Contracts form the core of your business operations, encompassing agreements with investors, clients, employees, and more. Despite their pivotal role in the success of your company, many business owners tend to underestimate the importance of well-constructed agreements.
Whether hastily creating your own contracts or relying on inexpensive, do-it-yourself legal documents purchased online, neglecting the significance of these legal agreements can prove to be a costly mistake. A poorly crafted agreement may lead to substantial financial losses in attorney’s fees, court costs, or even jeopardize the very existence of your business.
In the previous installment, we covered the initial five pitfalls associated with the do-it-yourself approach to legal agreements. In this continuation, we’ll explore the remaining five pitfalls, shedding light on the risks inherent in navigating these critical documents without professional guidance.
06 | OVERLOOKING EXIT STRATEGY
In addition to addressing breaches, a comprehensive agreement must account for various circumstances leading to the termination of a relationship. Planning for potential exits, such as selling the business, closure, or incapacitation, ensures a smoother transition and minimizes conflicts. Early inclusion of exit strategies in agreements, such as operating agreements or bylaws, fosters clarity and reduces conflict in the future. Our expertise as your Family Wealth and Estate Attorney ensures the incorporation of a clear exit strategy, minimizing conflicts, liabilities, and expenses.
07 | NEGLECTING CONFLICT RESOLUTION
Effective agreements should encompass provisions for dispute resolution, encouraging alternative methods like mediation or arbitration before resorting to litigation. Mandating these processes helps manage disputes preemptively and ensures conflicts are addressed productively without resorting to court battles.
08 | INADEQUATE INTELLECTUAL PROPERTY PROTECTION
Intellectual property (IP) is a vital asset for your company and warrants comprehensive protection in legal agreements, particularly when engaging independent contractors. Unlike employees, contractors often retain full copyrights to their work, necessitating work-for-hire and copyright assignment clauses in agreements to secure ownership of the IP. Our Family Wealth and Estate Attorney expertise ensures every contractor agreement safeguards your company’s IP, offering maximum protection against potential threats.
09 | UNWISE INDEMNIFICATION AGREEMENTS
Agreeing to broad indemnities in favor of the other party exposes your business to significant liabilities. Indemnification terms can compel you to compensate the other party for losses incurred in specific circumstances. Seeking professional review before signing agreements helps prevent accepting overly broad indemnification obligations, ensuring you only bear responsibility for what is fair and reasonable.
10 | PERSONAL INVOLVEMENT IN AGREEMENTS
Signing legal agreements in your own name rather than your company’s name exposes your personal assets to risk. Even with limited liability protection from an LLC or corporation, signing agreements personally can pierce the corporate veil, allowing creditors to target personal assets to settle business claims. Every agreement, regardless of apparent significance, should be signed in your company’s name. Consulting with us, your Family Wealth and Estate Attorney, for agreement review is a crucial step in safeguarding your business.
RESPECTING THE IMPORTANCE OF AGREEMENTS
Handling legal agreements for your business is akin to attempting complex electrical work without expertise. Seeking guidance from licensed professionals like us ensures the creation of clear, concise agreements. Whether crafting new contracts or reviewing existing ones, including those drafted by other attorneys, our Family Wealth and Estate Attorney expertise will provide support. Implementing a robust agreement process enables effective navigation through inevitable changes in relationships while addressing conflicts healthily and productively. Contact us today for comprehensive assistance in creating and managing your business agreements.
This article is presented by Michelle Bell, an expert in estate planning and business succession services. Our office provides comprehensive legal support for businesses, assisting you in making informed decisions throughout your entrepreneurial journey and in planning for future contingencies. We also offer a specialized session where we review your business’s legal structures. To arrange this consultation, please click the following link: https://calendly.com/mcblawpllc/30min.
The information in this article is intended purely for educational and informational use and should not be considered as advice on ERISA, tax, legal, or investment matters. For advice specifically tailored to your unique situation, such advice should be sought independently from this educational content.