Do You Make This Starbucks Mistake In Your Business Agreements?

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business agreementsAre your business agreements really protecting your interests? Here’s a cautionary tale to learn from.

Starbucks wanted to distribute its coffee in grocery stores. Because Kraft already had the distribution network in place for its food, Starbucks signed a contract to have Kraft handle its coffee too.

What was Starbucks’ mistake?

Since the contract was designed to last forever, Starbucks had to pay Kraft almost $3 billion to walk away from the deal.

Related Article – B2B Contracts – How To Avoid 4 Common Mistakes

Times change, people change, and so do your business needs. Plan accordingly.

That’s why the business agreements our firm prepares are designed to protect clients now and give them options in the future when circumstances change. To learn more, check out our Business Contract Legal Protection Package.

How To Use Business Contracts To Prevent A Single Point Of Failure

By | Business Contracts, Employment Agreements, Independent Contractor Agreements | No Comments

How To Use Business Contracts To Prevent A Single Point Of FailureBusiness contracts can help prevent your company’s cascading collapse caused by a single point of failure (SPOF). Did you know that one of the biggest mistakes entrepreneurs make is running their ventures so that a SPOF can wipe out everything?

In fact, most small businesses are riddled with SPOFs ready to explode like a land mine when you can least afford it.

For example, let’s say you have a worker (employee or independent contractor) that’s vital to your operations who needs to take a week off to attend a parent’s funeral. If the worker’s absence brings your company to a halt, that’s a SPOF.

Or your software developer acts like a prima donna, making unreasonable demands or not timely delivering. Will your business be held hostage?

Related Article – B2B Contracts: How To Avoid 4 Common Mistakes

And for business owners, the most vital SPOF is the one you see in the mirror, i.e. your business can’t survive without you. Your vacations (if you take one) are 24/7 working vacations where you’re checking text messages, voicemail, and emails to make sure everything’s running.

How To Prevent SPOFs

It doesn’t have to be that way.

Build in redundancy by cross-training workers and finding alternate sources for vital products and services.

One of the best places to start eliminating SPOFs is to identify all of the key tasks that must be performed for your business to function smoothly (including your own responsibilities) and make sure there’s at least 2 to 3 people who can handle those tasks.

The Importance of Business Contracts For Avoiding SPOFs

Then use employment contracts and independent contractor agreements to formalize those responsibilities with each worker to ensure you’re protected. Our firm prepares these types of agreements as part of a Business Contract Legal Protection Package.

Let’s face it. Because it’s essential to your company’s success to make sure no one becomes a fatal bottleneck, you need to put the right business contracts in place to prevent your operations from grinding to a SPOF halt.

Does Your Business Lawyer Draft Contracts That Encourage Dispute Resolution Or Lawsuits?

By | Business Contracts, Dallas Business Lawyer, Intellectual Property | No Comments

Does Your Business Lawyer Draft Contracts That Encourage Dispute Resolution Or LawsuitsImagine your most important business agreement has been breached by the other side. What would you do?

For many companies, the answer is a costly lawsuit that often sucks up more time and money than the amount of damages caused by the breach in the first place.

Is there an alternative to a breach of contract lawsuit?

Yes.

Have your business agreements drafted an experienced business lawyer so that they favor resolving disputes quickly and at minimal cost.

How?

Here are three key issues to cover in your business contracts that should fix most problems:

(1) Include a comprehensive alternative dispute resolution process;

(2) Make the law that governs the agreement favorable to you; and

(3) Have disputes settled in a location that minimizes your costs.

Related Article: 5 Things You Should Review With Your Business Lawyer Annually

1. Alternative Dispute Resolution Clauses

5 Things You Should Review With Your Business Lawyer AnnuallyYour agreements should provide for a multi-step process for solving problems without going to court.

Common stages of dispute resolution include informal discussions between the parties, mediation, and arbitration (binding or non-binding). Many business attorneys who are not trial lawyers prefer binding arbitration for their clients because it typically saves time and is cost-effective.

2. Applicable Law

Make sure that the law governing your agreement generally favors you. This is particularly important when the other party is located in another country whose laws on contract enforcement are lax or nonexistent.

3. Venue

Even if you’re not heading to court, you’ll want the location of your dispute resolution process to be in a location that’s convenient for you. Ideally, that will mean having the contract provide that mediation and arbitration occur in the same geographic area (e.g. city or county) as your company’s headquarters. In the alternative, if the other party insists, agree in the contract to resolve disputes at a neutral location that’s mutually convenient.

What contract disputes should your business lawyer encourage be resolved by a court instead?

Unfortunately, sometimes it’s necessary to sue to protect your company’s legal rights. Because of this, your corporate legal counsel will want to carve out exceptions to mandatory alternative dispute resolution to cover issues like intellectual property infringement, violation of a non-competition clause, and related matters where equitable relief from a court may be needed.

When you invest in a Business Contract Legal Protection Package from our law firm, one of the things we focus on when preparing your agreement is helping protect your interests if there’s ever a dispute between you and the other party. Because life’s too short to spend it in court.

Don’t Treat Your Employees Like Strippers

By | Business Contracts, Employment Agreements, Independent Contractor Agreements, Taxes | No Comments

employees independent contractorsAs reported by Jessica Anderson in the Baltimore Sun (Strip club dancers are suing clubs over pay – and winning), strip clubs are getting in trouble by improperly treating strippers as independent contractors instead of as employees.

Although there’s no hard and fast rule as to whether an individual working for your company is an employee or an independent contractor, the U.S. Internal Revenue Service (IRS) does provide some guidance on the issue.

Important Employment Factors

Two key factors that favor employment status are setting the work schedule and controlling how the work must be done by the person. For strip clubs, this meant club management telling the dancers when they had to perform and dictating what they could and couldn’t do when stripping/dancing.

What’s the potential damage by mislabeling employees?

If you treat your employees as independent contractors, you may be liable for back wages, statutory damages, penalties, employment taxes, plus contributions to workers compensation and unemployment compensation funds. These misclassified employees may also be eligible for benefits you’ve provided to your other workers, such as 401k contributions, paid vacation, and health insurance.

How to this problem?

If your workers are really employees, treat them as such from the time you extend an offer to work for you. Pretending they’re independent contractors when they’re not creates a ticking time bomb of legal and tax liabilities you don’t want.

On the other hand, if a worker truly is an independent contractor, it’s often a good idea to make that relationship clear in a professionally prepared written independent contractor agreement signed by the parties. If the contractor decides to assert employment status, you’ve got a contract to point to when trying to convince a judge or government agency that the worker is not an employee.

IRS Form SS-8

If it’s truly unclear whether your workers are employees or independent contractors after consulting with an experienced business lawyer, you may wish to file a Form SS-8 “Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding” (PDF file) with the IRS for a determination as to the workers’ status.

Sale of Business Leads to Expensive Breach of Contract Lawsuit

By | Business Contracts, Business Lawyer, Business Legal Alerts, Buy Internet Business, Buy/Sell Internet Business, Sell Internet Business | No Comments

As reported in The Connecticut Law Tribune, “Oral Surgeon Wins $3.1M in Breach of Contract Suit.” Although you can read the details of the particular lawsuit in Karen Ali’s article, note the important lesson from this case. The terms and conditions of an agreement to buy or sell a business must be followed, including post-closing obligations each party owes the other.

When picking a business partner, be at least as careful in performing due diligence as you would when selecting a potential spouse for marriage. The monetary stakes are often higher in the business arrangement.

Also make sure that you have a signed professionally prepared buy-sell agreement so that if one party decides to leave, you’ve already put in place a road map to be followed that preserves business continuity and ideally does not adversely affect the relationship between the parties upon separation.