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Protecting your Business Rights

by Editorial Staff--South Jersey Biz

It’s never been easy to run a business, between protecting intellectual property, dealing with competition (sometimes from former employees) and ensuring compliance and proper corporate documentation. But throw into the mix health care and tax reform, plus changing privacy laws, and it can get even harder. That’s why we asked local attorneys for their feedback on the main challenges facing business owners today, and what they should be doing to ensure success.

Judith S. Charny, Charny, Charny & Karpousis, P.A.
“As a divorce lawyer, I often represent business owners, entrepreneurs and professionals, or their spouses, who are going through a divorce. As a business owner myself, I am especially sensitive to the concerns of such clients. One of the main issues in these cases is the value of the business interest, especially if there was no prenup agreement that excluded the ownership interest from equitable distribution in a divorce. The valuation of the ownership interest is also very relevant when it comes to issues of child or spousal support. Another issue that is often contested is that of the owner’s compensation as this may not be tied to the economic value of the services rendered but rather to the owner’s ability to take whatever he or she can or wants to take out of the business. Probably the most important decision for a divorcing business owner (or his or her spouse) is the selection of legal counsel experienced in handling such

Kevin DiMedia, Earp Cohn, P.C.
“One of the main challenges for my business clients over the last several years has been doing more with less in an effort to maintain and hopefully grow their company. Yet even with top-line increases, bottom lines are still subject to inflation, tax increases, and the growing myriad of other business/employer costs of operation. In the short-term, business owners must maintain their value and competitiveness to retain existing clients, yet also track long-term trends to respond effectively in order to develop new customer relationships. From a legal perspective, it is no different, and costs of services remains a factor and sometimes decision-driver for business clients choosing an attorney. Business legal services—whether corporate, real estate, tax, compliance or other—are a large part of my practice as an attorney. Achieving the end-result/product (and not the process) is my business focus for efficient and effective legal services to my clients and their business bottom line.”

John C. Eastlack Jr. , Weir & Partners, LLP
“One of the main challenges that businesses today are facing is increased competition, not only from established businesses, but potentially from the businesses’ very employees who may wish to start their own business to directly compete with their current employer or to jump to a competitor with the company’s proprietary information. A challenge for small business owners is to prepare a legally compliant employee non-compete agreement. Such an agreement needs to be reasonable both in duration and its geographic reach. The agreement also needs to identify the prescribed competitive activity by the former employee and relate that prohibited activity to something that the employer believes is a legitimate business interest which is necessary to protect. The agreement should also spell out what the employer believes is proprietary information. … Having a legally enforceable employee non-compete agreement is important to protect the short- and long-term business interest of any company.”

Sam Fineman, Cohen Fineman, LLC
“The main challenges impacting business today are managing high litigation costs, maintaining industry compliance and surviving the nebulous Internet. So how does a business achieve these goals in today’s litigious environment? To paraphrase Benjamin Franklin, an ounce of prevention is worth a pound of attorney fees. Every business should secure a reasonable amount of commercial insurance to hedge against certain types of lawsuits, typically torts (e.g., employee malfeasance, defamation, sexual harassment). While insurance carriers control the litigation defense, a comprehensive policy will save the business from potentially debilitating losses. Next … no business is immune from the vicissitudes of the Internet. Owners have to monitor the Internet vigilantly for defamatory attacks concerning their services, reputation and character. Having a ready ‘cease-and-desist’ letter is invaluable in such situations. Also, the Internet-savvy business should have a social media policy in place to establish employee expectations.”

Ron Graziano, Graziano & Flynn, P.C.
“Businesses today are bombarded with information dealing with the impact of a sluggish economy, health care costs, weather disasters, etc. Yet the devastating impact of an owner or employee’s divorce rarely receives attention. Few business owners or managers consider the process of divorce and its inevitable disruption of previously smooth operations. … Aside from the emotional turmoil, divorce proceeding often requires business personnel to spend countless hours collecting economic information—tax returns, health care plans, retirement funds, life insurance, stock options—even frequent-flyer miles. These activities are disruptive and costly. Insert language in employment and non-compete agreements making the employee responsible for the cost of data gathering and the need for the business to pay its own counsel. Use your own counsel to 'narrow’ the request and tailor the response both in terms of scope and years. If an employee is a minority shareholder or owner, fewer options are available. However, prior to any divorce proceeding, placing a limitation on document access in the ownership agreement or contract could help.”

Lynda L. Hinkle, Law Offices of Lynda L. Hinkle, LLC
“The biggest legal challenge facing business today is the uncertainty created by changing values that are reflected in new law. The Affordable Health Care Act, especially, has many business owners fearful of expanding. … It’s important to manage wisely, but also to be fearless in expansion. Business owners must use the tremendous power we wield in a way that is selfless enough to be responsive to the community and nation we serve but selfish enough to maintain and grow our businesses. That’s a difficult dance, but that’s what free enterprise is all about. In the short term, one way businesses can reduce their risk is by managing employee expectations in a time of significant change. In the long term, businesses should look toward being responsible employers and citizens of their communities by using surplus to improve their employees’ lives and communities, because government is increasingly requiring this of us; and we should want to do it because human capital is the most important resource in our nation.”

Christopher S. Lam, Parker McCay, P.A.
“Regardless of the economic climate, business owners should always ensure that their legal ‘housekeeping’ is in order. Particularly for those businesses that have more than one partner or co-owners, their corporate documentation is crucial to the short and long-term success of the company. Companies of all sizes and in all industries should evaluate whether they have taken the time to address all potential issues that could arise with respect to the business relationships among the co-owners, their employees and even their customers and suppliers. The appropriate time to clearly define the terms of these relationships through shareholders agreements, employment agreements and standardized terms and conditions with customers and suppliers is before disputes arise, not afterward. Disputes among co-owners or with a company’s employees or customers over issues that could have been avoided with proper documentation can be expensive or sometimes fatal to a business.”

Julie LaVan, LaVan Law
“Some of the main legal challenges businesses are now facing include transactions, insurances and preemptive measures. Although contractual transactions are a part of everyday business, a poorly drafted contract can act as a sword instead of a shield, and can create more problems than it sought to prevent. Insurance companies will accept the risk of accidents in your business for a sum of money. However, insurance policies vary, providing different levels of coverage. The coverage purchased may not cover the anticipated risks. Litigation remains an option, but is expensive. Many businesses now seek preemptive measures, e.g. arbitration, mediation, negotiation, to lessen costs. Private alternative dispute resolution associations provide much-needed support and mediators to facilitate the trend. In the short term, businesses need to remember that the current environment will end. Opportunity is found in chaos, and those businesses that spot these opportunities will ride out the turbulent waves of the current environment. In the long term, the steps taken in the short term will bear fruit.”

Jennifer G. Laver, Weber Gallagher Simpson Stapleton Fires & Newby, LLP
“One of the main challenges impacting businesses today is complying with ever-changing health, safety, employment, labor and environmental regulations. Information regarding changes in regulations is easily attainable through industry-related and governmental publications, websites, blogs and email updates. It is also vital to understand how changes in these regulations affect your business. In order to stay on top of these issues, it is imperative to have a designated employee who is responsible for ensuring your business is in full compliance with all local, state and federal regulations. This could be the office manager or risk manager. It is also important to work with your insurance agent to make sure you have the necessary coverage. Businesses today need to be aware and educated. Not following regulations, being unaware of a new law or not having proper insurance coverage can cost a business everything.”

Fran Manning, Stradley, Ronon, Stevens and Young, LLP
“Business owners must act and react to ever-changing laws, driven largely by government regulation and activity. Some key areas of concern today include: (1) health care: the Affordable Care Act will force businesses with 50-plus employees to provide health insurance or face penalties; (2) technology/privacy: January 2013 regulations issued under the Health Insurance Portability and Accountability Act (HIPAA) have created a sea of change in liability for certain employers regarding use and release of protected health information. Fines are steep, even for 'unknowing’ violations. Information security is a must, and can be expensive; (3) hiring practices: The EEOC intends to subject hiring practices that adversely impact minorities, older workers and people with disabilities to increasing legal scrutiny; and (4) social media: State and local governments are enacting laws restricting employers from requesting or requiring employees or applicants to provide usernames or passwords for personal accounts or profiles on social networking sites. The laws often prohibit retaliation resulting from the employee’s refusal to disclose requested social media information.”

Scott Marcus, Scott H. Marcus & Associates
“Having practiced business law for 35 years, I find the main challenges impacting business today to be: the law is always ‘behind’ technology; and businesses suffer from too many regulations. An example of my first point: After the popularity of emails used in business, it took many years for statutes and case law to recognize their importance as evidence and as writings which have binding authority. While the legal system is intended to support societal values, when those values change, the law is often slow to catch up. Every day, there are new statutes and regulations created to prevent an ill. In business, these laws often have unintended consequences and hamper business development. A successful business person must have the most current technical skills and knowledge of the laws that impact their business. Having a good lawyer helps, too.”

Nikitas Moustakas, Capehart Scatchard
“There are a multitude of legal issues to consider which impact businesses today. The type of business entity you choose is crucial because it impacts every aspect of your business from ownership, control, governance, liability and tax. There are several types of entities such as corporations, limited partnerships and limited liability companies. These are effective in limiting the liability of the owners. Seeking legal advice as to the most appropriate entity for your business can help determine the means to protect your personal assets, prevent courts from piercing a corporate veil, and to encourage investors to invest in your business because creditors cannot seize personal assets. However, a significant issue is preserving the name of your business and the protection of such. It is essential that a business establish and protect its intellectual property rights.”

Markley S. Roderick, Flaster/Greenberg, P.C.
“As a lawyer representing many entrepreneurs, I see a few challenges in the months ahead. One is the uncertainty in Washington, D.C. Although the economy is recovering, many politicians seem more interested in scoring political points. The end of the federal stimulus money last year and the 'sequester’ are having negative effects on the economy. It’s hard for businesses to make long-range commitments with so much uncertainty over fiscal policy. The inequality between the wealthy and the not-wealthy also presents a growing problem. Most businesses cater to a wide range of income levels, not just the very wealthy. As income for the bottom 90 percent stagnates, there are simply fewer customers. … Looking ahead, the economy has a lot of slack right now, and once demand picks up, there will be opportunities for businesses prepared to be aggressive. The trick, as I see it, is to decide how aggressive to be with the fiscal fog still hanging over Washington.”

Published (and copyrighted) in South Jersey Biz, Volume 3, Issue 5 (May, 2013).
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