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

A terrific post from employment attorney Ellen Simon discusses the potential liability and hazards when an employer accesses the personal emails of an employee. The actions of the employer described in the post were extreme but every employer should think twice before accessing an employee's personal email.

I have discussed the dangers of the electronic workplace in several presentations over the past several years including last year for the Central Iowa SHRM Chapter. I'll be giving a similar presentation at the upcoming Iowa Employment, Training and Benefits Conference on April 21, 2009. The conference is sponsored by HR-One Source. If you are an employer in Iowa, we hope to see you there.

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 I am excited that the Wall Street Journal featured Rush on Business as one of the blogs that provide insight for would-be franchisees.  One of my passions for a long time on the blog is providing information to franchisees on pre-investment due diligence.  Recently I ran across a potential franchisee that was told by a franchisor that he should not seek legal counsel. The franchisor told the prospective franchisee that a lawyer would only try to talk them out of the deal.

The purpose of a franchise agreement and disclosure document review is not for the lawyer to talk the client out of their franchise business opportunity. An appropriate review will help point out the legal and business risks and possible areas of negotiation. (Yes, many franchise agreements are negotiable). After the review, the client must still make their own decision about whether to proceed forward. I have been told by more than one client that a review opened their eyes to help them better understand the franchise opportunity. Some moved forward while others backed away from the deal.

There are some classic warning signs of franchisors that I have written about in the past. You could probably guess #1. There are a significant number of excellent franchisors out there. Don't waste your time on those that don't believe you should seek counsel when you are potentially investing your life savings.  You owe it to yourself to do the best job possible investigating the franchise and performing the most due diligence possible.  

Some of the other sites in the WSJ article are a great place to start for that due diligence including:

Blue MauMau (www.bluemaumau.com)

Franchise-Chat (www.franchise-chat.com)

The Franchise Pundit (franchisepundit.com)

Unhappy Franchisee (www.unhappyfranchisee.com)

www.wikidfranchise.org

I would also add one of my personal favorites, The Franchise King Blog. The blog's  author, Joel Libava, is pro-franchise but is a big proponent of franchise due diligence.

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I'll be one of the speakers at the Raising Capital seminar sponsored by BIZ this Tuesday, March 24th at 8:00 a.m.  The seminar admission fee is $30.00 and features entrepreneurs, venture capitalists and accountants. The seminar is designed to help the entrepreneur plan successfully for an investment in their business.

For more read here.

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In these tough economic times many individuals have lost their jobs. As a result, many are thinking of opening their own business or buying a franchise to replace the income lost from their former job. Franchise lawyer Charles Internicola has an excellent post on the topic. Charles has also published a new book, An Entrepreneur's Guide to Purchasing a Business, to provide important information for would be business owners.

Over the years I have been fortunate to see successful business owners from all walks of life. But remember, the vast majority of businesses fail. Do not jump hastily into a decision to own your own business. Charles points out some of the major considerations you will need to think about including whether you have sufficient capital, family support and whether you are prepared to "wear the many different hats" required of the new business owner.  

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Partnership agreements (also known as Buy-Sell Agreements) are like prenuptial agreements for people that are in business together.  The formation of any business with multiple owners should include a buy-sell agreement.  Why?  Because reality dictates that it is not a matter of IF your partnership will end, but rather WHEN your partnership will end. Unfortunately the buy-sell is an agreement that is often neglected by business people because they want to save on initial start-up costs or falsely believe there is no need because the partner is a “friend” or “family member”.  As a fellow business lawyer says, “As with prenuptial agreements, people tend to overlook the importance of buy-sell agreements or simply don’t want to deal with the subject; after all, they are in love!”

What are effective buy-sell agreements designed to accomplish?  An effective buy-sell agreement covers how an owner can sell his ownership interest and how that ownership interest is valued.  Further, an effective buy-sell agreement sets forth what happens in the event of an owner’s death, disability, retirement, termination, divorce, bankruptcy or other considerations.  These agreements will also generally require a right of first refusal.  This means if one owner finds an outside buyer for his interest the owner must first offer those same terms to the existing owners.  This protects the owners from suddenly running the business with someone they did not intend to have as a partner.

When should you enter into a buy-sell agreement?  The time to enter into a buy-sell agreement is at the beginning of the business relationship when everyone is excited and getting along well.  Dealing with the buy-sell agreement in the beginning helps to prevent the unenviable position of negotiating under difficult circumstances with former friend, their families and their estates.  It is often difficult to negotiate a deal when something has gone wrong and people are upset.  Without a buy-sell agreement negotiated in the beginning, owners may end up in court and the business may suffer.  The costs of litigating a business dispute can easily run in excess of $100,000 per side while the buy-sell agreement usually costs less than a few thousand dollars. Unquestionably most business owners would rather concentrate on running their business than spending time in court.

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You've worked hard to build a successful business and have built up some significant personal assets. You were smart enough to sell stocks before the recent stock market downturn so you have a fair amount of cash built up. You own a few pieces of real estate.  One night your 18 year old son is driving his car and causes an accident. The driver of the other car is seriously injured and may require medical care for the rest of his life. The car is owned by you and insured in your name. The amount of insurance will not cover the other driver's damages. A personal injury lawyer files a lawsuit on the other driver's behalf and tells you they will be seeking payment beyond the insurance limits.

FIrst, let me say that if this scenario occurs to you the time for asset protection has likely passed. Making adjustments after the fact may raise red flags and could subject you to liability for fraudulent conveyances. You must protect your assets in advance. Unfortunately asset protection is often overlooked.

One of the easiest ways add a layer of protection in this scenario is to have umbrella insurance coverage. Look at obtaining the most expensive coverage you can reasonably afford. One million dollars ($1,000,000) in umbrella coverage is usually under $200.00 or less per year, plus some added expense for increased coverage on your vehicle. However, I say you should consider buying a larger policy. You might be surprised to learn to that five million dollars ($5,000,000) in umbrella coverage will not cost you substantially more while the protection is FIVE times as much.

But remember that not all umbrella policies are the same. They differ in coverage, definitions, scope and features. Some umbrella coverages may have exclusions that do not provide coverage in connection with  a business, occupation, trade or profession. Therefore, It is  good idea to read the policy carefully to understand what is covered and what is not. Sometimes business owners automatically assume they are covered for all situations with their umbrella policies. That is not always the case and you may end up with business owners that have the false sense they are covered. Generally, umbrella policies will cover you for personal situations only.

Another consideration in the scenario I outlined is whether the child should own the car and maintain all insurance coverage. Naturally the cost of insuring the vehicle is substantially higher if you place the insurance coverage in the name of your teenage son. But the the increased cost may not be nearly as great as the potential loss of assets. If you are able to afford it, consider placing ownership and all insurance coverage in the name of your child if the child is the primary driver of the car. This could help protect your assets from damages caused by your child. While you are sure to complain about the costs when you pay for the insurance, you will be very happy if the scenario I described ever happens to you.

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