Making a business in Florida – Part 8 of 9
When a for profit business opens in Florida, it will generally either provide a service or sell merchandise. In either case, the intent is usually to operate the business to earn a profit for its owners.
To that end business owners strive to market and promote the business to increase sales and generate that profit. Thus, protecting the business from a lawsuit should be part of its natural development and growth plans.
Protect the business with good documents
What too many business owners overlook in their quest for growth is the need to protect and insulate the business from attacks.
Beware of the corporate divorce
Such battles can develop internally, which is why governance documents like operating agreements for LLCs or bylaws and shareholder agreements for corporations are beneficial. Having properly drafted corporate governance documents as they are called will not necessarily prevent these internal disputes. But if they do arise the governing documents provide a structure and plan for their resolution.
When there is a dispute between the partners in a business it is commonly referred to as a corporate divorce. A business partnership is not far from a marriage, thus the reference is an appropriate one. Governing documents like the operating agreement for a LLC are interpreted by our courts in the same manner as contracts. That means that judges charged to adjudicate these corporate divorces must apply the unambiguous plain language of these agreements to which the parties previously bound themselves.
One issue that often arises in corporate divorces is the value of a partner's shares or interest. If the governing document defines a valuation protocol or formula then the judge must apply that agreed method for the valuation. One party may claim it is unfair but that is what they agreed to and it is to what they are legally bound. Without an operating agreement in an LLC for example Chapter 605 controls as to valuation.
Chapter 605 is the Revised LLC Act that was enacted in 2013 and applied to all LLCs in Florida, including foreign businesses, after 2015. That set of laws provides a default valuation of fair value, which is a nebulous concept. A business that elects not to define the valuation for disputes, departures, or death of a member will find itself in protracted litigation involving expensive financial experts. That scenario can easily be avoided with proper governing documents like an operating agreement which is far less costly than the lawsuit later.
Attacks from outside the business
These attacks can also come from employees or independent contractors that are adjacent to or outside the corporate entity. They can also emanate from competitors or vendors outside the business.
Normally the conduct of a reasonable and prudent business owner is to first attempt to remedy or resolve the dispute. If a supplier or customer is displeased the business will try to work things out. If an employee or contractor is unhappy the company will determine if that is well founded and try to react appropriately. While it may be impossible to guard against every one of these outside parties suing the business having well crafted contracts and agreements can dissuade many of these parties or at least structure the dispute so that the cost of defending the claim does not detrimentally impact the business too severely.
What specifically should be included in these agreements is based upon the knowledge and experience of a seasoned business lawyer. For that reason alone many online or downloadable contracts rarely work well because the analytical capacity of the human mind is missing from that equation. The corporate counsel charged with preparing these important business documents should provide options for various clauses and discuss the pros and cons of each so the business owner can make an educated and informed decision as to each.
Protect your brand with intellectual property registrations
The brand of a business is undeniably a critical part of the entity. Businesses that properly brand themselves and protect those brands not only promote their own growth and profitability but also add a valuable component should another party wish to buy the business or its assets.
Protecting the brand of a business is not limited to the filing of a trademark. It is a program geared toward defining the proprietary information of the business and developed by it and determining how best to protect that.
With many businesses having an online and social media presence there are measures that businesses can take to guard their brand and proactively prevent others from hijacking their brand. Designing these programs for businesses is a service provided by David Steinfeld and the Law Office of David Steinfeld.
The Palm Beach Business Lawyer Blog
Board Certified expert in Florida business law, David Steinfeld has almost 25 years legal experience.