Many businesses are started without taking all the necessary steps to ensure that the owners have protected themselves and the business. The two issues I see most often are concerns over personal liability and the loss of one or more of the owners.
First, personal liability protection. Many people know that they need to file documents with the Secretary of State’s office to start a business. But, depending on the business type and your individual circumstances, there may be additional requirements that a business attorney can help you navigate. Properly incorporating a business limits the personal liability of the owners, which is great in theory. However, if you stop after filing with the Secretary of State your protection may still be limited.
Second, what if the business loses an owner? Many businesses have multiple owners, whether you call them partners, shareholders, or members, and no plan for what will happen if one of the owners is unable to continue in the business for any reason. Will you be able to work with your partner’s spouse or children? Will they have any interest in working in the business? What if you and your partner have a falling out and cannot work together anymore? How will you determine the value of the business? Can your partner sell their ownership to anyone they want? These are questions that a business attorney can help you answer now, while the business is stable, rather than later through expensive litigation.
If you are considering starting a business, it is important that you take some time to speak with an attorney who is experienced working with startups to guide you through the requirements to do so properly. It may cost additional money now, but it could save you significantly more in the future.Read More
The first thing any good lawyer will tell you is that if it’s not in writing, it doesn’t exist. Under the law there are sometimes ways to get around that. However, the best practice for any successful business is to reduce every agreement to writing and have it signed by all parties involved. Having a written contract in place with your clients, vendors, employees and the like is essential to protecting yourself and your business.
A valid contract requires, among other things, an agreement of the parties. A good way to show that each party assents to the agreement is by requiring a signature. Merriam-Webster’s Dictionary defines a signature as a person’s name written in that person’s handwriting. But a signature was not, and is not, always this dictionary definition. As the human culture evolves, so does our method of validating our written works.
The act of “signing” dates back to the ancient Sumerians, who used symbols and pictures to lay claim to their works. The use of a person’s name did not come into play until the 1st century AD. Over time, it became more and more the standard to use a signature to acknowledge your work or enter into an agreement. Those who could not read or write often used an “X” as their mark while literate individuals signed their full name. Until the last few decades, the only way to sign a contract was the traditional handwritten method.
So, what does it mean to “sign” an agreement in the digital age then? The days of putting pen to paper are quickly going by the wayside. Schools around the nation have all but eliminated teaching basic handwriting and cursive in favor of typing courses. This trend is understandable given the current climate of using computers to handle most of our written communication needs. But now businesses, who enter into contracts nearly every day, must progress with the times as well.
States began passing laws that allowed for electronic signatures (e-signatures) in the mid-1990’s. These laws gave signatures created using electronic methods, such as typing your name or clicking a box on a computer screen, the same legal effect as a handwritten signature. On June 30, 2000, the U.S. government signed the Electronic Signatures in Global and National Commerce Act into law, standardizing the use of e-signatures and records throughout the country. Since then countries all over the world have adopted similar laws to account for the growing use of e-signatures. Florida has a statute on the books that specifically states an electronic signature shall have the same force and effect as a written signature.
As a business owner, you must make the decision whether to require a signature or not on your written agreements. From a legal standpoint, not every written agreement must be signed. However, the Uniform Commercial Code as adopted by Florida requires an agreement for the sale of goods $500 or more be in writing and signed by the person against whom enforcement is sought. Other state and federal laws also require certain types of contracts to be signed by either one, both or all parties. To avoid confusion or failing to have signatures on documents legally requiring them, it may be in your best interest to require all parties to sign every written contract.
The next step is to decide how you want to accept a signature: hand-written or electronic? A handwritten signature is the default method of acknowledging a contractual agreement. Electronic agreements and e-signatures require additional capabilities and may not be practical or even necessary for many businesses. Some items to consider when making this decision are:
- How big is your company – in particular, the size of your budget and the number of contracts you enter into on a regular basis?
- Where are the individuals signing the documents located?
- How technologically capable is your main consumer base who will be entering into these contracts?
- What is your document retention policy (such as ability to store original signature documents versus electronic storage capabilities)?
- Do you have a web page and web-based software capable of utilizing online forms and e-signatures?
Times are changing and there is virtually no reason to keep a pen in your pocket anymore. Now we can exchange contact information via text, take notes using our fingertips and make a purchase with a wand that doesn’t require ink. While many companies no longer engage in paper transactions and only accept e-signatures, there are still many others that need to use the handwritten method. There are parts of this world, even in the United States, that do not have reliable access to electricity and computers. Also, there are many individuals who choose not to utilize the advances made in technology (does anyone’s grandparents come to mind here?). It is important to remember that having options, even in the case of accepting signatures, can be a great thing.
A final thought: over 200 years ago, a man we may otherwise have never remembered became famous for having the biggest signature on one of the most important documents in our nation’s history. Without his taking a pen to paper, generations of Americans may not have been inspired to perfect their own “John Hancock.” Your signature is something entirely unique to you, that you create and adapt as you age and that cannot be accurately reproduced by others. Do you really want to give that up?
Kelly Karstaedt is an attorney and shareholder of Karstaedt & Stanko, P.A., a business law firm focusing on providing in-house counsel corporate law services to small to mid-size businesses and non-profit organizations. She was a business litigation attorney before turning her efforts to the transactional side of law. She is also the executive director of a legal professional association and works closely with multiple non-profit organizations.Read More
You want to help our community become better by raising awareness of something you are passionate about to the general populous. It can be the arts, education, homelessness, or even business development. How do you give yourself the best opportunity to achieve this goal? That’s easy, you start a not-for-profit organization! But wait, not so fast. While non-profits can make it easier to help the community there are a few things you need to consider before starting a company.
The most important is whether there are other entities that already provide the same or a similar service to the one you are considering. If so, you might not need to start an entity, but instead simply join under their umbrella. Of course, you will want to do some research about how they work and whether you believe you can work with that group. If you cannot find another entity or you cannot work with the one you found you then have a few more questions to answer.
First, what type of non-profit you are going to be. While most people think of a charity when they think non-profit there are actually many types – civic organizations are another popular type for bettering the community. Next, you need to consider what regulatory or compliance requirements you will have to comply with – non-profits, especially charities, tend to have more oversight than most for-profit companies. They need to register with the IRS and, possibly, the state department in charge of consumer protection. One thing many people starting a non-profit may not realize is that they still must file tax returns, usually via IRS Form 990, pay sales and use tax, and pay taxes on “unrelated business income” which is simply money from sources that aren’t the company’s main line of business.Read More