MAXIMIZE BUSINESS PROFITS
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- DO NOT OPERATE YOUR BUSINESS AS ASOLE PROPRIETORSHIP OR PARTNERSHIP: Generally,
in addition to possible adverse tax consequences, a sole proprietor and
all general partners of a partnership remain personally liable for all
debts and obligations of the business. This includes liability for tort
claims, e.g. negligence, personal injury, fraud, etc. and includes
liability for the actions of employees acting within the scope of
business. Liability insurance covers this exposure only to a limited
extent. Moreover, substantial assets of sole proprietors and partners
may encourage litigation.
- WHENEVER POSSIBLE USE CONTRACT FORMS SPECIFICALLY DRAFTED TO PROTECT YOUR INTERESTS: Business
documents come in a variety of forms, most having some legal
significance. A business should anticipate business documents needed
for the operation of the business, and have these documents specially
drafted by legal counsel with the goals of the business in mind, and
specifically to avoid collection and litigation problems in the future.
If a dispute does arise, your contract forms could be the determining
factor as to whether you are sued, and if so, whether you prevail. THIS
IS VERY IMPORTANT.
- NEGOTIATE CONTRACTS WITH THIRD PARTIES: Although some
contract documents, invoices, purchase orders, etc. as presented by
other parties may be non-negotiable, most business documents can be
negotiated. With this in mind, all such contracts should be carefully
reviewed. Adverse and unfavorable provisions should be either
eliminated or negotiated. Sometimes it is important that you insist on
the addition of new terms to protect your interests. REMEMBER, THE
OTHER PARTY’S FORMS ARE NOT DRAFTED TO PROTECT YOUR BUSINESS INTERESTS.
- WHENEVER POSSIBLE AVOID PERSONAL GUARANTIES: Although some
contexts typically require personal guaranties, for example a business
loan, or equipment lease, in some form contracts they can be eliminated
without controversy. If so, striking such language might prevent your
personal liability if a problem occurs.
- WHENEVER POSSIBLE INSIST UPON A PERSONAL GUARANTY WHEN SELLING EXPENSIVE GOODS OR SERVICES ON CONTRACT: For
the same reason you want to avoid signing personal guaranties, you want
to insist upon them when selling or leasing goods or services to third
party businesses on credit. Obviously, you want to be able to look to
the assets of the owner if a default or insolvency occurs.
- WHEN NECESSARY USE SECURITY AGREEMENTS AND COLLATERAL WHEN FINANCING EXPENSIVE PURCHASES:
to do whatever is necessary to make sure you are paid. Personal
guaranties and collateral with a properly filed and recorded financing
statement can go a long way to protect you against default.
- WHEN A DISPUTE ARISES SEEK LEGAL COUNSEL IMMEDIATELY: Business
owners typically bend over backwards in an attempt to negotiate with
the opposing party when a dispute occurs. Although, there is nothing
wrong with negotiation and compromise, a business owner needs to know
immediately his or her legal standing in the dispute. This is important
for two reasons: First, it gives the business owner a basis from which
to reasonably negotiate. Second, it allows for a settlement or
resolution that will be legally binding. In many cases compromises
eventually blow-up leaving the business owner in a worse position than
he was originally. This does not mean that an attorney must necessarily
be involved in the negotiations. In many cases he can remain in the
background protecting the business owner as an advisor.
- BE CAUTIOUS WHEN DEALING WITH EMPLOYEES: We live in a time
when employee lawsuits are thriving. In order to avoid such suits, the
employer should consider the following: (a) Have all employee
agreements in writing; (b) Even have "at will" employees sign an
acknowledgment form prior to employment which indicates their status,
and that no oral promises have been made for continued employment; (c)
If you have a policy manual, make sure that it does not in any way
conflict with any written or oral understanding with any employee; (d)
Never fire an employee—for any reason—without first communicating the
reasons for the firing and allowing him or her to explain their
position; (e) When terminating an employee have a trusted witness
present; (f) TAKE ALL SEXUAL HARASSMENT CLAIMS SERIOUSLY-AND
EFFECTIVELY DEAL WITH THEM.
- ADEQUATE INSURANCE: Maintain adequate business
insurance—particularly liability insurance. Carefully consider the
nature of your business and assess your insurance needs with a
qualified independent insurance broker.
- TAX ADVISOR / FINANCIAL CONSULTANT: Secure a highly
qualified tax advisor and financial consultant and review the tax and
financial position of the business annually.
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