Drafting an operating/partnership/shareholder agreement seems to be my most important but least utilized service. For whatever reason, business owners are very reluctant to spend the money on a well-drafted operating agreement tailored to their needs when they can download one for free. If you are a regular visitor to my site, you have read the horror stories about companies that settle for generic operating agreements or others that simply go without.
A couple of weeks ago I spent over an hour with two business partners trying to nail down the specifics for their operating agreement. One remarked, “wow, I had no idea so much went into these agreements.” I explained that so many things can go wrong when you’re in business with another person. The operating agreement’s
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I’m Gina Bongiovi. I’m a lawyer who works with startups and small businesses. Whether you’re in the startup phase or whether you just have an idea rolling around in your head you might want to turn in to a business one day, you need to know how to start a business in Las Vegas. If you’ve done any research, you have found out that the process is pretty complicated and involves a whole bunch of steps; you have to go to a bunch of different agencies, you have to figure out a name, you have to figure out what entity you want to be, you have to figure out what sort of tax permit you need from the state, how you want the IRS to
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Here’s what happens when you get your operating agreement from a legal forms company.
I just finished helping a client negotiate a buyout. In English, that means he and his partner stopped longer seeing eye to eye on how to run the business so the partner offered to buy my client’s shares in the company.
We spent a month negotiating and getting nowhere when the partner’s attorney proposed adding someone new to the company without my client’s permission. This type of thing normally doesn’t fly without at least a majority vote. Of course, these guys were 50/50 partners and were already hostile, so agreeing on something was not going to happen. I asked for a copy of the company’s operating agreement, which they had bought from a
Continue reading Small Business Horror Story #7: Pre-Packaged Operating Agreements
“Oh, we don’t really need a partnership agreement; we’re great friends.”
“We’ve been best friends since childhood, so we know how to resolve arguments.”
“He mah bess frenn.”
These are words that strike fear and anxiety into a corporate lawyer’s heart. Granted, our perception may be slightly skewed given that we always see what happens when things go horribly wrong. Still, if you want to maintain the friendship, putting together some sort of partnership agreement is the best way to do so.
A business partnership is a lot like a marriage. Therefore, a partnership breakup is a lot like a divorce. An operating/shareholder/partnership* agreement is like a prenuptial agreement but it’s not nearly as awkward to discuss.
For so many reasons, it is imperative to put one of these owners’
Continue reading Going into Business with a Friend?
A few weeks back I was a coach for Startup Weekend. Basically it works like this: a bunch of entrepreneurs get together Friday night and each has a chance to pitch his or her idea. The group as a whole narrows the field to about a dozen ideas and the people whose ideas were not chosen redistribute themselves among teams. Then the teams work tirelessly over the next 52 hours to develop the idea into a working prototype which they then pitch, as a group, to a panel of judges. The judges can include venture capitalists, consultants, and angel investors. The team that won last year just garnered about $750,000 in funding. So this is a big deal.
Over the course of the weekend, the same
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At the risk of attempting to sound like a salty veteran, I’ve reviewed a number of commercial lease agreements in my day. While I do my best to control my instincts that turn me into an overprotective mama bear for my clients (usually the tenants), sometimes I just have to stomp my feet and say NO, you’re NOT signing that. Now go to your room. I mean…ahem…nevermind.
Last week a client presented me with an Exclusivity Agreement she received from her prospective landlord. My client wanted to open a nail and skin care salon in a shopping center that already had a hair salon as a tenant. In short, the exclusivity agreement between the landlord and the existing tenant said that the landlord could not lease to another tenant whose
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Gryphon Valuation Consultants, Inc. www.BizVals.com 702-870-VALU (8258)
Buy/Sell Agreements provide a blueprint for the transfer of business interests, allowing business owners to control and protect their investment in an organized and prescribed manner. Think of the Buy/Sell Agreement as a prenuptial between business partners.
Buy/Sell Agreements address certain triggering events such as death, divorce and the departure of business owners and should be an integral part of every business planning process – ideally, very early in the process. A well-constructed Buy/Sell Agreement serves five crucial functions:
Creates a ready-made market for a company’s shares or membership interests upon the occurrence of a triggering event or other predefined transfer scenario; Defines the price (value) at which the shares or membership interests will be transferred and the terms of the facilitating transaction
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I recently met with one member of a two-member LLC with no operating agreement. We’ll call my client Jane and her partner Joe. Jane was concerned because Joe was engaging in activities that could jeopardize reimbursements the company receives from the government for the services it provides. Jane voiced these concerns and Joe promptly “erased” her from the company. He physically locked her out of the office, refused to return her mailbox key, removed her name from and access to the company’s bank account, and convinced most of the employees to sign an agreement prohibiting them from speaking with her. Without an operating agreement, nothing technically prevented Joe from doing all these things, even though Jane was an active member in the company. Luckily, Jane managed to get her
Continue reading Small Business Horror Story #2: No Operating Agreement and the “Eraser”
Reason #1: Leases are landlord-favored. They’re written by the landlord. This means every provision the landlord could skew his way, will be so skewed.
Reason #2: For accuracy. They’re such voluminous documents that often the landlord or property management company doesn’t carefully change all the required information to reflect your lease. For example, one client had been paying on a lease for five years before I looked it over prior to trying to negotiate a reduction in her rent. I discovered that the lease she had signed was actually for the bigger space next door. This client had been overpaying rent for years and the landlord was unwilling to even consider refunding her the overpayment without her suing him. Because she was already struggling, which was why she needed a
Continue reading Ten Reasons Your Lawyer Should Review Your Commercial Lease Agreement
Are you working for or with a company that has promised you ownership or profit sharing? Do you have this promise in writing?
I recently met with an intelligent go-getter who was a bit naive about business. Two years ago he began doing business development for a local company. The owners of the company had promised to reward him for his work and had endowed him with a title that made him sound like an owner, though in reality he was only an independent contractor. The owners’ promises were never reduced to writing and two years later, after having built the company’s entire client base, this client has nothing more than a fancy title, a meager salary and a pretty solid noncompete agreement that prevents him from starting his
Continue reading How to Make Sure Your Sweat Equity Pays Off