Can You Really Replace Your Lawyer with Artificial Intelligence and Internet Forms ?

Some months ago, I sat in a monthly CEO round table discussion regarding artificial intelligence (AI) and how it does and may, in the future, impact each of our businesses. One of the CEO’s astutely said he imagines in the not so distant future he won’t be needing me for much. He thinks he will be able to get all of his business deals done through Siri, Google or Alexa. After we all chuckled for a minute, I thought about whether that is true. If not, why not? If so, what do we need to do to differentiate ourselves from AI lawyers and law firms.

In considering the options, I came to the conclusion that he is partially right, and at the same time, very wrong.

He is right because so much information is available on the internet and finding forms that look pretty good or on point is not too hard today. With AI, finding the right form and information should be even easier. On the very wrong side of the equation, there is actually some art to what we do. Some of the clients who need us the most have tried to save money by drafting for themselves only to find themselves in a messy situation. Often, the drafts are inconsistent, lack key provisions, have language that is hard to interpret and create unintended consequences. Form agreements do not reflect orally agreed terms.

AI will get better.

With AI, it’s conceivable that some of the problems described above will dissipate. I still believe, the best business lawyers will continue to distinguish themselves from other lawyers with practical counsel based on experience.

AI will not compete with great legal minds.

When we hire young lawyers, I look for great minds with personalities that can communicate. Law school does not teach you to perform the tasks of a lawyer, but rather how to think like a lawyer. How to assess risk and pursue results. As business lawyers, we need to do even more. By learning from our clients about their business, we anticipate the future of business dealings and changes to law. Then, we design business structures that can grow with the business itself. So for our business clients, AI will need to be more than a system that pumps out forms to effectively compete with us.

Practical business advice will be difficult to convey.

We look at each client situation both from the practical business situation as well as the legal and risk management side. Our clients are small to mid-size businesses that are accelerating. We respond quickly, effectively and with an eye on the budget. We offer practical advice that is supported by quality legal work. Often, our clients’ businesses will need cash infusions or loans. We endeavor to ensure the business is being run and documented in a way that enables investors to invest without adding undue burden to the business owner. We need to be good at business – not just good lawyers.

Culling the information is an art.

As good as AI may be, the quantity of information will be daunting. Clients will be challenged to discern the practical solution. Culling forms and knowing what various types of investors need, what the IRS requires and balancing have to have, with nice to have, with not really needed, is an art form. It is learned from the number of deals we have done and from the experience of listening to the voice and tone of the client and other parties. The work changes with outside factors as emotions and desires of all of the parties fluctuate.

So at least until proven otherwise, I would be willing to put up my team and experience at the Walk Law Firm, PA up against the advice of Siri, Google and Alexa as practical business lawyers for small to midsize and accelerating businesses. We may create less forms in the future, but I am confident we will still be needed for our practical business and legal counsel.

WALK LAW FIRM, PA Named a 2017 Law Firm 500 Honoree for Fastest Growing Law Firms in the United States

We are very proud of the growth our firm has experienced over the last 3-years, but our record only stands because of our tremendous clients, dedicated team and passion for providing practical and timely legal counsel for businesses and their owners.

“Although we have grown quickly, we have worked hard to be measured by  results for our clients, not growth for growth’s sake,” commented Rochelle Friedman Walk, Esq., President of the Walk Law Firm, PA. “Our team has been dedicated to providing excellence in customer service resulting in many happy clients. In doing so, our commitment and focus has taken us on a fabulous journey of growth – both personally and for our business,” she continued.

We are pleased to announce that our law firm has been named a 2017 Law Firm 500 Honoree awarded to the fastest growing law firms in the US. It began earlier this year when we were nominated for our growth, operational excellence and commitment to client service. To our surprise, we were ranked 74th, which was stunning for a firm of 3 lawyers.

A significant area of growth for us has been in advising buyers and sellers of e-commerce businesses, especially Amazon.com, Jet.com, Ebay.com and other well known online retail. We strive to understand the current state of the art and the best methods for transferring, funding and managing the sale of these types of accounts and businesses.

We believe our focus on what we do best has enabled clients and referral sources to stick with us and rely on us. We exclusively represent businesses and their owners with a passion for quality, practical counsel. Whether the project is an acquisition of a new business, the sale of equipment, company agreements, partnership and shareholder agreements or simply practical counsel on how to handle a sticky situation, employment matter or intellectual property license, we are ready and willing to jump in and help.

The Law Firm 500 Award is an honor for our firm to receive and a tribute to our team. We are proud to serve our clients and delighted to be including in this list of growing and dedicated law firms.

As we continue to grow we encourage you to follow our progress, and stay in touch! You can view the full list of Law Firm 500 Honoree firms here: https://lawfirm500.com/award-honorees/

 

Key Reasons to Create an Employee Handbook— or at least appropriate policies

An Employee Handbook organizes and contains company policies and procedures. There are numerous reasons for employers to choose to issue an Employee Handbook or Employer Policy Manual. Although there is no federal or Florida law requiring private employers to provide a handbook, there are some communications you are required to make to your employees.

Each month, we receive numerous calls form clients with employees who would like to make a change in how they handle anything from payroll to work hours to ethics matters and use of computers, mobile phones, tablets, internet, social media and websites. Without policies and procedures in place, and without a clear statement of expectations, clients often find themselves stuck on making changes and communicating expectations.

Policies are governed by both federal law and state specific law and regulations. Compliance with both is a necessity. The Federal Department of Labor has a terrific tool called E-laws Adviser. At the Walk Law Firm, we recommend our clients review and use that tool in addition to calling us for advice. It covers wage and hour laws as well as other important matters such as determining if someone and independent contractor or an employee.

At the Walk Law Firm, we pride ourselves in assisting our clients with practical advice that is compliant with the law. Not every decision is black and white and when making decisions to eliminate a position or downsize in general, it is important to seek quality advice. We represent employers primarily, but have also assisted many executives as well as employers with executive compensation matters such as stock bonuses or stock incentive plans or other equity incentive plans, separation agreements and employment agreements.

Employee Handbook FAQs:

  • An Employee Handbook introduces new employees to the company, gives the company a chance to set forth your expectations for your employees, and provides an introduction to the company;
  • An Employee Handbook makes it easier to ensure that all employees receive notice of the company’s policies;
  • An Employee Handbook creates a centralized place for employees to look for answers and guidance on your company’s practices and expectations, and what to do in various situations; and
  • An Employee Handbook and signed acknowledgments of receipt can assist in an employer’s legal defense, such as when non-compliance leads to termination of employment or another kind of adverse employment action.

Do Not Inadvertently Create a Contract

  • Employee Handbooks must be drafted in a manner that does not create legal obligations that the employer did not intend, and contain provisions reserving certain employer rights. Preparation of the handbook or at least review by your counsel is crucial.

Maintaining a Handbook

  • Employers must review Employee Handbooks periodically to ensure that all policies are current and lawful. At a minimum, a handbook must be reviewed and revised, if necessary, when there is a change in the law, employer policies or procedures, and when the employer expands into new states.Employer

Deadlock is Often the Ultimate Demise of Good Business

Consider this common scenario.

You’ve entered into business with your spouse, friend, or relative. At the inception of your business, you agreed that both of you would serve as the directors or managers of the Company, and you would be equal partners, each allocated fifty percent (50%) of the shares or ownership interest in the Company. Your relationship with your partner is healthy; you trust them; you trust their judgment; you’re excited about your idea, about your business. And life is great until…….

….. You have your first real dispute. The one that does not solve itself nor does it resolve with a drink at the bar.

As the business develops, you’re faced with decisions about the future direction of the business, about major business activities. Eventually, there may be a decision on which you simply cannot agree. And because you have equal control of the Company, your conflicting views ultimately stalemate or deadlock the business until you come to some agreement or decision.

Unfortunately, more often than not, people in this common scenario do not properly plan for or consider the potential for corporate deadlock, and it can lead, not only to the deterioration of a personal relationship, but also a business relationship and a business.

 HOW TO RESOLVE CORPORATE DEADLOCK

Planning for the Future.

The best way to avoid corporate deadlock is to plan ahead.  This should be a major consideration when you enter into a business relationship with anyone.  Sit down with your partner and discuss setting up a procedure for what happens if a deadlock arises.  It may not be an easy conversation to have – it may be difficult to imagine disagreeing with your partner. But sit down with your partner early and really consider the following things: (i) the nature of the business; (ii) your business plan; (iii) you and your partner’s individual ideas of the direction of the business; (iv) what problems that could arise in the business, financial or otherwise; (v) each person’s individual skill set. All these things can play a role in your deadlock discussion and the most appropriate procedure for resolving a potential deadlock. These frank conversations are even more important when one party is providing the money and the other is providing sweat equity.

Shareholders’ Agreements and Operating Agreements.

We find a lot of times that people who enter into business with a family member or close friend don’t even have a Shareholders’ Agreement or an Operating Agreement. This might be for a variety of reasons – they didn’t plan for initial legal costs and fees; they feel that they will be able to run the business through oral agreements and understandings; or, they find it uncomfortable to discuss the issues found in corporate governance documents, like transfer upon death, disability, divorce, debt, dissolution, or simply the desire of one partner to monetize and be paid out etc.

We recommend to all our clients, regardless of relationship between partners, shareholders, or members (even husband and wife), that they have some form of Shareholders’ Agreement or Operating Agreement in place establishing the governance of the entity, the rights, duties and obligations of the parties, including, if necessary, provisions addressing potential deadlock scenarios in management or between members or shareholders.

Alternative Provisions.

There are a number of different ways that an entity can resolve deadlock, and, in fact, it may be beneficial to a Company to implement multiple or hybrid deadlock methods. These methods can easily be incorporated into a Company’s governance documentation. Here are a few ways to resolve deadlock:

  1. Create a third party advisory board – either with other Members or Shareholders of the Company, or even an outside third party knowledgeable in the business and/or decision subject to deadlock;
  1. Consider implementing automatic mediation or arbitration – this may not be feasible for all companies or for all deadlocked scenarios – it can be costly and time consuming – but it can be quite effective in preventing dissolution when there is a deadlock for a major decision;
  1. Consider splitting or designating certain decisions to each partner – for examples, this partner has the ultimate decision making authority on banking and property, and the other partner has the ultimate decision making on sales and marketing – this method requires the partners to determine strengths and weaknesses and delineate accordingly – this method is useful when doing some form of hybrid deadlock provision;
  1. Consider a buy-out provision – if the partners cannot agree, one partner can buy the other partner’s shares or membership interest – there are a number of ways to structure a buy-out provision;
  1. If nothing else works, provide for a definitive right to withdraw or force dissolution or liquidation without court intervention. In this instance, you may be left relying on the default solutions contained in the Florida Statutes [Sections 605 and 607] or the decision of a judge who is unfamiliar with your business.

Need help in putting in place a shareholders’ agreement or an operating agreement?

Need help revising your current agreement with some alternative deadlock provisions?

The Walk Law Firm is available to review your current Shareholders’ Agreement or Operating Agreement in order to help you determine if, in fact, it’s appropriate for you and your partner(s).  Document review and drafting can be handled on a Flat Fee or Fixed Fee basis. To learn more, please contact us at the Walk Law Firm.

 

Sweat Equity v. Money Investors: Who Makes the Rules? [The Golden Rule of Business]

Many years ago, while working as the General Counsel to a large public company going through a Chapter 11 Bankruptcy, I learned that the Golden Rule as we all learned it in kindergarten [do unto others as you would have other do unto you] is not the only Golden Rule when it comes to business. I certainly support and believe in the Golden Rule we learned in kindergarten and try my best to adhere to it, but when it comes to money and business, I have learned that the Golden Rule really is: the person with the gold makes the rules.

In business large and small, there is often reward and equity for those who have a great idea or are the work horses driving success (the “Sweat Equity Owner”). Typically, however, the greatest percentage of equity and, hence, the greatest return in pure dollars, goes to the person who put up the money in the first place (the “Cash Equity Owner”). Once the business gets going, this often leads to resentment of the Sweat Equity Owner and frustration of the Cash Equity Owner.

Not surprisingly, the Sweat Equity Owner often feels like he has worked harder and should be compensated for the hard work and ideas. In addition, the family of the Sweat Equity Owner has started to feel the pain of long hours and missed meals and events, resenting the Cash Equity Owner whose life and lifestyle has not changed at all.

The Cash Equity Owner is frustrated because the project is taking longer than expected to show a return and the Sweat Equity Owner continues to ask for cash, primarily to meet living expenses in the form of  salaries for business personnel. The Cash Equity Owner usually has other investments or businesses and more business experience and wants the Sweat Equity Owner to work differently and take his advice on how to get the work done more quickly so that product can get to market faster. His family (or fund investors) wants to know when they will see a return on investment.

Not to sound like a broken record on the reasons for Business Divorce, but there are some things that can be done at the onset of a relationship to avoid these dilemmas. Too often, when the relationship is formed, there is no substantive discussion of duties, timing for deliverables and exit strategy for the Cash Equity Owner. The conversations are very high level and never transcribed into a detailed agreement. One party calls cash loans while the other considers it equity.

In the last 12 months, I have encountered among other missteps: companies in which the equity was never issued despite cash being infused; standard Bylaws from companies like Legal Zoom were used, but no one ever read or understood what they meant; Articles were filed on www.Sunbiz.org indicating the names of managers, managing members, officers, owners … who were not in fact in the positions indicated and who had no authority to act on behalf of the business; domain names and other intellectual property placed in the name of one owner instead of the business …. This list is hardly exhaustive, but all have led to expensive legal battles between business partners on break-up.

When I get the call, whether as an attorney or mediator, that business partners are seeking to terminate their business relationship, the first step in my analysis is to look at the agreements between the partners.  These documents become the guide on how to proceed. If they have been carefully crafted and reflect the partners intent, often the cost to the business as well as the individuals for navigating the business divorce is emotionally and financially insignificant —- Owners typically know what to expect and time is spent implementing already agreed plans. Without these written agreements or mutual acknowledgment of intent of unwritten agreements by the Owners, the cost in the first days of efforts to separate can be thousands, and at times, tens of thousands, of dollars.

At this point you are probably thinking that I am exaggerating, but in fact, if a lawsuit needs to be filed  in order to keep the business running and make it clear who has authority to act, the effort is significant and lawyer time and cost is high. We start by preparing a complaint seeking injunctive relief and serve it with requests for admissions, production of documents and interrogatories. At times, we demand a receiver be appointed if we are representing the Cash Equity Owner and our client is not ready or able to step in and run the business. We seek emergency hearings to ensure if our client in good faith believes irreparable harm to, or waste of, business assets will occur if action is not immediate.  We often need to include third parties such as the domain hosts or banks to require them to turn over account codes and keys or to freeze assets.

Courts do not like to get involved in daily business activities and if the situation  lacks clarity, the court may appoint a receiver on its own. Domains and intellectual property will need to be be place in escrow; bank accounts will need to be frozen or unfrozen; payroll companies, customers, vendors, employees will all need to be notified as to who has authority to direct activities just to keep the business operating  and attorneys will be stepping into conversations with domain hosts, bankers, customers, vendors and employees…. all while on the clock. By the way, the Receiver will hire an attorney as well and both the receiver and attorney will also be on the clock.

Back to the Golden Rule — needless to say, the Cash Equity Owner often has the gold necessary to stay afloat while the Sweat Equity Owner does not.

Although good friends and family members make great investors because they are trustworthy, life changes and needs change over time. By having a frank conversation up-front and documenting the deal, before money is invested, much of the financial and emotional cost can be minimized on business divorce and friendships and family relations can remain favorably intact. Like a good pre-nuptial, shareholder agreements, operating agreements, and buy-sell agreements, can minimize cost in the future and avoid undue emotional harm. To me, it is well worth spending a couple hours in frank discussion and a couple thousand dollars up-front when investing in a business to avoid a later fight at ten times that expense.

At the Walk Law Firm, we regularly advise clients on these matters and encourage open discussion between owners. We can work as company counsel or as counsel to a business owner in helping businesses sort through these issues.

Credibility Education for Tampa’s Small Businesses

Summary: Tampa Bay based company creates partnership with national and local businesses to provide credit and business growth strategies for qualified small businesses.

Tampa, FL – October 1, 2013 – Nationally recognized consumer and small business finance advocate, S.E. Day will host the For Small Business Only, LLC (FSBO) Business Education seminar.  Utilizing strategic alignments with corporate creditors and vendors, the FSBO seminar will provide qualified small businesses with credit building tools that assist in establishing their business credit profiles through credit reporting bureaus including Dun & Bradstreet’s PAYDEX® score.  The seminar is a one day event and will be held on October 22, 2013 at the Steinbrenner Pavilion (across from the Bucs stadium).

“The #1 challenge faced by every small business is successfully establishing business credit without using the owner’s personal credit,” states S.E. Day, founder of FSBO and host of The Legally Steal Show hosted by S.E. Day™.  “At FSBO, we work from the top down through innovation and strategy. We have aligned with major U.S. corporate creditors to provide credit tools and accounts that assist small businesses in building business credit and establishing their PAYDEX® Score.  We are also partnering with local small business owners and thought leaders like attorney Rochelle Walk to provide education and strategies to assist the participant in growing their businesses from sustainability to profitability.”

“Our firm represents and works with many small businesses and we strongly believe that success of small business is fundamental to the success of our economy ,” states Rochelle Walk, President and Owner of Walk Law Firm, PA.  “The FSBO Event will be an opportunity to provide the participants with education  regarding legal concerns and legal planning aspects of being properly prepared to grow their businesses to the next level.”

For further information and registration about the For Small Business Only Business Education seminar, please visit the website at www.ForSmallBusinessOnly.com or call 813-379-7248.  To determine if a business qualifies for credit products through FSBO, please email Info@ForSmallBusinessOnly; or, visit LinkedIn, click on groups, and join the For Small Business Only group today and get registered.

About For Small Business Only (FSBO)
FSBO is a Florida-based company providing qualified small business owners with practical knowledge and applications specifically designed to enhance their business presence and increase their bottom line.

To qualify for credit products and trade accounts, participants with For Small Business Only, LLC must meet the following requirements: be in business for a period of one to two years; possess a current, legal business structure with their state’s Secretary of State; possess a complete business address and business telephone number (no P.O. Boxes allowed, home office addresses are acceptable); and, have an IRS issued tax ID number.

Contact

S.E. Day
The Legally Steal Show
813-379-7248 ph
FSBO@legallysteal.com
www.ForSmallBusinessOnly.com

What is a Business Divorce?

Last month, I wrote about the not so odd couple – business divorce. In continuing my educational efforts and with the hope we can help folks in business avoid some of the most difficult issues faced when breaking up with a business partner, I am continuing my blog series on Business Divorce….

Business Divorce comes in many forms but has one common characteristic — the owners are at odds, or in agreement, and want or need to attend to the separation of their business interests. The typical reasons include, but are not limited to:

  1. Generational transitions;
  2. Owners are deadlocked on a material matter preventing the business from moving forward;
  3. The owners have different visions for the future;
  4. One or more owners needs or wants to cash out;
  5. A partner has become disabled or divorces and there are no contractual provisions which are triggered;
  6. One of the owners of a business is divorcing or separating from his or her spouse or life partner, which triggers one or more clauses in governance documents of a company;
  7. An owner becomes a debtor in a bankruptcy;
  8. An owner has committed fraud or has taken corporate assets as their own without the consent of other owners;
  9. An owner manager has committed waste;
  10. An owner is no longer contributing or supporting the business as part of management or financially.

When these matters come to me as a lawyer, I still deploy my mediator skills to seek an amicable resolution whenever possible. As a mediator, I employ my extensive knowledge of business law and my creative energy to find middle ground that brings the matter to resolution. As an attorney and mediator, I look to the governing documents (Bylaws, operating agreements, partnership agreements, shareholder agreements, actions by the Board and Management …. ) and governing law to advise my clients and to navigate the often treacherous waters.

I am often surprised that lawyers and clients have failed to address some of these items up front when creating the business. My clients know that we always discuss the “Parade of Horribles” when drafting governing documents, with the hope of avoiding undue conflict at the time the business is sold or owners separate.

In future articles, I will focus on the specific concerns that arise in business divorce and ways in which owners might avoid these issues with some up front planning.

Business Divorce – The Not So Odd Couple

Recently, I added the certification of family law mediator to my already extensive list of mediation certifications to the surprise of many of my friends and associates. It should not be surprising that an attorney with an active mediation practice would mediate family law matters in addition to other business, insurance, bankruptcy, patent and intellectual property and other disputes, it’s just that my law practice has been heavily focused on business matters and it appears that I have never been engaged in the area of family law, but actually I have.

My typical practice involves representing businesses and their owners in all aspects of business life.  I have been the Chief Legal Officer and Chief Administrative Officer for public and private companies, have navigated Boards of Directors and CEOs through Chapter 11 Bankruptcies, hostile take overs, mergers, acquisitions and a variety of other crises. Sometimes those crises and matters include the addition of new owners, the separation of executives and owners, disgruntled minority owners and overcoming deadlocks. In my post “big” business life, I have started a law firm that offers the same quality and level of service provided to our nation’s biggest companies to small and middle-sized businesses on a fee structure that smaller businesses can afford. The issues are no simpler; the legal services no less complex, and the need to protect business assets, confidentiality, dignity and reputation at least as challenging.

Complicating the business of small business today is the close relationship between business partners and life partners. I am finding often that the break-up of life partners can cause mass disruption to unrelated business interests and partners, especially when there are no provisions in operating agreements or shareholders agreements covering these issues. Sometimes, life partners are business partners as well. Even without the complication of life partners, I am finding that business people go into business with others without adequate diligence and without formalizing agreements at all. In the last six months alone, I have been engaged or consulted as either a mediator or lawyer in at least a half dozen situations in which business partners are seeking a “business divorce.” And I must say, my skills and knowledge gained through family law mediation combined with my business law knowledge and acumen has come in pretty handy.

If I can help you as a mediator confidentially settle your business disputes, or help you as an attorney negotiate your deal with your partners, please contact me by completing the form below or calling our office at 813.999.0199.

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IP Basics for Start-Ups and Business

When you start a businessintellectual property protection should be a primary part of your start-up business plan.  What intellectually property (IP) has your business developed?  Why should you protect it? And, more importantly, how do you go about protecting the various types of intellectual property that your business owns?  Every business is different and will have different intellectual property considerations, so it’s important to develop a strategy on how your business intends to protect its unique inventions, innovations, and information. It is important to remember that your trade name, ideas,  concepts and customer lists are important assets of your business — assets that need protection.

 

What is your intellectual property?

Intellectual property refers to creative and innovative inventions, marks, designs, or works of authorship that you or your business independently created.  Ask yourself this question, “If you gave this product, information, or design away, could it hinder or prevent you from competing in your industry’s market; would it prevent or impact your profitability?” If the answer is yes, then it is more than likely some form of intellectual property.

 

There are several different types of intellectual property that your business should consider when taking an inventory of its IP for business planning purposes, including: (i)patents, or new or improved inventions, including products and processes; (ii)trademarks, or logos, brands, and designs; (iii) copyrights, or unique works of authorship, including software, articles, books, brochures, artwork, music, etc.; and (iv)trade secrets, or formulas, patterns, compilations used in a business to gain an economic or commercial edge over competitors.

 

In the early stages of your business plan, you should take an inventory of what types of intellectual property that your company owns and which intellectual property is worth protecting.  In other words, examine your business to see what might be eligible for intellectual property protection, including patent, trademark, copyright or trade secret protection, and determine the value that these inventions, innovations, or information provide to your business.  The state and federal protections afforded to intellectual property owners are designed to reward your creativity and provide you with an economic or commercial benefit, so take advantage of these protections.

 

Why should you protect your intellectual property?

Your intellectual property is an asset of your company just like your office, or your bank account.  In fact, depending on the size of your company, and the importance or value of the intellectual property, you can easily include your IP as an asset value on your corporate balance sheet.  Your intellectual property distinguishes you and your product or services from those of your competitors and their products and services.  Just like any other corporate asset, you need to safeguard your intellectual property.  If you fail to adequately protect and police your intellectual property, your competitors, and even worse, your own employees or contractors, can study, steal, and improve upon your product or service and run you right out of the market.

 

Also, social media has exponentially increased the speed of informational posting and exchanges.   This is important for a number of reasons – one, the simplicity of these social media outlets allows you to quickly and easily put information out there that you may have failed to adequately protect that is accessible to consumers, clients, and competitors; and two, a competitor can just as easily steal, improve, and disseminate the information, which could seriously impact the economic benefit of the intellectual property to your business.

 

Additionally, registration is sometimes a requirement for pursuing a legal remedy (e.g., copyrights), so it is extremely important to register early.  And finally, another reason why you should invest now in your IP’s adequate protections is because a lawsuit later will be far more costly than the application and registration fees and the attorneys’ fees for consultation and filing.

 

How do you protect your intellectual property?

It is extremely important to consider and build intellectual property concerns into your business plan. You should educate yourself and your team on the basics of trademarks, copyrights, patents, and trade secrets, so at the very least, you know when something has been created that has the potential to be afforded protection.  Next, you will want to register your IP, either at the state or federal level, depending on the level of protection you desire.  Because of the unique nature of your business, and because the various types of intellectual property are protected in different ways through various registration processes, it is good idea to at least consult with an intellectual property attorney who is familiar with start-up businesses and familiar with your industry.  An attorney can help you file the appropriate state or federal registration, and often such tasks can be completed on flat or capped fees.  They can also help you protect your IP while registration is pending.

You should also establish corporate policies regulating ownership of your business’s new and existing intellectual property.  Often times, it’s not a competitor stealing a business’s IP; it’s a former employee, independent contractor, or partner who undermines the business. Have your employees and contractors execute adequate protection documentation, including well-drafted non-disclosure and confidentiality agreements, employment agreements, independent contractor agreements, etc.

Finally, once you have registered your IP, you should actively police it.  Collaborate with your clients, vendors, merchants, and anybody else who helps you get your product or service into the stream of commerce and keep your eyes open for illegal duplication of your product and/or services.  It is the owner’s responsibility to police its own intellectual property and to insist on legal compliance of the respective laws, rules, and regulations when you find someone infringing upon your IP rights.

 

Florida Legislature Passes New Revised Limited Liability Company Act – Important Reading for Members and Managers of LLCs

Intro

On May 3, 2013, the Florida House of Representatives unanimously passed the new Florida Revised Limited Liability Company Act (the “New Florida LLC Act”).  The Florida Senate unanimously passed a companion bill a week earlier.  Governor Scott approved the bill without issue or opposition on June 14, 2013.  Since LLCs are the most common form of business in Florida, this article is important reading for all business owners, especially owners seeking to protect their LLC assets and personal assets as soon as 2014. The New LLC Act will be codified as Chapter 605 of the Florida Statutes and will govern limited liability companies (“LLCs”) within the state of Florida.  The New Florida LLC Act is materially different, in both form and substance, than the Existing Florida Revised Limited Liability Company Act (the “Existing Florida LLC Act”), which is codified in Chapter 608 of the Florida Statutes.  If you or your company is an existing Member or Manager of a Florida LLC, or if you plan to become one in the near future, it is extremely important to understand the New Florida LLC Act and how it may impact your existing and future operating agreements and other governance documents.   The summary below is not a comprehensive review of the new LLC Act and is not intended to replace the advice of an attorney, but rather is designed to help you assess your own LLCs and potential need to take action.

When will the New Florida LLC Act become effective?

 The New Florida LLC Act becomes effective on January 1, 2014 for all LLCs formed in Florida on or after January 1, 2014.  For all LLCs in existence prior to January 1, 2014, the New Florida LLC Act will not become effective until January 1, 2015; however, the members of an LLC may elect to have the New Florida LLC Act become effective as early as January 1, 2014. To do so, the governing documents of the LLC will need to be amended.

How will the New Florida LLC Act impact my LLC?

 The New Florida LLC Act, like the Existing Florida LLC Act, and like most business organization statutes, is a default statute, which means that it provides a set of standard rules governing LLCs and how they are organized, how they operate, and how they are governed.  These standard rules may be modified, with limited exceptions, through specific language contained in either the Articles of Organization or the LLC’s operating or management agreement.  Like all LLC statutes, the New Florida LLC Act specifically prohibits the LLC from including language that modifies or supersedes certain statutory provisions (these are often referred to as “non-waivable provisions”).  This is significant because the New Florida LLC Act expanded the number of provisions which are now,  non-waivable and may not be altered by agreement of the members.

What changes were made in the New Florida LLC Act?

Expanded Non-Waivable Provisions.  The New Florida LLC Act has clarified that an LLC’s operating agreement may not remove certain rights, obligations and authority granted by the Act. Some of the provisions which an operating agreement may not change include:

  1.  The ability of the LLC to sue and be sued in its own name
  2. The right of a member to maintain a direct cause of action against the LLC, another member, or a manager in order to enforce such member’s rights and otherwise protect such member’s interest
  3. The right of a member to maintain a derivative action
  4. The right of an LLC to refuse to relieve persons, including members and managers, from liability if such persons acted in bad faith or committed willful, or intentional misconduct or a knowing violation of the law
  5. A Member’s or Manager’s duty of care, duty of loyalty, or obligation of good faith and fair dealing The  power of a member to dissociate from the LLC
  6. Statutory requirements with respect to the  contents of a plan of merger, plan of interest exchange, plan of conversion, or plan of domestication, plan of dissolution, articles of organization, statutory agents and other similar provisions
  7. The applicable governing law of the Florida LLC

Managing Member Eliminated.  Under the Existing LLC Act, there are three potential management options:  (1) Member managed, (2) Manager managed, and (3) Managing Member managed.  The New Florida LLC Act has effectively eliminated the concept of Managing Member managed.  It is possible that your operating agreement may need to be amended in order to avoid confusion, unintended results, and unintended personal liabilities, and to make very clear which of the remaining options you intend to use for your LLC.  For example:  once the New Florida LLC Act becomes effective, for those LLCs that are Managing Member managed, the Managing Member may no longer be able to act alone and may require all authorized actions to be subject to a member vote in accordance with the operating agreement.  In order to avoid an unintended result, you should revise your operating agreement and governance documents to reflect the intent of the members.

New Statement of Authority.

The New Florida LLC Act allows an LLC to file a statement of authority with the Florida Department of State as a way of providing constructive notice to third parties regarding persons authorized to act on behalf of the LLC.  The Statement of Authority will be effective for five years from the last amended or filed Statement of Authority, unless terminated earlier in accordance with the New Florida LLC Act.  You should consult with an attorney to determine the implication of filing a Statement of Authority and whether such Statement of Authority would be beneficial for your LLC.

Other Changes.

  •  Non-US entities are now permitted to domesticate as a Florida LLC
  • Non-economic members (members that don’t or are not obligated to contribute) are now permitted
  • The new Act includes specific service of process rules for LLCs

What should I do with my existing operating agreement?  Moving forward, how will my operating agreements be different?

If you or your company are a member or manager of an existing LLC, or are planning to enter into a new LLC, you need to understand the New Florida LLC Act and all the changes that were recently made.  At minimum, you should review your operating agreement with a qualified business attorney. LLC Agreements need to reflect how the members desire to operate the business. An experienced and practical business attorney will help you navigate the new Florida LLC Act in a way to help you amend your operating agreement to be consistent with your intent and operations.

The Walk Law Firm is available to review your operating agreement and help you understand the impact the New Florida LLC Act will have on your Florida entity. Operating reviews can be handled on a Flat Fee or Fixed Fee basis.   As experienced Florida business and commercial law attorneys, we have studied the New Florida LLC Act and can work with you to revise, amend, restate and draft new provisions for your LLC management and operating agreements eliminating unintended confusion or results.