalf of your business. You or other people in your business can serve as the registered agent, but doing so raises a few potential issues. To avoid those issues, you can hire an attorney or company to serve as your registered agent. Registered agent services are inexpensive and can provide an added layer of professionalism. A registered agent is required in every state where your business operates for as long as it is in operation. You can change your registered agent at any time. What Does a Registered Agent Do? A registered agent acts as an official point of contact for a business. Agents receive important correspondence sent to the business, such as government compliance notices, tax documents from the state, and legal notices (e.g., a notice of legal action against the company or a subpoena). State laws require an incorporated or registered business to name a publicly accessible agent to receive such correspondence. Depending on the state, a registered agent may also be known as a statutory agent or an agent for service of process. Does My Business Need a Registered Agent? There are several different business structures you can choose for your business, including a sole proprietorship, a partnership, a corporation, and a limited liability company (LLC). Each type is categorized as either a common law entity or a statutory entity. You are not required to file any paperwork with the state for common law entities. Sole proprietorships and general partnerships are common law business entities. You do not need a registered agent for them. Statutory entities require formal state registration. You have to file documents with the state, disclose certain information about your business, and name a registered agent. Corporations, LLCs, limited partnerships, and limited liability partnerships are statutory business entities. What Are the Requirements for a Registered Agent? While every state requires a statutory business entity to have a registered agent, the requirements for an agent vary by state. In general, most states require a registered agent to meet the following conditions: ● Be a resident of the state where the business is registered and be at least eighteen years of age (if the agent is an individual) ● Be registered in the same state where the business is registered (if the agent is a company) ● Have a physical address (i.e., not a PO box) in the state where the business is registered ● Be available during regular business hours to receive documents Ensure that you understand the registered agent rules in every state where your business operates (note that what constitutes doing business in a specific state can vary). Noncompliance with state registered agent laws carries consequences. For starters, you may not be able to register or incorporate your business without a qualified agent. If you fail to maintain a registered agent in accordance with state laws, the state could assess fees, penalties, and even dissolve your business. In some states, the owners of LLCs and corporations not in good standing with the state can lose liability protection. More practically, you need an agent who can properly do the job so that you are up to date on notices. If your agent is derelict in their duties, you may not receive notice of a lawsuit against the company or may miss out on a tax document that demands immediate attention. Can I Act as a Registered Agent for My Business? Anyone can be a registered agent for your business, as long as they meet the legal criteria. This includes you and other members of your business, such as business partners, corporate officers, and employees. It could also be a trusted person outside your business. However, your business cannot serve as its own registered agent. It must be an individual from the business or a third-party individual or service provider you hire to serve as your agent. What Are the Benefits of Hiring a Registered Agent? At start-up, it may be faster, easier, and cheaper to just name yourself or another member of the company as its registered agent. But there are some reasons why you might want to use a third-party registered agent: ● Time and effort: Small business owners have a lot on their plates. Receiving company mail may not seem like a big investment of your time, but if you are frequently out of the office on business trips and meeting with clients, you may not be around to receive time-sensitive documents. A registered agent can make sure that any official correspondence is opened right away and made available to you for immediate response. ● Compliance: A professional registered agent does more than review the mail for you. They can implement a system that keeps your documents and deadlines organized. For example, an agent can create an online calendar that notifies you of upcoming due dates, like tax filings and annual reports. They can also create copies of documents in the cloud that you can access anytime and anywhere. ● Privacy: Remember that a registered agent’s address must be publicly accessible. That means that if you are the registered agent, your personal address becomes a matter of public record. This might not matter as much if your business is not home-based, but it could still make your address available to spammers. In addition, some legal notices are delivered by law enforcement officers. Having your agent at a separate location can avoid any awkward interactions in front of clients. ● Low cost: Hiring a registered agent usually costs only a few hundred dollars per year at most. Time is money, and the time you save by outsourcing this service—not to mention the noncompliance risks you could avoid by having a dedicated agent—may be well worth it. In addition, the fees you pay to a registered agent are a tax-deductible business expense. Thinking about hiring a registered agent? Do you have questions about whether your business qualifies as doing business in the state and need an agent here? Our law office can act not only as your registered agent but also as a trusted, full-service business adviser. Contact us today to schedule an appointment.

If your business is registered with the state, you are required to name a registered agent at the time of registration or incorporation. A registered agent is the person who receives legal and tax documents on behalf of your business. You or other people in your business can serve as the registered agent, but doing […]

How to Conduct an Effective Employee Performance Review

Estate Planning Attorney

Employee performance reviews can be stressful for workers and managers alike. Now more than ever, with workers quitting their jobs in droves as part of the “The Great Resignation,” managers may be hesitant to provide direct, constructive criticism that could be perceived as overly harsh. Employees, in fact, widely agree that most performance reviews do […]