Rush on Business : Iowa Corporate Lawyer & Attorney : Rush Nigut of Brick Gentry Law Firm : Serving Des Moines, Cedar Rapids, Davenport, & Sioux City

 I was busy reading an article on Why Lawyers Don't Run Startups (And Why Entrepreneurs Hate Lawyers) when I ran across a terrific lesson learned from the article's author, Steve Blank. 

In every company that gives you a contract there's someone who wants a deal. When you run into contract issues, call them first for advice.

In my experience, this is SO true. I'll often review and negotiate contracts for clients. Often, there are terms that are unacceptable and put the client at considerable risk if they were to give in on the terms. I'll always ask them to go back to the person who has the most stake at getting the deal done to find out if a compromise can be reached. Hint: It's rarely the lawyer on the other side of the table who could care less about the deal and cares much more about a brilliantly written contract that forever protects the other side from every possible liability. It doesn't always work, but more often than not, we are able to move past the stalemate.

As a part of the process, it's important for business people to communicate their overall strategy to their lawyer. As the article suggests, what are the short term consequences of signing a deal? What can screw you in the long term if you agree to the contract? What contract terms really matter to you? Many lawyers concentrate too hard on protecting their clients from EVERYTHING. When in reality getting a deal done on terms that you can live with should be your priority.

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Last December I wrote about how an employee wage misclassification case cost Oracle $35 million. The question about whether an employee is exempt v. non-exempt is often misunderstood by employers. Often, employers want to avoid paying overtime to employees.  So employers will play a game of Russian roulette by paying those workers a salary instead of hourly. 

Have you reviewed your employee wage classifications recently? If not, we recommend that you do so. We have found in our reviews that employers large and small often make mistakes in classifying the wages of their workers. Sometimes even companies with sophisticated HR departments make errors - just ask Oracle. And companies right here in Iowa make mistakes too.

A tremendous resource regarding employee wage classification found on the Department of Labor website at www.dol.gov. There's great information on the site about the tests used to determine whether employees are exempt or non-exempt . Don't wait for a lawsuit to review your wage practices. By then, the horse will be out of the barn and you'll likely find yourself paying a substantial settlement or judgment.

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Over the years I've noticed that very few businesses actually plan for selling or passing on their business to employees or family. It's one of the most important things any business owner can do.

I've teamed up with business coach Monte Wyatt to provide a free seminar to business owners on business succession planning. The seminar is Friday, April 13, from 11:30 a.m. to 1:00 p.m. at the Brick Gentry offices located at 6701 Westown Parkway, Suite 100, West Des Moines, IA 50266. We will provide lunch.

If you'd like to come please RSVP by sending an email to rush.nigut@brickgentrylaw.com. Seating is limited to 20 people. We would love to see you there!

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* This is a guest post from Aaron Hall.  Aaron is a Minnesota business lawyer that handles intellectual property matters. See his information below.

Someone is copying my website. What are my options?

Illegally copying websites is a big problem as the internet grows. Illegal copies of your website may be made by competitors, spammy websites looking for free content, or other businesses who liked what you wrote. If you are the victim of copyright infringement, you have a number of legal rights and options.

Options for Victims of Copyright Infringement

By creating content for your website, you automatically own a copyright in that content. If someone is infringing your copyright by copying your website content without permission, you have the following options.

1. Try to Work it Out Yourself

First, you can try to work it out with them by contacting them and asking them to take down the infringing material. If you feel comfortable with negotiation, this is certainly the cheapest option.

2. Attorney's Cease and Desist Letter

Second, you can hire a law firm to send a cease and desist letter which serves as a take down notice. That letter can demand that the person take down the infringing material and also pay some sort of fee to settle the matter. For example, you might demand payment of $500 for use up until this point, in addition to the infringing material be immediately removed from the website.

3. Register Your Copyright and Sue

Third, you can register a copyright with the U.S. Copyright office and then sue for copyright infringement. Federal copyright registration is a requirement before initiating a copyright infringement lawsuit in the United States. In general, copyright litigation must be done in federal court. Fortunately, copyright registration is very cheap and you can do it on your own or with the help of an attorney. Then you can contact a law firm to initiate a lawsuit for copyright infringement and seek damages.

The Cost of Protecting Your Rights

One public policy behind copyright law is that you are required to enforce your own rights against those who infringe upon your intellectual property rights. For that reason, your material must at least have certain degree of value in order to justify spending the money on copyright registration and enforcing your legal rights. The courts don't want to get bogged down with small and nominal copyright claims. However, when the value of your material is significant, the options here provide you with the various routes you can take to protect your copyrighted material. Many business owners view enforcing their intellectual property rights as merely protecting an intangible asset of their company. Intellectual property is an investment, like other assets of your business, which requires protection from thieves who would attempt to steal what your business has built.

Aaron Hall is a business attorney at the Twin Cities Law Firm, LLC in Minneapolis, Minnesota. He represents companies in intellectual property matters including copyright, trademark, and litigation.

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 The Business Innovation Zone (BIZ) is holding its annual Raising Capital seminar at StartupCity Des Moines on March 27 starting at 9:00 a.m. Raising capital for your business is complex and often time consuming. This is a great seminar to get you started.

There are several lawyers, accountants and business people presenting including Ben Milne who is the CEO of Dwolla. Ben will be speaking on the "pitch" to investors. That should be very interesting as his company just completed a $5 million raise for venture capital.

I'll be speaking on partnerships. We'll talk about the why partnership disputes commonly occur and how to avoid them. It's not uncommon for partnership disputes to cost in excess of $100,000 for litigation and can often derail a company's plans for growth and profits.

And while you're at it, check out this post on the BIZ Blog on Creative Fundraising. It's a good read.

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A common thing I see from franchisees is that they include only the name of the franchisor in contracts as opposed to including the corporate or limited liability company name of THEIR franchisee business. Most of the time the names are different. For example, if I own a  "Subway" franchise but my corporate name is "Rush Nigut Enterprises, Inc.", I need to make sure I include my corporate name in any contracts. 

I have seen this happen way too many times to count. On one occasion a franchisee litigation client failed to include the name of his corporation in a contract. The court ruled that he was personally liable for the debt because he had not disclosed to the other side that he was signing in a corporate capacity. Including just the name of his franchise in the contract was not enough.

Also, always be careful to always to sign with the title of your corporation or limited liability company, (i.e. President, Vice-President, member, etc.). This will assist in giving the proper notification to the other side that they are dealing with a corporation or LLC and not an individual responsible personally for the debt.

Be sure to contact a business lawyer if you have questions about whether you're signing contracts properly.

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Joel Libava a/k/a The Franchise King is running a great contest for prospective women franchise owners. It's called the ONE WOMAN. ONE FRANCHISE Contest. Joel is looking for one woman who is ready to make the commitment to be a franchise owner. He's going to help that woman choose, research and buy a franchise.

Joel is helping celebrate the launch of his new book, Become a Franchise Owner. I've read it and if you're interested in franchising, I recommend you read it too.

I have agreed to help out the contest winner with a franchise disclosure document and franchise agreement review. Several other sponsors are assisting as well including a business formation from CorpNet, a press release from Ignite Venture Partners, a six month subscription from Live Plan to assist with business planning, a consultation with online marketing expert Matt Mansfield, and a free book on finance from Nicole Fende.

Should be a great opportunity for one lucky prospective woman franchise owner. Register today!

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In the past many new business owners funded their ventures through home equity lines of credit. But with the decrease in home values over the past few years, it's been tougher for the start-up business owner to rely on home equity for funding. So what's a new business owner to do?

An article from the Wall St. Journal discusses How to Finance Your Start-Up without Tapping Home Equity. Some of the options include:

• Peer Lending - sites like www.prosper.com and www.LendingClub.com or Crowdfunding through www.kickstarter.com. 
• Asset-Based Credit - loans backed by marketable securities, equipment, inventory, accounts receivable and other business assets. Also factoring. 
• SBA Loans - Bank financing can often be tough for true start-up. Usually more viable as business becomes established.
• Angel Investors - The Des Moines Business Record recently had a story on Angel Investors in the tech sector. The number of angel investors are increasing in Des Moines and throughout Iowa but still low compared to some other parts of the country.
• Personal Credit and Savings - most businesses are funded this way. Bootstrapping a business can be very difficult. And not having enough capital can be fatal to the business.

All of these funding mechanisms are also in play for many franchises according to the Fox Rothchild Franchise Law Update. John Gotaskie says in his post that recent conversations with angel investors leads him to believe that angel investors are getting antsy from sitting on the sidelines and are interested in returning to the fray. If true, that's good news for franchises and small businesses alike. The momentum occurring throughout Iowa in the start-up community is also a good sign. You may need to get creative and beat the streets but funding is out there.

See also:Does Your Business Need an Angel?

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I often review contracts for clients that are doing business with companies from out-of-state. Inevitably these contracts will have a choice of law provision that says the laws of [insert state] apply. Clients usually take it for granted that a court will apply the laws of the state referenced in the contract.

But a recent post from the Austin Technology Law Blog points out that isn't always the case and we should consider those contract provisions we often never think about. The post discusses a contract involving truck drivers and whether the truck drivers were employees or independent contractors. The two state laws involved were Georgia and California. Georgia law had a rebuttable presumption that the drivers were independent contractors while California law would favor them being employees. The contract in question chose Georgia law and that's where the defendant had its principal place of business.

A driver filed a class action claiming violations of the Fair Labor Standards Act and California wage laws. You'd think Georgia law would apply and the drivers would be treated as independent contractors, right? Wrong! The court held that California law ultimately applied. 

An interesting decision to say the least. The case points out it's important to consider provisions such as choice of law that are often not considered by the parties. Consider whether those provisions are written clearly and properly. I wonder whether it would have made a difference if the contract provision would have said the laws of the State of Georgia applied "without giving effect to conflict of laws principles"? The contract provision in question said only that the laws of the State of Georgia applied.

It appears the court in this case was determined to apply California law since Georgia law directly conflicted with a fundamental California policy. Just goes to show you how important some of these contract provisions can be and why it's so important to have agreements reviewed by experienced business counsel.

Click for the court's opinion: Ruiz v. Affinity Logistics Corporation

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