Being Proactive About Business Legal Needs: The 3 Most Important Things to Set Your Clients Up For Success
If you’re anything like me, you enjoy working with companies and helping them solve for different business issues. When I was new to business law, I wanted to boil the ocean for my clients. I learned that this is not only unnecessary most of the time, but there are a few key things that help greatly minimize risk, which is important, because more than 100 million lawsuits are filed against small businesses in the U.S. every year.
Contract disputes are an incredibly common source of liability for businesses, and according to courtstatistics.org, median costs for a business liability lawsuit start at $54,000, and average around $91,000 for contract disputes.
Based on my experience, these are the top 3 legal topics that businesses find themselves having issues with, and what we should be doing proactively to help protect them.
1 – Start with Equity Management
Because of the overwhelming nature of equity management tasks, such as keeping cap tables up to date, managing stock option vesting, equity issuance and transfers, and running scenarios, many businesses will default this responsibility to a law firm. While there’s not necessarily anything wrong with this option, outsourced GCs understand that many of these responsibilities can be easily managed using modern technology, thus saving their business clients a lot of money.
As your business’s trusted legal advisor, it’s crucial that this data is kept up to date for your clients. If you haven’t already, I implore you to implement some type of equity management software. If I had to make a recommendation, my favorite is Carta. Carta can be used to manage equity and cap tables, and they present an incredibly smart, intuitive online platform.
2 – Ensure Accurate Worker Classification
Employee agreements, independent contractor policies, HR…these are just some of the employee-centric areas that need to be tackled in order to help protect your business clients against potential liabilities. However, I would argue that the larger concern is the proper classification of employees.
Helping your clients classify their employees correctly is a critical part of helping to manage their team, and letting this slack can have severe financial repercussions. According to the Federal Department of Labor, “the misclassification of employees as independent contractors presents one of the most serious problems facing affected workers, employers and the entire economy.”
Make certain that you’re not just familiar with, but up-to-date on what constitutes an employee vs. an independent contractor. Utilizing the IRS guidelines, you can help your businesses make these distinctions by evaluating the company’s behavioral control, financial control, and the type of relationship they have with their workers.
3 – Protect Their IP
Once a business is established, many individuals begin to create intellectual property from the founder(s)’ original idea, and as such, intellectual property can become an issue very quickly. Who’s creating it, what’s being created, and how it’s being shared all become paramount issues. It’s our responsibility to help businesses protect their IP, and ensure that these business ideas stay within the business.
Help protect the IP of your companies through the administration and management of proper NDAs, copyrights, licensing, patents, non-compete agreements, terms and conditions, and privacy policies. If you haven’t already, I would also highly recommend that you talk to the business owners about putting everything being created for the company in the name of the company.
Make sure that the business is using IP assignment agreements, especially for any work done with independent contractors, and especially if the company wasn’t using IP assignments in the beginning.
Think About Helping Them Grow vs. Holding Them Back
In law school we’re taught to consider every possible risk and account for it. This shows up in the over-edited contract. If you’re thinking about ways in which you can help your clients grow revenue, you’ll find that everything from sales contract negotiations to partnership agreements are less of an editing chore, and more of an opportunity to prove your value to the client. There’s an assumption that legal exists to drain money from the coffers and hinder deal flow. It doesn’t have to be that way. By creating a truly symbiotic relationship with your clients, where you act as an extension of their executive team, their success and growth leads to yours as well. These business owners have put their trust in our hands — so let’s get to work.
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