The Stats

During an economic downturn, employee lawsuits tend to increase because employees feel more vulnerable and seek legal action to protect their rights. According to a report by Seyfarth Shaw LLP, the number of workplace class action lawsuits increased by 17.5% in 2020, partly driven by the COVID-19 pandemic and economic downturn.

The Reasons Why You Need Legally Sound Employee Agreements

Employee lawsuits can be costly for employers, both in terms of legal fees and potential damages. According to The 2015 Hiscox Guide to Employee Lawsuits, the median cost of employment claims that resulted in defense and settlement payment was $200,000. And that’s only the monetary cost. Lawsuits are generally time-consuming and can damage a company’s reputation.

Having employee agreements is essential for both you and your employees as it helps to set clear expectations and protect the interests of both parties. Here are some items you should include in your employee agreements and the key reasons why they are important:

1. Clarify terms and conditions of employment: This can help clarify the terms and conditions of employment, such as job responsibilities, compensation, benefits, and work schedule. This is critical in preventing misunderstandings and disputes between employers and employees.
2. Protect confidential information: This can include confidentiality and non-disclosure clauses, which protect your company's and client’s confidential information. This can help prevent employees from sharing sensitive information or trade secrets with competitors or the public.
3. Set expectations for employee conduct: It is best practice to include clauses related to employee conduct in the employee agreements. This includes expectations for professionalism, compliance with company policies, and restrictions on outside employment or activities. This can help to ensure that your employees behave appropriately and ethically while representing the company.
4. Establish ownership of intellectual property: To prevent intellectual property theft, you can include in the employee agreements the clarification of intellectual property ownership created during employment, such as inventions, patents, trademarks, and copyrights. This can prevent the headache and monetary cost of disputes over ownership and ensure that your company retains the rights to all of its intellectual property.
5. Protect against liability: Include clauses related to liability, such as indemnification and release clauses, which protect the company from legal claims or damages resulting from employees’ actions.

Is Professional Legal Expertise Necessary?

Because employee agreements are legally binding contracts that have significant implications for you, the employer, and your employees, you want to ensure they comply with legal requirements and are enforceable. We do not recommend writing these agreements yourself unless you have a law degree.

If you do not have an in-house attorney or legal consultant, or you need additional legal help that needs immediate attention, and your company’s legal team is tied up in other projects, you should consider using outsourced legal services. There are many benefits to acquiring outsourced legal services, including but not limited to the following:

1. Cost savings: Most outsourced legal services charge by the hour or project, so you only pay for the time spent on your project.
2. Specialized expertise: You can choose the services and expertise your company needs.
3. Improved efficiency: Outsourcing legal services can improve efficiency by allowing you to focus on core operations while leaving legal support to outside experts. This also includes reducing the burden on in-house legal staff and helping them prioritize their workload.

Every business should take proactive measures to protect themselves from legal issues and liabilities by providing clear policies and training to employees. It is just smart practice.

When you incorporate your business, you turn it into a legal entity separate from the individuals—yourself and your business partners—that started the company. Alongside incorporation, it can be highly useful to implement corporate bylaws that establish the internal structure that will dictate how your business is run.

What are Corporate Bylaws?

If you’ve ever established articles of organization or incorporation for a business, you’re likely familiar with bylaws. Bylaws are rules and regulations established by an organization or group to govern its internal affairs. These rules can cover a wide range of topics, such as membership requirements, voting procedures, meeting protocols, officer duties, and financial management. Bylaws are typically created when an organization is formed, and they may be amended over time to reflect changes in the organization's needs or circumstances.

In general, bylaws are more specific to C-corporations and S-corporations. However, LLCs have operating agreements that are essentially used for the same purpose as a corporation's bylaws. If your business isn’t legally registered as a corporation, you are not obligated to create corporate bylaws. However, bylaws are a highly proactive tool to ensure your business runs smoothly.

Note that bylaws are not the same as articles of incorporation, as those are documents filed with state agencies to establish your business as a separate legal entity. Bylaws primarily serve an internal purpose, though are required to be made public if your company is publicly traded.

Why are Bylaws Important?

Bylaws serve as a critical component of your business, as they provide a framework for how your organization operates, and they help ensure that everyone involved is aware of the rules and procedures that govern their actions. They can also be used to resolve disputes and ensure that decisions are made fairly and transparently.

As a note, bylaws are generally legally binding, so you should ensure that your business is in compliance with any legal requirements when creating or amending any bylaws.

Bylaws proactively protect your business by providing the following:

Governance: Bylaws establish the rules and procedures for how an organization operates and how decisions are made, making sure that everyone in the organization is aware of their roles and responsibilities. They similarly provide a framework for conflict resolution and general decision-making.

Compliance: Bylaws aid in setting a business up for compliance with any legal or regulatory requirements that apply to it. For example, nonprofit organizations may be required to have certain provisions in their bylaws in order to maintain their tax-exempt status.

Clarity: By implementing bylaws, you clarify the rights and obligations of members, shareholders, or other stakeholders in an organization. This also allows you to define the scope of authority for different positions within the organization, establish internal controls, and provide a clear understanding of how decisions are made.

Continuity: If your business experiences turnover, having bylaws in place establish a sense of continuity, even as individuals come and go. This is helpful especially if your business changes leadership, as you have a guarantee in place that the business will run in the same way regardless of who is in charge.

Transparency: Finally, bylaws aid in establishing transparency and accountability within an organization. By establishing clear rules and procedures for decision-making, bylaws help ensure that everyone is aware of how decisions are made and who is responsible for making them.

Overall, bylaws are an important tool for ensuring that an organization operates effectively and efficiently, and that everyone involved is aware of their roles, responsibilities, and obligations.

Does Your Business Need Bylaws?

Whether or not your business is legally required to establish bylaws depends on the structure of your business and the size of your organization. Bylaws are typically associated with formal organizations, such as corporations, nonprofit organizations, and cooperatives. If your business falls within this category, then contracting an outsourced attorney to put bylaws in place is an excellent, proactive step to take.

Bylaws are especially useful for organizations that have a complex structure or multiple stakeholders, as they help to define roles and responsibilities, establish decision-making processes, and clarify the rights and obligations of members or shareholders. They also aid in preventing or resolving disputes within the organization and ensure that everyone involved is on the same page.

If your business is a sole proprietorship or a partnership with a small number of partners, you may not legally need formal bylaws. However, even in these cases, an outsourced attorney can help you put basic rules and processes in place to protect your business in case of disputes, lack of internal controls, or big changes. Ultimately, bylaws are a proactive measure to protect your business in the long-term.

Are you currently operating a business, or planning to start a new business in 2023? Running and starting a business can be highly rewarding, but also immensely challenging. There are numerous legal requirements that should be taken into consideration within your business plan to protect yourself and your ideas from being stolen, prevent tax violations, and safeguard against financial issues. Here, we’ll address common mistakes that newer business owners make and how to avoid them.

Mistake One: Operating as a Sole Proprietorship or General Partnership

If you have a sole proprietorship or are operating as a general partnership, you could be putting yourself at unnecessary risk, as neither option provides liability protection. This means that if a mishap occurs, you, your family, and your assets are at risk of being impacted in a business lawsuit. Protecting yourself from liability as an entrepreneur is just as important as the product or service you create.

Restructuring your entity can be quite the undertaking. We recommend reaching out to an outsourced legal services provider, such as Catalyst Legal, to discuss entity options that best suit your needs.

Mistake Two: Failing to Use Formal Agreements

Formal agreements and contracts form an essential component of running a business. While it would be nice to assume that every client, business partner, and vendor you interact with is fully trustworthy, this is sadly not the reality of the business world. Even if you have never had issues in the past, it only takes one instance—such as a damaged shipment or late client payment—to put your business at risk. In instances where you are in the right, it can still be costly to prove so.

Generally, formal contracts address issues such as which party is liable for problems with transactions, purchaser remedies, and limitations on damages in the event of a default. Formal agreements are not only useful for protecting yourself, but also make executing the day-to-day tasks of your business much easier. They’re needed when applying for loans, opening a credit card, hiring new employees, renting office space, and more. Implementing formal contacts within each area of your business is a proactive measure to safeguard against disputes and issues when they inevitably arise.

Mistake Three: Hiring Contractors, but Treating Them Like Employees

Using contractors can be an excellent solution when you have additional work that needs to be completed, but are not ready to invest in a full-time hire. While contractors generally have higher hourly rates than full-time employees, you can save significantly in hiring costs, benefits, and general liability. However, many entrepreneurs make the mistake of treating contractors like regular employees.

Independent contractor misclassification can look like providing the worker identical training, workspaces, and assignments without extending benefits, minimum wage, or worker’s comp. A true contractor should be running their own business, providing their own materials, and deciding how and when they will perform the work. The relationship is also a temporary one. The consequences of misclassification can include hefty fines from the IRS, payment in back taxes, and other serious penalties.

The best way to ensure your contract workers do not become employees is to create a formalized agreement that outlines the terms of your relationship with them—then following it! This is another excellent area for an outsourced attorney to step in; they can help create the formal contract and ensure that working boundaries are clearly defined.

Mistake Four: Failing to Create Confidentiality and Non-Compete Agreements

The last thing you want as a business owner is for competitors in your area trying to poach your top employees. Or, perhaps worse, for the employee to take proprietary information, trade secrets, and business practices to open up their own competing business. A non-compete agreement is a type of NDA that places common-sense restrictions on your employees to prevent them from working for competition, or creating a business that competes directly with you. Confidentiality agreements can be a useful tool to prevent the sharing of trade secrets. It can similarly cover any information you want to protect, such as intellectual property, client lists, knowledge of business practices, financial information, or specialized training.

Mistake Five: Neglecting to Protect Intellectual Property Early On

Intellectual property can be extremely valuable, as it often forms the core of your business, and can be sold for financial gain if you ever decide to exit the business. By protecting your intellectual property, you can significantly expand the value of your assets, and ensure that competitors cannot gain from your hard work.

Intellectual property should be trademarked, copyrighted, or patented, depending on what is it. A registration provides you with additional remedies and, in some cases, may be the only way to protect your intellectual property assets. Many businesses spend tens of thousands of dollars marketing and advertising their product or service, but never stop to consider how they should be protecting their investment.

By safeguarding each component of your business, and by proactively seeking legal counsel, you can establish a strong foundation that will keep your business thriving for years to come.

Often, your business will run into situations that will require you to share confidential information with another company or individual. When these situations do arise, putting a non-disclosure agreement (NDA) in place is a prudent measure to protect sensitive information, your business’ confidentiality, and proprietary business information.

What is an NDA?

An NDA is a legally binding contract that establishes a confidential relationship between your business and another. (They are also referred to as confidential disclosure agreements, confidentiality agreements, and proprietary information agreements.) Those signing the contract agree that any information exchanged cannot be made available to any other parties. NDAs are commonly used within business transactions, such as a merger or acquisition, during the due diligence process in which sensitive information is exchanged. There are two types of NDAs:

• Non-Mutual Agreements, in which only one party is required to maintain confidentiality, as they are the only ones receiving sensitive information. For example, a non-mutual agreement may be used with a new employee that has access to sensitive information about the business.
• Mutual Agreements, in which both parties share and agree to not disclose any confidential information. A mutual agreement would be used between businesses considering a merger, for example.

When Should My Business Use an NDA?

Essentially, your business should enter into an NDA when sharing any information that is inherently valuable or private to your business. The information shared is to be used only for the limited purpose for which the information is being disclosed. Below are common scenarios that would require an NDA.

Product Development

If you’re contracting a vendor to either develop, manufacture, or distribute a product that belongs to your business, an NDA can ensure that your design is not replicated, stolen, or otherwise shared. Similarly, if you’re pitching an idea to a company that takes product idea submissions, an NDA should be used to protect your idea. Patenting your idea is another proactive, protective measure you can take.

Employee Access to Sensitive Information

The last thing you want as a business owner is for a former employee to take proprietary information, trade secrets, and business practices to open up their own competing business. Requiring new employees to sign a non-mutual NDA upon hiring can protect your business in the long-term. The NDA can cover any information you want to protect, such as intellectual property, client lists, knowledge of business practices, financial information, or specialized training.

Negotiations with Prospective Buyers

If you’ve been considering selling your business, the thought of sharing sensitive information with multiple prospective buyers can be daunting. An NDA when selling your business will not only prevent your confidential data from becoming publicly available, but also can hide the fact that you’re selling. This reduces the chance of client and employee turnover during the selling process.

The same applies to any business transaction in which due diligence must occur.

Utilizing Outsourced Business Services

If your business contracts an outsourced service provider to execute some function of your company, a non-mutual NDA can protect any information that the provider might handle. This is especially important when the service provider works with sensitive financial information or has access to log-ins, email lists, your website, or social media accounts.

If you do not currently have any NDAs in place, or you are involved in business dealings that could benefit from additional protection, an outsourced attorney can step in to help draft an ideal contract for your business’ needs. An outsourced attorney can ensure that the NDA is thorough enough to protect sensitive information and establish the terms of the information exchange, as well as help you identify any terms that you are and are not willing to negotiate.

It's likely that this week alone, you'll enter into multiple contacts—perhaps without realizing it. Generally, these contracts are informal and unwritten; for example, splitting up household chores, borrowing a friend's car, lending your lawnmower to a neighbor, or making a purchase online, in a store, or at a garage sale. With these types of contracts being routine parts of our day, it's unlikely that you ever draft formal agreements for these instances. However, for business owners, choosing to not put an agreement in writing can have devastating consequences—especially for smaller or brand-new businesses. Failing to document agreements through formal contracts can create unnecessary stress for business owners.

Take the following example: a person sets up and operates a business out of their home. They sell products online, which are purchased wholesale from a manufacturer. No formal agreement is entered into by either party—except for a very short purchase order, which merely outlines the product, a unique SKU, and the number of units purchased. When the business owner receives the product, the box is heavily damaged. Upon opening the package, the business owner realizes half of the products they ordered were damaged and, therefore, unsellable. However, when the business owner calls the manufacturer, they refuse to take responsibility for the damages. They claim that they aren't liable for any products damaged in transit. In this case, who is responsible for covering the loss? What is the business owner's recourse if they cannot convince the manufacturer to send them additional product?

Unfortunately, this type of dispute happens all the time, highlighting the need for formal, written contracts. For a seasoned business, a situation like the one described above may not be as detrimental to the company, as the losses can be absorbed over time. However, for newer or smaller businesses, capital is critical to continued growth—and a 50% loss on a transaction is less easily weathered. Typically, formal contracts will address issues such as:

• Which party bears the risk of a loss in transit
• Purchaser remedies
• Limitations on damages in the event of a default

Although routine transactions may never require a formal, written contract, there are several situations in which a business owner should be sure to have a documented agreement:

• Hiring employees, especially key employees who will have access to sensitive financial information or business data.
• Long-term vendor relationships, where there will be a high volume of transactions occurring on a regular basis.
• Transactions with ongoing obligations, whether those obligations be on the buyer side or seller side.
• Businesses with multiple owners, which should always have partnership agreements in place that dictates how profits and liabilities will be distributed, and places limits on what each owner can and cannot do.
• Large transactions, whether it's a loan, purchase, or investment that total over $5,000.
• Any situation or dealing that presents inherent risk from the goods or services that a business provides.

Of course, there are many situations in which it's advisable to have the agreement put in writing. Consulting an attorney is critical if there is any uncertainty about whether a written contract is needed. Many small business owners worry about the cost of hiring an attorney to draft a contract. However, the real concern should be whether the business can bear a loss that stems from not having a formal contract in place. In fact, the long-term cost of having an attorney draft an agreement is not high, considering that if a business ends up in court, a straightforward agreement will make the terms easier to enforce. The last thing a business owner wants to do in the midst of a dispute is to have to prove that an agreement even exists.

Take a proactive measure to protect your business and contact Catalyst Legal for a free consultation. We can walk you through any potential gaps in your business’ processes that may be putting you at risk for unnecessary liability.

New businesses rarely have extra cash to spend, which means that some of the important legal processes - such as registering your trademark - often slip through the cracks. If cash is tight for your business, it is important to register your company name before your logo. Though you should eventually register your logo, it is less likely to be stolen by a competitor. Your business name, however, should be protected from the get-go, allowing others to know that it belongs to you. Here, we'll address all of the legal need-to-knows about trademarking and how you can better protect your business.

What Exactly Is a Trademark?

A trademark is a symbol, phrase, word, or design that identifies a particular source of goods and services from those that belong to another company.

Trademarks are used to help brand your company and your products. The strength of a trademark is determined by a sliding scale:

• Generic Marks - These are not registerable, as they define goods or services. We see these type of marks with things like bandages, aspirin, etc.
• Descriptive Marks - These are difficult to register because they are used to describe goods and services; an example would be using the term "best electrician".
• Suggestive Marks - These marks are registerable as they imply a particular good or service. For example, Nike suggests shoes, and Greyhound suggest busses. Suggestive marks are strong and normally do not have a difficult time getting approved.
• Arbitrary Marks - These marks are used for a word or symbol and rarely have direct correlation to the goods or service; think - the Apple brand does not correlate to computers. (example is Apple - Computers)
• Coined Marks - These marks are made up of words or phrases, such as Yahoo, Kodak, or Exxon.

Why You Need to Register a Trademark

Registering a trademark serves to prevent other businesses from stealing or imitating your brand. If someone else uses your trade name or logo for their services, a trademark registration will give you several options to stop that infringing use. A registration also puts others on notice that you own the mark that other brands cannot use. Often, providing notice of your rights is enough to prevent others from using your marks. Registration is the only way to formally cement your brand as your own.

Selecting a Mark That Is Critical for Your Brand

How do you select a mark that will set your brand apart from all the other companies? For example, if you are opening a new dental office, what are you going to do to compete with the hundred other dentists in the area? And, how do you convince clients to use your services over others? Essentially, you have to use your mark to increase the strength of your brand. Start by understanding your target audience and how you can reach out to them. Advertising is the top way to get your name out to potential customers. Selecting a mark that is memorable and meaningful can go a long way to setting yourself apart from competitors.

Although trademark rights spring out of use, failing to register your trademark can have serious repercussions for your business. That little ® after your logo or name helps to stand out. It communicates a level of trust with your target audience, as well as lets other companies know you care about your company and you have taken the time to invest in the legalities of running a business.

What is the Registration Process?

Catalyst Legal can provide you with the information needed to register your logo and company name, aid in completing the necessary paperwork, and even help you brainstorm your business' marks if needed. Our goal is to provide you with the best information possible to make an informed legal decision.

What happens if the logo or idea you have come up with has already been trademarked?

To avoid any complications, Catalyst Legal can aid in researching your mark, ensuring that yours is original and will help your business stand out.

Once the trademark has been selected, the paperwork process can begin. To complete the application, you will need the date of first use, samples of the mark, and a list of your goods and service.

Generally, the process is straightforward; however, the trademark examiner may raise the following concern:

• The mark is descriptive or otherwise unable to be registered
• The mark is too similar to another business that offers similar goods
• A disclaimer may be required

Additionally, the United States Patent and Trademark Office (USPTO) will publish your trademark for opposition, opening up the possibility for a legal battle if another company finds your mark too similar to theirs. Utilizing our services can help avoid these issues, as we can provide legal guidance before you submit your application.

Do I Need to Register My Mark?

This is a question we hear all too frequently. The short answer is yes! If you want to protect your ideas and brand, you need to legally register your trademark. Even if cash is tight in your initial stages as a business, trademark registration is a crucial investment in the long-term success of your organization.

You have worked hard to start your own business, but have you taken steps to protect it? Litigation can destroy your business if you don't have the proper protections in place. Not only can litigation be a huge headache, but it can also be a PR disaster for your business. Implementing a few proactive measures will go a long way to protect your business, and will place you in a stronger position in the event that your business is sued. Below, we'll address six steps you need to follow if you want to keep your business out of litigation.

Document, document, document!

If you wait to start protecting your business until you're sued, it's too late! Start off by putting business practices and processes in writing, including contracts with employees. Business often have employees of several different rights, such as freelancers and W2 employees. Correctly defining the scope and nature of employees' duties in a written contract will help everyone involved with the company.

Additionally, employees need to sign non-compete, non-disclosure, and confidentiality agreements. Contracts will prevent employees from taking information about the company and selling it to your competitors, using the company secrets to get a new job, or setting up a competing business. Contracts help to protect the valuable information that makes your business successful.

It's similarly important to ask that your business vendors and service providers do the same. Contracts should include information about intellectual property rights, pricing information, delivery terms, confidentiality issues, and any other critical information pertaining to your relationship. Payment terms are one of the biggest areas to focus on, as it will help to prevent serious financial loss if you run into a vendor payment issue. Additionally, correct definition of the delivery and payment terms will help to reduce the risk of being sued by vendors and service providers.

Finally, consider implementing customer contracts, which are set up to avoid problems with guarantees. Have you ever needed to recall a faulty product, or been injured as a result of a faulty product? Who is responsible for the financial damages because of the product? Contracts with customers that clearly spell out the risks and assign legal responsibility for problems that may arise. This helps to prevent issues with liability later on down the road. If you have a third-party vendor handling products, it is important to write a waiver of liability to ensure your company is protected in case of a product recall.

Don't fall victim to a simple "handshake" contract. Rather, take the time to formally document business protocols to ensure your company will be protected. Not every situation will merit a formal agreement, but you need to track your handshake with a paper trail. Keeping the right information together puts your business ahead if you do end up dealing with litigation.

Hire an Attorney to Review Your Documents

If you have not drafted the documents through an attorney, you may not have identified all of the issues that could arise with a deal, which could cause problems if litigation occurs. An attorney needs to review all written agreements to make sure you're protected from every angle.

When working with an attorney, be sure to understand the documents you sign on behalf of your business. Sometimes an agreement might look straightforward, but the fine print can leave your business exposed to risk. An experienced attorney knows common risks that businesses face, as well as how to mitigate those risks.

Set Up Correct HR Measures

When you hire new employees, they ideally sign an employee agreement and then are sent to complete onboarding training. However, many businesses - especially new businesses - do not make this a priority. There are specific human resource measures that need to be established to ensure employees have all necessary information and that they know what is expected of them.

 Drafting an employee handbook is a highly proactive risk-avoiding measure, as it establishes employee expectations, appropriate behavior, and company policies. Firing an employee without having a handbook in place can expose you to the risk of being sued for wrongful termination. Writing a proper employee handbook is the ideal way to protect your company and prevent major lawsuits. Similarly, conducting and documenting annual employee trainings can be helpful in reinforcing the policies in your handbook.

Know Your Business Partners

Do you know who you are going into business with? While your best friend or sister may be a blast on the weekends, starting a business together is not always a wise decision. A business partnership is not unlike a marriage, as you need to completely trust in this other person and know that they will pull their own weight. For example, if they exceed your business' budget, you could become burdened with debt if the business fails. Don't partner with someone because you feel obligated to do so. Rather, make sure you share core values with your partner, and that you both are aligned on business objectives and processes.

Be Proactive About Protecting Your Intellectual Property

It's crucial to be proactive when it comes to your intellectual property by registering copyrights, trademarks, and patents. Failing to protect your intellectual property early on can lead you into needing to protect yourself in court. In some cases, you may lose your rights entirely if protective measures are not in place.

Not protecting your intellectual property can also make it easier for your competitors to steal your ideas and profit off of them. No one should be using your protected intellectual property unless they have signed a license agreement. License agreements are another crucial component of business growth and avoiding litigation.

Maintain Correct Insurance

Business insurance generally protects you from being sued personally, keeping your personal assets out of the reach of judgment creditors. However, if you do not obtain adequate insurance, someone may be able to come after your personal belongings in a lawsuit. Even if this is not a realistic possibility, you do not want litigation to interfere with your dream. Failure to have adequate insurance in place can drive you into bankruptcy when a major lawsuit arises.

Call your insurance provider to explore options to best protect your business. If a person does have a legitimate claim against your business, insurance will compensate them, protecting you from losing everything.

Likely, you put your heart and soul into your business. Take the additional measures needed to protect it! Contact Catalyst Legal today for a free consultation as to how we can help protect every aspect of your company.

The world of online marketing brings constant changes and, as a business owner, it may be difficult to stay on top of it all. Marketing online is crucial to others knowing about your business, but in doing so, you must adhere to online marketing rules and regulations. Selling products on your website may not seem like a big deal, but there are several documents that you need to create, sign, and submit to actually do so. Below, we'll outline some of the pitfalls we most commonly see with businesses engaging in online marketing, as well as how to avoid them.

Protection

Consider everything that you've invested in your business - you've probably spent a great deal of time and money creating an excellent product or service and building a client base. Now, consider what measures you've taken to protect that investment. Have you obtained the proper trademarks and copyrights to prevent others from stealing your hard work?

You should never spend thousands of dollars in marketing without first investing in trademark and copyright registration. In fact, the registration process is relatively simple and can be done more quickly that you would expect. Having copyright and trademark information on your website is the best way to let others know that you're the creator and owner of the product you worked so hard to create.

Essentially, anything created to be used in online marketing for your business should be protected. This includes your logo, trademark, and slogan. Registering each aspect that you will use for marketing will guarantee the ability to keep all of the money that your business makes.

One final consideration regarding trademarks is to similarly ensure that your business is not infringing on another company's or individual's trademark. Be careful of the way in which you use copyrights and trademarks, especially when it concerns competitors or other businesses. Learn more about fair use and how it applies to your business, understanding that fair use does not always apply in commercial situations.

Privacy and Data Collection

You've probably already experienced issues with privacy and data collection as a consumer - perhaps you sign up for one email newsletter from a business you trust, then end up receiving twenty emails from businesses you've never heard of.

It's critical to notify your audience that you are going to collect their personal data, such as email addresses and phone numbers, then inform them what the data will be used for. If you do not use the information in the right way, your business can be sued. Either inform your clients that your business intends to sell their contact information, or send out marketing materials after they sign up.

When it comes to privacy and data collection, be sure to establish a privacy policy and have it reviewed by an attorney before publishing it online. Never post customer images if you have not received proper written permission.

False Advertising

One common legal matter that we handle often involves advertising. To avoid legal issues, advertisements cannot be unfair, deceptive, or misleading. Create ads that are relevant to the company and to the product. By using misleading advertising, your customers may end up purchasing something they did not actually want. Not only is this bad business, but you can additionally be sued for false advertising.

When it comes to advertising, the best practice is to always be upfront and honest with your customers. Honest advertising and excellent service and product offerings not only help build you a loyal client base, but protect your company from potential lawsuits. Similarly, be wary of comparative advertising, such as telling your clientele that your product is far superior to your competitor's product. This can also expose you to potential liability.

Final Reminders

Online marketing can be intimidating, as it exposes your business to potential legal risks if proper protocol is not precisely followed. To keep your business safe, utilize our legal team to review your marketing and advertising efforts. Our expert team will review all of your business' online marketing with a critical eye to ensure compliance and mitigate legal risks to your business. Fill out the form below to receive a free consultation!

We once had a client who came in for a consultation with a story we've seen many times before - he and a close friend had started a business together. Initially, things were going really well: they had a great business model, were opening up an underserved market in Salt Lake City, and had excellent profit margins. After a year, profits began to decline. When our client took a closer look at his books, he realized that his friend was spending significant amounts of money on expensive lunches, golf outings, and even personal expenditures.

When our client broached the subject at their next partnership meeting, his partner brushed it off as simply the cost of doing business. He refused to stop using the corporate account as his own personal piggy bank. This caused a rift in their relationship, and brought their once-successful business to a grinding halt. Eventually, the business was forced to close, leaving both partners out of quite a bit of money.

Though the lesson was learned the hard way, the client regretted never drafting a partnership agreement with his friend. Many partnerships choose to forego the agreement for a myriad of reasons: to save on expense, to avoid negotiating with a close friend or family member, or because they simply don't understand the value of putting the agreement on paper. At the time, our client didn't realize that having a partnership agreement could have limited the amount of money each partner could spend without the other's approval. This would have prevented one partner unilaterally taking on debt in the name of the company.

What is a Partnership Agreement?

A partnership agreement is the governing document for a company. It explains how the company will be run, outlines how profits and liabilities will be distributed, and places limits on what partners can do. In an LLC, a partnership agreement is commonly referred to as an operating agreement. In a corporation, the governing document is the bylaws.

A good partnership agreement will outline who is permitted to open bank and credit accounts, take on debt, and purchase real estate. It will also define the rights of individual owners, create mechanisms for resolving disputes, and provide a way out in the event of gridlock.

Ideally, business owners should create a partnership agreement that is tailored to their specific business rather than using a boilerplate document that can be found online. Online templates can provide a starting point, but oftentimes have hidden language that can be devastating for business owners. For example, one former client used a partnership agreement found online that had language stating that the partners would share profits through a sixty-forty split instead of fifty-fifty. Luckily, partnership agreements are flexible and can be easily changed under the right circumstances. However, it is always better to get it right the first time, because you never know when a dispute will arise. Changes to partnership agreements are much more difficult when the owners are not talking to one another.

Regardless of the type of entity business owners may consider, having a clear partnership agreement is a preventative measure that can save business owners a lot of headaches. In some cases, the agreement may even prevent the business from folding altogether. Cost is often the reason many business owners choose not to have a partnership agreement drafted. However, in most circumstances, the cost is no more than $1,000.00 and can be bundled with setting up the company. Whether you are partnering with a total stranger, a close friend, or family member, having a partnership agreement in place is critical. It will bring peace of mind, can save you thousands of dollars in litigation fees, and could even save your business from having to close because of a dispute.