How to Legally Protect a Business Idea

You have a great business idea and need time to bring it to fruition. In the meantime, you may wonder how to protect a business idea and ensure your future success. Unfortunately, many fail to take reasonable steps in protecting a business idea from competitors and lose their rights, even as the original creator. How to Protect a Business Idea There are a number of ways to legally protect your business ideas. The best option for you depends on the type of idea and what you want to do with it. Reviewing all options with a business law attorney to protect your business ideas ensures you make the right choices moving forward.  Federal or State Registration When you’re thinking about how to protect an idea for a business, one of the first things you are likely to consider is officially registering your idea with the appropriate federal or state office. Registration falls into three main categories: patents, copyrights, and trademarks. Each of these categories provides different types of protection and for different lengths of time. Patents A patent is a property right granted by the U.S. Patent and Trademark Office (USPTO). The title of patent holder entitles you to exclude others from using, making, or selling your invention for some time. The USPTO provides information on how to patent a business idea.  There are three different types of patents: utility, design, and plant.  Utility patents protect the way an invention functions, and design patents protect the way an invention looks. Plant patents can protect invented or discovered asexually reproduced plants. Design patents last for 15 years from the date of the grant, while utility and plant patents last for 20 years. Consult with a qualified business law attorney to discuss how to patent a business idea. Patent registration is costly and requires considerable time. A business law attorney ensures you file for the correct patent and eliminates delays through their knowledge of the patent application process. Copyrights A copyright represents a collection of rights granted to an individual upon creation of an original work. A copyright provides answers to the question of how to legally protect a business idea. Copyrights include the following: The right to reproduce the work, The right to prepare derivative works, The right to distribute copies,  The right to perform the work publicly, and The right to display the work publicly. A copyright grants you, the owner, the right to assign, license, or transfer the copyright to others. Additionally, the power of copyright permits the owner to choose the way the public views your work. Trademarks A trademark is a word, phrase, symbol, or design that identifies and distinguishes the source of goods. A service mark is a word, phrase, symbol, or design that identifies or distinguishes a service’s source. Examples of trademarks include slogans, brand names, and brand logos. Acquiring the rights to a trademark does not require registration. The first and continuous use of a trademark in commerce establishes your rights. However, registering a trademark does provide additional protections. You may decide to register your trademark with the USPTO, your state, or both, depending on the type of protections you need.  Non-Disclosure Agreements A non-disclosure agreement may serve as an effective protective measure if you plan to work with others on your idea. A non-disclosure agreement, or NDA, operates as an agreement between parties not to disclose your idea or share information with third parties. A qualified business attorney may draft an NDA with no expiration date, thereby providing you even stronger protection. Non-Compete and Non-Solicitation Agreements A non-compete agreement operates similarly to an NDA, but it serves to prevent someone from starting a business similar to yours. A non-solicitation agreement may work in conjunction with a non-compete agreement to prevent someone from stealing your employees or clients. Typically, non-compete agreements have to be limited in time, scope, and location. For example, if your company sells tires in a small town, it would be difficult to enforce an agreement that prevented someone from selling tires anywhere in the country for the rest of their lives. However, the agreement may prevent someone from starting a competing tire business for five years within a 30-mile radius of your business. Work-for-Hire Agreements  Work-for-hire agreements can allow you to get help with your idea without giving up your rights. In a work-for-hire agreement, you hire someone to work for you to analyze and improve your idea. Anything these individuals come up with to perfect your idea becomes yours. If you file a patent, someone you hire will identify as a co-inventor on your patent. Despite this title, they own no rights to the patent. Provisional Patents  The U.S. Patent and Trademark Offices issues provisional patents (PPA) to protect an invention. Provisional patents protect a patent during the 12 months before filing the formal application. The provisional patent allows the inventor to pitch the idea, test its commerciality, and fine-tune any prospective issues before completing the expensive patent application. The recognizable “patent pending” label affixes to patents during this provisional period. Trade Secrets Law Another way to protect your ideas is to keep them secret. The Uniform Trade Secrets Act (UTSA) protects trade secrets that:  Have either actual or potential independent economic value because they are not generally known; Have value to others who cannot legitimately obtain the information; and Are subject to reasonable efforts to maintain their secrecy. There exist two common ways of stealing trade secrets. One is through dishonest means such as stealing. Another is through a breach of confidence. For example, a former employee who had rightful access to the trade secret may use it without permission or sell it to another company. If someone steals your secret, you may have a legal claim against them if all three of the above elements are present. The steps you take to protect your trade secret are particularly important. You can show you made reasonable efforts to maintain secrecy by doing things like: Limiting the number of…

Common Shareholder Disputes How to Resolve Them

The term shareholder is not just relevant to Fortune 500 companies. A shareholder is any individual or institution that legally owns at least one share of stock in a private or public corporation. If you own stock in a company, or your pension includes publicly traded stocks, you are a shareholder. Shareholders are also sometimes called members of a corporation. Shareholders essentially have a financial interest in a corporation or company. Considering the money at stake, shareholders can get into any number of different types of disputes. With more and more owners of a company, it’s inevitable that disputes will arise about how the company is managed. Hopefully, the shareholders can work together to resolve these disputes. Sometimes they cannot, and shareholders need their own attorney representation. Business Disputes Attorney Michael Long Shareholder Rights The rights and responsibilities of a shareholder differ according to the governing shareholder agreement. Shareholders commonly have the right to: Sell their shares; Purchase new shares;  Nominate directors; Vote on directors nominated by the board of directors;  Propose shareholder resolutions; Vote on shareholder resolutions;  Receive payment of dividends; Sue the company for violations of a fiduciary duty; Vote on management proposals; and  Receive payment of assets remaining after liquidation. A shareholder’s rights and responsibilities are outlined in the company’s constitutional documents, e.g., the articles of incorporation and any shareholder agreements. The rights such an agreement provides will inform the method shareholders choose to resolve their disputes. What Is a Shareholder Dispute? Shareholder disputes can be disagreements among shareholders or between shareholders and the owners of the company. Shareholder disputes can take on a number of different forms. Whether shareholders disagree with the company’s management style or decision-making or there has been an instance of fraud or illegal conduct, shareholder disputes can differ widely. Examples of Common Shareholder Disputes Shareholders get into disagreements over any number of issues. With money on the line, shareholder disputes can be contentious. Examples of common shareholder disputes include: Breach of a shareholder agreement; Disagreements over direction; Disagreements over company management; Breach of fiduciary duties; Minority shareholders not getting enough respect; Differences in compensation or contribution;  Conflicts of interest; Personal problem affecting business relationships;  Lack of dividend distributions; Concern over possible illegal or fraudulent activities; and Breach of a director’s service contract. Disputes amongst shareholders are common and often high-stakes. Failure to seek legal advice early in the course of a shareholder dispute regarding a shareholder’s legal rights and strategies can escalate the seriousness of the dispute. For this reason, it is important to seek the advice of an experienced business law attorney as soon as possible. How to Resolve Common Shareholder Disputes The first step to resolving a shareholder dispute is to look over the shareholder agreement. The manner in which shareholder disputes are resolved may be determined by the governing shareholder agreement. A shareholder agreement will likely include provisions that provide procedures for forcing a shareholder to sell their shares given certain circumstances. If the shareholder agreement does not provide any such procedures, shareholders can and should form a shareholder agreement during the process of resolving the dispute. Other methods for resolving shareholder disputes include: Proposing a resolution to address the dispute at a general meeting; Appointing a disinterested director, board advisor, etc. to resolve the dispute;  Appointing additional statutory directors, etc. to avoid deadlock and bring a fresh perspective;  Calling a general meeting of the shareholders to consider a resolution dismissing a director; Terminating a shareholder’s employment, if applicable, under an employee settlement agreement; Engaging a neutral professional mediator to resolve the dispute; Arranging a buyout by an external buyer, another shareholder, or the company, in accordance with the company’s articles and any governing shareholder agreements; Selling the company and distributing the proceeds to shareholders in accordance with the articles of association and any governing shareholder agreement; Presenting a petition to have the company wound up, if it is just and equitable to do so; or Filing a lawsuit, known as a derivative claim, on behalf of the company against the wrongdoers; The method of resolution you choose depends on the specific circumstances of your dispute. No matter what you decide to do, you should first consult all applicable shareholder agreements and the articles of association. Your rights and responsibilities will be limited by any such agreements, so it is important to be educated about their requirements. You should also be sure to consult an experienced business law attorney who can help you interpret your operating agreement and explain applicable state and federal laws. How BrewerLong Can Help  BrewerLong is a Florida-based law firm that handles all manner of business law cases. From formation to dissolution, we can represent you throughout the life of your business. Our team of experienced business law attorneys works tirelessly to provide individualized services. Contact us today for a free case consultation. We’ll work with you to develop the best strategy for your case.

All You Need To Know About Legal Audits

As a business owner, you understand the numerous rules and regulations that ensure a compliant business. However, despite your diligence, important issues may be overlooked. The consequences of missing anything may cost your business in penalties and litigation fees. Staying on top of everything can be overwhelming. However, a legal audit checks the legal health of your business. A qualified business law attorney behaves as a legal auditor to analyze any risks or gaps in liability that may exist for your company. Predetermining where these gaps and risks exist before they are exposed protects your company from consequences that may be difficult for your business to recover from. It’s common for a new business to take shortcuts while getting started. Unless these weaks spots are uncovered and upgraded, a successful business can fall prey to its past mistakes. Business Attorney Trevor Brewer What Is a Legal Audit? A legal audit focuses on a single aspect of your business and analyzes your legal position. A legal audit ensures that no hidden risks exist within your company. The problems a legal audit identifies are those that put your company at risk for penalties and litigation. While a legal audit performs an in-depth analysis of one area of your company, it is not so intrusive as to interfere with your company’s day-to-day operations. Possible topics addressed in a legal audit include the following: Choice and structure of business entity; Acts of the board of directors and supporting documentation; Intellectual property protection; Methods of marketing and distribution; Any pending and future litigation; Estate planning; Insurance coverage; Human resource practices, including hiring and firing; Employment agreements; Securities law compliance; Antitrust and related government regulations; Product liability;  Environmental law; and Sales and collection practices. Not all of these topics may be relevant to your business. A legal audit’s depth and complexity depend on the company’s size. Additionally, the type of business in which the company is engaged, the number of shareholders and employees it has, and whether the business is in a regulated industry also play a large factor in the legal audit’s scope. Why Should You Get a Legal Audit?  As a growing business, it’s essential to identify potential issues or liability before they become an actuality. The most significant benefit of a legal audit comes from discovering compliance issues before they cost your company in penalties or litigation. There are myriad risks that you may expose your company to by failing to get a legal audit. Accounting Risks Failure to maintain accurate accounting records for the business or mixing personal assets with those of the business increases liability risk for the company. For example, the commingling of personal assets may lead to a piercing of the corporate veil. Piercing the corporate veil eliminates the limited liability protection afforded to business owners and exposes them for personal liability for any litigation that may be pending. Compliance Risks Failure to obtain all required permits and licenses for your business leads to fines, penalties, and in some instances, closure of the company. You can also face penalties and liability for failing to comply with various state and federal laws governing things like data security, marketing, and safety standards. Human Resource Risks Failure to have employment handbooks, employment agreements, and general employment policies increases civil liability risk from past and present employees. Corporate Compliance Risks Failure of the board of directors to keep accurate records and minutes of decisions made in meetings subject the company to liability by shareholders and investors. Reporting Risks Failure to accurately report on company performance each quarter leaves the company open to possible default by investors and lenders. Who Should Get a Legal Audit Any business, even one that is just starting out, should consider a legal audit. Different businesses are vulnerable to various liabilities. The legal audit serves to identify these potential issues as they apply to your company’s specific circumstances. Even as a small business, a legal audit can provide the following benefits: Giving investors and lenders reason to have confidence in your company;  Achieving profitability or increase your profit margin by spotting operating inefficiencies and serious fraud issues;  Simplifying the tax process;  Avoiding liability; and  Helping you obtain specific business certifications that require legal audits. Gaining an annual picture of your business through a legal audit can increase productivity, boost revenue, and reduce unnecessary operating expenses. How Often Should I Get a Legal Audit Legal audits may be completed on many topics at one time or may progress in phases. A legal audit is often initiated when new management takes over and a company wants to make sure they start with a clean slate. A costly mistake may also trigger a legal audit. It’s wise to consider an annual legal audit for your business in the absence of these occurrences. The survival of any business requires preparation, organization, and responsiveness. A legal audit provides these protections for your business. Why Hire a Lawyer for a Legal Audit Just as you would hire an accountant to review your books or a tax expert to perform a tax audit, a qualified business lawyer should conduct the legal audit of your business. Additionally, an attorney can provide a clear, objective analysis of your company operations and legal procedures. The attorneys at BrewerLong assist businesses of all sizes. BrewerLong helps you build your company, grow an established business, or mitigate risks to your company through a legal audit. We provide a clear assessment of your business through multiple discussions. Our legal team knows that small businesses deserve and require the same legal representation as larger companies and corporations. We work closely with you to help your business achieve its envisioned goals and objectives. Seeking the counsel of a successful business lawyer for your legal audit could mean the difference between your business’s success and failure. Contact BrewerLong today to discuss the process for a legal audit and how it can benefit your business. 

LLC Member Buyout Agreements

When you start your LLC, it is unlikely that you envision yourself leaving the business. Similar to a marriage, you may expect a perfectly harmonious relationship for the foreseeable future. However, as time progresses, you may find your vision for the LLC has changed, or perhaps a member has found a more profitable opportunity they wish to pursue. The operating agreement for an LLC outlines the expectations, roles, and responsibilities of the LLC members. This agreement also provides a procedure for a member leaving the LLC. While the term “buyout agreement” implies a sale, this is not entirely accurate. In actuality, an LLC buyout agreement is an agreement between the members of an LLC about what will happen if a member wishes to leave. It is always prudent to have a buyout agreement in place. Business owners are often surprised that a LLC member does not automatically give up his or her LLC membership interest when the member leaves. An LLC membership interest is property, and you cannot take it away without an agreement. Business Attorney Trevor Brewer What Is an LLC Member Buyout Agreement? When you created your LLC, you probably also created an operating agreement. The operating agreement for your LLC provides information about day-to-day operations and the roles and responsibilities of all LLC members. The operating agreement may also contain a clause regarding withdrawal procedures that all LLC members must follow. A buyout clause in an operating agreement might also include information calculating compensation for departing members. If your operating agreement does not contain a buyout clause, you should draft a separate buyout agreement. Working through and completing a buyout agreement forces members to share their expectations when an LLC member leaves. Perhaps you will want to dissolve the LLC if a member leaves. Or perhaps you will want to give other members the opportunity to buy out their interest. Exploring and defining the terms of a buyout agreement may force LLC members to have real-life discussions about “what if” scenarios. Addressing these “what if” scenarios before they occur could save the LLC and relationships when an LLC member decides to leave. If your operating agreement does not address what happens when a member leaves and you don’t have a buyout agreement, Florida law will govern removal of members from the LLC The Florida Revised Limited Liability Act provides for the membership transfer of a Florida LLC. Under the Act, members may depart at any time. Additionally, it addresses how to forcibly remove a member if a dispute arises. The Act provides for removal in these situations by judicial order or unanimous vote by other LLC members.  What Should a Buyout Agreement Include? When drafting a buyout agreement, schedule a meeting with all the LLC members. If an LLC member is planning to exit the LLC, also include this person. At the meeting, discuss topics such as the valuation of the departing member’s interest, who can buy out a member and under what circumstances, and the terms of any purchase of the membership interest.  Value Determination One of the critical elements of any buyout agreement is the value determination of the LLC membership interests. LLC members may collectively determine the value of the LLC. Alternatively, they can agree to a method for calculating that value at the time of a member’s departure. For example, the members might agree that the fair value of the LLC should be determined by formal valuation provided by a professional business appraiser. A buyout agreement can then give the remaining members the right to buy back an LLC ownership interest for a predetermined price. Providing this language and information in an operating agreement simplifies the process if a member decides to leave the LLC. Once a value of membership interests is determined, LLC members must agree on the method of purchase. For example, members may require the purchase price to be paid in full at the time of departure or over a specified period of time. Triggering Events An operating agreement should also consider whether any triggering event will prompt the buyout of a member’s interest. The members of the LLC should agree on what happens after a triggering event occurs. There are several common types of triggering events. Bankruptcy Filing for bankruptcy could force an LLC member to sell their interest in the business. A buyout agreement could allow for the remaining members to buy the bankrupt member’s interest. Death If a member dies, their ownership interest in the LLC may pass to their heirs or spouse. Remaining LLC members may find themselves working with a person with whom they never intended to do business. You can utilize a buyout agreement to prepare for this “what if” event and determine an LLC path forward. Retirement/Resignation When a member plans to retire from the LLC, an agreement should be in place regarding their interest in the LLC. Determining how the retiring member’s interest will be divided or sold prevents any conflicts or disagreements between existing LLC members.  Divorce An LLC member may lose their interest in the LLC in a divorce proceeding. Including language providing a right of first refusal to existing LLC members prevents this scenario from occurring. Incapacity A buyout agreement can also address what to do if an LLC member becomes incapacitated due to injury or illness, including what will happen to their interest in the LLC. Forced Sales Forced sale language in an operating agreement provides that upon certain triggering events, such as when a member decides to retire, the remaining LLC members must buy the departing member’s interest. When such a provision is included in a buyout agreement, it will generally require the remaining members to purchase the interest within a predetermined period at a predetermined price. Why Should I Have a Buyout Agreement?  An LLC should always consider having a buyout agreement in case a member decides to leave the LLC. Including the language for a buyout in the operating agreement minimizes the possibility of a…

When Can You Sue A Business Partner

When you start your business partnership, you and your partner may have the same goals. However, unexpectedly, relationships may sour. Perhaps your partner undertook actions that undermined the company’s reputation and damaged business. In some situations, the only resolution to the conflict is suing your business partner. Consult with an experienced business lawyer to determine how to sue your business partner.  “Business relationships are often like marriages. It is oftentimes much easier to get into a business relationship with your partner than to get out of it.” Business & Litigation Attorney Michael Long There are various grounds for suing a business partner. The underlying purpose of partnership lawsuits is to remedy damage to the business caused by things like breach of contract, negligence,  abandonment, and more. Common Grounds for Suing a Business Partner There are many reasons you may need to sue a business partner. However, the following are some of the most common you may encounter. Breach of Partnership Agreement Business partners typically share in business decisions. However, if one business partner breaches a partnership agreement, its effects may be disastrous. If you sue your business partner for breach of a partnership agreement, various elements must exist for your claim. These elements include the following:  A valid, enforceable partnership agreement exists;  Your business partner has breached a term or terms of the contract; and You or your business has suffered damages resulting from the breach. If the above elements are present, a valid claim for breach of partnership agreement exists, and you may have grounds for suing your business partner. A strong partnership agreement provides clauses addressing courses of action regarding contract breaches. For example, the partnership agreement may provide your partner with a certain number of days to cure the breach. If included in your partnership agreement, and your partner fixes the breach, you may avoid a lawsuit. If your partner refuses to fix the breach, you may have grounds to sue a business partner.  Abandonment You may wonder whether you can sue your business partner for abandonment. Abandonment occurs when the business partner leaves the partnership. In some situations, the business partner may continue to collect a paycheck despite not actively working. Abandonment constitutes grounds for suing a business partner as it may be considered a breach of fiduciary duty. All partners owe the other a duty to place the interests of the business above their own. If a business partner abandons the partnership to pursue opportunities for themselves, this may constitute a breach of fiduciary duty.  Negligence A negligence claim might exist against your business partner if their actions harmed the partnership. The following elements must exist for a negligence claim:  Duty. Your business partner owes you and the partnership a duty of care. This duty of care requires business partners to make decisions in good faith.  Breach. Your business partner acted negligently when acting on behalf of the partnership.  Causation. The breach of duty caused harm to the partnership. Consult with a business law attorney to determine whether you have a negligence claim against your business partner.  Violation of Intellectual Property Rights A violation of intellectual property rights belonging to the partnership may also give you grounds to sue your business partner. A partnership agreement may provide that all copyrights, patents, and trademarks are the partnership’s property. However, if your business partner has used this intellectual property for personal gain, their misuse may give you grounds to sue them.  Criminal Activity by Your Business Partner Sometimes a business partner engages in criminal activity, such as fraud or theft. Criminal acts may include stealing money from the partnership or stealing money from a customer. These activities can both cost your business financially and undermine its reputation. Therefore, they can provide valid grounds to sue your business partner. Alternatives to Suing Your Business Partner  If you would prefer to explore options for settling disagreements outside of court, alternatives to a lawsuit exist.  Settlement You may consider negotiating with your business partner to determine terms of settlement to which you both agree. Settlement may mean the termination of your partnership and repayment of any losses by your business partner. Saving on litigation costs by pursuing avenues other than a lawsuit may serve your partnership’s best interests. Consult with an experienced business law attorney to explore possible terms of settlement for your situation.  Mediation Additionally, mediation may be another alternative to resolving conflicts. Rather than engaging in a lawsuit for months or even years, mediation may provide a more efficient result. However, mediation requires the cooperation of both parties. There is no point in engaging in the mediation process if neither party wishes to work with the other. If mediation is not an option, your best option moving forward is suing your business partner.  Arbitration Does your partnership agreement include an arbitration clause? An arbitration clause in your partnership agreement may apply to specific situations. Consult with a business law attorney to review your partnership agreement. If an arbitration clause applies to your situation, you may be able to avoid suing your business partner while still obtaining a legally binding resolution to your situation. Arbitration allows parties to settle their disputes out of court while obtaining legally enforceable decisions. Contact Us  Considering whether to sue your business partner is a difficult decision. A decision to sue will undoubtedly damage the relationship between you and your business partner. The attorneys at BrewerLong have over a decade of experience providing high-quality, tailored legal services to all clients. Hiring a lawyer to assess difficult business decisions mitigates the risk of legal disputes in the future. BrewerLong attorneys ensure each client receives personal attention and meaningful communication. Our team at BrewerLong possesses a thorough understanding of the time, energy, and effort it takes to run a business. We invest in the future of your business. Contact us today to discuss grounds for suing a business partner. 

Can You Remove a Shareholder From Your Business

If a relationship with a shareholder fails to work out, the removal of that shareholder from your business or corporation is possible. Complications may arise when undertaking the removal of a shareholder.  “Removing a shareholder from a corporation is often contentious. Even when a shareholder agreement can be removed, doing so can give rise to lawsuits.” Business & Litigation Attorney Michael Long Consult with an experienced business law attorney to determine whether the shareholder can be removed.   Review Shareholder Agreement  The most critical first step in planning for the removal of a shareholder is a review of your shareholder agreement. Your shareholder agreement may provide the proper procedure for the removal of a shareholder.  A shareholder agreement operates as a type of contract, providing guidelines for proper shareholder conduct. If a shareholder fails to adhere to conduct guidelines within a shareholder agreement, the removal of the shareholder for misconduct is easier.  It can be more difficult to remove a majority shareholder absent a shareholder agreement. Since a majority shareholder holds more than 50% of the voting rights of a company, whether a majority shareholder can be removed becomes substantially more difficult, if not impossible. Therefore, when attempting to remove a majority shareholder, provisions within a shareholder agreement may help. If a majority shareholder violates any rules of conduct within the shareholder agreement, basing the majority shareholder’s removal on that violation simplifies the removal process.  However, the involuntary removal of a shareholder opens up the possibility for future legal disputes.  Shareholder agreements also provide information about the number of issued shares, restrictions on transferring shares, rights of current shareholders to purchase shares, and details regarding the sale of shares.  Some shareholder agreements do not provide for proper removal procedures. If no shareholder agreement exists or there has been no violation of an existing shareholder agreement, consult with a business lawyer to determine removal options for your company.   If a shareholder is also an employee, you may wonder whether you can fire a minority shareholder. While it is possible to terminate a shareholder’s employment, carefully review your employment contract. Consult with an attorney to anticipate any potential legal issues with termination of employment.    Other Ways to Get Rid of a Troublesome Shareholder Available removal avenues may fail for various reasons. Perhaps you don’t have a shareholder agreement or can’t show that it was violated. Or maybe you have been unable to get sufficient support to vote out the shareholder. If you are unable to directly remove a shareholder, there are other options to encourage them to leave the company. Sell Shares One option to consider is negotiating with the minority shareholder to sell their shares. While you can technically force a shareholder out, negotiation prevents the opportunity for legal issues down the road. It is always possible to negotiate with the shareholder regarding the purchase of the minority shareholder’s stake. While it is common to discount sales of minority shares, presenting a reasonable offer may encourage the shareholder to accept.  It’s important not to engage in any activity constituting minority shareholder oppression. Minority shareholder oppression examples include the following: Withholding information from the shareholder;  Withholding profits or dividends;  Violating minority shareholder rights; and  Going against specific provisions in the shareholder agreement.  Pursuing any of these courses of action could result in legal action by the shareholder for this conduct. Permissible conduct which may encourage a minority shareholder to sell their shares includes: Termination of shareholder employment. If undertaking this avenue, carefully review termination procedures in your employment agreement. Reduction of shareholder authority. Voting to reduce the minority shareholder’s decision-making power may encourage the shareholder to sell their shares. While this conduct is generally permissible, consult with a business attorney to prevent any opportunity for future legal disputes down the road. Buyout Shareholder Even if the shareholder fails to violate terms of the shareholder agreement, removal may still be possible. For example, your shareholder agreement may provide for a buyout clause. A buyout clause allows for purchase of a minority share for an agreed-upon price. A buyout clause prevents minority shareholders who cannot be voted out from refusing to surrender their shares.  Contact Us When determining whether a majority or minority shareholder can be removed, consult with the qualified business attorneys at BrewerLong to guide you in the right direction. Despite the removal of a shareholder, ensure your company continues operations smoothly and without interruption. BrewerLong attorneys work to limit any opportunities for future legal disputes with removed shareholders. With over a decade of experience, the attorneys at BrewerLong work to create excellent experiences through helping, listening, and collaborating with all clients. Contact us today to discuss whether a shareholder can be removed from your company. 

5 Things to Know About Florida Asset Purchase Agreements

Purchasing a new business can be an exciting prospect. However, it is also a complicated one. “The Asset Purchase Agreement is the most important tool for making sure a business buyer not only gets the assets to operate the business but also gets protection against undisclosed surprises that might affect the business’s value.” Business Attorney Trevor Brewer If you are considering a business purchase, it’s a good idea to consult with an experienced mergers and acquisitions lawyer. They can advise you in seeking a business to purchase, negotiating the purchase agreement, and getting your business up and running. In the meantime, here are some basic things you should understand about Florida purchase agreements to buy a business. 1. What Is an Asset Purchase Agreement? An asset purchase agreement is a contract for the sale of a business or specific business assets. These are complex business agreements that can take time to negotiate and finalize. Typically, parties to a business asset purchase agreement in Florida engage attorneys to negotiate on their behalf. 2. What Does the Asset Purchase Process Look Like? When purchasing a new business, there are several steps to complete. Your purchase agreement will typically provide deadlines for completing each of these tasks. Purchase Agreement The first step is to negotiate your asset purchase agreement. This can involve several offers and counteroffers. Your attorney can help you negotiate the finer points of the agreement. We discuss many of these in further detail below.  Earnest Money Typically, the buyer will need to deliver earnest money immediately after signing the asset purchase agreement. Earnest money is typically 5–10% of the purchase price. But the parties can agree in the contract to any fixed amount or percentage. Seller Disclosures Soon after finalizing the agreement, the seller typically must provide disclosures regarding important aspects of the business, such as: Business assets and real property; Intellectual property rights; Stockholders; Subsidiaries; Employees and employee benefit policies; Insurance policies; Outstanding debts; Ongoing legal action; Permits and licenses; Past business performance; and Financial operations. Further, the seller must warrant that the representations are true. Due Diligence Next, the buyer has an opportunity to perform due diligence. This allows the buyer to investigate the claims and disclosures the seller has made. They also have the chance to ask any questions and perform physical inspections of property, equipment, and other assets. Financing If the buyer does not rescind the agreement after receiving the disclosures and completing due diligence, the sale can move forward. If the buyer will be financing the purchase, they will then have some period of time to obtain a loan commitment from their lender. Closing With financing secure, the parties can now schedule a time to close on the purchase agreement. At closing, the buyer will deliver the agreed funds to the buyer. The buyer will deliver any necessary documents, keys, and property to the seller. 3. What Are the Essential Terms of an Asset Purchase Agreement in Florida? Every asset purchase agreement in Florida should specify: The parties to the agreement; The purchase price; What assets are included in the sale; What assets are excluded from the sale; Representations and warranties; and The timeline for completing individual tasks as well as finalizing the agreement. You can find template agreements covering these essential items as well as some boilerplate terms to get you started. However, it’s important to tailor your agreement to your specific needs. Simply filling in the blanks on a generic asset purchase agreement is unlikely to sufficiently protect your interests. 4. What Things Should You Consider Including in Your Business Asset Purchase Agreement? There are a number of important issues you should consider addressing in your asset purchase agreement. Since each business is unique, the terms of your agreement should also be individually crafted to meet your needs. We discuss some common terms below, but your attorney can advise you of additional terms that might be important for you. Non-Compete and Non-Solicitation Agreements If you are buying a business, you will likely want to include non-compete and non-solicitation agreements in the purchase contract. Non-compete agreements must be reasonably limited in time and scope. The agreement should specify: The type of business the seller is restrained from operating; The geographical area of the restriction; and The length of time that the restriction will continue. Florida law presumes that a non-compete restriction against a seller is reasonable if it lasts less than three years. But depending on the circumstances, restrictions lasting as long as seven years may be enforceable. Non-solicitation agreements are also important. They can be drafted to prevent a seller from poaching either your clients or your employees. Without comprehensive and clear non-compete and non-solicitation terms, there are many things the seller can do to undermine your new business. They could start a competing business down the street or lure away your prospective clients, which could ultimately spell the demise of your business. Escrow Hold Back Typically, an asset purchase agreement in Florida will include indemnification provisions. These require the seller to reimburse the buyer for any losses resulting from the seller’s previous operation of the business. For example, if the buyer has to settle a breach of contract claim based on events that occurred while the seller owned the business, the seller would be responsible for the costs of the settlement. When you negotiate your asset purchase agreement, you can request an escrow hold back. This type of provision requires part of the proceeds from the sale to remain in escrow for a particular period of time after the sale is final. If an indemnification claim arises, those funds are then available to compensate the buyer. It helps to guarantee payment from the seller on their indemnification obligations. Seller’s Continued Role in the Business You may want to include terms in your purchase contract relating to the seller’s continued involvement in the business.  In some cases, you may keep the seller on as an employee to operate the business. In that situation,…

How to Close Down an LLC

There are different reasons why an LLC, or limited liability company, would close. Sometimes members may wish to retire and have no desire to continue the LLC. Perhaps market growth has slowed significantly, and it is unprofitable to continue operating the LLC. Whatever the reason, correctly dissolving a state-registered entity like an LLC requires multiple steps. Failing to close an LLC properly may lead to unnecessary administrative costs and increased liability. Avoid confusion and a potential lawsuit by learning how to close an LLC in Florida.  The legal obligations of an LLC can continue for years after an LLC is dissolved, and in some cases the LLC’s members can wind up being responsible for those obligations. LLC members should take a thorough approach to dissolving and liquidating the LLC, to avoid costly surprises in the future. Business Attorney Trevor Brewer When Can You Dissolve an LLC? Typically, the operating agreement for your LLC dicatest the circumstances where you can dissolve the LLC. In many cases, the operating agreement will require a vote among members in favor of dissolution.  If no operating agreement exists, Florida law allows you to dissolve an LLC by unanimous written consent of all members. Additionally, Florida law permits dissolution when the following occurs:  No member exists for the LLC for a period of 90 days or more; An entry of judicial dissolution; or The Department of State files a statement of administrative dissolution. You should preserve a record of all documents in the LLC official files. Steps to Close Down an LLC Officially dissolving an LLC requires you to complete critical tasks. Your LLC operating agreement should provide detailed rules on the procedure of dissolution. If you do not have an operating agreement, the dissolution procedure will be governed by the Florida Revised Limited Liability Company Act. Typically, you should expect to complete the following steps. Agreement First, you should schedule a meeting of the members of the LLC to vote on dissolution. Different LLCs have different requirements for dissolution. Some LLC operating agreements require a unanimous vote. Other LLC operating agreements require a majority vote in favor of dissolution.  When reviewing your operating agreement, it’s essential to determine whether specific procedures exist regarding dissolution. The operating agreement may require advance notice of the meeting and a particular time for members to vote. Be sure to record the vote in the official minutes of the dissolution meeting. Give Notice Provide notice to all creditors and claimants of the LLC. Additionally, provide notice to any employees of the LLC. Notice provides creditors the opportunity to file any lawsuits against the LLC. Although not required in Florida, it does encourage a smoother dissolution process. Settling all creditors’ claims first allows for worry-free distribution of remaining assets to members.  In Florida, written notice to creditors must include the following information: Description of the claim that claimant may assert; Whether the LLC admits that it owes the debt; Mailing address;  Deadline for confirmation of the claim; and A statement that distributions from LLC will be made to members after the passing of the period without notice. There may be claimants unknown to the LLC. Filing or publishing your articles of dissolution ensures that these unknown claimants receive notice that the LLC is closing down.  Engage the services of a qualified business attorney to consult on how to provide proper notice to creditors for existing and future claims. The process can be complicated. You will want to take steps to ensure that you don’t miss any creditors and that you limit the liability of your members after completion of distributions. Financial Review Before distributing remaining LLC assets to members, review the LLC’s finances. Be sure to pay all outstanding debts and obligations of the LLC. Additionally, there may be bills and expenses in the future that are presently unknown to the LLC. Therefore, it’s important to reserve some LLC funds to cover these unforeseen expenses. The LLC must pay creditors before it can make distributions to members. If you distribute funds before paying creditors, members may be held personally liable to the LLC’s creditors. Taxes When you dissolve an LLC, you need to close all its tax accounts, including paying all tax obligations on the state and federal level. Additionally, if your LLC has employees, it’s essential that all payroll withholding and sales taxes are correct.  Filing a final tax return on the federal and state level must be completed before dissolving a Florida LLC. LLC members must also be prepared to show any gains and losses on their tax returns. Since LLCs operate as pass-through entities, members are personally responsible for paying these taxes. Once all these steps are complete, contact the IRS to close your EIN (employer identification number). Wrap Up Business Florida law provides that upon dissolution of an LLC in Florida, the LLC must cease operations in any other states where it conducted business. You also need to be sure to pay any remaining taxes in all those states. Each state requires different filing and fees to cease operations properly. The experienced team of business attorneys at BrewerLong is prepared to assist clients through this process. Dispose of Assets The final step in a Florida LLC dissolution is distribution. Once all creditor claims and tax obligations have been paid and closed, you can distribute any remaining assets. Distributions to LLC members should be made according to the terms of the operating agreement. Distribution will generally reflect each member’s interest in the LLC. File Paperwork Florida law requires a filing of the articles of dissolution with the Florida Secretary of State. These articles provide the following information: The name of the LLC; The date of dissolution; Whether dissolution was agreed upon by vote or written consent of members;  A statement that the LLC’s obligations, debts, and liabilities have been settled and paid; A statement that distribution of the LLC’s remaining assets to the remaining members of the LLC is complete; and A statement that the LLC has no…

Do You Need to Hire a Business Lawyer

Every business will need to consult a lawyer at some point. Whether you are forming a new business, operating an established business, or winding up a business, you can benefit from the advice of an experienced business lawyer. Many business owners wait to consult a lawyer until they are actually involved in a legal dispute. This is a big mistake that can cost you thousands of dollars.  Although business attorneys can help with litigation, their role is primarily preemptive. They can help you identify potential problems and take action to protect your business. Hiring a business lawyer is like creating a business strategy or buying insurance—you do it to anticipate problems, not to react to them. Some of our work involves getting businesses and business owners out of difficult legal situations. But we much rather focus our time and effort on helping our clients avoid those situations in the first place. Business Attorney Trevor Brewer Why Hire a Lawyer? The needs of each business are different. Some small businesses may be able to operate with minimal legal assistance. On the other hand, larger or more complex businesses may need daily legal advice.  Whether you need to hire a business lawyer and how much assistance you need depends on both the type of business you operate and the specific issues it is facing. Here are some of the specific situations where you should consider hiring a business lawyer. Buying or Selling a Business Buying or selling a business is a complex process. It’s also likely that there’s a lot of money at stake in the transaction. There are several ways to determine the value of a business, and a lawyer can help you determine whether you are getting a fair deal. Your lawyer can also help you conduct due diligence. On the seller’s side, due diligence may include: Disclosing hidden defects or liabilities as required by law; Organizing important documentation to support your valuation of the business; Collecting organizational, financial, and other records that the new owner will need; and Resolving liens or outstanding obligations that may decrease the business’s value. On the buyer’s side, it may include: Reviewing the company’s records and organizational documents; Coordinating with an accountant to review the company’s finances; Collecting information about outstanding obligations that the buyer will assume; Obtaining lists of the company’s assets, intellectual property, contracts, insurance, employees, etc.; and Checking for legal issues that could lead to litigation. At the very minimum, it is important to have an attorney review your purchase contract to alert you to any questionable or unfavorable terms.  Starting a New Business Many people starting a small business try to save money by using online forms. However, taking this route can be a game of Russian roulette. The DIY approach can be sufficient for those who get lucky and never face serious conflicts down the line with business partners, employees, suppliers, customers, etc. But for others, it can end up costing them many times more than what they would have spent hiring a business lawyer in the first place. Some important start-up tasks a lawyer can help you with include: Choosing a business name; Determining the appropriate business entity for your needs; Drafting articles of organization; Registering your business with the state; Obtaining tax ID information for your business; Drafting an operating agreement; Drafting partnership or shareholder agreements; Obtaining appropriate insurance; Identifying licensing and permit requirements for your business; and Reviewing leases or other real estate transactions. Getting these tasks right from the start can help your business operate more smoothly and avoid disputes down the line. Protecting Intellectual Property An attorney can also advise you about the best way to protect your intellectual property. This may include filing for a patent, trademark, or copyright. Your attorney can help you understand when each type of filing might be appropriate. Intellectual property also includes trade secrets, such as secret recipes, algorithms, sales methods, training procedures, and any other internal process unique to your business. Your attorney can suggest appropriate methods to guard these secrets, such as nondisclosure agreements. Establishing Employment Procedures If you have employees, hiring a business lawyer can help ensure you comply with all state and federal employment laws. Your attorney can advise you on things such as: Wage and hour requirements; Workers’ compensation and unemployment insurance; Tax withholding; Employment eligibility verification; Discrimination and harassment; Employee benefits; Workplace safety; Required notices;  Record keeping; and Employment policies. It is easy to run afoul of employment laws if you don’t know what the requirements are.  Establishing Compliance Practices In addition to employment requirements, there are various state and federal laws that regulate different types of businesses. Industries that are heavily regulated include: Financial services, Health and pharmaceutical services, Credit services, Restaurants and bars, Utilities, Marketing, Automotive services, and Sales. An attorney can help you understand the laws that apply to your business and establish procedures to ensure compliance. Signing Contracts Any time your business contemplates entering into a contract, you should consult a business lawyer. Common business contracts include: Contracts with customers, Contracts with suppliers, Employment or independent contractor agreements, Confidentiality agreements, Insurance contracts,  Purchase agreements, and Property and equipment leases. Your lawyer can negotiate with other parties so that you can get favorable terms. They can also help you understand any risks or liabilities the contract may expose you to. Addressing Business Disputes It is essential to hire a business lawyer if you become involved in any type of business litigation. Common reasons for business lawsuits include: Partnership or shareholder disputes, Contract disputes, Property disputes, Personal injury, Employment disputes, and Intellectual property infringement. If you need to enforce your rights, a lawyer can advise you of your options. They can also handle all aspects of the litigation, including filing, discovery, negotiation, and court appearances. If you receive a legal complaint stating that someone has filed a lawsuit against you, you should contact a lawyer right away. You have only a limited amount of time to respond to a lawsuit,…

Buying a Business in Florida 5 things to know

If you are considering buying a Florida business, it is important that you do your research. The seller may be required to disclose certain information. However, it is ultimately up to you as the buyer to do your due diligence and make sure the business is a sound investment. Buying a business in Florida can be a complicated endeavor. It is highly advisable that you consult with an attorney who focuses on business acquisitions to protect your interests. But to get you started, here are 5 things you should consider before you buy a business in Florida. Before closing on the purchase of a business, business buyers must have confidence that they have asked every reasonable question about the business and they have gotten a satisfactory answer for those questions. Business Attorney Trevor Brewer 1. What Is Included in the Sale of the Business? When buying a business in Florida, you should make sure everything you will need to operate the business is included in the sale. Perhaps you just want to buy assets, equipment, and inventory that will allow you to start your own new business. Or perhaps it’s actually the name or other intellectual property of the business you are most interested in.  Whatever your intentions, be sure to negotiate for everything you will need. It’s important to discuss your needs with an attorney and have them look over the purchase contract. This way you won’t be taken by surprise later. 2. How Successful Is the Business? In researching the right business to buy, it is necessary that you have a full picture of the business’s past success and income potential.  Perhaps you are hoping to step into a thriving business and earn immediate income, or perhaps you are hoping to get a deal on a struggling business with the hope of turning it around. Whatever your goals, there are several things you will want to know. The Reason the Owner Is Selling This may be something you need to dig into a bit. It could be that the owner just wants to retire or move onto a different business venture. But it could be that the business has other problems such as: It isn’t as profitable as it appears; It will need to incur a large expense in the near future; Running it is unusually difficult;  The demand for the product or service has decreased; or A new competitor in the area has been luring away business. Ask around town or talk to employees or vendors to see if you can learn what’s going on behind the scenes. Whether the Owner Has Been Making a Living If the owner has to rely on other sources of income to make ends meet, this business may not be as solid as it appears. Ask the owner to let your accountant review their financial records. If you feel like the owner isn’t being transparent about the business’s history, that could be a red flag.  How the Business’s Income Is Affected by Seasonality Most businesses have certain times of the year that are busier than others. But for some businesses, seasonality can be extreme. Is the business located in a tourist area where the population changes seasonally? Does it cater to an activity that is more popular during some parts of the year? Seasonality is not necessarily good or bad, but it is something you want to be aware of before you buy a business in Florida. Will you make enough money during the busy season to make up for the off-season? Does operating a business in this way make sense with your lifestyle? Whether Demand for the Business Is Growing, Shrinking, or Staying the Same When buying a Florida business, you need to take a critical look at the local market. Does demand for the product seem pretty stable, or can you see it changing in the near future? Consider things such as: Whether local demographics are shifting; Whether other businesses in the area are opening or closing; How advancing technology may affect the relevance of the product or service;  How likely changing trends are to affect demand for the product or service; and How steady earnings have been over the past several years. Be realistic about the prospects for your business. You want to make sure that there is going to be continuing demand for the business before you invest in it. 3. What Obligations Will You Be Taking on? If you are purchasing a new business, it may come with obligations as well as assets. You may be subject to any number of liabilities, such as: Existing contracts, Pending lawsuits, Loans, Debts, Unpaid taxes, Warranties, Judgments, or  Liens. Be sure to get a comprehensive list of all these liabilities before you buy a business in Florida. An experienced lawyer can be invaluable in helping you identify and understand existing obligations. 4. Is the Asking Price Reasonable? There are various ways to value a business. The most common include: Market approach: comparing what similar businesses are selling for; Income approach: using the business’s past and future income to extrapolate its value; and Asset approach: determining the value of the business’s assets. You should seriously consider obtaining a professional business appraisal before agreeing to a purchase price. 5. What Kind of Licensing or Permits Do You Need? All businesses require some form of registration, licensing, or permits. Depending on the type of business and where it is located, these may include: A general business permit; DBA (doing business as) registration; Business entity registration; Professional and occupational licenses; Building and zoning permits; Health permits; Liquor licenses and food permits; Tax registration and ID numbers; and Environmental permits. It is important to compile a full checklist of which specific permits you will need and their ongoing cost before buying a Florida business. Talk to an Attorney Before buying a business in Florida, talk to the experienced business acquisition attorneys at BrewerLong. We understand how complex this process can be, and we can…