Best Practices to Protect Yourself in a Business Partnership



Like in failed marriages, business divorces are a nightmare. Why do business partnerships often end in divorce? They end, largely, because they’re not based on solid legal foundations.

In other words, not enough legal groundwork is laid in advance.

You’ll want to seek advice from a qualified business attorney and tax professional. They should have knowledge of your sector and have experience in the formation of partnerships.

photostock boardWhen considering a partnership, several topics need to be discussed and agreed upon.

Only then, should all details be part of a signed agreement.

As it is, the ups and downs of a business create stress.

Trying to resolve issues when your company is mired in emotional turmoil without a written prior agreement is a recipe for disaster.

It only leads to debatable controversies, emotional outbreaks, broken friendships, divorces, ruined professional images, and usually expensive litigation.

Again, all of this is preventable.

Not to give legal advice, I strongly recommend you obtain qualified legal and tax advice – every person, business and locale are different.

This is mainly to apprise you of the typical issues.

Here are the basics for which you should prepare:

1. Structure

Decide what business structure is best for you and your partner, such as a limited liability partnership (LLP) or S Corporation. This is where the professional counsel starts to be vital.

In an LLP, for example, one person will be the general partner. The others need legal protection in case of undesired behavior by the general partner.

You also should plan in advance the organizational chart; the roles of each person; benchmarks; and how decisions will be made, especially when there are differences of opinion. Even with the best of planning, cash flow issues result in disagreements. For success, you must avoid fights over money.

Trying to resolve issues when your company is mired in emotional turmoil without a written prior agreement is a recipe for disaster.

2. Sources of capital

Determine where your company will get its funding and contingencies – what will happen if the business needs more money –will it be an outside source providing funds or will the partners cough up the money.

You also need to decide who will participate as the result of their sweat equity. In other words, get an agreement on the written expectations for each participant.

3. Compensation

This is where it gets a little tricky. It’s easy to set up the percentages of ownership for each of the participants.

Not to be overlooked are other matters. They include vesting schedules, reserving stock for future employees or investors and how to allocate profit and loss – will they be commensurate to equity in the company or will there be equal shares?

You need a written definition of profits. For instance, there’ll come a time when you need to reinvest. You’ll also have to plan for partner distribution. Qualified people can best advise you.

4. Exit strategies

“Business marriages” as in other types of relationship don’t always last forever. Trust me, it happens. Health concerns arise for partners, some pass away, and people change their plans.

As a result, some partners want to cash out their involvements or demand they the company be sold when the others want to continue operating the company.

Therefore, your partnership agreement must state what will be permitted to occur. That might even include rights of first-refusal and buy-sell agreements.

5. Resolving disputes

You and your partners need to agree in advance on how you’ll break stalemates in the event of conflicts. This is often needed when a partner is leaving.

Your options include agreeing to arbitration clauses or mediation. At the launch of the business, everyone should agree on the selection of a forensic accountant to evaluate the assets to avoid contentious fighting. Another option would be to plan formulas for determining who gets what.

From the Coach’s Corner, related information:

10 Tips for Hiring the Right Attorney for Your Business — In running a successful business, you typically need the services of three professionals — a good tax accountant or CPA, insurance agent and an attorney. Know that talent and skill levels are crucial for your success.

Entrepreneur – Why, How to Start an HR Program — Cash flow is, of course, a big concern for big companies and startups, alike. But when a micro business starts growing, it’s time to anticipate needs for human capital – employees.

6 Patent Tips to Protect Your Inventions, Intellectual Property — Whether you’re a new or existing business, take precautions to protect your inventions. Entrepreneurs are well-advised to consider ways to avoid legal entanglements over their inventions and intellectual property. If you don’t take steps to protect a valuable invention, you risk two possible consequences. But you can do something about it.

4 Tips to Protect Your Business with a Trademark — The last thing you want as a business is for your company logo and name to be stolen. The trick to avoid such a travesty is to be trademarked by the United States Patent and Trademark Office (USPTO).

11 Tips to Negotiate Your Commercial Real Estate Lease — Depending on your locale, commercial real estate is either readily available or hard to find. Either way, it requires due diligence and skills to negotiate the best commercial real-estate lease.

“Character is tested when you’re up against it.”

-Dick Vermeil


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Photo courtesy of stockimages at www.freedigitalphotos.net

Minimizing Liability and Managing an OSHA Inspection



Government is making it harder and harder to run a business. Many business owners dread government’s voluminous regulations, including from the Occupational Safety and Health Administration (OSHA), an agency of the U.S. Department of Labor.

Founded in 1971, the agency has great power. Admittedly, government oversight is warranted for worker safety.

However, some of OSHA’s actions have been abusive for political gain, according to published reports. (See: GOP Rep: Obama’s OSHA is Targeting Non-Union Shops.)

Photo from the article: Union representatives join federal government safety inspectors on site visits to non-union businesses

OSHA is allowing union organizers from the Service Employees International Union (SEIU) to accompany OSHA inspectors to at least one unsuspecting non-union business.

In an interview with Fox news host Greta Van Susteren, Brent Southwell, CEO of Professional Janitorial Service, declared SEIU organizers surprisingly accompanied OSHA to the business on three occasions. 

Prior to the three visits, the company had not been cited with OSHA complaints. 

Mr. Southwell told Ms. Van Susteren:

We have no problem with OSHA coming in. Our problem is when they bring in the union representatives to try to intimidate us and basically using government agencies to try to force us to become union.

Ms. Van Susteren asked for comment from OSHA and the SEIU. SEIU declined to comment.

She published OSHA’s response:

In a written statement, OSHA saying in part allowing non-employee third party representative to accompany OSHA inspectors on walk around inspections is not a new OSHA policy. OSHA’s long-standing regulations interpreting the law the states that representative can be a third party if that third party representative is necessary to conduct a thorough investigation. 

In checking Google News — there are more than 10 thousand search results for OSHA. 

An IndustryWeek article, “Exploring the Limits of OSHA’s Inspection Authority: A Precursor to Exercising Your Rights,” caught my eye. It was written by an attorney, Michael Rubin, at Goldberg Segalla LLP 

What are your rights if you get a surprise visit from an CSHO (compliance safety and health officer)? 

Not to oversimplify, and I urge you to read the full article, here are excerpts from what Mr. Rubin wrote:

To Consent or Not to Consent

In most cases, the CSHO will arrive without a warrant. Since the CSHO is dependent on your consent for the inspection to proceed, this provides an opportunity (prior to consenting) to negotiate a reasonable scope and reasonable conditions for the inspection. If you succeed in this regard, it would usually be advisable to consent. Indeed, if you don’t consent, you risk the loss of any potential “good will” that could have otherwise been created during the process and also lose control over the scope of the inspection.

In addition, it may be a signal to OSHA that you have something to hide.

Importantly, an employer has the right to request that the inspection not proceed until a specific employer representative appears at the site.

Maximizing the Utility of the Opening Conference

The first stage of an OSHA investigation is the opening conference. At the opening conference, the CSHO is required to explain why the employer is being inspected, including whether it is a programmed or unprogrammed inspection. Unprogrammed inspections are usually of a higher priority and may be triggered by imminent dangers, catastrophes, fatal accidents, complaints, or referrals. If the inspection is due to an employee complaint, the CSHO is obligated to provide the employer with a copy of any written complaint (without the name of the complaining employee). The CSHO is also required to describe the intended scope and duration of the inspection.

Notably, Section 8 of the Occupational Safety and Health Act states that inspections must be conducted in a “reasonable manner” during “regular working hours.” In so keeping, you have the right to insist that a reasonable scope and protocol be established for the inspection.

Requests for Documents

With respect to any additional document requests, an employer has the right to (and should) request that the requests be put in writing and all be directed to a single management representative. This management representative should be the same person to provide the records to the CSHO. This is important and serves to manage and control the inspection.

Of course, any privileged documents should not be produced. Also, copies should be kept of everything produced.

Employer Involvement in the Walkaround

The walkaround is the actual inspection. During this phase, the CSHO will walk the site, gather evidence, and seek to identify potential safety and/or health hazards in the workplace. The CSHO is authorized during this phase to take photographs, videos, and measurements; collect environmental samples; and employ other reasonable investigative techniques. Importantly, both an employer representative and an employee representative have the right to accompany the CSHO at all times during the walkaround and duplicate any investigations conducted by the CSHO, including taking side-by-side photographs, videos, measurements, and samples. This should be done.

Notably, when an employer identifies an operation or condition as a trade secret or confidential business information, OSHA is required to treat it as such and keep the information confidential.

Restrictions on Employee Interviews

Although the CSHO is entitled to interview your employees as part of any inspection, there are certain restrictions–employees are not “fair game” to the extent you may think. First, a notable distinction exists between hourly employees and those in management. Although the CSHO may interview hourly employees privately (and may insist on doing so), an employer representative has a right to participate in all management interviews, in part because any admissions made by management may be attributed to, and used against, the employer.

In addition, hourly employees do have the right to request that a personal attorney or union representative be present during their interview. If honored by the CSHO, this would negate any private interview of the hourly employee.

Again, these are only excerpts. You are urged to read the full article. It explains OSHA’s inspection authority and your rights.

Mr. Rubin is special counsel in the OSHA and Worksite Safety Practice Group at the law firm Goldberg Segalla. He is co-editor of Goldberg Segalla’s OSHA: Legal Developments and Defense Strategies blog. He may be reached at mrubin@goldbergsegalla.com.

From the Coach’s Corner, more information on dealing with the government:

HR Tips to Avoid Legal Hassles with Immigration and Customs Enforcement — Employers have been having problems with the U.S. Department of Homeland Security’s Immigration and Customs Enforcement (ICE). ICE served 3,004 notices of inspection (NOI) in fiscal 2012.

Tips on Understanding the Mindset of IRS Auditors — An IRS audit is enough to make you tense with cold sweat in the palms of your hands. More businesspeople have complained to me about the mean-spirited treatment at the hands of IRS agents than any other federal agency. Worse, the agents’ frequent lack of common sense is shocking.

Government Warns Business in Ruling Against Costco on Social Media Policy — Many companies encourage their employees to promote their offerings and services on social media. But beware, it was bound to happen: The trend has caught the attention of the National Labor Relations Board (NLRB), which can dictate your social media policy.

Agency Provides Help for Small Business to Cope with Federal Government — Most small businesspeople are weary from overzealous government. A federal agency is doing something about it.

Don’t let Minimum Wage Mandates Ruin Your Business — Your cash flow, credit access, pricing and profit margins are all directly or indirectly at-risk with the proposed mandates to increase the minimum wage. Workers should be paid well, if they’re good performers.

“Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master.”

-George Washington

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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

Seattle business consultant Terry Corbell provides high-performance management services and strategies.