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

Growing Des Moines businesses may want to consider a six month program offered by the Small Business Administration called the Emerging 200 (e200) Initiative.  Locally the course is taught by Monica Dolezal of Bizstarts.  The program begins in April.

The goal of e200 is to identify 200 inner-city businesses across the country that show a high potential for growth and to provide them the network, resources and motivation required to build a sustainable business within a designated inner-city geographic location.

The cornerstone of the e200 initiative is an in-depth educational program running approximately 80-100 hours, to be held two half-days per month from April through October, 2010. It will focus on topics such as organization management, finance, growth strategies and management, market development, and strategic planning.  Small business executives in the e200 Initiative participate in an intensive and comprehensive program, draw from each other's experiences and expertise, develop connections with local capital providers, and complete a growth plan by the end of the program.

Participation in e200 is free to qualifying businesses. Criteria for participation includes having been in business for a minimum of three years, $400,000 or more in gross annual revenues, and a business location within the City of Des Moines. Participation will be limited to only 15 businesses in Des Moines and 200 businesses nationwide.

For more information contact Monica Dolezal of Bizstarts at 515-229-2345 or the local Des Moines SBA office at 515-284-4522.

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A common thing I see from franchisees is that they include only the name of their franchise in an agreement as opposed to including their corporate or limited liability company name. Most of the time the names are different. For example, if my franchise is "Tops Franchise" but my corporate name is "Rush Nigut Enterprises, Inc.", I need to make sure the corporate name is included in the contract. 

I had this exact thing happen to a franchisee client. He failed to include the name of his corporation in a contract and used only the name of his franchise. 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.

So be careful to always include your corporate or LLC name and sign with your title, (i.e. President, Vice-President, member, etc.).

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A bill in the Iowa Senate could require all businesses to provide paid sick leave to their employees.  My gut tells me many small businesses cannot afford to provide paid sick leave.

What do you think? 

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This is a part of an on-going series of posts which will form the Legal Guide for Starting a Business in Iowa.

You are considering forming an Iowa small business. What type of business structure should you choose? In Iowa, your choices generally are a sole proprietorship, a partnership, S corporation, C corporation, or a limited liability company. There are others but these are the main entities to research.

Some of the factors to consider in choosing a business structure are:

1) Personal liability protection;
2) How profits are taxed;
3) Ability to take advantage of fringe benefits;
4) Ease in raising capital.

A sole proprietorship is the easiest to set up (you generally do not need to take legal action) but you have unlimited personal liability. In today's sue happy society it is probably a good idea to consider a form of business that provides you with personal liability protection like a corporation or LLC.

Similarly, a partnership is also easy to set up and involves two or more people. A partnership requires no formal documentation but a partnership agreement is preferred. Like sole proprietorships, you and your partners have unlimited liability. With the ease of setting up and operating a limited liability company, a partnership is usually not recommended given today's litigious society. 

Traditionally, most small business owners selected the S corporation as their form of business. The S corporation is often a good choice because it provides you the limited liability you need but you avoid double taxation because all business profits are taxed to you as an individual.

The limited liability company has exploded in popularity over the past decade and also provides limited liability and avoidance of double taxation. An LLC may offer flexibility not available with corporations when it comes to ongoing requirements, its ownership and how the owners are paid.

The C corporation has traditionally been used for larger businesses but accountants may recommend this entity because the owners can take advantage of certain fringe benefits. Also if you need outside capital, a C corporation may make it easier to attract investors such as venture capitalists.

So which business structure should you choose? Before choosing a business structure it is wise to talk with an accountant. The accountant can review your financial situation with you and advise you on the best strategy for your business. In my view the choice of a business structure usually boils down to tax treatment. So talk to your accountant first and then go to the business lawyer to set up the business entity.

Our next posts in the Legal Guide to Starting a Business in Iowa series will examine the S corporation, limited liability companies and C corporations in more detail.

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This February is National Start a Business Month. To celebrate I am offering to form any Iowa incorporation or LLC for half the price during the month of February 2010.  It's my small way to encourage business start-ups and help out start up entrepreneurs.

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A couple of years ago I set out to write a Legal Guide to Starting a Business in Iowa. Unfortunately trying to work, write a blog, coach baseball and write the guidebook didn't quite work for me. I started the guidebook but never came close to finishing it.

So this year I have decided to blog the guidebook. At the end of the project, I'll have my book and hopefully Iowa entrepreneurs will have something that is helpful and informative.  The project may take several months so most of the information on the blog over this time will be very general in nature rather than dealing with current events. I'll still blog on current events as appropriate.

Thanks for your continued support and have a happy New Year!

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A couple of years ago I touched on how wage and hour lawsuits were on the rise. Since then Iowa's own Casey's General Stores got tagged for $11.7 million in a settlement.  But not even I could have predicted the potential $1,000,000,000 liability that AT&T allegedly faces for failure to pay overtime. Yep, that's a BILLION dollar claim!

Naturally that kind of pie in the sky number might leave one to think, "It's never going to happen to me, my business is much smaller and I won't be a target." But when you look at the fact that experts believe approximately 70 percent of businesses are out of compliance with wage and hour laws, you shouldn't be quick to shrug off the prospects of a process server knocking on your door. All it takes is one disgruntled employee to contact the Iowa Workforce Development or the Department of Labor and you could find yourself in the middle of a wage and hour dispute.

So what are some helpful tips to avoid wage and hour lawsuits? (The outline below is from an earlier post.  The comments from some prominent employment attorneys are especially good).

• Conduct a Wage and Hour Review.  Your first step should be to get with an employment law attorney or other wage and hour/human resources specialist who can review your pay practices to determine whether you are in compliance with the law.  The cost spent for a review and developing a compliance program could save you tens of thousands of dollars in the long run or perhaps even millions if you run a large company. 
• Train Managers.  Making sure managers understand the rules is paramount.  Managers can avoid costly mistakes and spot problems before they become too costly.
• Think Exempt-Non Exempt, Not Just Salary - Hourly.  Too many employers pay employees a salary and then believe that relieves them from any obligation to pay overtime.  Employees need to make sure those employees are properly classified as exempt (someone who is typically not paid overtime) or non-exempt (someone that is generally entitled to overtime).
• Take Complaints on Wage Issues Seriously.  You want to treat wage and hour complaints just as seriously as employment issues including harassment or discrimination.  In fact, these wage and hour lawsuits could be more costly to your business.
• Do Not Retaliate.  Never, never, never retaliate against someone that makes a complaint for wage and hour issues.
• Develop strong policies on pay practices and employee hours.  Make sure employees work those hours assigned and do not work off-the-clock.  Above all, properly document the number of hours worked because just like in baseball where a tie goes to the runner - if the employer has not documented the hours worked by the employee - the benefit of the doubt will go to the employee. 

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An older post from Guy Kawasaki on the top lies from lawyers but worth reading. Kawasaki says at the end of the post that it wasn't his idea so lawyers shouldn't get upset with him.  However, most lawyers could benefit from reading the post.  An important take away is that if you say something, you had better follow through. 

Of course every business person could probably heed that advice, not just lawyers.

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An article in Barron's supports, in a big way, the importance of keeping good business records. The article details how the IRS disputed a $75,000 repayment of a loan for a business owner named Henry resulting instead in a $68,000 dividend, on which Henry owed tax. 

Joseph Gelband, a tax attorney from Larchmont, New York, wrote the article. He provides some wise counsel for business owners:

[Henry's] story points to the importance-especially for a closely held corporation-of observing formal business practices, if for no other reason than to create a record.  Minutes should be kept, and updated at least annually. Executive salaries, bonuses, and loan transactions should be reflected in those minutes, which should be reviewed by the company's accountant when statements are prepared.  The existence of that kind of paper trail would have left Henry in a much stronger position.

Now is a great time to document those transactions before the end of the year. 

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The Franchise King has a great list of 20 small business blogs that have the right stuff. These blogs possess some of the best content on the Web when it comes to small business. Be sure to check them out!

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Throughout this blog you will see posts that recommend business people enter into a shareholder agreement when they start a corporation with multiple shareholders. But did you know that unless your shareholder agreement states otherwise, your shareholder agreement may only be valid for 10 years pursuant to Iowa corporate law?

Chapter 490.732 of the Iowa Code seems to indicate exactly that (although I have never seen it applied in a case yet). I think this is something that maybe even some of the most experienced corporate attorneys may not realize. So don't be surprised. You should review your shareholder agreement. If it is more than 10 years old, it may no longer be valid and a new agreement may be necessary.  If the agreement is less than 10 years old it may be a good idea to revise it so there is language indicating the agreement applies for more than 10 years. 

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I had the pleasure of sitting down for an interview with Michael Libbie yesterday. We talked blogging, discrimination cases, franchising and other issues.

If you didn't catch it live you can watch the podcast here. (The interview begins at about the 30 minute mark).

If you haven't heard about Des Moines Local Live, you should check it out. It's an Internet radio station with 50 local radio hosts talking everything from business to sports.  A real testament to Des Moines' Internet-blogging presence.

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Need capital for your business? Looking for an investor? If so, you should take the opportunity to attend a seminar from the Business Innovation Zone of Central Iowa (BIZ) on how to get your business into shape and attract an investor's eye.

Adam Claypool of DeWaay Investment Banking is the speaker. I have worked with Adam on several occasions so I know this will be a worthwhile opportunity to listen to one of central Iowa's more prominent investment bankers. The presentation is this Wednesday, October 21st at the Des Moines Partnership offices, 700 Locust Street, Suite 100, Des Moines, Iowa. It begins at 11:30 a.m.

Afterwards you can listen to me on the radio this Wednesday at 1:00 p.m. with Mike Libbie offering insights on business on Des Moines Local Live.

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Megan Erickson of the Dickinson Law Firm has started Erickson's Blog on Social Networking and the Law.  Now that's a blog that will have a never ending flow of posts.  She already has an interesting array of posts including one where a business owner got slapped with a $2 million libel lawsuit for Facebook and Twitter posts.

This is one blog I'll be sure to follow.

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The title of this post may be a little tongue-in-cheek, but I would say at this point I am forming perhaps 2-3 times as many LLCs as S corporations.

It still doesn't mean you should rule out the S corporation as your entity of choice. It could be the entity for your situation. Joe Kristan, an accountant with Roth and Company in Des Moines, explains in a recent post who can and should own a S corporation. 

It's important to note that a decision to form an s corporation or LLC is often as much a tax driven question as it is a legal decision. That's why I encourage all new business owners to contact an accountant, in addition to a business lawyer, to determine which business entity to form.

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Liz Overton of Sullivan & Ward, P.C. has a timely post on how employers should deal with the H1N1 virus. 

While it's true that employers are currently under no obligation to allow additional time off to employees who do not have available time off or have exhausted their available leave, I could easily see employers facing a tough dilemma about whether to adjust their leave and/or PTO policies if a significant outbreak of H1N1 occurs at work, or perhaps even in our schools. 

Have you considered what you will do as an employer if a significant outbreak occurs?  Will you make changes in your policies? Whatever you decide, consistency and fairness are keys to avoiding legal problems.    

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A few weeks ago I posted on how your spouse could get you fired. Well, its not just your spouse you need to worry about. What about your kids?

A recent Family Circle article discussed how a teen's post got her father fired.  The father apparently could not get time off to attend his daughter's school musical.  The daughter was upset and vented about it on her MySpace page.  The article says she stated she didn't want to work for someone like dad's boss: "He yells all the time, treats my dad like dirt, won't let my dad spend time with his family even though he gets to take time off constantly, and doesn't even know how to do his job."  

Unfortunately, the rant went out to several hundred of the girl's MySpace friends, including kids at school, one of whom was the boss' son. The boy showed the post to his father and the girl's father was fired.

All of this underscores the importance of discussing with your kids how "public" information can become. Even if an account is private, that doesn't mean that one of your kid's friends won't share the information with the rest of the world.  

P.S. Sorry I couldn't find a link to the article online but check out the October 17, 2009 edition of Family Circle magazine for the article, Share Tactics. There are several examples of how today's teens have no problem revealing every detail of their lives online.

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Okay, you have decided you can do it on your own. You don't need a lawyer to review your agreement (at least until the proverbial you know what hits the fan).  But let me give you some MasterCard commercial-like "priceless" advice:

READ YOUR AGREEMENTS. 

I am honestly not trying to be a smart aleck when I say this. I cannot tell you how many times I have seen really smart business people fail to follow this simple plea.  Just reading and actually understanding your agreements will help you avoid a great deal of trouble - with or without a lawyer.

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You've probably seen them in your contracts. Miscellaneous provisions such as choice of law, litigation venue, successors and assigns provisions, no waiver, entire understanding, or supersede clauses.  They tend to always appear at the end of the contract and are almost always an afterthought by the parties. After all, those provisions don't mean anything, right? 

Wrong.

Often when a contract claim proceeds to litigation these miscellaneous provisions are outcome determinative.  Take for example the litigation venue provision.  Let's say you are a small Iowa company and the contract specifies that your case must be heard in the courts of Los Angeles, California.  This means you must be prepared to fight the case in Los Angeles or you may automatically lose your case. The California venue will almost assuredly drive up the costs of litigation over an Iowa venue. First, your Iowa lawyer, unless he or she is licensed in California, will need to get local counsel in California. Chances are the California local counsel will charge a substantially higher hourly rate than here in the Midwest and you will likely need to travel for court hearings and other proceedings.  WIthout the money to fight, you are doomed from the outset regardless of how good your case may be. Plus, without a history with the judges in that state it is often difficult to predict the outcome of issues which could put you at a real disadvantage.

That's just one example. The other miscellaneous provisions in your contracts can come back to bite you in other ways. My recommendation is to carefully consider these provisions and don't treat them as an afterthought. If litigation occurs, you may be very happy you did.

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A jury recently found a Union County Board of Supervisor, Mike King, not guilty of disorderly conduct after half hour of deliberation.  Brick Gentry's Matt Brick and Doug Fulton defended King in the case.  

For details on the case please read Matt's blog post regarding the intersection of employment law and criminal law.

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Tiger Woods is the greatest golfer of his time. He was such a lock going into the weekend of the PGA Championship that an Irish bookmaker actually paid out the winnings on Tiger before the third round even started -- oops! I'll admit that I never could have imagined Y.E. Yang would actually pull it out for a victory.

But all of this provides a good lesson about trial law. You just never know what will happen when you go in front of a jury or judge. The case you thought was a lock may not be so.  When we are in the role of representing the underdog (which is often the case) I love it when the other side says we can't win. It motivates us, and frankly, it takes much of the pressure off. If you're not supposed to win you have nowhere to go but up!

So thanks, Y.E.. You proved why the game must be played, no matter who is in the lead (or who thinks they have the case that can't be beat).

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A recent case reported in the Des Moines Register discusses how a handshake deal on the sale of a home went awry for a man that apparently invested over $100,000 in a home - only to learn the home was not his.

Actually there was a one-line agreement in this instance which read, "I Floyd A. Schake agree to put 1500 E. 9th on contract with Billy Erico Stockbauer on 1 Feb. 1989." Schake argued successfully to the court that the language meant he intended to sell the home on contract in the future but the deal was never made.

While the axiom is to get a contract in writing, it is especially critical in real estate deals where oral contracts are generally not valid. The judge in the case ruled that the language did not set out the terms necessary to convey the property.  It's fairly easy to criticize Stockbauer for not having an agreement that set out all the terms but this type of thing happens much more than anyone would ever imagine.

That's why the old adage holds, "get it in writing."

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How Business Gets Done, Words of Wisdom from Central Iowa Experts has hit the virtual bookshelves at www.lulu.com. I am honored to be a contributing author with several respected peers in our business community. My chapter is on the Partnership Prenuptial where I discuss the importance of drafting a  buy-sell agreement from the beginning of your business relationship.

The costs of litigating a business dispute can easily run in excess of $100,000 per side while a buy-sell agreement usually costs less than a a couple of thousand dollars. Unquestionably most business owners would rather concentrate on running their business than spending time in court.

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Major league baseball teams have not exactly been known for their employee relations over the years. But the Boston Red Sox are an excellent example of how treating employees the right way can pay big dividends. 

Read attorney Jay Shepherd's post on Division-leading employee management to find out why.

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 The U.S. Supreme Court recently handed down a decision in Gross v. FBL Financial Services. The Court ruled that a plaintiff bringing a claim under the Age Discrimination in Employment Act (ADEA) must show by a preponderance of the evidence that age was the "but for" cause of the employer's adverse employment decision, and that an employer need not show that it would have made the same decision regardless of age, even if the employee produces some evidence that age may have been a contributing factor in the decision. Accordingly, plaintiffs must now prove that age was a factor in a decision. The burden of proof no longer shifts.

The case is widely viewed as a big win for employers but some employment lawyers, like Daniel Schwartz, believe employers should largely ignore the decision. Daniel says that while it will be "technically" harder for plaintiffs to establish a claim, it is only marginally so, and he also expects "corrective" legislation at some point.  From a practical perspective he does not see a huge change in the way employers will defend age discrimination claims or the way in which plaintiffs will bring those claims.

Ross Runkel of Law Memo says it is the biggest employment law case of 2009 and considers it a big surprise because the issue decided by the Court was not briefed and argued. But, like Schwartz, he too expects action from Congress so the impact may be short lived.

Read the decision here.

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 I am proud to be one of the authors of How Business Gets Done: Words of Wisdom By Central Iowa Experts. Thirty-two experts from Central Iowa have collaborated to share their best practices on a variety of subjects including marketing, leadership, accounting, and legal. It's a great desk reference for any entrepreneur.

Visit lulu.com to pick up a copy of the book. Proceeds go to fund scholarships through www.bizci.org. Hats off to Mike Colwell and Drew McLellan for masterminding such a great book.

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Whether you are starting a business from scratch or buying an existing business you should consider setting up a corporation or limited liability company (LLC) before you actually sign any agreements or documents relating to your new venture. To the extent possible, avoid signing any contracts, loan agreements or leases in your personal name. In many cases, however, you may be required to personally guarantee the loan or other debts but it is still recommended that you place those agreements in the company name. It is often surprising how the start-up documents may impact litigation issues down the road. If those agreements are in the business name it may help you avoid personal liability on unknown issues in the future. One of the most important reasons for starting a corporation or LLC is to protect your personal assets from the risks of the business. It is smart to start right from the very beginning.

A post from Ohio business lawyer Terri Rasmussen describes how one person went a little too far in trying to avoid personal liability. But the underlying advice in the blog post cannot be minimized. It is critical to sign documents in your corporate capacity (i.e. "President" or "Vice-President") and if you are signing on behalf of an LLC you should sign as "Member". Using catchy marketing titles such as "Big Cheese" or "Chief of Results" has no place when you are signing documents that could bind your business and subject you to personal liability. 

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Looking for money for your business? Check out the entrepreneurial resource guide from Biz. The guide explores and explains grants, loans and assistance programs.

I am excited to speak at the Biz on How To Choose the Right Business Structure for Your Business. The presentation is June 17th at 11:30 a.m. The admission fee is $10.00 and lunch is provided. 

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 According to the Wall Street Journal, Iowa-based Casey's General Stores agreed to pay $11.7 million to settle two class action wage lawsuits.  

According to the Department of Labor and industry experts, it is believed that 70 percent (or more) of businesses are out of compliance with wage and hour laws. How can your business help avoid wage and hour lawsuits? See my previous post on the topic here.

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From time to time I enjoy featuring a business law blog worth reading. The San Diego Small Business Law Blog from Joseph Dang is definitely one to check out. Although the blog is centered on California law, Joseph has a number of general posts that are helpful to any small business owner.

In particular, I encourage you to read his posts on business formation and incorporation. Real good stuff!

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The Iowa House and Senate recently passed legislation to give consumers a private right of action for fraud claims.  Previously Iowa was the only state in the nation that did not provide such a right to its citizens.  

Consumer advocacy groups say there are too many exemptions under the bill, which is expected to be signed by Governor Culver, including services provided by insurance companies, banks, lawyers, cable TV providers, doctors, veterinarians and architects. But overall this is a positive step for protection of Iowa's consumers. 

The Iowa Attorney General is understandably pleased as it will now allow private lawyers to pursue consumer fraud claims and will help alleviate a backlog of these claims which were handled previously by the AG's office.

Consumers may be awarded up to three times the amount of the actual damages plus an award of reasonably attorney's fees if successful.  This will undoubtedly put pressure on businesses accused of fraud claims to resolve their differences with consumers.  

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I'll be speaking about the dangers and pitfalls of the electronic workplace this afternoon at the Iowa Employment, Training and Benefits Conference sponsored by HR-One Source. 

Matt Brick and Doug Fulton of Brick Gentry are also presenting at the conference.  Matt is providing the employment law update and Doug will present on FMLA basics. 

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A few weeks ago I attended a conference relating to venture capital in Iowa. During the talk several of the panelists commented that they would not sign a non-disclosure agreement prohibiting them from discussing a potential business idea they learned about from someone seeking capital. The venture capitalists did not want potential liability for ideas that they might hear several times in a week. Almost every single panelist indicated that sliding a non-disclosure agreement over the table at the beginning of the meeting was a deal killer.

That discussion led into a great discussion involving non-compete agreements and employee non-solicitation agreements. The participants had mixed feelings about non-compete agreements. It is often tough for entrepreneurial types to admit that restricting another person from competition is a good idea. However, all were committed in the importance of employee non-solicitation agreements. An employee non-solicitation agreement prevents one of your employees from hiring one or more of your employees for a set time period, generally about 1 year.

In the end the panelists believed that the human capital was critical to the success of the business, perhaps even more so than the clients themselves. An interesting take indeed. 

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This is a guest post from Mike Colwell, Executive Director of the Business Innovation Zone (BIZ).

Why bother doing a background check on a potential employee?  Well, not too long ago a friend of mine did not and ended up with a new credit card in his business’s name he knew nothing about.  By the time he found out, there were thousands of dollars in charges and a mess to deal with.  This day and age you need to check the background of the people you plan to hire.  At a minimum do a local criminal background check.  Consider asking the applicant to sign a form giving you permission to do the background check. Even if the information is public just asking permission may provide for an interesting discussion.  This is especially important when hiring someone for an accounting or other financial job.  In this case you may want to consider a national criminal background check.

How do you go about doing these types of checks? Here in Des Moines, I turn to my friend Katie Roth at Portico HR. Any good HR agency should be able to either directly assist you or provide you with an online or local resource that is reputable. Now more than ever, it is important to hire wisely and protect your business from fraudulent activity.

BIZ is a community sponsored non-profit business accelerator designed to provide economic growth in Central Iowa through the development and expansion of entrepreneurial enterprise. 

From Rush:  Interested in writing a guest post for Rush on Business? Please contact me at rush.nigut@brickgentrylaw.com.  

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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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There has been considerable interest in raising venture capital among several entrepreneurs in the Des Moines area recently. For those looking to raise capital you won't want to miss an upcoming event sponsored by BIZ.

Matt Kinley, senior vice president of Pappajohn Capital Resources and Equity Dynamics, will be the BIZ guest and speaker at the Business Insights and Networking Luncheon on February 18, 2009. Matt will discuss raising venture capital from the investor's point of view.

Many entrepreneurs do not understand what is expected from their business in order to raise capital. This is a great opportunity to learn from one of Iowa's most respected and active venture capitalists.

The admission fee is $10.00. The event starts at 11:30 a.m., February 18th at the Des Moines Partnership's offices, 700 Locust Street, Suite 100 in downtown Des Moines.

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One of my favorite franchise related bloggers is Joel Libava who is affectionately known as The Franchise King. He has more franchise related blogs than possibly anyone on earth. He also has written an informative book on the steps needed to effectively research franchise opportunities.

Libava is quoted in a recent Entrepreneur article on How to Research a Franchise.  I recommend reading it.

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Read my post on IowaBiz for More on Twitter in the Workplace. Twitter is a micro-blogging application that is quickly becoming the new "thing" for business networking and marketing. Chances are you may already have an employee in your business on Twitter. Don't get left in the dark.

Don't believe it's a big deal? Then why are people like @ChuckGrassley and @LanceArmstrong using Twitter?

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My partner Pat Burk weighs in with a blog post on the new Iowa LLC law and real estate transfers. It's a great blog post because LLCs have long been the entity of choice for real estate ownership. The post includes a discussion on statements of authority and title examination.

Pat distinguishes nicely my previous comments concerning due diligence in dealing with LLC members to make sure they have appropriate authority to act for the LLC and the need to have title examiners assume proper authority. Again, it will be interesting to see how courts treat these issues (and others) under the new Iowa LLC law. 

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The Des Moines Register has an interesting article on the fitness business market in Des Moines. Included in the article is a discussion on the growing number of 24/7 franchises in Des Moines. So, it begs the question, "Is buying a fitness franchise a solid investment in this market?"

I have represented a number of franchisees in the fitness industry. Based upon this experience, I would say the competition is fierce and a prospective franchisee needs to carefully consider whether to purchase a fitness franchise gym given the current market conditions in Des Moines.  Specifically, I would look very carefully at the trends of the franchisee concerning the number of outlets.  You should closely review the information regarding outlets. Carefully study the number of transfers and not just the number of closures.  A high number of transfers may be an indication that franchisees in the system are struggling, but unprofitable gyms have not been shut down.  Of course if there is a significant number of closures in the system that is definitely a bad sign. The reality is that profitability in this market with a fitness franchise gym is often a tough task to achieve.

Be sure to visit with current franchises and franchisees that have left the system. Ask the franchisor whether its records are updated so you can talk to as many franchisees (and former franchisees) as possible.  Consider what will differentiate your facility from other gyms in the area.

I am not saying that profitability cannot be achieved in this industry but I encourage any prospective fitness gym franchisee to conduct thorough research (and maybe think twice) before making the investment.

FYI:  Coming soon I have developed a new niche site related solely to franchise issues called RushonFranchise. It will include programs on how to research and buy a franchise for franchisees and how to develop a franchise program if you are a franchisor. I will interview experts in the industry and will have in-depth materials on franchising. For those of you that are regular readers, this is the ever-evolving Interactive Learning Environment I referenced previously on this blog.

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 The State of Iowa recently announced that it intends to step up efforts to enforce independent contractor misclassification. It is anticipated these enforcement efforts could bring in millions to the state coffers.

For more information on this topic please see my recent post on IowaBiz and another post from August of 2007 warning about independent contractor misclassification.

See also this article on how to avoid misclassification of independent contractors. 

It is more important than ever for businesses in Iowa to understand the differences between employees and independent contractors.

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With the recent economic downturn, layoffs have begun to occur. A potential option for many former corporate employees is franchise ownership. While franchising does offer many advantages it is critical to approach a franchise opportunity just as you should any other business opportunity - with caution.

It is a misnomer that franchises are more likely to succeed than other businesses. In fact, the International Franchising Association has discouraged all franchisors from making such claims. The truth is that franchises fail at a rate that is similar to non-franchised business.  So careful due diligence is important when considering a franchise opportunity. One of the best things you can do is talk to as many existing (and former) franchisees as possible. Also, consider several key disclosure issues including:

1. Franchisor's litigation history;
2. Amount of the initial investment;
3. Vendor rebates and products you must buy from the franchisor;
4. Earnings claims made by the franchisor;
5. Franchisor's financial statements;
6. Trends concerning the number of outlets.  It is important to closely review the information regarding outlets. Carefully study the number of transfers and not just the number of closures.  A high number of transfers may be an indication that franchisees in the system are struggling, but bad stores have not been shut down. 

And finally, be willing to walk away. This is the paradox of successful negotiation. Those that are willing to walk away usually find they get more in negotiation.

For more on franchise due diligence be sure to visit the Federal Trade Commission's Consumer Guide for Buying a Franchise. 

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This blog post is the fourth in a series of blog posts highlighting changes in the 2009 Iowa Limited Liability Company Act. The new law applies to all LLCs filed in Iowa after January 1, 2009. The new LLC law will apply to older LLCs beginning on January 1, 2011 unless otherwise agreed by the members.

The new Iowa LLC law has a significant change relating to management. The current law provides that member voting is based upon capital contributions of the members. Generally, that means voting is based upon the percentages of the members and a member with 51% or more will control how the company is operated.

 However the default provision with the new LLC law is one member - one vote. This means that even a member with a minority percentage may have the ability to have as much management authority as an member that has a majority of the membership units. Accordingly, if a majority owner wants to maintain management control, the written operating agreement will need to specify such arrangement.

This may become even more important after January 1, 2011, when all LLC companies will need to comply with the new law. Some unsuspecting LLC majority owners may be surprised to learn that they may not be in control of their business unless an operating agreement specifies the majority interest controls.

This issue is just one of reasons I recommend that all LLC owners seek legal advice from a business attorney when forming an LLC under the new Iowa LLC act.

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This blog post is third in a series of blog posts highlighting changes in the 2009 Iowa Limited Liability Company Act. The new law applies to all LLCs filed in Iowa after January 1, 2009. The new LLC law will apply to older LLCs beginning on January 1, 2011 unless otherwise agreed by the members.

In my last blog post I picked on the new Iowa LLC law because I don't see great benefits to LLC members with some of the changes in the law related to operating agreements. But changes relating to Statements of Authority may not be so bad. (That is if you are an LLC owner. Third parties might disagree). 

Currently, Iowa LLC law says that all members of the LLC are agents of the company unless otherwise stated in the articles of organization. The new LLC law provides that members are no longer automatically agents of the company. As fellow Iowa business lawyer Marc Ward points out on his blog, "The risk of a rogue member binding or otherwise obligating the LLC will be gone."

The new law also permits an LLC to file a statement of authority with the Iowa Secretary of State. (Still amazing to me the Sec. of State has no notice of the new LLC law on its site). The statement of authority will serve as notice of who does or does not have authority to act for the LLC, sign documents transferring real property, or otherwise act for and bind the LLC.  The statement can state the authority or limits on authority by position (e.g. member, manager, president) or a specific person or persons.

Third parties will need to be careful in assessing whether a member actually has authority to sign on behalf of the LLC.  In doing so, third parties probably should request a copy of the Statement of Authority documentation from the LLC. This information will also likely be viewable on the Sec. of State's Web site under the Company's  filings. It will be interesting how courts will handle the issue of "apparent authority" under the new law (i.e. where a person purports to have authority to bind the company but really doesn't). After all, the whole purpose behind the provision is to prevent rogue members from binding the company. Is "apparent authority" thrown out the window if a Statement of Authority is filed?

A statement of authority filed in the county recorder's office will be conclusive evidence in favor of a person who gives value for real property in reliance on the statement.  Similarly, a filed statement limiting the authority of a person or position to transfer real property will constitute notice to all.

Under the new law, a statement of authority will expire 5 years after it or the most recent amendment becomes effective, unless canceled earlier.

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This blog post is second in a series of blog posts highlighting changes in the 2009 Iowa Limited Liability Company Act. The new law applies to all LLCs filed in Iowa after January 1, 2009. The new LLC law will apply to older LLCs beginning on January 1, 2011 unless otherwise agreed by the members.

Beginning in 2009 there are a couple of issues relating to operating agreements that LLC business owners must consider. The operating agreement is the document that sets forth how the LLC is governed and run.

1. LLCs are not required to have an operating agreement in writing but watch out. On its face the fact an operating agreement is not required in writing might excite LLC owners. However, it is not advisable to go without a written operating agreement, particularly if there are two or more members in the LLC. Even a single member LLC should consider a written operating agreement in order to protect against piercing the corporate veil. If an operating agreement is not in writing, the provisions of the new statute will automatically apply to the LLC. In many instances, the statute has provisions that may surprise and bite unknowing LLC owners especially with regard to management rights, profit distribution and transfers of interest. It is best practice to have a written operating agreement.  
2. Operating Agreements may be amended orally. LLC owners may amend their operating agreement orally under the new statute. Again, while that may make it easy to amend the agreement it will likely remain best practice to override this statutory provision to include language in the written operating agreement requiring an amendment to be in writing. That way members may avoid the enevitable arguments that ensue when agreements are not memorialized in writing. People tend to remember things differently when agreements are not in writing and the agreement is more difficult to prove in court.

Check back for more on the Iowa LLC law changes in future blog posts.

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This blog post is first in a series of blog posts highlighting changes in the 2009 Iowa Limited Liability Company Act. The new law applies to all LLCs filed in Iowa after January 1, 2009. The new LLC law will apply to older LLCs beginning on January 1, 2011 unless otherwise agreed by the members.

Beginning January 1, 2009, you will no longer file Articles of Organization with the Secretary of State to start your Iowa limited liability company. Instead, you will now file a Certificate of Organization to begin the process. Unless there are changes with the Secretary of State, I do not anticipate the filing fee would change from the current fee of $50.00. (Amazingly, the Iowa Secretary of State's Web site has no mention of the upcoming changes that I could see). 

The Certificate of Organization under the new Iowa LLC law will actually have less detail than Articles of Organization typically had in the past. The only information required for the Certificate of Organization are as follows:

1. The name of the limited liability company;
2. The street and mailing address of the registered office and the name of the registered agent.

That's it. The organizer also won't need to state the the LLC has a perpetual duration in the articles as the new law automatically provides that LLCs have a perpetual duration (just like corporations).

Now, that may seem simple enough to start but there are a number of issues with the new Iowa LLC law that could trap unsuspecting business owners. I will highlight some of those areas in upcoming posts. 

An excellent resource on the this topic is Ward on Iowa Limited Liability Company Law, written by Marc Ward of the Dickinson Law Firm. Marc has devoted an entire blog to the changes in the new Iowa LLC law. 

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There are significant changes to the Iowa limited liability company (LLC) statute effective January 1, 2009.  The changes include everything from how an LLC is initially formed and filed with the Secretary of State to changes that apply when a member leaves (i.e. disassociates) from the LLC.

Check back over the next couple of weeks for a series of posts regarding the new changes in Iowa's LLC law.

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A great discussion took place last Friday on Twitter among several young entrepreneurs in the Des Moines area. As a result, Daniel Shipton of Impromptu Studio took the bull by the horns and organized an "impromptu" entrepreneurial roundtable discussion for this Tuesday, December 9th from 12:00 p.m. - 1:00 p.m.

The anticipated roundtable will consist of Matt Kinley of Equity Dyanmics, representatives of the Technology Association of Iowa and several local entrepreneurs.  So if you care about the entrepreneurial climate here in Iowa be sure to participate.  I'll see you there.

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There are many entrepreneurs who want to run all their business AND personal expenses through the business.  For example, earlier this spring I witnessed a father buying his son's baseball equipment at a local sporting goods store.  I chuckled when he pulled out a company check to pay for the equipment.  Sure, one expense might get buried and never noticed in an audit but experience tells me that "pigs get fat while hogs get slaughtered."  Many business people don't understand where to draw the line.  Business expenses are fine to deduct.  But  running obvious personal expenses through the business just isn't acceptable.  It could even be a reason to "pierce the corporate veil" in litigation causing you to lose your limited liability protection. 

But where it may really hurt is when you go to sell your business. That is when it is critical to show the best possible operating profitability and cash flow to gain a fair price for your business. This means those avoidable (or perhaps illegal) expenses take away from the bottom line of the business and leave you with less value.  Moreover, it draws questions about your integrity and could make it harder to sell our business.

So keep the end in mind. Accurate and organized financial statements are a must. A penny saved today might be a dollar lost tomorrow.

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Last December I wrote a blog post on how Iowa has never been the hot bed for franchisors but it seemed as though some Iowa franchisors were really picking up steam.

Now we are pleased to announce that our new franchise client, The Pink Hippo , just completed its first franchise sale in Urbandale, Iowa and will soon be expanding to other states. The Pink Hippo specializes in the sale of hairbows and other accessories for young girls.  Julie Nitchie and Gretchen Stevenson are motivated entrepreneurs and have developed a unique franchise offering. Our services for the Pink Hippo included completion of their franchise disclosure document and franchise agreement plus assistance with the development of their franchise operations manual.

Congratulations to The Pink Hippo and we wish them continued franchising success.

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I recently received an email from a business brokerage advertising their services.  In the email the brokerage said they have "low-risk" businesses and franchises for sale. While that may make for good marketing - I must unfortunately say that "low-risk" businesses do not exist in my opinion. If our struggling economy has shown us anything, it has demonstrated that risk is inherent in business. To advise otherwise minimizes the enormity of the decision to purchase a business.

Now don't get me wrong. I am not knocking the business brokerage. It's their job to sell businesses and that's just what they are attempting to do. But the prospective buyer should be more cautious and take the time to understand the inherent risks of ownership in the business you intend to buy.  It is absolutely critical to conduct due diligence. Appropriate due diligence includes examination of the following areas in the business:

• Organizational documents and good standing with state and/or federal authorities
• Financial information
• Physical assets
• Real Estate
• Intellectual property
• Employees and employee benefits
• Licenses and permits
• Environmental issues
• Taxes
• Material contracts
• Product and service lines
• Customer information
• Litigation
• Insurance Coverage
• Professionals
• Articles and publicity

See this due diligence checklist for more details.  It is a very comprehensive checklist.  The level of due diligence will likely vary with the size of the business transaction but this list should give you a good outline of the issues to consider. 

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In this current economic downturn many people will lose their jobs.  Many of those individuals will turn to franchising as a form of business ownership instead of opting for another position in the corporate world.  While franchising may be a legitimate option for some, it is important for prospective franchisees to remember that it is not often very easy to get out of a franchise agreement.  Investing in a franchise is not a decision to take lightly.

A typical franchise agreement may last anywhere from 5-10 years and have options for renewal.  Often franchisees mistakenly believe they can get out of the franchise agreement if things go bad.  The reality is that the written franchise agreement usually remains in force and often the franchisor has rights to sue the franchisee for lost royalties if the franchisee does not pay.  Not to mention potential problems you will have with your lease and/or other contracts.

So before you buy a franchise follow these steps as outlined on the FTC Website:

• Study the disclosure document and proposed contract carefully.
• Interview current owners in person. (They should be listed in the disclosure document.) Visiting them in person may help you identify any that are "shills" — people paid to give favorable reports. Don't rely on a list of references selected by the company because it may contain shills. Ask owners and operators how the information in the disclosure document matches their experiences with the company.
• Investigate claims about your potential earnings. Some companies may claim that you'll earn a certain income or that existing franchisees or business opportunity purchasers earn a certain amount. Companies making earnings representations must provide you with the written basis for their claims. Be suspicious of any company that does not show you in writing how it computed its earnings claims.
• Sellers also must tell you in writing the number and percentage of owners who have done as well as they claim you will. Keep in mind that broad sales claims about successful areas of business — "Be a part of our $4 billion industry," for example — may have no bearing on your likelihood of success. Also, recognize that once you buy the business, you may be competing with franchise owners or independent business people with more experience than you.
• Shop around. Compare franchises with other business opportunities. Some companies may offer benefits not available from the first company you considered.
• Listen carefully to the sales presentation. Some sales tactics should signal caution. For example, if you are pressured to sign immediately "because prices will go up tomorrow," or "another buyer wants this deal," slow down. A seller with a good offer doesn't use high-pressure tactics. Get the seller's promises in writing. Any oral promises you get from a salesperson should be written into the contract you sign. If the salesperson says one thing but the contract says nothing about it or says something different, it's the contract that counts. If a seller balks at putting oral promises in writing, be alert to potential problems and consider doing business with another firm.
• Consider getting professional advice. Ask a lawyer, accountant, or business advisor to read the disclosure document and proposed contract. The money and time you spend on professional assistance, and research — such as phone calls to current owners — could save you from a bad investment decision.

In representation of a new franchisor I have recently been on the other end of this investigation process. But it is clear to me that a good franchisor will not discourage you from conducting due diligence.  You should be very wary of high pressure sales tactics.  Don't be in a hurry.

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Twitter is one of the hottest social networking tools. President-elect Barack Obama even used it during his recent campaign. But is it a good idea to allow Twitter in the workplace?

Read my post on IowaBiz to learn more.

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I am excited to announce that Rush on Business has been honored as the Best Business Blog and Best Resource Blog in the Iowa Web Awards for 2008.  Since I started this blog in March of 2006,  I wanted to do my part to improve the public image of lawyers.  My strong sense of purpose is to educate and provide information to business people in a way that helps them identify legal issues and make more informed choices about what legal services they need.  The collaborative process of a law blog (or any blog) can allow this to happen.

I am grateful to receive the awards.  I want to thank 48Web Consulting for its work in forming the Iowa Web awards and also Daniel Shipton of ImpromptuStudio for hosting the awards ceremony.  It was a great evening at IgniteDesMoines last night.

Thanks to all that support this blog.  

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Good article on IowaBiz regarding insurance for employee lawsuits.  Most businesses would be smart to explore this type of insurance coverage, especially in today's slumping economy.

I think many small businesses are under the mistaken believe that they are covered for employment lawsuits through their ordinary business liability coverage. This is usually not the case.  You will need to purchase a specific policy relating to employer practices in order to be covered. In addition, employer practices liability insurance policies vary greatly so be sure to carefully review the covered items with your insurance agent and lawyer.  Find a policy that provides comprehensive coverage.

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Week one in the Des Moines Franchise Case is in the books. Looks like the trial will last another couple of weeks. In the first week several city council members and officials testified but the bottom line is that this case boils down the the experts and the trees.

As discussed in my previous post, the central issue of the trial is to determine if the franchise fees charged by the city are in fact reasonably related to the City's administrative expenses. In an effort to defend its administrative expenses, the city argues that it costs about $19.6 million per year to regulate utilities in public rights of way. Much of this allegedly comes from improper tree trimming causing more than $4 million in damage each year to trees along 800 miles of streets.

The plaintiff challenged the validity of the number of the trees and also presented expert testimony from an arborist who testified that he could not follow the city's tree survey and found substantially less trees in the public right of way.

For more read this article from the Des Moines Register. 

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The City of Des Moines utility franchise tax trial begins today.  The following is a summary of the procedural aspects of the case and what is at stake.

Initially, the Des Moines had been sued in District Court by Lisa Kragnes seeking to declare the utility franchise fee found on MidAmerican Energy bills illegal. Kragnes won in district court when the judge granted her motion for summary judgment. The City of Des Moines appealed and the Iowa Supreme Court reversed the summary judgment decision.

The Supreme Court reversed the case because it ruled a geniune issue of material fact exists as to whether all or part of the franchise fees are reasonably related to the City's administrative expenses. The Court ruled the grant of the franchises to the utility causes the City to incur some ongoing administrative expenses in the exercise of its police power. These expenses would include the reasonable costs of inspecting, supervising and otherwise regulating the gas and electric utility franchises.

The Court has now remanded the case to the district court for a trial on the merits which begins today. The critical issue is whether the fees charged by the City of Des Moines bear a relationship to the cost to the City of the utility's occupancy of public areas in the City. The Court said the case record is replete with references that the City of Des Moines used a portion of the franchise fees for purposes other than administrative expenses. The Supreme Court, however, ruled that this fact alone does not mean Des Moines is not using other streams of revenue to cover the administrative expenses it incurs as a result of granting MidAmerican the gas and electric utility franchises. 

The upcoming trial will determine if the franchise fees are in fact reasonably related to the City's administrative expenses. If not, the district court will then issue an order disallowing the franchise fees as contained in the ordinances and also likely award damages to the plaintiff's class. If the franchise fees are reasonably related to the administrative expenses, the court shall enforce the ordinances up to an amount equal to the fees reasonably related to the City's administrative expenses in exercising its police power.

For more check out this article from the Des Moines Register.

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UCLA professor Samuel Culbert says to get rid of the employee performance review. But to protect your business I say you better not do that any time soon. Find out why in my post over on IowaBiz.com.

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It has taken longer than I had hoped but my November goal is to lauch the Interactive Learning Environment for clients and others interested in employment law compliance and training, franchising basics and starting up your business.  Our initial free program will include a Legal Guidebook on Starting Your Iowa Business.  Gradually, we will release more and more content on the important issues that impact your business. One of my partners, Matthew Brick, will be a major contributer on employment law issues.

My introductory video is complete so I need to get moving on the programs. Due to time constraints with work load and this project, followers should expect blogging to be very light over the remainder of the month. I appreciate your loyal support to this blog and I encourage you to give our ILE a try when its finished. 

A special thanks to the guys at createWOWmedia who have been so invaluable in getting the ILE project off the ground. Stay tuned for the finished product and I look forward to your comments once we are up and running.

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The ABA's Forum on Franchising is this week in Austin, Texas.  Another all-star lineup features an intensive program about learning from mistakes under the new FTC rule.   Again, there are several other terrific programs.  One of the more interesting talks is about franchising in the BRIC markets.  (Brazil, Russia, India and China).  Like the US, those markets have experienced an economic downturn.  How will that impact franchising development in those countries?  

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Brick Gentry's Austin Kennedy is now live with his new immigration law blog.  The blog was designed by our friends at Lexblog.

Austin chairs Brick Gentry's immigration and naturalization law practice group, with an emphasis on employment-based immigration (ie., work visas), employer immigration compliance (ie., avoiding and recovering from ICE raids) and investor visas. Austin has helped employers navigate our immigration laws and find the talent they need to be successful in virtually every sector including health care, manufacturing, construction, agriculture, information technology, education, research and development, finance and non-profit.

So be sure to visit Austin's blog often if you are interested in immigration issues.

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Juice Magazine recently interviewed me for an article on how to start your own business. I offered the following tips to new business owners:

• Get agreements in writing up front, whether it's a few hundred dollars or larger.
• Small business centers are a good place for people to start. It's often a good place for people to go get some counseling.
• You should be very careful if you're going to go into business with partners. You should draft a buy-sell agreement that outlines how the business will be run, and what happens if one of them should die or want to leave the business. Whether it's family or friend. 

I also thought Iowa intellectual property attorney Brett Trout offered some excellent advice by recommending that new business owners obtain a federal trademark for their business name or product. In this flat world it is more important than ever to protect your intellectual property. A federal registration is significant because it enables you to collect attorney's fees and treble damages under certain circumstances in a trademark infringement lawsuit.

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The Ohio Practical Business Law Blog examines the new Franchise Disclosure Document (FDD) a recent post.  The new FDD rules began in earnest  on July 1, 2008.  

Previously I posted on some of the key differences between the old UFOC rule and the new FDD rule including:

• Use of unaudited financial statements.  Start-up franchisors may phase-in the use of audited financial statements.  In this case the franchisor must clearly and conspicuously disclose that the franchise has not been in business for three or more years and cannot include all required financial statements.  (There may still be requirements to submit audited opening balance sheets in registration states).  Franchisees should make sure to review the financials carefully as always.
• Financial Statements.  The FTC will allow the use of financial statements prepared according to U.S. generally accepted accounting principles ("GAAP").  There must be separate audited financial statements for any parent that "commits to perform post-sale obligations for the franchisor or guarantees the franchisor's obligations" in the disclosure document.
• No Broker Disclosures.  The Amended FTC rule eliminates the broker disclosure requirement.  However, the broker will need to be listed on the Receipt Page because the Receipt Page requires the franchisor to identify all "franchise sellers".
• Litigation.  Franchisors will be required to disclose material franchisor-initiated litigation against its franchisees.  The rule will be more lenient as a franchisor will only have to disclose actions that the franchisor filed during its last fiscal year - not the last 10 years. Further, a full description of the case will not be necessary.  If a counterclaim is filed against a franchisee the disclosure will need to be treated as any other franchisee-initiated action and the regular, full disclosure will be required.  (Franchisees will need to more fully investigate whether franchisor-initiated litigation occurred whether it is in the disclosure document or not).
• Financial Performance Representations.  The new rule encourages franchisors to provide financial performance representations but it is still voluntary.  Franchisors may provide a more detailed cost and expense analysis which could be helpful for prospective franchisees.  Also, franchisors may provide financial representations based upon a subset that shares the same characteristics. 

There are other differences so be sure to talk with an attorney experienced in franchise matters if you are looking at purchasing a franchise. 

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The bailout is not universally popular with Main Street America but the International Franchise Association says a bailout is needed because our credit crisis "threatens to derail the future growth of franchised businesses because it undermines the health of credit markets as well as equity markets."

There is no doubt Wall Street is hoping against all hope that a bailout occurs.  If it the legislation isn't passed I have heard pundits predict the DOW could drop as low as 8,000.  More banks would fail, retirement accounts would plummet and a lengthy recession could occur.

But I have mixed feelings about this bailout.  Should bad business decisions be rewarded?  Most of the business people I represent rightly remark, "I don't get a handout, why should they?"  Should we just let the market work itself out?

Columnist Rhonda Abrams urges that small businesses need direct help. Some of the areas Congress could help small businesses include giving tax credits for hiring your first employee, credit card fairness, SBA disaster assistance loans and estate tax reform. Generally, franchisees are of the small business variety.  It seems they would benefit more if direct help occurred from Congress rather than just bailing out the largest financial institutions in America.

It's tough to know the answers and I don't pretend to be an economist. I have talked recently with several local bankers concerning the current economic climate.  The bankers have told me they are still making loans and actually have some optimism for the Iowa economy.  That flies in the face of a recent report indicating that West Des Moines is No. 4 on the list of the towns that could be hardest hit by the financial crisis.  I hope the local bankers are right.

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Congress recently passed the amendments to the Americans with Disabilities Act (ADA) that will go into effect January 1, 2009.  It is anticipated President Bush will sign the law soon.

Read all about the new ADA amendments on my blog post for IowaBiz.

Update:  President Bush has now signed the law. 

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The Midwest Small Business Conference is now set for October 10 & 11, 2008 at the Des Moines Marriott.  This event is rescheduled from the previous announcement on this blog because the original date conflicted with the Iowa-Iowa State football game. (Conference organizers learned that not even business gets in the way of football).  Fortunately the conference was able to pick up a new date and additional speakers.

I will be speaking on how to keep your business out of court.

Click here for a lineup of the conference speakers.  We hope to see you there!   

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I am honored to be included among the Alltop franchising news selections.  Some exciting things have been happening for me on the franchising front including developing the franchise disclosure document and franchise agreement for a new local franchisor, the opening of a client's new Max Muscle franchise location just on Thursday and the completion of a franchise litigation dispute.

I am also excited to attend the Forum on Franchising in Austin, Texas this October.  Last year's seminar was one of the best I have attended.  Given this year's lineup I am sure it will be equally as good.

Thanks to Joel Libava of Franchise King Blog for suggesting this blog for Alltop. 

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From the Small Business and Entrepreneurship Council I found this comparison of where Obama and McCain stand on the key issues of concern to U.S. small businesses.

I have not independently researched the comparison document myself but I have heard the candidates refer to many of their plans and it appears the SBE Council has tried to give a "no spin" look at the issues.

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It's so simple.  Everybody knows you get agreements in writing, right?

Then tell me why so many people ignore this most important axiom in the business world.

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I connected this morning with Tyler Osby of Four Legacies Mortgage.  I met Tyler through Twitter (you can follow him @tylerosby). I have been impressed with the breadth of information he provides.  He uses Twitter in a very meaningful way by acting as a resource on the mortgage market. 

Tyler brought up a great point today during our discussion.  When someone starts a business they must demonstrate at least TWO YEARS of verifiable income, assets, credit history and tax returns before the new business owner will be able to get a new mortgage.  It's something I've always known but never really discussed much with clients when they are forming a new business.

So if you are planning to start a new business be sure to review your mortgage interest rate.  Otherwise, it may be a couple of years before you can do much about it.  

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I have seen many articles on the Internet which state that you absolutely need to form a limited liability company (LLC) if you are a small business owner.  The S corporation, once the darling of small business entities, is probably feeling a little lonely these days.

One important aspect of the S corporation is that you may be able to save on self-employment taxes by using an S corp instead of an LLC.

But don't get too carried away in the belief that you can set a low salary says accountant Joe Kristan in his latest post on Iowa Biz regarding s corporation salaries.  The key is to set a "reasonable salary" if you are the owner, although admittedly no one really knows what that means.

As is often the case in dealing with tax issues, Joe's advice is to remember that "pigs get fat, but hogs get slaughtered."  It's definitely a good idea to talk with an accountant when setting your salary in your S corporation.  It could save you considerable time and expense in dealing with the IRS. 

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A recent article from the Wall St. Journal online discusses something I thought I would never see from a franchisor: A money back guarantee. 

Others are not convinced and warn to investigate the details carefully in the Franchise Disclosure Document.  

Thanks to Joel Libava for pointing out the article.  Joel is a franchise consultant from Cleveland,Ohio that publishes an extraordinary amount of content regarding franchising.  Both the good and the ugly.  And never dispassionately.  Be sure to check out his Web sites if you have an interest in franchising.

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Twice a month I blog for IowaBiz which was acquired by the Des Moines Business Record this summer.  Since that time it appears the bloggers have stepped up their game.  The posts have been informative and entertaining.  I encourage you to take a look.

My post today for IowaBiz centers on the trend of hiring outside law firms on a non-billable hour basis.  It's a trend I embrace and use frequently in my law practice.  Similar to the law firms mentioned in my post, I have already provided outside general counsel services to certain business clients based upon a mutually agreeable fixed monthly fee.  These clients receive a fixed monthly bill and do not receive bills for phone calls and overhead costs such as copying and postage.  I also have performed certain projects such as incorporation and LLC formation on a fixed rate and have also done so with contract review and writing.  No, I have not completely eliminated the billable hour from my practice but would love to do so.

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Great post from Susan Reid on the Small Business Trends Web site on the 15 Ways the Olympics Exemplify Success for Small Business Owners.  In the comments of Reid's post, Anita Campbell has some terrific words about West Des Moines, Iowa's very own Shawn Johnson.  Johnson definitely made us all proud with her amazing attitude and fantastic performance.

But I'll add one to Reid's list:

Be Honest.  Although you may initially capture the gold it certainly won't be worth the consequences if you are caught being dishonest.  It includes your dealings with the IRS, customers, suppliers, employees and business partners.  The dishonest small business owner will likely get sued, or worse, end up being prosecuted.  And with the Internet it is very hard to keep your reputation quiet.

photo of Shawn Johnson in butter at the Iowa State Fair on Flickr by Iowaarcheryboy.

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I will be speaking at the Midwest Entrepreneur and Small Business Conference scheduled for September 12 & 13 at the Jordan Creek Marriott in West Des Moines.

I encourage you to check out the preliminary presenters' list for this first of its kind conference in our community.  Hope you will consider attending.

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Gavin Craig in his new Twin Cities Business Litigation Blog has an excellent post on the importance of making sure the world knows you have a corporate entity.  Craig is convinced that many small business owners (especially contractors) do not know how to properly operate a corporation or LLC. Craig says,

When a person incorporates their business, it takes more than just filing a form with the Secretary of State. When a business is incorporated, it can't be a secret to those that do business with the new corporation. In other words, the new corporation needs to disclose the fact that the business (the party that is contracting with others) is incorporated on its letterhead, business cards, invoices and checks.

Craig is right on with his warning on this issue.  Whether you live in Minnesota, Iowa or Timbuktu, you must make sure you disclose the fact you have a corporate entity on your letterhead, business cards, invoices, checks and especially CONTRACTS. 

This is a particularly important message for franchisees.  Many franchisees operate under franchise trade name but fail to disclose in contracts, letterhead, business cards, etc. the name of their actual corporate entity.  One franchisee I know was personally sued for the damages related to an advertising contract because he had not disclosed to the other side that he actually operated with an LLC rather than as a sole proprietorship.  He had signed the contract using only the trade name of the franchise.  The other side said at trial that it didn't know the franchisee had an LLC.  So ultimately the judge sided with the advertising company.  It was an expensive lesson that could have been easily avoided. 

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The Wall Street Journal's 'Stories from Around the Web' featured my recent post on The Real Reason the Packers Traded Favre.  It's the second time in the past few months that Rush on Business has been featured on the WSJ online site. 

Another fun thing is my post on Favre was up on the computer at the Iowa State Fair in the Mediacom booth last Saturday.  I didn't make it in butter but fun nonetheless.

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After reading a post from Ohio business lawyer Terri Rasmussen I wrote a post for IowaBiz asking whether Iowa will need a "business" court to compete?

In response I received an email from the Co-Chair of the ABA's Subcommittee on Business Courts, Lee Applebaum, who was kind enough to provide me more information on the recent developments in business and technology courts.  At this point Iowa is not included in the states that have established business and technology courts.

Business people often express frustration with our court system but Iowa courts do rank high in polls when it comes to judical fairness.  What you think?  Should Iowa should establish or experiment with a business court?

photo on flickr by Greg Westfall

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The Ohio Employer's Law Blog earns a gold medal with its Olympic-themed Blawg Review #172.  Jon Hyman's review has some great blog posts from lawyers across the country,  both in and outside of employment law.  Be sure to read it.

Thanks to Jon for including my post on the real reason the Packers traded Brett Favre.   

photo on flickr by Marc van der Chijs

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"How could the Packers trade him?"

"What were the Packers thinking?"

"I just don't understand it?"

I am writing to shed some light on this decision.  Favre turns 39 in October.  That means next year Favre would have entered a protected class for the purposes of age discrimination when he turned 40.  Sure, Favre may have had a decent season with the Packers this coming year (although he most assuredly will not for the Jets), but what about the following year?  Seriously, how many years does this guy have left?  Eventually he would have been benched in favor of a younger quarterback.

So Aaron Rodgers (age 24) steps into the role of starting quarterback now.  Rodgers may be untested but it makes perfect sense.  Trade Favre now and avoid the unpleasantness of an age discrimination claim by the all-time passing leader later.

So quit blaming the Packers' president or general manager for this fiasco.  Everybody knows the lawyer is to blame.  

photo on flickr by *Jame*

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Many people dream about owning their own business.  More and more people are choosing franchising as the avenue to to pursue these dreams.

The Federal Trade Commission (FTC) has excellent information in its consumer guide for buying a franchise.  The FTC recommends that BEFORE you invest in or select a franchise you should think about how much money you have to invest, your abilities, and your goals. The guide warns you to "be brutally honest."  Three key areas are listed:

1.  Your Investment - How much do you have to invest?  How much could you afford to lose? Do you need financing? What's your credit score?  Do you intend to invest with partners? How much do you have in savings?

2.   Your Abilities - Does the franchise require special education, expertise or training?  What skill sets do you bring specifically to this business?

 3.  Your Goals - Do you need a specific annual income?  Do you have interest in a particular field?  Are you interested in retail or service?  How many hours can or will you work?  Do you intend to hire a manager or run the business? Is this a primary source or supplement to income? Do you get bored easy or are you in it for the long run?  Would you like to own multiple locations?

One of the biggest questions to ask yourself in my view is whether you are just buying yourself a job.  If you buy a franchise you should treat it like an investment and expect a return on that investment.  Otherwise, you are most likely better off just looking for employment.  It's certainly less risky and considerably less stressful. 

In the next post we will examine what it means to "buy yourself a job" and how to avoid that trap.

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Franchisee lawyer Richard Solomon has a passion for spreading the word about conducting pre-investment due diligence.  His latest post on the BlueMauMau site outlines many of the pitfalls experienced by franchisees in various industries.  It also discusses the fact that a mere review of the franchise disclosure document and franchise agreement is not enough.  On that subject he says,

Every failed franchisee hired some cheap lawyer to “read the contract”.  When you add up what you are risking, you will appreciate that a few hundred dollars for an incompetent review of documents by someone who doesn’t know where else to look for what needs to be considered is really stupid. You can’t afford that approach. But it’s your money and your decision.  

I agree with Richard that due diligence is critically important.  I also agree that prospective franchisees must do more than just read the contract (i.e. Franchise Agreement and Disclosure Document).  Real due diligence will require a multi-disciplined approach.  The prospective franchisee should get a lawyer, accountant, banker, and even a marketing professional into the decision-making process.  If a specific location is key (such as retail or restaurants) you will want a commericial real estate agent also involved.

But above all, the franchisee must become engaged in the process.  Don't rely on the professionals to do the hard work for you.  You must roll up your sleeves and investigate.  In the next post we will discuss more of the details about how conduct franchise due diligence.    

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In this morning's paper I noticed that Dear Abby a/k/a Jeanne Phillips dispensed a little advice concerning the sexual harassment of "Millie". 

While I didn't have major problems with the advice in the column ("Dear Abby" thinks Millie should report the inappropriate behavior by one of the firm's clients to her boss), I wondered why "Dear Abby" wouldn't also mention that "Millie" should consult the advice of an employment lawyer.  Perhaps an employment lawyer would inform Millie about the need to follow the steps outlined in any employment handbook when reporting the harassment and her rights and responsibilities in the event that the employer does nothing to investigate or stop the harassment.  This includes the fact that Millie may need to file a civil rights claim if she intends to pursue any legal action. 

Just a thought but I always think it is important to get information and advice from someone that actually might be able to help you.  Many lawyers will provide a free consultation or work on a contingency in plaintiff's cases, so you shouldn't be afraid to seek the advice of a lawyer when the situation calls for it.

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Washington employment lawyer Donald Heyrich details some recent huge verdicts against employers.  The verdicts in his report range all the way up to a whopping $47 million.

Looking to avoid big verdicts?  I say treat employees with RESPECT and keep in mind the Golden Rule of Employee Relations:  Fairness.  Unfortunately too many employers forget these basic rules.

It is critical to remember that in a jury trial your jurors are likely to be employees rather than employers.  Being fair will not only reduce the employment claims against you but increase your chances of success if you are sued.

photo on flickr by benleto

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These posts demonstrate some good business basics:

Small Biz Survival has a good blog post on how to keep good tax records. 

Kyle Kruidenier of the Iowa Law Blog talks about the importance of thinking with the end in mind when forming a business.

Marc Ward shares why LLC operating agreements should be in writing.

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Many Iowa business owners think the new Iowa SmokeFree Air Act only applies to bars and restaurants.  Not so!

Check out my post today on the Des Moines Business Record's IowaBiz site for more details.

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Employment law guru Mark Toth has some very helpful "cheat sheets" covering the Family Medical Leave Act (FMLA), the Americans with Disabilities Act (ADA) and the Age Discrimination in Employment Act (ADEA).

Mark says there are more cheat sheets to come.  Also, you would be smart to attend his free Webinar on July 30th for Every Employment Law in 60 Minutes or Less.

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Nothing like a good article on franchising to bring me out of a blogging hiatus that I anticipated would last at least another week.  But thanks to the Small Business Trends site and franchise consultant Joel Libava, my rest is over.

The Franchise King posted on a Central Ohio restaurant franchise called Roosters that seeks experienced franchise operators rather than newbies that might not understand the industry.  Like Joel, I agree it's a good concept for a franchisor to target franchisees that have experience in the industry.  Experienced operators are much more likely to be successful.  We agree on that.  We actually couldn't agree more on that.

However, Joel doesn't carry that logic forward when it comes to working in a franchise before buying one.  Joel says he is often asked this common question:

“Joel, are there any franchise companies out there that will let me work with a local franchisee, to see if I like the business?” 

And being the laid back guy he is (now don't get me wrong, Joel is a well-intentioned guy who wrote a book on Franchise Research Steps), Joel responds with an emphatic "No!"  He doesn't recommend it because the franchisee won't get the full story.  After all, they don't have any "skin in the game, so how could they possibly understand what the franchise business owner is going through?  He more or less says that if you aren't willing to go "all in" from the outset perhaps you should take it as a sign that you shouldn't go into business for yourself.  (Unfortunately too few people will heed this advice in my experience and take it as a personal challenge to go forward).

So it's my view working in a franchise business BEFORE buying doesn't make you a chicken!  In fact, it may be the best due diligence any prospective franchisee could do.  It's the same reason why so many successful business owners were once employees of the business they ended up buying.  It's the same reason a successful franchise owner I know worked in retail for a year before buying a retail franchise.  She wanted the experience.  No, she NEEDED the experience before investing much of her life savings.    

Now, it's true that some prospective franchisees might not benefit from the experience.  Some prospective franchisees have no business ever owning a franchise or any other kind of business.  But to say all prospective franchisees shouldn't avail themselves of the opportunity to work in a franchise system seems a bit bold in my opinion.  As a franchisee and reader of this blog pointed out:

The most difficult information to obtain and verify is franchisee profitability.  The profitability of the franchisor and the franchisees is not always related.  Sometimes those selling franchises make money while the franchisees do not.  And it is not always due to lack of due diligence on the part of the franchisee.  It may be because of inaccurate information supplied by the seller or franchise support that was promised but never delivered.

Risk is inherent in any business venture.  You are taking a chance and a leap of faith.  But actually working in a franchise business before you buy may allow you to find out whether you want to stake your life savings on the opportunity.  Taking a chance with maximum information is not random chance but a calculated risk - and that could make all the difference.

photo on flickr by ™bluhousworker and original photo by TedSher

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Des Moines CPA Joe Kristan provides an important lesson on his Roth & Co. Tax Updates Blog in a post entitled, "It's Your Company.  Is it Your Deduction?"

Joe recounts the story of an entrepreneur who incorporated a business but then spent over $47,000 in business expense out of his own pocket, which he then deducted on his schedule C.  When the IRS called him on it  the tax court told him that only the corporation can deduct corporate expenses.  If the shareholder pays them and isn't reimbursed, the expenses are treated as a contribution to capital.  That increases the shareholder's basis, but that doesn't help the shareholder's tax picture until the company is sold.  That's true both for C corporations and S corporations.

Joe offers this lesson:

Mr. Meyer could have submitted his receipts to the company for reimbursement; the company would have been able to deduct the expenses.  Or he could have had the corporation pay the expenses directly.  But by paying the expenses out of his own checkbook and not turning them in for reimbursement, he lost his deductions altogether.

Another problem I see is the entrepreneur who wants to run all his business AND personal expenses through the business.  For example, earlier this spring I witnessed a father buying his son's baseball equipment at a local sporting goods store.  I chuckled when he pulled out a company check to pay for the equipment.  Sure, one expense might get buried and never noticed in an audit but experience tells me that "pigs get fat while hogs get slaughtered."  Many business people don't understand where to draw the line.  Business expenses are fine to deduct.  But  running obvious personal expenses through the business just isn't acceptable.  It could even be a reason to "pierce the corporate veil" in litigation causing you to lose your limited liability protection.  

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Liz Overton recently discussed the latest blow suffered by Wal-Mart on wage and hour claims over on the Iowa Law Blog.

I predict It's only a matter of time before wage and hour class action claims impact more mid-sized and smaller companies.  It's the one area where plaintiff's attorneys are experiencing success.   

Read also my previous post on how to avoid wage and hour lawsuits including some great comments from top notch attorneys like Dan Schwartz, Anthony Zaller and Bill Grell.

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All Business has a decent article describing the ten key provisions of a franchise agreement.  However, I do take issue with the comment in Section 1 that "most franchisors offer ongoing support including administrative and technical support."

As I discussed in my last post on franchising, it is my experience that "most" franchisors DO NOT offer much in the way of ongoing support including administrative and technical support.  I believe this is a major item that separates the good franchisors from the bad ones.  And trust me, the MAJORITY of franchisors I have seen are downright awful in this category.

The majority of franchisors are good at only one thing - getting you into business.  After that, you're on your own and you'll be left to wonder why you are paying all those franchise royalties.  Perhaps harsh words for the industry overall but the truth hurts.  If you are buying a franchise make sure to do your due diligence and find those franchisors with a system for ongoing support.  Otherwise, why buy a franchise?

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With the help of Doug Mitchell and Andy Brudtkuhl I will be going live with an Interactive Learning Environment to complement this blog very soon.   The Rush on Business Legal Wire will focus primarily on employment law, franchise due diligence  / investigation issues and business purchase or sale considerations.  I also hope to attract top speakers to participate in the process.  The online seminar presentations will include in-depth written materials, audio presentations, podcasts and possibly video.

Forums will also be available for you to share your insights and ask questions.  Similar to the blog format, I won't be able to answer questions regarding specific situations but we can discuss topics generally.

I welcome your comments and suggestions on topics you would like to hear more about.

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Don't forget that Iowa's smoking ban in public places starts July 1, 2008.  If you are a business interested in learning more about compliance with the new law please visit the Iowa Department of Public Heath site at www.iowasmokefreeair.gov.

An informative Q & A concerning the smoking ban is available here.

Bar owners in particular are upset about the new law.  Is a challenge in the works?

photo on flickr by greefus groinks

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While discussing a franchise case recently an attorney working with me observed that the franchisor really didn't agree to do anything for the franchisee in its franchise agreement.

Unfortunately most franchisees are under the mistaken belief that franchisors will provide all kinds of support.  When it doesn't happen and the business relationship has fallen apart, the franchisee is surprised to learn that the franchisor isn't contractually obligated to do much of anything.  Which generally means that if a lawsuit occurs the franchisee may have very little recourse.

The solution:  Franchisees should discuss specifically with the franchisor exactly what the franchisor is going to do to support the franchisee during the term of the agreement.  If the franchisor makes promises that are not contained in the franchise agreement, ask for those promises in writing.  If the franchisor won't put those promises in writing be ready to walk.   And never, I mean NEVER, believe the franchisor that tells you they won't hold you to the terms of their written agreement.  You can be assured that the franchisor's lawyer in any lawsuit will never acknowledge that such a statement was ever made and most franchise agreements are written so that any such statement could not be used as evidence anyway.

Ulitimately there is no validity to the claim that franchise operations are less likely to fail than non-franchise operations.  A franchisor that just gets you into business doesn't offer you much.  Always do your homework, ask the tough questions and demand answers.

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Employers have an obligation to prevent sexual and other forms of harassment in the workplace.  Unfortunately some employers are under the mistaken belief that their sexual harassment policy adequately covers them.  Here are some common mistakes I have noticed while conducting employment compliance reviews:

• The written policy against harassment doesn't include an anti-retaliation provision for those employees who report harassment.
• The written policy does not provide and communicate in writing multiple channels for the complaint procedure. Employees should be able to report harassment to more than one person within the company. The complaint process should be clearly defined in your employment manual.
• Supervisors are not trained each year and supervisors are not required to report harassing conduct.  Consequently employers often miss out on a possible defense in any lawsuit.
• Once notified of harassing conduct  employers fail to take immediate action to investigate.  Employers have the attitude that the employee must "deal with it."  Complaints of harassment are often not taken seriously.
• Offenders are not disciplined or terminated as appropriate.

Commit these mistakes at your peril.

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Jonathan Frieden of the E-Commerce Law Blog offers some excellent advice that companies should refrain from copying another company's Web site terms of use policy.  Jonathan says that even sophisticated companies are tempted to reduce legal expenses by copying such policies.

Iowa intellectual property attorney Brett Trout has also offered the same advice.  As Brett pointed out in his post, an Iowa company looks pretty awkward explaining to a court why its dispute should be tried in Albuquerque.    

The bottom line is that even if you use standard terms of use policies and other online policies you will need some customization for your particular business needs.  Discuss with your lawyer whether he or she has standards forms that can be customized for your business.  Most eCommerce lawyers have such forms.  But it is a good practice to avoid directly copying the terms of use and other online policies of other companies.

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Nascar has been sued by a former technical inspector in the Nationwide series.  The African-American woman seeks at least $225 million in her claims for sexual harassment, racial and gender discrimination and wrongful termination.  In the lawsuit, she alleged she was referred to as "Nappy Headed Mo" and "Queen Sheba," by co-workers, was often told she worked on "colored people time," and was frightened by one official who routinely made references to the Ku Klux Klan. In addition, she claims male co-workers made sexual advances, two of whom allegedly exposed themselves to her, and graphic and lewd jokes.

If true, those claims are indeed strong evidence of harassment and discrimination.  But what's worse is that her supervisor allegedly ignored her complaints and dismissed by saying that the guys were "former military guys" with a rough sense of humor and that she would just need to "deal with it".  Now, Nascar must "deal" with a huge lawsuit.  And in case they didn't notice, this predominately white and male sport is a fairly easy target in a case of this nature.

Nascar should have heeded several of my tips on how to avoid employment lawsuits.  Th two that quickly come to mind are to treat all employees with respect and to take action promptly to investigate when complaints occur.  If you are a supervisor in an organization where harassment or discrimination is suspected you had better not tell the employee to simply "deal with it".  That's going to get you sued every time. 

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In the film Evan Almighty everyone believes Evan has lost his mind when he begins building an ark next to his home to protect against an upcoming flood.  Right now, in Iowa, no one would proclaim him crazy.  Our recent flooding has once again wrecked havoc to homes and businesses throughout Iowa.  

So how do you build an ark to protect yourself from continually rising employment lawsuits?

1.  Treat Employees with Respect:  Seems like a basic philosophy but it is amazing how many employers forget to treat their employees with respect.  Employees that are humilated or treated in a disrespectful way are much more likely to sue your company. 

2.  Communicate with Your Employees:  First, make sure you have an effective employee handbook with up-to-date employment policies and publicize your policies to employees.  Make sure you follow your policies.  One of the easiest ways to land in an employee lawsuit is the failure to follow your employment policies.  Also make sure you have an open door policy where employees are allowed to voice their concerns or complaints.  Do not let complaints fester.  Deal with them right away.

3.  Implement an Effective Unlawful Discrimination and Harassment Policy:  Your harassment policy should include more than just sexual harassment.  There may be other forms of harassment based upon race, religion, age or disability.  It is also critical to consistently train employees and supervisors regarding unlawful harassment and discrimination.  You should consider training employees on harassment and discrimination issues at least once every year.

4.  Document, Document, Document:  The importance of good record keeping cannot be overstated.  If you don't have something in writing, chances are a jury or judge may not believe it happened.  Be sure to document even verbal warnings and maintain an appropriate personnel file in order to make sure the documentation is not lost. 

5.  Conduct Honest Employee Evaluations on a Regular Basis:  Unless your company is headquartered in Lake Wobegon every employee is probably not above average.  Evaluations can be valuable proof in an employment lawsuit.  Make sure poor performance is properly documented.  Otherwise, the judge or jury will not believe you when you say the employee performed poorly but all their evaluations are excellent.  You should conduct the evaluations on a regular basis, usually at least once per year.  I recently represented a client sued for discrimination.  A key in defending the case were the honest performance appraisals performed b management.

6. Do Not Retaliate:  Employers are often blindsided by retaliation claims.  There are a number of proactive measures you can take in order to avoid liability for retaliation claims.  It is important to avoid retaliation because recent cases have lowered the burden for plaintiffs to prove their retaliation claims and the number of retaliation claims from plaintiffs is continually on the rise.

7.  Take Action and Investigate Promptly: If a complaint arises, make sure you take the complaint seriously and investigate promptly.  A quick and thorough investigation may help eliminate problems before you have a real mess.  You will need to consider who should conduct the internal investigation.

8.  Compy with Wage and Hour Laws:  Ensure your exempt employees (i.e., salaried employees) are properly classified as exempt under the law.  Wage and hour claims are also on the rise and could result in a class action against your company.  This is a common area of the law that is ignored by many employers and could result in significant liability.

9.  Review and update your employee handbook and/or policies:  At least you should review your policies to incorporate any changes in the law or your manner of doing business.

These simple steps will go a long ways to reducing employee lawsuits.  To ensure that your company has done everything it can to avoid employee lawsuits, you should have your employment policies, training and practices reviewed by your employment lawyer.

*This post originally appeared as the Seven Ways to Avoid Employee Lawsuits from January of 2007 but this updated version is worth repeating.  It also includes some ideas from Anthony Zaller of the California Workforce Resource Blog who had commented on my original post. 

Photo on flickr by Whisper Photograhy.

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Glad to see my friend Mark Landa blogging over on the Iowa Law Blog.  Mark has an important reminder that the time for filing a civil rights complaint under Iowa law will be extended from 180 days to 300 days in order to conform to the federal timeline.

Iowa employment lawyer Victoria Herring points out on her blog that it is not a good idea to push deadlines but the extended time frame will allow complainants (and employers) and additional time to work out a resolution or gather evidence for claims.

The new Iowa law goes into effect July 1, 2008.

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Indiana civil and business lawyer Sam Hasler recently expressed his view that the place to incorporate your business is generally in your home state.

I agree with Sam. 

Delaware or Nevada may offer viable options for some companies but in general most Iowa small businesses are probably wise to incorporate here in Iowa.  First, Iowa has very low fees when it comes to incorporating your business.  It is a $50.00 fee to file Articles of Incorporation for a domestic corporation in the state of Iowa.  Further, it only a $30.00 fee every two years for a biennial report if you file online.  These fees are extremely low compared to other states.

Second, you won't avoid Iowa taxes by incorporating your Iowa small business in Nevada or Delaware if you are doing business here in Iowa.  The tax and corporation laws of Iowa will require you to register your company and pay fees as a foreign corporation in Iowa and you will be required to pay Iowa state income taxes for any income earned.  (You also do not avoid federal income taxes by incorporating in Nevada despite the lack of an information sharing agreement with the IRS).

And the perceived court advantages in Delaware?  That might be fine for a large business that is actually going to litigate a case in Delaware but it is probably not cost effective for most Iowa small businesses to litigate their cases in Delaware.  Besides unless you have well-written forum selection clause in contracts your Iowa small business will likely end up in Iowa courts anyway.

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This post on employment lawsuits causing most e-discovery woes just confirms the reasons why a sound document retention policy is necessary in today's business environment.

Organizations need to respond to an increasing number of document requests, from regulatory compliance issues to internal investigations to full-scale litigation. Much of this information is available electronically. Despite the prevalence of such document requests most organizations remain reactive rather than proactive when it comes to dealing with the issue of electronic discovery.

Are you prepared?

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This past January I posted on an Iowa immigration bill that targeted employers.  The bill sparked significant debate but was not passed.

Now in the wake of the raid at the AgriProcessors slaughterhouse and packing plant in Postville, Iowa, Iowa's legislative leaders are renewing promises to target employers.

This time legislative leaders will introduce legislation to prevent employers from hiring immigrant workers as independent contractors when they should be considered employees.  It is also anticipated the legislature will renew efforts to create sanctions on employers that knowingly hire undocumented workers.

I have written on the issues relating to employees and independent contractors on several occasions.  The issue of whether a worker is an employee or independent contractor is one of the most misunderstood (or should I say ignored) areas of the law.  The proposed legislation is likely to crack down on the use of illegal immigrants serving as independent contractors in the construction industry. 

In my experience a significant percentage of workers in the construction and other industries are misclassified as independent contractors rather than employees, not just illegal immigrants.  For most companies I would argue it's more about saving on payroll taxes and workers' compensation insurance than hiring undocumented illegal immigrants.    

As I have said in the past, the approach of misclassifying workers as independent contractors is not worth the risk.  The safest course is to treat workers as employees if the workers' status as an independent contractor could reasonably be questioned. 

If you have questions about whether to treat workers as employees or independent contractors be sure to consult with an employment lawyer.

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A new Iowa law blog has sprouted.  Jim Nervig of the Brick Gentry law firm has started the Iowa Real Estate Lawyer Blog.  Jim's just getting his feet wet at this point but he is off to a fine start. 

Jim practices in the areas of real estate transactions, tax sale law, tax assessment appeals, zoning and other municipal law, corporation law and wills. He frequently speaks at seminars on real estate, tax sale and zoning topics.  Jim previously served as City Solicitor for the City of Des Moines, Iowa. Jim's blog is intended to help readers stay current on issues relating primarily to real estate and tax sale law and procedures in Iowa.  Particularly when it comes to tax sale law, there are few in this state with the knowledge and experience possessed by Jim.

I encourage you to add Jim's blog to your favorites if you are interested in real estate.  It will be worth it.

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Tonight I will be appearing on the Iowa Business Hour with Jim Goodman from 7:00-8:00 p.m. on 98.3 WOW-FM. 

I follow a long line of distinguished guests on the program including the incomparable Brett Trout. 

If you don't have anything else to do take a listen tonight.

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Do you have bad credit?  If so, this article on how to qualify for a franchise loan even with bad credit may interest you.  But please don't be offended when I say I hope you don't get the loan.

The number one reason I see for business failures is the lack of sufficient capital.  I have seen several people invest their entire life savings only to have their business fail because they lacked the money to survive the first 6 to 24 months.  These overly optimistic business owners scraped the money for the initial loan but had no room for error.  When the business didn't cash flow right away they were doomed.

My advice is simple for those that have bad credit and want to start a business.  Work on improving your credit and accumulate cash to invest in your business. You should plan on having at least double the capital you believe you need.  If you have the idea you just cannot pass up at this time you may need to go raise capital through a rich uncle, an angel investor or venture capital.  If you are investing in a franchise operation as discussed in the article you can probably forget about venture capital.  It's not likely to happen.

I am not saying every person with bad credit shouldn't consider starting a business.  But the odds of business success (a difficult task under the best of circumstances) go down measurably when the potential business owner cannot manage money well and does not start out with adequate capital.  A much better article would have been about how someone could improve their credit and increase savings to start out a business on solid footing.  Providing loans to those that cannot afford them is not the recipe for business success.  After all, it's the same mentality that caused the mortgage crisis our nation currently faces.

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My most recent post on Love Contracts received some link love from the Wall St. Journal and Law.com's Legal Blog Watch.  It's nice to get a little recognition now and then from the heavyweights.

Be sure to check out employment lawyer Mark Toth's blog that was the source of my post.  He has one of the most informative and creative employment law blogs around.

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Mark Toth of the Manpower Employment Law Blog has an interesting post on "hooking up at work" and whether love contracts are a good idea.  This is where co-workers sign a contract in order to protect the company and the employees involved against sexual harassment or other discrimination charges.  Mark says he doesn't think the agreements are necessarily a good idea because it forces the company to become the love police and subordinates may claim that they were forced to sign such an agreements under duress when a superior is involved.

Other employment lawyers quoted in the Newsweek article featuring Mark believe the love contracts may be a good idea.  However, I tend to agree with Mark.  Sure certain office-romance relationships may start out consensual but it can quickly turn to harassment when one of the lovers calls it quits and the other won't give up the pursuit.  I tend to believe that the changed circumstances and conduct that occurred after the relationship broke off still opens the company up to liability - love contract or no love contract. 

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Tomorrow's BIZ networking luncheon features Jonni Tonnemacher, a CPA specializing in fraud detection services.  Learn how to identify fraud in your business and implement controls to prevent fraud from occurring.

I have not heard Jonni talk previously but the topic is fascinating.  It is downright scary how much fraud occurs in business.  Don't be a victim.  Be informed.

Read more about the offerings of BIZ at www.bizci.org.

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I am frequently involved with the purchase and/or sale of a business.  Often the purchaser discovers the business through a business broker.  In the Des Moines area, it seems as though several of the business brokers convince prospective buyers to make an offer before seeking legal advice or reviewing the basic terms before the offer is signed. (i.e. price, financing terms, earn-out, non-compete, etc.).  The selling point is that the broker's form offer to purchase makes the agreement contingent upon review by professionals including a lawyer and/or accountant. 

While the contingency is a good one, the problem is that it does not replace a consultation with a lawyer or accountant before the offer is made.  The simple reason is that once the offer is made it creates a binding agreement.  If you fail to consult the lawyer before signing the offer the basic terms of the sale are complete.  At that point, the lawyer may be able to help you with the legal wording in the final contract but it is awfully tough to change the terms of the deal.

So if you are purchasing a business be sure to consult a business lawyer before signing the offer.  Don't fall for the notion that a contingency permitting legal professionals to review the agreement will allow you to change the terms of deal in the final agreement.  Once you sign the offer it is probably too late.

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In his new blog, Marc Ward of the Dickinson Law Firm, sets out some key changes to the new Iowa LLC Act.  One important issue to remember is that by default under the current law, Iowa LLCs are member managed unless unless the articles of organization or the operating agreement provides for management by manager(s).  Under the new law only a provision in the operating agreement can change the management of the LLC from member-managed to manager-managed.  As Marc indicates:

The operating agreement must expressly provide that (a) the LLC is "manager-managed" (b) the LLC is "managed by managers" (c) management of the LLC is "vested in managers" or (d) words of similar import.  Be safe, use one of the first three phrases recognized by the Act to avoid all doubt.

But even perhaps more importantly, the new law (effective Jan. 2009) provides that a member is not an agent that can bind the LLC just because they are a member.  The LLC may also file a statement of authority with the Iowa Secretary of State that specifically sets forth who does or does not have authority to act for the LLC to execute an instrument transferring real property or to enter into transactions on  behalf of or otherwise act for or bind the LLC.

Hat tip to Joe Kristan for pointing out Marc's blog.  For those that doubt the validity of social media, it's kind of funny that I learned my neighbor was blogging through someone else's blog post. 

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Former general counsel and small business owner, Anita Campbell, offers sage advice in her post on the Build a Solo Practice Blog about how to write a better contract .  What is the better contract in Anita's view?

1. First and foremost, the better contract protects the client.
2. The better contract is written in plain English.  (A novel concept indeed!)
3. The better contract is written for a 12th grade education or lower.
4. The better contract incorporates standardization.

A word of caution concerning standardization of contracts:  Clients will often take a standardized contract and fail to adapt it appropriately for the current business transaction.  Clients should be reminded that it is a good idea to have the business lawyer review the agreement to make sure it adequately protects the client in the current transaction, contains the actual terms of the current transaction and fulfills the goals of the current transaction.  I can't tell you how many times I have seen the embarassing situation where a business person took a standardized contract and failed to revise it appropriately for the situation.  It happens often when people pilfer agreements from the Internet and fail to modify the terms.  If litigation occurs, the result of this carelessness could be a verdict against the client.

Anita's solution involves providing a set of instructions to the client along with the standarized contract.  Included in the instruction sheet is the direction to have the business manager consult the corporate lawyer before signing or implementing the agreement.  This may work well with organizations that have in-house counsel but is probably less intuitive for businesses with outside counsel.  I offer the reminder to always have contracts reviewed by your business lawyer.

Hat tip to Susan Cartier Liebel and her Build a Solo Practice Blog.  Susan is passionately building one of the best blogs in the country.  Notice I didn't limit it to legal related blogs either.

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The Small Business Administration (SBA) and FranNet have teamed up to offer an online training course for those interested in franchising.

The free online course on franchise basics provides three key sections that examine more than 10 essential areas relating to franchising, including Whether Franchising Right for You and How to Choose the Right Franchise. The course also covers franchising options, strategies for growth, and pitfalls to avoid. Course participants will be able to better understand franchising and decide if it is the best small business option for them.

For more information please be sure to contact Joe Cooney who is the FranNet consultant for the Iowa / Nebraska region.  I have found Joe to be a very helpful resource.

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Anita Campbell of Small Business Trends shares her thoughts about how to avoid the contract from hell on the Build a Solo Practice site. 

As a former general counsel and now a small business owner, Anita has been on both sides of the fence when it comes to contracts.  According to Anita, here are some things to avoid in your next contract:

• Too much legalese.
• Using adverbs like "whereas" and "heretofore".  It's kind of like using "COMES NOW" for pleadings.  Does anyone really talk like that?
• More than 5-7 defined terms.
• Attaching multiple exhibits.  I can speak from experience that multiple exhibits is a real pain for the drafter so I can't imagine what it is like for the reader.
• Making it so hard to understand that it leads to avoidable litigation just because no one can understand it.

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Teri Rasmussen of the Ohio Practical Business Law Counsel blog has gathered some excellent resources for those who are interested in pursuing a franchise to start a business.

Thanks to Teri for referring to a couple of my blog posts but I also recommend checking out the Small Business Administration's consumer guide to buying a franchise as well as attorney Mike Hamblin's 4-part series on franchising.

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In a recent blog post, Daniel Schwartz of the Connecticut Employment Law Blog reminds employers just how important it is to notify insurers under their employment practices liability insurance.

This advice is not just critical in the employment context.  It is vital for every type of insurance your business may have.  If a claim occurs be sure to notify your insurer immediately.  The failure to do so may result in a denial of coverage.

Thanks to Daniel for the reminder.

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Do you have an estate plan?  It has been reported that approximately sixty percent of people in the U.S. do not have a will.  Of course having a will is critical if you have children but let's not forget about another baby - your business.

As the owner of a closely held business much of your wealth may be tied up in the business.  If you have not planned properly you may cause tremendous problems for your heirs.  After paying probate and estate taxes your heirs may also encounter liabilities that were payable upon your death.  All this during a time where the business may have decreased revenues due to your death.

Fortunately proper planning may eliminate many of these problems.  Using buy-sell agreements and trusts are two of the ways that business owners can protect their assets and reduce taxes.

Another important life-goal for business owners is charitable giving.  This week's Des Moines Business Record has an informative article on available options for starting your own philanthropic legacy. 

Even if you are young, consider an Acorn Fund through the Greater Des Moines Community Foundation.  For an initial contribution of $1,000 and a commitment of $600 per year until the amount equals $10,000, a young business owner could start their own permanent endowment fund.  And not only do you get the deductions for charitable contributions but you may also be eligible for additional tax credits.

photo on flickr by Norma Desmond

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VIctor Aspengren on the IowaBiz site has a great article about  focusing on the behavior rather than the person in employee terminations. 

Super advice.  Be sure to read it.

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Come join Brick Gentry attorneys Matt Brick and Douglas Fulton for the 2008 Iowa Employment Law Conference sponsored by HR OneSource at Prairie Meadows on April 23rd.  There will also be speakers from the Department of Labor, Director of Veteran's Employment and Training Service, and a Committee Chair to the International Association of Chiefs of Police.

By the way, be sure to check out Matt Brick's new Iowa Lawyer blog.  He is off to a great start with some interesting topics.

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One of my franchisee clients offered a very simple question that every prospective franchisee should ask of other franchisees when conducting due diligence:

What doesn't the franchisor do well?

He says this evoked the best responses from franchisees when he conducted his due diligence.  If you are considering a franchise be sure to talk to as many franchisees as possible.  Speaking to only a handful is not enough. 

For more information be sure to read this article on franchise due diligence resources.

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In last week's Tip of Week (yes, I am a little behind), John Phillips of the Word on Employment Law raises the interesting perspective that it is possible to overdocument in employment cases.

Some of John's warnings on overdocumentation include:

• Documentation on trivial matters.
• Creating a paper trail right before an employee is terminated.
• Documenting conduct or performance issues for an employee when you have not done the same for others.
• Summarizing in a document right before an employee is terminated all the things you wanted to document when the conduct occurred but didn't.
• Preparing documentation after the employee is terminated.

Granted, John's point is well taken.  It is important to be fair and consistent in the documentation of employee performance and conduct.  Employees should be treated in a consistent manner and it is best to document performance and conduct as it occurs. 

However, I am not sure I necessarily agree that it is best to go forward without any documentation at all when the documentation has not been done right away.  It depends on the circumstances.  There are times when a summary of events written after the fact may be helpful.  Much of this also depends on the way the document is written.  And of course I would never advocate that anyone fabricate evidence.  

Please consult your employment lawyer for advice in a particular situation.   

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The Dickinson Law Firm's Iowa Banking Law Blog ignores its disclaimer and provides some legal advice:

F-Bombs in a deposition are a bad idea!

It's just another subprime market meltdown.  One F-bomb is a mistake.  Two might be forgiven.  But 73?  That's gonna get you sanctioned every time.

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Are you considering a franchise business?  Read this blog post on evaluating the strength of your franchisor before signing on from the First Prize Franchise blog.

Time and time again I see people invest their life savings into franchise operations.  Some of these people achieve great results but others do not.  There is no validity to the claim that franchise operations are less likely to fail than non-franchise operations.  One critical aspect to consider in my view is the brand itself.  Is the brand recognizable?  If not, the franchise better have a fantastic system, unique concept or protected intellectual property.  Otherwise, I think you need to question whether the franchise is right for you.

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The term "SEO" stands for search engine optimization and has been around for a decade.  Heck, I've probably been familiar with the term for about nine years.  I can't imagine that someone could trademark a term as generic as SEO but that appears to be happening.

Read Brett Trout's blog for this interesting development.

P.S.  This just in, Brett Trout to trademark "IOU".

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Today I will present at the Central Iowa SHRM monthly meeting located at Copper Creek Golf Course on electronic workplace issues. The electronic workplace is all around us. Computers, voice mail, internet, intranet, e-mail, fax machines, laptops, PDAs, videoconferencing, social media, blogs and more are common features in the American workplace. The development of the electronic workplace has not come without legal implications. The same technology that allows us to perform work more efficiently creates several twists on several areas of employment law. We will explore many of the dangers and pitfalls in the electronic workplace:

I. Email

• Discovery in Litigation
• Record Retention
• Discrimination, harassment and other concerns

II. Internet

• Accessing Inappropriate Material
• Social Media and Blogs
• Copyright violations

III. Employee Privacy Rights

• Electronic Communications Privacy Act
• Handbooks - lower expectation of privacy
• Consistency

IV. Telecommuting

• ADA
• Workers' Compensation

V.  Employment Ads and Resume Posting on Internet

Program details:  Tuesday, April 8, 2008 at Copper Creek Golf Course, 4825 Copper Creek Drive, Pleasant Hill, Iowa.  Registration begins at 7:15 a.m. Business Meeting begins at 7:40 a.m. Program begins at 8:00 a.m.

1.0 General recertification credit has been pre-approved.

Thanks to the Central Iowa SHRM Chapter for the invitation.

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A new program from the non-profit Iowa Foundation for Microenterprise and Community Vitality (IFMCV), will provide a statewide mechanism for Iowa's microentrepreneurs to connect with community development agencies for assistance. Among the groups spearheading the effort are the Greater Des Moines Community Foundation and the Community Vitality Center (CVC), a policy analysis center based at Iowa State University. The program specializes in providing loans of $35,000 or less to small businesses.

State legislators are considering ways to fund microenterprise assistance programs that would be offered through the Iowa Department of Economic Development. An appropriations bill now under consideration would provide $500,000 to fund a microenterprise specialist at the IDED and begin a microloan program, using unspent Grow Iowa Values Fund dollars.

These are exciting developments for the state's small businesses which have long been ignored in Iowa. For more information please read this article from the Des Moines Business Record.

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The Des Moines Register had an article about how support has poured in for a Pizza Hut Delivery driver that was suspended from work after he shot an alleged armed robber.  The employee had a valid handgun permit but a Pizza Hut human resources representative indicated that employees are not allowed to carry guns "because we (Pizza Hut) believe that is the safest for everybody."

I saw a clip where the delivery driver spoke with the TV media and he was obviously shaken by the incident.  He said he appreciated the fact his employer had given him the time off without automatically taking action against him. 

I know many readers on the Register blogs have been critical of Pizza Hut but they appear to be handling this difficult situation rather cautiously.  They have not terminated the driver at this time but rather have suspended the employee pending an investigation. 

Public opinion is definitely in favor of the driver.  Even a state senator has publicly stated his position that the company would be wrong to fire the driver and vows to stop buying Pizza Hut products if the driver is fired.  So this is a tough one for the company and there are no easy answers.  I don't envy the employer's position on this one. 

Ultimately I suspect the employer will enforce its policy but I will let you know as this unfolds.

photo on flickr by hashcakes.

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Iowa's first legal blog has moved to its own url at www.blawgit.com and new posts will no longer be available at its former blogger site. Iowa patent attorney Brett Trout has achieved remarkable success with his blog.  It is an award winning blog that provides tremendous information on patent, trademark and Internet law.

Brett is also the author of Cyber Law:  A Legal Arsenal for Your Online Business.  It's a great desk reference that I highly recommend.

Brett also occasionally (I guess often) demonstrates his unique sense of humor.  This blog is a real treat and one of the best around so be sure to visit often. 

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It's no April Fool's joke, the Iowa Secretary of State corporate biennial reports are due today, April 1, 2008.  If you have not filed your report be sure to do so today.  In Iowa, limited liability companies are also required to file the report.  If you file online the cost is $30.00 for the filing fee.  The cost is $45.00 if you file a paper report.

If you do not file your report a notice is generated and eventually your corporation will be administratively dissolved after the notice.  You can get your corporation or LLC reinstated but that will cost you additional time and effort.  You also cannot get reinstated unless you have paid all applicable state taxes.

So get your report filed today.  If you know your corporation # and pin # you can file the report by going to the following link:

https://www.sos.state.ia.us/BiennialReports/index.asp

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Pennsylvania employment lawyer Michael Moore has an excellent post on Five Things Every HR Generalist Should Know about Retaliation Claims.  Michael notes that the number of retaliation claims rose 18% in 2007 to a record high, doubling since 1992.  His post covers the following areas:

• What is unlawful retaliation?
• What is "Adverse Action" by an employer?
• What is "Protected Activity by an employee?
• Promptly investigate comments & complaints regarding discrimination.
• Monitor supervisors for adverse action following an employee complaint.

In my experience, employers are usually cognizant of discrimination and harassment claims. However, they are often blindsided by retaliation claims. The successful resolution of a discrimination or harassment complaint means you are only halfway home. Supervisors and employees must not retaliate against the employee who complained. This is especially important because of a United States Supreme Court decision lowering the burden for employees to show retaliation.

Here are some proactive measures employers can take in order to avoid retaliation claims:

1. Make sure your employee handbook includes a policy prohibiting retaliation.
2. Always have alternative reporting avenues.
3. Conduct supervisor and management training on harassment, discrimination and retaliation. 
4. Make sure supervisors and management have been asked the tough questions when it comes to employee discipline. Make sure the discipline has nothing to do with the complaints of harassment, discrimination or retaliation. 
5. Periodically talk with the complaining employee to determine if anyone has retaliated against them. If performance is an issue for the employee be sure to bring this to the attention of the employee and make sure to document your conversations. Document! Document! Document!

As always, be sure to consult your employment lawyer for advice in specific situations.

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Des Moines attorney Charles Kenville has a great post on the need for lawyers to be mindful of the new media exposure in their cases.  Chuck has a criminal law bent to his post but his reminder is just as true for civil cases.

I know from experience that savvy businesses are acutely aware of blogs and other social media in their trial preparation.  In particular, Microsoft did a great job a staying in contact with Des Moines patent attorney Brett Trout and I when the Microsoft-Iowa litigation was going full steam.  But the plaintiffs were not to be outdone.  We routinely received updates from the plaintiffs' public relations team as well.

The bottom line is that lawyers engaging in trial law today ignore blogs and social media at their peril.  Learn how to read RSS feeds to stay on top of pretrial publicity.  You will be glad you did.

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I read a Des Moines Register article this past week on a young man who is starting a business while employed by another company.  According to the SBA deputy director in Iowa this happens frequently.  I must say that I greatly admire anyone who has the courage and desire to start their own business. But my question is whether this is good for employers?

This is not an easy question.  On the one hand it is important for an employee to grow and allowing an employee to create a business on his or her own time may in fact create a more productive and happy employee.  Particularly if the employee is starting a business that is different than the employer and they do it on their own time there may be no harm.

On the other hand, an employer pays an employee to do their job.  The employee's allegiance should be to the employer as long as that employee is receiving wages and other job benefits, right?

I must confess that I am not sure whether there is a right answer and it probably depends on the circumstances.  I am aware of many successful companies that draft policies that prohibit outside business activities while many other successful companies provide an environment that encourages employees to start their own companies.

One important risk in allowing employees to start businesses while on the employer's dime is the potential for the employer to start a similar business and steal clients.  This should be prevented.  One way to do this is with a non-compete agreement.  Other ways employers can protect themselves is through the use of confidentiality and non-solicitation agreements. 

But employers may want to read this article on what to do when an employee betrays you.  Unfortunately, many employees are not as upfront and honest as the young man in the Register article.  Employees have a legal obligation to act in the employer's best interests.  If an employee breaches this duty an employer may have an enforceable right.

Photo on flickr by Burpee Gardens.

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Ohio business lawyer Terri Rasmussen has an excellent overview of the resources available on the SBA Website.  (With a hat tip to Joel Libava on the Small Business Trends Blog for the original post).  Terri also refers to a helpful post from Anita Campbell on the Ten Ways Business.gov Helps Your Business.

While I couldn't agree more with these posts about the valuable information found on the SBA Web site, I would add I find the Kauffman eVenturing site to be one of the most useful business resources on the Internet for pure business advice and information.  The quality of the ideas and writing on the Kauffman site is outstanding.

P.S.  If you are looking for an interesting interview, be sure to take some time to listen to Central Iowa's very own Sherry Borzo interview Anita Campbell on the dsmBuzz site.  It's terrific!

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A cautionary tale about partnership from Richard Fox on the Kauffman eVenturing site is an absolute must read.  Fox shares how he thought his legal background would protect him well as he created shareholder agreements, buy/sell agreements, voting trusts, special bylaws and articles of incorporation when he entered into a business partnership.  But even he was surprised when a 50 percent partner tried to sell the company out from underneath him after his father's funeral.  To make matters worse the partner tried to sell the company to their number one competitor.

Fortunately for Fox he was able to ultimately sell the company for a handsome price because he continued to concentrate on building the business rather than retaliating against his partner.  But it's pretty clear Fox believes any business person should be extremely careful when taking on partner.  He offers the following priceless advice (with my comments following):

• Know Your Existing Shareholders' Rights. Shareholders of private companies—even minority shareholders—hold the same legal rights as shareholders of public companies. When you accept shareholders, you accept the same scrutiny that comes with being a public company without the benefits. Understand that you can never be adequately prepared for a shareholder who wants to maliciously assert their shareholder rights to cause you problems. 

(Comment:  In Iowa, all shareholders are entitled to the financial information of the company as well as copies of all corporate documents   I strongly suggest you keep all copies of all important corporate documents and financial information routinely, not just when you need them.  In particular make sure you have any documents that would evidence ownership rights.  It is my experience that often one partner will have access to the corporate documentation while the other partner does not.  Don't let that happen to you).

• Avoid Taking on New "Legal" Shareholders. Entrepreneurs sometimes give ownership interests to key employees to allow them to share in the equity growth of the business. For the reason stated immediately above, you might consider offering "phantom stock," (read this article for more on phantom stocks) which carries all the economic benefits of common stock ownership without the potentially abusive rights of legal ownership. A lawyer should be able to advise you on the details. 

(Comment:  My experience with clients is that most employees really want to be paid more.  I know entrepreneurs often want employees to feel as though they have a "piece of the action".  But I also caution you to think twice about employee ownership).

• Take the high road. Rather than counter-suing the partner, Fox chose to put his energy into building the business. Not only was it good for the business, but it kept from muddying the waters any further and made a much needed ally out of the company's other corporate director. 

 (Comment:  This is very difficult to do is some situations.  Sometimes you may have no alternative but to fight back.  But I agree it is critical to continue growing the business). 

• Be prepared for anything. Pushed to the edge, some people will fight back with extreme measures. Although secretly passing legislation is extreme, be prepared for the unexpected.

(Comment:  I have learned this lesson the hard way myself with business partners in a few of my endeavors.  Do everything you can to protect yourself.  Start by knowing your rights and make sure to document, document, document.  Adversity often brings out the worst in people but amazingly people also change with substantial success.  Researchers have found the mere presence of money changes people.  It is also a good idea to have a trusted confidant that can help you vet a potential partnership without emotion).

• Sell on your way up. Entrepreneurs are "hard-wired" to grow businesses. The idea of selling is usually a far-away concept that is considered, but knowing the best time to sell is not intuitive. Don't wait until you can see the peak because chances are your buyers can see it too and will discount the price accordingly. Plan on a full year for the sale process to be completed; if you pull the trigger too late, you may miss.

(Comment:  This is a tough one for most business people.  You need to have a little luck on your side to sell at the right time.  But it's just like investing in the stock market.  You will likely never sell at the peak so don't be greedy.  A business sale should be a win-win for the buyer and seller). 

Overall, I just can't stress enough the importance of carefully considering whether a business partnership is right for you.  I often joke that it is not a matter of "if" but a matter of "when" the partnership will end.  But this is one joke I don't consider to be a laughing matter.  Fox's tale proves it.   

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Today is my last day with the Sullivan & Ward law firm.  This coming Monday I am taking a hop, skip and a jump over to the law firm of Brick Gentry, P.C. in West Des Moines, Iowa.  This is actually almost literally true as the Brick Gentry law firm is located across the parking lot just to the west of my current office location. 

It is difficult to leave my friends at the Sullivan & Ward firm but I am excited by this new opportunity.  Brick Gentry is a growing law firm with an excellent reputation in the Des Moines legal community for over 40 years.  The firm now consists of approximately twenty-five lawyers practicing in a wide range of areas including business law, municipal law, health care law, employment law, litigation and real estate.   

I'll join the firm as a shareholder and continue to work with my current business law clients and litigation matters.  Rush on Business will also continue although you will notice some changes to the links and contact information on the blog in the next couple of days. 

My new contact information is:

Rush Nigut, Brick Gentry, P.C., 6701 Westown Parkway, Suite 100, West Des Moines, IA 50266.  Phone:  515-274-1450; Fax:  515-274-1488; email:  rush.nigut@brickgentrylaw.com

Thank you again to all of you that read this blog.  I appreciate your support and look forward to this next step in the journey.  Stay tuned for more because I have a few plans ahead to mix it up and enhance the blog.  I'll need to settled in but I am looking forward to working on some new challenges very soon. 

photo on flickr by phxpma

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Here's some great tips for new small businesses.  Some terrific advice.  The top ten tips as listed:

1. Save up as much money as possible before starting.
2. Start on a shoestring.
3. Protect your personal assets.
4. Understand how--and if--you will make a profit.
5. Make a business plan, no matter how short.
6. Get and keep a competitive edge.
7. Put all agreements in writing.
8. Hire and keep good people.
9. Pay attention to the legal status of your workers.
10. Pay your bills early and your taxes on time. 

I especially appreciate the emphais placed on paying your payroll taxes on time, particularly the portion you withhold from your employees' wages. (See the commentary on No. 10).  It is critically important to understand that a corporation or LLC will not protect you from personal liability in the event these taxes are not paid.  (For an example, see a post from my favorite blogging accountant, Joe Kristan).

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As a blogger you may want to read this post from the Write Stuff on how to protect your online reputation. 

The post discusses how several employees have been fired from their jobs for writing controversial blog posts including a Web designer that shared stories and opinions about co-workers on a personal blog, an airline attendant who posted photos of herself in an empty jet, and the former CNN reporter who published opinionated entries on his blog.

As pointed out:

In each instance, the blogger’s justifications and legal arguments may be compelling. But that doesn’t change the fact that they all have one thing in common: Termination from lucrative positions that permanently clouds their employment histories.

The post goes on to give some great reminders including

• Blog as if your employer is watching and behave accordingly.
• Don't mix business and personal matters.
• Research company employee handbooks and/or consult HR before blogging.
• Consider what you stand to gain against what you stand to lose.
• If you are monetizing your blog check your company's conflict of interest policy.
• Blog truthfully and accurately.

Above all, whether you are blogging on a personal or business blog, you must be cognizant of whether your words and actions could damage and/or embarass your employer.  If so, you shouldn't be surprised when you receive your pink slip. 

And also always remember the shortest corporate blogging policy:  "Be professional".

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I don't know a single employer that can't use some good interview tips.  Fortunately for us Ohio Employer attorney Jon Hyman shares how to avoid hidden interview traps  and common stereotypes to avoid during job interviews.

These are great posts so be sure to check them out.

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The Electronic Discovery Blog of K & L Gates has an informative post on a recent electronic discovery decision out of the Northern District of Georgia. 

In the case the court found that deleted emails were not reasonably accessible and the defendant had no duty to search backup tapes for emails of a sexual nature.

Lessons from this decision:

1. DIscovery requests for emails should be relevent, specific and limited by time, sender and recipient.
2. Following a written document retention and destruction schedule can prevent spoilation sanctions.
3. Plaintiffs should request company-wide email perservation and not rely solely on the fact litigation has commenced.  Requests should also include the names of individuals from whom you want the emails.
4. If the costs of retrieving emails on backup tapes are too high, judges are reluctant to order production.

Read the entire decision here.

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Brian Honnold of Professional Solutions Insurance Services shares important information on IowaBiz that every retailer should know about their insurance coverage when you build out your new retail space in your local mall or strip center.

If you don't fully check out your coverages chances are you will be sorry.

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As disclosed in the last post the new amended FTC rule concerning franchise disclosure documents requires franchisors to update their UFOC by no later than July 1, 2008.  After July 1, 2008, franchisors must comply with the new FTC rule only.  Currently, franchisors may comply with either the former rule or the new rule.

Here are some key differences between the former rule and the new rule:

• Use of unaudited financial statements.  Start-up franchisors may phase-in the use of audited financial statements.  In this case the franchisor must clearly and conspicuously disclose that the franchise has not been in business for three or more years and cannot include all required financial statements.  (There may still be requirements to submit audited opening balance sheets in registration states).  Franchisees should make sure to review the financials carefully as always.
• Financial Statements.  The FTC will allow the use of financial statements prepared according to U.S. generally accepted accounting principles ("GAAP").  There must be separate audited financial statements for any parent that "commits to perform post-sale obligations for the franchisor or guarantees the franchisor's obligations" in the disclosure document.
• No Broker Disclosures.  The Amended FTC rule eliminates the broker disclosure requirement.  However, the broker will need to be listed on the Receipt Page because the Receipt Page requires the franchisor to identify all "franchise sellers".
• Litigation.  Franchisors will be required to disclose material franchisor-initiated litigation against its franchisees.  The rule will be more lenient as a franchisor will only have to disclose actions that the franchisor filed during its last fiscal year - not the last 10 years. Further,  a full description of the case will not be necessary.  If a counterclaim is filed against a franchisee the disclosure will need to be treated as any other franchisee-initiated action and the regular, full disclosure will be required.  (Franchisees will need to more fully investigate whether franchisor-initiated litigation occurred whether it is in the disclosure document or not).
• Financial Performance Representations.  The new rule encourages franchisors to provide financial performance representations but it is still voluntary.  Franchisors may provide a more detailed cost and expense analysis which could be helpful for prospective franchisees.  Also, franchisors may provide financial representations based upon a subset that shares the same characteristics. 

There are other differences so be sure to talk with an attorney experienced in franchise matters if you are looking at purchasing a franchise.

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Interested in franchising your business and have an extra 36 minutes? 

You may want to listen to this informative podcast on AllBusiness featuring franchise lawyers Julie Lusthaus and Warren Lewis discuss the pitfalls of the Franchise Disclosure Document (formerly known as the UFOC).

The new amended FTC rule concerning franchise disclosure documents requires franchisors to update their UFOC by no later than July 1, 2008.  After July 1, 2008, franchisors must comply with the new FTC rule only.  Currently, franchisors may comply with either the former rule or the new rule.

Stay tuned for the next post on some of the differences between the new franchise disclosure document and the UFOC.

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Jon simply has one of most informative employment law blogs around.  Here are his highlights of the new regulations:

Except in emergency situations, employees will be required to follow the employer's policy for notification of FMLA leave, eliminating employees' ability under the old regulations to take up to 2 days after an absence begins to notify their employer that they intend to take FMLA leave. This change will greatly improve employers' ability to plan and schedule around employees' medical leaves.

• Employers will be able to directly contact employees' doctors when employers have questions about FMLA medical certification forms that the doctors have filled out. Employers will no longer have to go through the employee as an intermediary, or retain their own doctor to contact the employee's doctor. While this change may have some effect on employee privacy, it will greatly improve the flow of information and streamline the ability of employers to make proper decisions based on full and complete medical information. This rule will also eliminate the expense and burden of companies having to retain their own doctors simply to ensure that a form is properly filled out.
• To employers' dismay, the regulations do not change the time increments in which employees can take intermittent leave, but do require that an employee using intermittent leave use the employer's regular call in procedure except in emergencies. Thus, employees will still be able to take intermittent leave in very short increments, continuing for employers the administrative nightmare of intermittent leave, albeit with some additional notice.
• Employers will be entitled to require employees to obtain certification of FMLA-eligible medical conditions twice a year instead of annually.
• Currently, the clock under which employees accrue their 12 months of service for eligibility has no time limit, even after multiple breaks of service. Thus, if I work for 6 months for a company, and return 10 years later, I am eligible for FMLA leave after another 6 months. The new regulations place a 5-year cap on years of service for calculating eligibility, except for military or childrearing leaves, or where rehiring is covered by a collective bargaining agreement.

Please note that I often find many small employers mistakenly believe they are subject to the FMLA regulations.  Generally, the FMLA covers employers with 50 or more employees, and employees must have worked for the employer for 12 months and for 1,250 hours of service during the previous year to be eligible for FMLA leave.  So be sure not to create a situation where you are responsible for FMLA leave if you are not required to do so.

As always, seek the advice of an employment lawyer in your particular situation.

flickr photo by mahalie

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My reign as the host of Blawg Review is coming to an end.  But never fear, Brett is here!

Next week Mr. Trout keeps the Blawg Review right here in the great state of Iowa.  I guess we will find out whether patent attorneys really do have all the fun.

As for me, I'll get back to some regular business law related posts next week. 

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Welcome to a RAGBRAI inspired Blawg Review.  What is RAGBRAI?  The Register's Annual Great Bicycle Ride Across Iowa is an annual seven-day ride across the state.  Heading into its 36th year, RAGBRAI is the longest, largest and oldest touring bicycle ride in the world.  It's not a race.  It's an experience.   And since Blawg Review is a carnival, nothing says carnival in an uniquely Iowa way like bicycles, spandex, pork chops, pie, frivolity and 10,000 of your closest friends!

The weather in Iowa is frigid this winter.  As the weekend of this Blawg Review approaches Iowans brace for another heavy snow.  Our friend Charlie Longbrief looks at the floor below his stationary bike and dreams of summer.  A person can stand only so many YMCA spinning classes.  He thinks back to his first RAGBRAI as a twenty year old when law school hadn't yet entered his mind and the biggest celebrity on the ride was Oakland Raiders great and Miller Lite spokeman Ben Davidson.  Now it's nothing to see the likes of lawyer turned politician John Edwards or the bicycling legend himself, Lance Armstrong.  Armstrong may have participated in the famous New York City Marathon but his heart will always belong with RAGBRAI.  Listen for yourself:

Day 1:  Missouri Valley to Harlan  - 58 miles

This year's ride starts in the river town of Missouri Valley.  While performing the traditional dip of his back tire in the Missouri River, Charlie sees Liz Overton of the Iowa Law Blog who warns him that because of the $350,000 settlement in a 2004 RAGBRAI death bicyclers better beware of the new proposed legislation from the Iowa State Association of Counties.

Unfazed Charlie gets on his bike and sets out on his adventure.  But as he rides off he does ask himself whether Mad Kane is right.  Is it wise to travel with friends particularly where tents are involved?

About 15 miles down the road Charlie takes a break and starts getting an earful from New Yorker Eric Turkewitz about how State Farm has been hit with a RICO lawsuit over alleged sham medical exams.  That hasn't been reported elsewhere and Charlie worries whether State Farm might be doing the same thing in Iowa.  Charlie is so interested he and Eric ride the rest of the way to Harlan together.  Although its only the first day Turkewitz remarks that he agrees with Lance Armstrong . . . RAGBRAI is a hell of lot more fun than his beloved New York City Marathon.

As he pulls into Harlan, Charlie finds himself a little short on cash and heads off to find an ATM.  There he sees John Crenshaw who starts telling him about the biggest scams banks are pulling off everyday. Charlie just shakes his head in agreement as he pays the $2.00 charge to get the money out of the ATM.  After a little angel hair pasta its time to hit the sleeping bag.  There is a big week ahead and unfortunately Charlie isn't twenty any longer.

Day 2:  Harlan to Jefferson - 83 miles

The next morning Charlie wakes up bright and early and sets off for Jefferson.  He has some clients that are buying a business nearby and that reminds him he should heed Larry Staton Jr.'s advice to know what you are getting when you buy a trademark from an existing business.

About half way to Jefferson our city boy is a little mesmerized by the miles and miles of corn.  It makes him wonder whether Farmer David will be able to pay that large patent judgment he now owes Monsanto as reported by the Patent Baristas.

In Scranton, just short of Jefferson, Charlie sees a big group of people gathered in a park off the town's main drag.  There he sees Dan Slater of the WSJ Law Blog who explains that all the hoopla is because the M & M boys have turned their attention to the RAGBRAI water slides because the Naked Cowboy drove them outta of Dodge.  The revelers love it and the log jam causes a very slow ride into Jefferson that evening.

Day 3:  Jefferson to Ames - 56 miles

It's a big day for politicians on the way to Ames, home of Iowa State University.  Barack Obama and John McCain are expected to make appearances today.  Hillary Clinton is here too and keeps talking about how the Florida and Michigan delegates must count.  Obama shrugs it off by saying even his six year old knows it wouldn't be fair to count votes where there was no campaign.  But at least Florida has made significant strides in improving its jury system according to Juries.  While Diane Levin points out voters can learn a lot from the field of negotiation.  Eugene Volokh shares that John Mellencamp may be able to stop McCain from playing his songs after all.

All the political talk has people addressing serious issues on the road today.  Riding on a three person tandum, Leon Gettler of Sox First tells Charlie that Sarbanes-Oxley not only failed to stop the subprime meltdown, it contributed by giving investors the false confidence that they could rely on the law, and not prudence to protect their market holdings.  Scott Greenfield shares that Congress has a pending bill that may immunize banks from paying billions in dollars to a small Plano, Texas company.  Patently-O adds that although DataTreasury is not directly mentioned in the bill it is pretty clear that Section 14 is directed primarily at the company. 

As Charlie rides into Ames he sees Kevin O'Keefe and  Holden Oliver of What About Clients engaged in a heated discussion about whether corporate clients really want a lawyer that blogs.  O'Keefe says yes while Oliver says no.  It then gets a little personal when O'Keefe accuses Oliver of being someone else.  Charlie blames Teri Rasmussen who started the whole thing when she said every client should want a lawyer who blawgs.

Day 4:  Ames to Tama-Toledo - 75 miles

Charlie gets ready to head off to Iowa's version of the twin cities today.  In the pancake breakfast line he meets Connie Crosby who is kind enough to introduce him to David Bilinsky.  David tells Charlie all about how there is a great need for law firms to turn their senior partners into business leaders.  David Maister overhears them and chimes in that one-firm firms are often quite successful.

After an uneventful morning Charlie witnesses an accident on today's route where someone goes to the hospital.  It looks like the rider will be okay but David Harlow of HealthBlawg warns that hospital-acquired infections are a real problem.  Iowa estate lawyer Matt Gardner says that even if the rider makes it through he should still think about the disposition of his bodily remains.

 As he enters Tama (or is it Toledo), John Phillips of the Word on Employment Law almost runs smack into a little beagle that darts in front of him.  The incident causes John to conclude that beagles should no longer be excluded from the Animal Employment Protection Act (AEPA).  John is obviously a little excited about the near miss and starts rambling about how he handled the situation a whole lot better than Roger Clemens handled the accusations from Brian McNamee.

Day 5:  Tama-Toledo to North Liberty - 82 miles

Now that we have passed the mid-way point for this year's ride, everyone is a little loosey-goosey today.  Charlie's cadence starts to pick up as the wind blows with the sweet smell of pork chops.  That could only mean that Mr. Pork Chop is nearby.  As he pulls off the roadside to visit our pork chop hero, Charlie sees that Iowa legal blogger extraordinaire Brett Trout and his band of Iowa legal bloggers are engaging Mr. Pork Chop in a battle of wills to determine who has the loudest pork chop call.  Sadly, while Trout may be Iowa's toughest attorney he is no match for Mr. Pork Chop in this arena.  Hear why:

After a pork chop and a short nap Charlie rides along to catch up with Michael Moore who discusses risk management in employee terminations and explains sometimes the "How" is as important as the "Why".  Pretty soon both of them come across a big party along the roadside.  A crowd is gathered around Dennis Kennedy who apparently is still celebrating his blawgiversary and birthday.  During the party Tulane Law Professor Alan Childress wonders aloud whether any Iowa legal counselors had ever been in trouble like the lawyer that got into trouble with his state bar by trying to talk his way out of a ticket for deer hunting.

Still a little full from his banana cream pie, Charlie and his new friend Charles H. Green ride along at an easy pace discussing that as more and more banks and consumers walk away from loans--and contracts gone bad, we are reminded that legally binding contracts are often only as strong as the morality of those signing them.

That evening after dinner there is lots of entertainment in North Liberty.  At a concert Cathy Gellis proclaims, "I need a husband!"  The revelation causes Jon Hyman to explain what happens when office romances go bad.  But Cynthia Shapiro, who received her RAGBRAI pass from George's Employment Blawg, says you might be able to have that office romance if you know a few secrets.  When Jennifer Jaskolka-Brown overhears them she warns them that email has made it much easier to collect damaging evidence in divorce cases.

Day 6:  North Liberty to Tipton - 62 miles

Charlie decides to join the Lance Armstrong peloton this morning for some fun.  As you might expect with Armstrong the ride is a little faster paced today.  There are several others brave enough to join the pack this morning:

• Colin Samuels says he'll never say never when Charlie asks if he'll ride again but Colin sure didn't like it when he got lost on the road from Harlan to Jefferson.
• David Lat explains that the only reason he is on the ride is because his playstation didn't arrive on time.
• Daniel Solove says this is more fun than being interviewed by Money Magazine.
• Barry Barnett offers tips on how to make the ride easier when you are with him.
• Jackie Dowd contemplates what life would be like without a legal system which is maybe a little profound this late in the ride. 
• Carolyn Elefant is usually Solo by Choice but today she is content to ride with the group especially since she thinks Lance is so cute.
• Anne Reed says sometimes its better to walk this way but Charlie can't imagine a walk across Iowa. 

Day 7: Tipton to LeClaire - 55 miles

The last day!  On his ride to LeClaire, Charlie meets up with the anonymous Editor of Blawg Review to tell him the ride has been worth it.  Together they dip their front tires into the Mississippi River where Charlie quips that normally what happens on RAGBRAI stays on RAGRBRAI, but this year what happens on RAGBRAI ends up on Blawg Review!

 * Legal Disclaimer:  This Blawg Review is a work of fiction.  Names, characters, places, events and incidents either are the product of the author's imagination or are used fictitiously.  Any resemblance to actual persons, living or dead, events or locales is entirely coincidental.

Blawg Review has information about next week’s host, and instructions how to get your blawg posts reviewed in upcoming issues.  My dear friend and fellow Iowa legal blogger Brett Trout takes the helm next week.  We wish him well as he tries to best the excellence of his previous effort on Blawg Review #106.

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 Flickr Photo Credits:  johnedwards2008, wade, blmurch, MNgilen, IaRuth, wade and artandscience

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Next week I will be the host of Blawg Review.  Blawg Review is a blog carnival for anyone interested in law.  I encourage you to submit your posts or any recommendations for posts.  Please follow these submission guidelines. 

If you haven't already done so or are unfamilar with Blawg Review, be sure to take a look at this week's Blawg Review #146 from the Invent Blog.

I have already received some great submissions so I am looking forward to the fun. 

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A .300 batting average may get you into Major League Baseball's Hall of Fame but winning only 30 percent of your employment lawsuits won't do the trick.

See Mark Toth's Manpower blog for the results of the Question of the Week - What % of employment lawsuits are won by employers?  That's right, only 30 percent.

But fortunately there are things an employer can do to increase their chances to win and/or avoid lawsuits.  Jon Hyman offers several suggestions for the proactive employer:

1. Review and update handbooks, policy manuals and forms;
2. Implement a document retention and destruction policy;
3. Implement a harassment training program;
4. Audit job descriptions and employee classification for wage and hour compliance;
5. Properly document all performance problems.

photo on flickr by ewen and donabel

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Chris Moander of the Wisconsin Business Law and Litigation Blog shares his take on the timeless advice that business people can pay for it now . . . or pay for it later.  Chris points out that many business people sadly lump legal services into the "too costly" or "unnecessary" categories when it comes to starting or running a business.  And while good legal services are not cheap it may actually save you in the long run.  Here are some of the downsides for not seeking professional advice as described by Chris:

• Purchased form documents create a false sense of security as “boilerplate” terms are assumed by the entrepreneurs to be “safe,” which is hardly the case. Owners who are not getting along and decide to split may find themselves mired in extremely expensive litigation over a long period of time, all of which could have been avoided by spending a fraction of the litigation costs on quality document drafting by an attorney.
• Technical faults in any number of license or regulatory filings go unnoticed until the company is audited, a criminal investigation occurs, or some other form of litigation begins. The litigation costs dwarf up-front legal costs due to the belief that preventative legal advice was not necessary or worthwhile.
• Buyers and sellers throw together an amalgam of words, believing that the resulting document reflects a mutual understanding. Eventually, one party feels aggrieved and suddenly the so-called contract is revealed as imprecise and nebulous…and so costly litigation commences.

My favorite blogging CPA, Joe Kristan, also shares similar advice over on IowaBiz.com.  Joe's moral?

When you mess with the ownership of your business, it's a lot cheaper to call a business lawyer and a tax guy before you do the deal; it costs a lot more to repair a deal than to do it right in the first place. 

Focus on doing it right the first time.  You will never regret it.

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Terri Rasmussen of the Ohio Practical Business Law Counsel blog says that every client should want a lawyer that blogs.  As you might guess, I agree. 

Why is it important, you ask?  Terri shares her thoughts (with some comments by me):

1. Knowledgeable Entrepreneur.  The blogging lawyer thinks in broader terms about what they want to know and what they can offer to clients.
2. Communication 101.  Connecting in a simple, straight-forward manner is key.
3. Authenticy and Real Voice.  You get to see the personality of the lawyer. 
4. Quality and Competence.  There is some ability to assess the quality and competence of the lawyer you are thinking about hiring.  No way to do that with a yellow pages ad.  This is where Terri makes perhaps her best point.  Any lawyer that is willing to put themselves out there and open up to scrutiny ought to be high on the list of any client.
5. Commitment to the Law Made Practical.  Most clients want to deal with a lawyer that just isn't in it for the money.  Why not consider a blogging lawyer that not only spends their spares time writing but also GIVES AWAY practical information to help people?  Blogging lawyers care.

Like Terri, I strive to have fun and help people through my blog and there is no question it has made me a much more effective lawyer.  Blogging is an educational process.  Not just for the reader but especially for the writer.  Without blogging I would never get to learn from great lawyers like Terri.

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It's always nice when people say great things about you but I am particularly humbled by a recent post from What About Clients?  WAC? is one of the great blogs (and I do mean great as evidenced by their award as the Best All Business Blog for 2007 by the ABA).  I respect Dan Hull and his gang for their absolute passion to delivering superior customer service.  WAC? is really just an extension of that passion.  As a young lawyer it was drilled into me that you do whatever it takes to serve clients and even a little bit more.  It's apparent Dan Hull lives that motto every day - 24/7.

But now there is a little pressure for the Blawg Review on February 18th.  Between WAC? and the comments from the wildly popular Iowa patent attorney Brett Trout I better not disappoint.

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When our law firm started the Iowa Law Blog, I had high hopes despite the fact that I knew a firm-wide blog would not be easy.  But I saw what Stark and Stark had created with their New Jersey Law Blog and knew it could be done.

I don't know if you have noticed lately but Sullivan & Ward's Iowa Law Blog really seems to be catching its stride.  Three blogging faithfuls (Matt Gardner, Jennifer Jaskolka-Brown and Liz Overton) are creating a wealth of information in niche topics of Iowa law including weath and estate planning, family law and employment law.   Here are some of their great posts this past week:

• What is Probate for an Iowa Estate?
• Full Disclosure Required in Prenuptial Agreements
• You're Fired

Plus we officially (finally) made the I list.   Thanks to Chris Punke for that great widget.  Now I just need to get it on the blog.

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I have often stressed the need for business people to follow corporate formalities and keep their corporations or limited liability companies up-to-date.  However, the recent decision impacting builders from the Iowa Supreme Court makes it significantly more important for builders and other contractors to do so.

The Iowa Supreme Court ruling essentially says that builders must provide a 15-year implied warranty for their work.  Fifteen years is a long time.  If a builder were to let their corporate entity lapse it could mean the builder would be personally liable if a lawsuit were to occur.  Same for other contractors who are likely to be pulled into lawsuits for work they performed as subcontractors.

Here are some basic tips on how to make sure your corporate entity stays viable:

1. Hold regular board of director and shareholder meetings in accordance with the bylaws.
2. Document those meetings with meeting minutes.
3. Observe corporate formalities (e.g. segregating corporate assets from personal assets; adhering to the bylaws, etc.)
4. File biennial reports with the Iowa Secretary of State.

Another tip would be that if you intend to dissolve or shut down a corporate entity you should follow the steps to publish notice of the dissolution as set forth in the Iowa Code.  This could allow the dissolved corporate entity to avoid certain claims that are not commenced within three years of the publication of the notice.

As always, be sure to seek the advice of your business lawyer if you have any questions in your specific situation.

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My friend and law partner Matt Gardner has an excellent summary on Sullivan & Ward's Iowa Law Blog about the crushing blow handed down to home builders this past Friday by the Iowa Supreme Court. 

The ruling holds builders responsible to subsequent owners for defective conditions.  The old law was caveat emptor or "buyer beware".  The Court noted that public policy justifications support further erosion of the doctrine of caveat emptor.  The purpose of the rule is to ensure that innocent home buyers are protected from latent defects.  The court said subsequent purchasers are in no better position to discover those defects than the original purchaser.  "Builders should be accountable for their work" quoted the court.

The new law might become known as the Home Builders' Attorneys Equal Employment Act (HBAEEA).  It seems inevitable more lawsuits will occur against builders because of the Court's interpretation.  Great if you are a homeowner but very bad for builders.

Read the full opinion here.

photo on flickr by pdz house

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Did you know that women are starting businesses at twice the rate of men? 

Check out this interesting video from the Forbes.com Network featuring an unique program from Count Me In for Women's Economic Independence, a provider of micro loans and education for women entrepreneurs.   The non-profit organization's goal is to inspire one million women to reach $1 million in revenues by 2010. 

For more information be sure to visit the Make Mine a Million Web site.  It's a great concept that Iowa's women business owners should investigate more closely to see what opportunities are available. 

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 I often tell clients it is important to establish relationships with at least four individuals when they start a business:

• Lawyer
• Accountant
• Banker
• Insurance Agent

But in order to have a starting five we need to add a fifth professional.  Who would I add?  How about a marketer? 

But the real reason I wrote this post was so I could shamelessly plug the best team in Iowa.  The Drake Bulldogs basketball team has now moved to 19-1 with a hard fought win over Creighton last night.  The 16th-ranked Bulldogs are clutch this year and have found ways to win at the end of the close games.  Excellent free throw shooting never hurts and last night was no different.  It was a great crowd and great fun.  If you get a chance be sure to catch a game this magical season.

It's been a long time Drake fans had this much to cheer about.  Go Bulldogs!

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When searching my feed reader last night I ran into this distressful thread on BlueMauMau.org, a pro-franchisee Web site.  In the comments below the initial post, franchise lawyer Richard Solomon says he is giving up on trying to help franchisees.  Richard says,

I'm about ready to climb down off the due diligence cross and go do something less stressful, like crisis management counseling. In crisis management, people really do want help and are willing to provide a budget for it.

I'll admit it.  There have been times where I have felt the same way as Richard when trying to assist franchisees in reviewing their franchise agreement and conducting due diligence.  There are times when a franchisee is going to do the deal come hell or high water.  But at this point I am not willing to stop trying to help these people. 

I think Richard's point is simple.  Isn't it unbelievable that people would be willing to invest their life savings in a franchise business but refuse to spend a little time and small expense to properly conduct due diligence?

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.  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 their deal.

I have been very fortunate to work with prospective franchisees that are serious about their due diligence.   Recently I had a prospective franchisee client that encountered all the classic warning signs from a franchisor.  I know this client felt disappointed the deal didn't go through but I was sure proud they were willing to walk away.  Only someone serious about their business would have done so.   

So don't give up Richard (and other franchisee lawyers).  It takes just one client to make you see this is all worthwhile and they definitely need our help.

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Under a new Iowa immigration bill, employers that repeatedly employ illegal aliens would face civil penalties of up to $10,000 and up to a year in jail under legislation being proposed in the legislature.  Employers would be exempt from penalties if they seek verification of a worker's citizenship status through the Department of Homeland Security's verification system.  But many employers complain that system is dreadfully slow.

House File 2026 has sparked significant debate.  Democrats claim it is a human rights issue.  Republicans claim it is pure politics in an election year and intended to protect unions while harming non-unionized independent contractors.   The Hispanic community in particular has great fears that jobs will no longer be available in Iowa under the new law.

This bill may have the biggest impact on Iowa businesses this legislative season.  Read  House File 2026 here.

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Employee lawsuits are continually on the rise.  So how do you keep your employees happy and stay out of court?

While it is technically not a "legal requirement" I have long suggested that treating employees with respect is the best way to avoid employee lawsuits.  Building on this thought I recently saw a couple of excellent posts from employment lawyers John Phillips and Jon Hyman concerning fairness as the Golden Rule of Employee Relations.

Treating others as you want to be treated is a concept that even young children understand.  But while the concept is easily understandable employers still have a difficult time being fair.  To this end, Phillips offers five areas of fairness where employers should concentrate their efforts:

1. Appearance: does an employment action appear fair to an outside observer?
2. Counseling: except in the most egregious of cases, was the employee told of a deficiency and given a chance to correct it?
3. Consistency: are similar disciplinary problems handled similarly and to the same degree?
4. Documentation: can you point to a performance review, written warning, a note in a personnel file, or some other contemporaneous piece of paper that supports the personnel decision?
5. Rationale: was the employee given a reason for the decision, and was it the real reason?

As Hyman points out, juries are big on fairness.  It is critical to remember that in a jury trial your jurors are likely to be employees rather than employers.  Being fair will not only reduce the employment claims against you but increase your chances of success if you are sued.

So next time you deal with an employee disciplinary situation be sure to remember the Golden Rule of Employee Relations.  It will make a difference.

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The Iowa Farm Bureau is sponsoring a business development seminar on February 7, 2008 at the Iowa Farm Bureau Auditorium in West Des Moines, Iowa.  (I didn't see a start time on the Web site but for further information you should contact 1-800-254-9670).

The Renew Rural Iowa is an Iowa Farm Bureau program that combines an innovative mentoring model for entrepreneurs with a rural vitality investment fund.  The program is designed to enhance the enterprise value of existing or new small town businesses to encourage their reinvestment within the community, thereby increasing the overall wealth of that community.  The program combines the relationships, network and resources of IFBF with the business mentoring muscle of Cedar Rapids-based Entrepreneurial Development Center, Inc. (EDC).

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Read this post from Indiana lawyer Sam Hasler to find out why it is so important to respond promptly and appropriately to sexual harassment complaints. 

In the case mentioned by Sam, Chili's Grill and Bar escaped liability even though the employee established a prima facie case of harassment in her lawsuit.

Sam also has some great advice:  "Having a harassment policy is not enough. Having a that policy in an employee handbook is not enough. Having the policy and enforcing the policy is the key to success."

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I've said it before (and also here) but it bears repeating that wage and hour class actions are booming.  Just this past week Iowa's Casey's General Stores was hit with a wage and hour lawsuit with allegedly more than $5 million at stake.  If that isn't enough to convince you to examine whether your company has vulnerabilities you better read this informative blog post from Mark Toth of Manpower.

The 4th Annual Workplace Class Action report from Seyfarth Shaw shows the volume of wage and hour class action continues to grow exponentially.  As the report's editor says, “identifying, addressing, and remediating class action vulnerabilities” should be at the top of every employer’s list of 2008 priorities. 

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This post from the New York Business Divorce Blog will make you think twice before becoming involved in a business with your romantic partner.

I recently wrote on the firm's Iowa Law Blog that one way to avoid a volatile business divorce is to draft and enter into an effective buy-sell agreement with your partner(s).  This is true whether you are entering into a business arrangement with your spouse, significant other or friend down the street.  Rarely do partner spouses enter into buy-sell agreements.  Like prenuptial agreements, it may not always be comfortable to form a buy-sell agreement  with a spouse.  But it is advisable nonetheless.

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Today I'll be pinch hitting for Brett Trout at the Des Moines Partnership's Biz Networking Luncheon.  I will cover how to stop doing things online that will land you into court.  The best part of this presentation is I get Brett's material.  I hope to see you there today.

This event will be held in the Arthur Davis room at the Greater Des Moines Partnership on January 15th. The luncheon will begin at noon and will conclude at 1:30. The cost of the event is $10 for members and $12 for non-members.  To RSVP for the event, please email Cathy Spenceri at caspenceri@dmacc.edu . We hope to see you there!

photo on flickr by jimcchou

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This Wednesday morning (Jan. 16th) I will speak at the IowaBiz breakfast series on the How To Avoid Legal Surprises for Your Company.  The presentation begins at 7:30 a.m. at the Professional Solutions Insurance Services' Building, 14001 University Avenue, Clive, Iowa.

Thanks to our hosts from Professional Solutions Insurance Services.  So far, the series has been fantastic including talks from Drew McLellan, Shirley Poertner, Brian Honnold and Mitch Matthews.

I hope to see you there.

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The Pennsylvania Employment Law Blog posts on how Lockheed's failure to take discrimination complaints seriously led to liability. 

Want to know how to avoid employment lawsuits?  See one of my more popular posts: 

 Seven ways to avoid employment lawsuits. 

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If you are looking at a franchise opportunity perhaps you should beware if your prospective franchisor says the following:

1. You don't need a lawyer to review the agreement. 
2. I would prefer you don't talk with the other franchisees.  You should only talk with me.
3. We won't negotiate any terms.
4. Trust us, we can't (and won't) change the agreement but we won't really hold you to that provision anyway.

Like many people you may be considering an investment of your retirement savings in a franchise.  You owe it to yourself to do the best job possible investigating that franchise and performing the most due diligence possible.  That includes hiring franchisee counsel to review the franchise agreement and disclosure document and talking with as many franchisees as possible.  Some franchisors won't negotiate but many will consider your needs.  And never, I mean NEVER, believe the franchisor that tells you they won't hold you to the terms of their written agreement.  You can be assured that the franchisor's lawyer in any lawsuit will never acknowledge that statement was ever made and most franchise agreements are written so that any such statement could not be used as evidence anyway.

Trust your gut.  Don't believe the hype.  Be willing to walk.

photo on flickr by Picture Perfect Pose.

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Roger Clemens has sued his former trainer for defamation in an attempt to regain his Hall of Fame reputation.  The WSJ Law Blog has a great story on the lawsuit.

The interesting question will be whether the trainer will file a counterclaim for defamation.  Why not?  McNamee now has to protect his reputation and Clemens has the deeper pockets.  At this point McNamee won't have anything to lose either.  Public opinion for baseball players after the Mitchell Report is perhaps only a little higher than the public's views of lawyers.

See my thoughts on the Mitchell Report here.

Photo on flickr by dethtrip99

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Iowa trial lawyer Joe Gunderson was featured this past week during the Iowa Caucus on the Wall Street Journal Law Blog.   Joe had the following comments regarding what it's like to have Iowa in the national spotlight:

It’s fabulous because we get a rejuvenated civics lesson every four years. Our newspapers for the past few months have been filled with the political process and the issues of the day. The candidates get asked questions in Osceola about the Iraq war. In Orange City, they get asked about ethanol. In Fort Madison, they get asked about Social Security and Medicare. Just this morning, I was driving in downtown Des Moines and there were college students standing outside, underdressed in 10 degree weather, smiling and waving Obama signs. How could you be cynical about politics when you see that in the morning while driving to work.

It was kind of funny that the Law Blog expressed surprise Gunderson was a trial lawyer AND chaired President Bush's Iowa campaign.  Only in Iowa, right?  Republican trial lawyers and Democrat defense lawyers like Gordon Fischer.   On the Iowa lawyer-advisor side, Joe mentioned Iowa lawyers Doug Gross (Romney) and Jerry Crawford (Clinton) in the story but apparently forgot about the younger Fischer and his advisor role on the Obama campaign.  Gordon accurately projected the huge turnout, which no one expected other than Ann Selzer, and helped lead the Obama campaign to victory. 

There's change happening here in Iowa too.

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Is your business in need of a buy-sell agreement?  Don't know how to get started? 

An excellent resource worth considering is a book from Z. Christopher Mercer called Buy-Sell Agreements:  Ticking Time Bombs or Reasonable Solutions?   A blog post from Mercer worth reading also raises an excellent point regarding buy-sell agreements:

If you are in the process of creating a buy-sell agreement, be sure that the document actually reflects the agreement of the parties to the critical business and valuation issues that relate to the particular situation.  If you have an existing buy sell agreement, review it to insure that it reflects agreement of the parties on key business and valuation issues that currently pertain to your situation (and not to the situation fifteen years ago when you first signed it!).  In both cases, be sure through review by competent legal counsel, that the agreement appropriately considers legal issues that pertain to your situation.

Seems like common sense but I recently learned of a situation where two owners had drafted their own agreement. (Kudos for at least recognizing the need for it).  The owners agreed upon a valuation.  The problem that arose is that neither owner really understood the valuation they had agreed upon and as their business progressed the valuation did not reflect the realities of their business.  The failure to review and implement an agreement with competent counsel has now resulted in litigation. 

It's also wise to get advice from an accountant or other business valuation expert when creating the buy-sell agreement.  A team approach is often very helpful.

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The Iowa Caucus is this Thursday, January 3rd.  The national media has descended upon us and at least one of my restaurant clients I talked with recently is extremely thankful.  Yesterday, I featured the Democratic candidates and today it's the Republican candidates.  Again, my intent is not to endorse any particular candidate but rather provide a little bit of commentary based upon my observations in the neighborhood. 

Rudy Giuliani - battle tested and has demonstrated his leadership abilities after the terrorist attacks in New York City.  Believes in low taxes and small government.  His stance on abortion and gay rights is opposite the typical Republican.  Personal life is messy.  The fact he campaigned less in Iowa than other candidates will likely hurt his chances for a caucus victory.  See video here.

Mike Huckabee - I first learned about him when he participated in the Little Rock marathon with Iowa's former Governor, Tom Vilsack.  And he hasn't stopped running since.  The time he has spent in Iowa has been worthwhile as he has thrust himself toward the top of the polls.  His down home fits well with Iowa voters.  His race with Mitt Romney has turned ugly at times but Huckabee has done more to help himself than any other candidate in Iowa.  See video here.

John McCain - Des Moines Register endorsement was a big shot in the arm for a campaign that seemed on life support a few months ago.  Iowa and McCain have never truly loved one another perhaps in part because his opposition against ethanol subsidies.  (I doubt he liked our indoor rain forest either).  McCain appeals to Independents and Democrats and could be a tough contender if he were actually to get the nomination.  His experience and public service are second to none.  See video here.

Ron Paul - Probably has the most vocal and ardent supporters of any candidate.  He is not just in favor of smaller government - he is anti-government.  One supporter I know has decided to caucus for the first time to support Ron Paul.  Paul opposed the Iraq war from the start and wants to end the IRS.  Has enjoyed an incredible fund raising effort over the Internet.  See video here.

Mitt Romney -  Earned front runner status in Iowa early.  Incredibly successful in business and managed to turn around the Olympics.  Recently has been dogged by changing positions on social issues.  His speech on his religion did not seem to be particuarly helpful.  Has spent a ton of time in Iowa and second place finish to Huckabee could spell trouble for his campaign.  See video here.

Fred Thompson - entered race later than other contenders.  Conservative and a former actor.  (Sound like anyone else?)  Believes in limited federal government, strong local government and low taxes.  Just doesn't seem to have picked up steam in Iowa.  See video here. 

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Yesterday I received five phone calls and four knocks at the door from several campaigns that are pulling out all the stops to win the Iowa caucus.  With the caucus coming up this Thursday, January 3rd, I wanted to highlight all the major candidates with some video footage of speeches.  Today I will feature the Democrats and tomorrow I will feature the Republicans.  I have added a little bit of commentary on what I observe in my own neighborhood but I am not endorsing any particular candidate. 

Joe Biden - Not considered by many to have a chance but has picked up some key endorsements in my neighborhood - including some republicans.  His affinity for foreign affairs and experience are his biggest assets. View video here.

Hillary Clinton - Either you love her or you don't.  Some in my neighborhood are concerned about her electability in a general election.  If nominated, will it just drudge up the same old issues that haunted Bill Clinton's presidency?  She has tremendous political skills and has some major political endorsements in Iowa.  Leading national polls but Iowa is more of a struggle.  Still running neck and neck with Edwards and Obama.  View video here.

Chris Dodd - His daughter spent the last couple of months in my son's kindergarten class.  An extremely personable and likeable guy.  (I doubt Connecticut voters appreciated the move to Iowa but I admire someone that puts his family first).  Long on experience (33 years in Washington) but short on momentum.  Worked to enact Family and Medical Leave Act.  A class act.  View video here.

John Edwards - probably has the most momentum right now of any democratic candidate.  Spoke to a huge crowd at East High School the other night.  While the polls are extremely close he appears to be gaining and moved ahead in certain polls.  Populist message appears to be resonating with Iowa voters.  Needs a victory in Iowa to continue on.  Those I talk with doubt that second place will be good enough this time.  View video here.

Barack Obama - Has given two of the best speeches of any candidate during the entire campaign.  His inspirational message of hope and change makes him a force to be reckoned with in the caucus.  Position that he was against Iraq war from the beginning sets him a part from the other candidates.  In a virtual tie with Edwards and Clinton for the lead.  Very charismatic.  View video here.

Bill Richardson - A substantial resume and a charming person.  I am not hearing a lot about him.  Vows to bring troops home now. A finish behind Biden or Dodd could spell doom for this campaign.  View video here.

Tomorrow:  The Republicans.

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Mike Sansone and Drew McLellan have developed the I List - a list that showcases the power of blogs in Iowa.  While Mike did a great job of compiling the list, some notable Iowa law blogs are missing from the list including Jennifer Jaskolka-Brown's family law blog, George Davision's Law Blog, Bill Grell of Huber Book & Cortese,  The Yin Blog  and our own Sullivan & Ward Iowa Law Blog. 

Our law firm has continued to recognize the power of blogs and we now have as many active blogs as any other law firm in the state including Rush on Business, Jennifer's blog, and the Iowa Law Blog.  On our Iowa law blog we have had six different lawyers who have posted on topics ranging from employment law to OSHA regulations.  Matt Gardner also had his own Wealth and Estate Planning Blog but now has turned his efforts toward developing our law firm blog.

So here is my list with those law blogs added.

Adam Carroll
Andy Drish
Art Dinkin, CFP, CLU, ChFC
Association of Business & Industry
Babich, Goldman, Cashatt & Renzo
Barry Pace
BeatCanvas

Bill Grell
Blue Frog Arts
Brett Trout
Bridges Financial
Broom Wizards
C Wenger Group
Carpe Factum
Claire Celsi
Cloud Nine Diamonds
Compass Financial Services
Conference Calls Unlimited
ConverStations
Dave Dreeszen
Des Moines Families
Dickinson, Mackaman, Tyler & Hagen
DMWebLife
Do You Q?
Dr U Fantasy Football
DSM Buzz
Dwebware
Employer Ease
Eric Peterson
Focal Point Multimedia

George Davison
Gift Idea Help
Home Know-it-All
Insight Advertising & Marketing
Iowa Bed & Breakfast Association
Iowa Biz
J. Erik Potter
Jann Freed

Jennifer Jaskolka-Brown
Josh More
Kyle's Cove
Maiers Educational Services
McKee, Vorhees & Sease
McLellan Marketing Group
NCMIC Insurance
Purple Wren
Radio Iowa
REL Productions
Rental Metrics
Rita Perea Consulting
Roth & Company
RSM McGladrey
Ruby's Pub
Runners' Lounge
Rush Nigut
Ryan Rossinick
Simplifive
Snap! Creative Works
Studio 24 Design

Sullivan & Ward's Iowa Law Blog
Swing Station
The Members Group
The Mitchell Group
The Simple Dollar

The Yin Blog
Transition Capital Management
US Rodeo Supply
Victoria Herring
Wade Den Hartog
Wealth With Mortgage
When Words Matter
White Rabbit Group

So don't just copy this list.  Add to it.  I am sure there are more hard working Iowa bloggers that deserve recognition and credit.  Let me know of any you would like to add.

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The Iowa Caucus is approaching quickly.  If you attend campaign rallies for the candidates or listen to TV ads you will almost never hear anything about small business. 

But in reality, America's small businesses are the driver of our economy.  Consider these facts from the Small Business Administration (SBA) as outlined in February 2006:

10. Small businesses make up 99.7 percent of all United States employers.

9. Small businesses create more than 50 percent of the American nonfarm private gross domestic product (GDP).

8. Small patenting firms produce 13 to 14 times more patents per employee than large patenting firms.

7. The more than 24 million small businesses in the United States are located in every community and neighborhood.

6. Small businesses employ 50.1 percent of the United States’s non-farm private sector workers.

5. Home-based businesses account for 53 percent of all small businesses.

4. Small businesses are 97 percent of America’s exporters and produce 26 percent of all export value.

3. United States saw an estimated 580,865 new small firms with employees start-up in the last year measured.

2. There are approximately 4,115,900 minority-owned businesses and 6,492,795 women-owned businesses in the United States, and almost all of them are small businesses.

1. The latest figures show that small business creates 65 percent or more of America’s net new jobs.

I encourage you to find out where the candidates stand on America's small business issues.  It's an issue vital to our economy.  You are unlikely to find an express position regarding small business on any of the major candidates' Web sites, so you will need to ask them.  Seriously, can anyone tell me where their candidates stands on SPECIFIC small business issues? 

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A Des Moines Register article discusses how many bosses are unwilling to allow night shift workers to caucus.  Understandably this makes politically active employees a little upset.  The article quotes a Medicom employee who said,

"It made me so furious. I raised such a fit I'm surprised they didn't send me home."

It's true that Iowa law does not require employers to give employees time off so they can caucus.  But as I have pointed out before it is my view that treating employees with respect is one of the best ways to avoid employee lawsuits.  An employer should ask themselves whether a few hours away from work every four years would really hurt production?  But think of the goodwill that could occur by respecting the employees' desire to participate in the political process.  Do you think you might have more committed and loyal employees?

At least the Des Moines Police Department gets it because police officers working on the night shift will have the opportunity to caucus provided they have made the request in advance and calls for service allow them to do it.

Update:  The Des Moines Register reported in its Sunday edition that the Medicom worker described above will now be allowed to participate in the caucus. 

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With 2008 fast approaching perhaps you are considering the pursuit of the American Dream to own your own business.  But where do you start?  Here are some helpful legal tips to consider before you start your Iowa business:

1. Find out the availability of your proposed business name. You can do a quick search on the Iowa Secretary of State Web site to see whether your name is available. If the name is available you may want to reserve the name through the Secretary of State but you are not required to do so before forming your business entity. You may also want to consider whether any company outside Iowa has your business name. You can conduct a free search on the U.S. Patent and Trademark Office or use a paid service to research trademarks nationwide. It is also a good idea to check whether someone has your proposed Internet domain name.  An intellectual property attorney could also be very helpful in this process.

2. Pick a Place to Incorporate or Form a Limited Liability Company (LLC). I am sometimes asked whether an Iowa company should incorporate or form an LLC in another state such as Delaware or Nevada. In general, an Iowa small business is probably better off incorporating or forming an LLC here in Iowa. The filing fees are low and the ongoing fees for registering the business in Iowa are among the lowest in the country. (Only $30.00 every two years if you file your biennial report online).

3. Choose the Shareholders and Directors. If you are forming a corporation who will be the shareholders in the company?  If it's an LLC, who are the members? These are the owners of the company.  Determine how much capital you will need. Do you have enough capital or access to capital in order to start the business on your own? If not you may need to consider other investors.

In most cases the shareholders of the small business are also the directors. Do you want outside directors? There may be good reasons to have outside directors but think this over carefully before you elect to do so.  Electing outside directors may limit your control over the business.

3. Create your Articles of Incorporation or Organization. The articles of incorporation (corp) or organization (LLC) act as a charter to start your new business in Iowa. The filing fee with the Secretary of State is currently $50.00. It is generally a good idea to have an Iowa business lawyer prepare your Articles of Incorporation or Organization and other corporate documents.

4. Prepare corporate bylaws or operating agreement. The bylaws (corp) or operating agreement (LLC) set out the operating standards and procedures the business company will follow.

5.Create meeting minutes, resolutions and agreements. It is a good idea to document the initial meeting minutes of the company including the meetings of the shareholders and directors or the members. At this time, you will elect the officers of the company including the president, vice-president, secretary and treasurer. You will also issue stock (corp) or membership (LLC) certificates at this stage. If you have multiple shareholders or members you will also likely need a buy-sell agreement.

6. Obtain your employer identification number (EIN). Your corporation or LLC will need to obtain an employer identification number from the IRS. This can be done through a convenient online application process.

7. Elect your tax status.  There are several different options for how your corporation or LLC could be taxed.  Make sure to talk with both your accountant and lawyer about which form of business entity is the most advantageous for your situation.

8. Open a bank account. You will typically need the EIN and a banking resolution in order to do this.

9. Obtain any licenses and permits. You will need to check the federal, state and local regulations to determine whether you need and licenses or permits to operate your business.

10. Follow the corporate formalties of running a business. In Iowa, this includes registering your business every two years with the Secretary of State's office. You also need to do corporate minutes at least on an annual basis including the election of officers and directors. Sign all documentation using your title as a corporate officer. You will also want to minimize or avoid situations where limited liability is not an absolute.

For more information on setting up an Iowa corporation or LLC please visit my small business formation page. 

photo on flickr by MargaretFun.

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An Iowa man who worked with Catfish Bend Casinos in Burlington was fired for posting a Dilbert cartoon on the office bulletin board.  Apparently the boss didn't appreciate the comparison to a drunken lemur.

Dilbert creater, Scott Adams, offers this advice:

If you intend to mock your boss with Dilbert comics, the trick is in knowing which comics to pick. Apparently there is a fine line between posting a comic that criticizes a particular policy decision, versus a comic that calls your boss an inebriated prosimian. (Thank you, Wikipedia.) 

It's important to remember that humor is in the eye of the beholder.   If humor is used too much or at the wrong time in the workplace bad things can happen.  A hostile work environment occurs when jokes, suggestive remarks, pictures, cartoons, or sexually, discriminatory or otherwise derogatory comments alter the circumstances of the workplace.

On the other hand, humor in the workplace is important to job satisfaction.  I really can't imagine working in a place without some humor here and there.  But at the very least it's best to still maintain professionalism and have a good sense of how people will react to your humor.  Calling your boss a drunken lemur?   Even Adams agrees that one was a little more cutting than the typical Dilbert strip.  In an interview with the Register reporter he said, "I can see how this one may have been a tad bit over the line."

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Abe Lincoln, Freedom Fighter (1978)
Abe: I don't know about this politician business.
Judge: What do you mean by that?
Abe: If I have to sacrifice my integrity for politics, I guess I'll just have to stay a lawyer! 

Up to this point I have avoided blogging on politics and the Iowa caucus.  It's a no win situation for me.  I have clients on both sides of the aisle and a policy not to debate politics with clients has served me well.    Besides, Iowa lawyers like Gordon Fischer and Ted Sporer do a tremendous job of covering politics with their blogs so I'll leave the debate to the experts.

But one campaign strategy surprised me.  Many of the candidates are lawyers.  But as Joe Kristan recently pointed out, lawyers are not exactly the apple of the public's eye.  It's probably part of the reason why lawyer candidates tend to rarely emphasize their legal careers.  But one candidate has decided to go against the grain.  Trial lawyer extraordinaire John Edwards is campaigning in Iowa today with his most famous client.

As detailed in his book, Four Trials, Edwards obtained a $25 million judgment on behalf of Valerie Lakey and her parents.  Valerie nearly lost her life when she was disemboweled by a swimming pool drain that was incorrectly attached.  He has sent out mailings featuring the Lakeys and is now campaigning with them.  He also unabashedly points to his career as a trial lawyer as an example of how he will stand up and fight against corporate and special interests.    It's a bold but risky move given the public opinion of trial lawyers in particular.  But I am proud of Edwards for not shying away from his tremendous career as a lawyer. 

While the image of lawyers could be improved, it should start with lawyers being proud of the profession they have chosen.  We offer society a valuable and important service.  My thanks goes to lawyers like Edwards who aren't afraid to talk about it.   

Photo on flickr by alexdecarvalho  

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The New York Knicks sexual harassment case provides some great lessons on employment law.  Previously I touched on the Knicks case in explaining how companies could avoid sexual harassment claims.  Now the case has been settled and there are additional lessons to learn.

Frank Steinberg of the New Jersey Employment Law Blog explains the importance of "fee-shifting" in employment law discrimination cases.  In these cases the loser pays the attorneys' fees of the other side.  This places a great deal of pressure on the defendants to consider settlement.  As Frank said,

It is quite possible that, depending on the cases, the fees could be greater than the damages awarded to the plaintiff.  Thus, a realistic evaluation of the likelihood of complete success should always be a part of the defense strategy and should be evaluated on a continuing basis. 

You should always consider business strategies for litigation.  I encourage you to approach litigation dispassionately and consider the best business approach to ending your dispute.  Sometimes the best business approach means litigation is necessary but only after you have carefully evaluated all aspects of your case to determine how to prevail, or at the very least, extract yourself from the litigation under the most favorable settlement terms.

Or, if you got your brains beat in like the Knicks did settlement is never a bad option.

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There's no business like show business, but there are several businesses like accounting.  David Letterman.

Joe Kristan shows he is really in the holiday spirit over on the Roth & Company Tax Update blog when he followed up on tax professor James Maule's post that every profession has its good and bad.  I know a lot of people don't like lawyers but weasels AND black widow spiders? 

Of course Joe proves there is no accounting for taste. 

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The Mitchell Report was released on December 13, 2007.  For baseball, it's just another black mark on an era now known as the "Steriod Era". 

But what was accomplished by the report?  Did we really need the report to determine steriod use was (and apparently still is) widespread in major league baseball? 

The report outed many of the big names in the sport but the reality is much of the report would not hold up in a court of law.  Many of the allegations are based upon hearsay and shaky evidence.  Besides it's incomplete.  Those mentioned weren't the only ones who allegedly took performance enhancing drugs in major league baseball.  Is it fair to name names under these circumstances?  

I find the hypocrisy in all of this amazing.   MLB glorified the pursuit of the single season home run mark and fans returned in droves to stadiums across the country. (Recall that baseball was practically dead before Sosa and McGwire did their magic due to the strike in 1994-95).  Selig apparently called the Mitchell report "a call to action".  Sorry Commissioner, but the call to action rang a few years ago.

I also find it particularly interesting that Rafael Palmeiro testified under oath before Congress that he did not take steriods - shortly before he tested positive for steroid use. Was he prosecuted? No. In fact, the President of the United States (and former Texas Rangers owner while Palmeiro played there) supported his friend 100 percent. Bush reaffirmed his belief that Palmeiro did not take steriods even after a positive test!

Barry Bonds?  Indicted despite no positive tests.

Mitchell says everyone should concentrate on his recommendations rather than focus on the names.  Unfortunately he knows that is not possible and it is disingenuous to indicate otherwise.  And if he truly recommends a full pardon for all included in the report why name names.  Ultimately I think the Mitchell report just excentuates major league baseball's mishandling of this whole situation.  This report just hurts baseball.  And I know others agree.

MLB should keep in mind this quote from Yogi Berra,  "If the fans don't come to the ball park, you can't stop them."  The fans deserve better than this report offers.  Stop with the mud slinging and solve the problem.  The report wasn't necessary in the process.  We all know the problem.  It's up to the commissioner and the players' union to do something about it.

 photo on flickr by jason michael.

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I am attending the Iowa State Bar Association's eCommerce seminar tomorrow.  The man formerly known as the sixth best law blogger in the world is one of the presenters.  I am looking forward to Brett's talk as he shares his Vegas Blogworld speech with the audience.

It got me thinking a little bit about how to improve presentations.  Recently I have been to a rash of presentations where the speakers throw up their power point and then talk directly to the screen rather than the audience.  It's unbelievably annoying.  It's death by power point.

The best presenters I know are terrific storytellers.  The best speech I have heard over the past year came from Charlie Anderson who delivered a terrific story about his company at a SEMEE event earlier this year.  He was the only presenter that evening who talked without a power point.  His passion was evident.  No slides were necessary.

For great advice on making the right presentation be sure to check out how I made my presentations little better.  This comment about slides from the post is particularly insightful:

Let the slide serve your message, rather than letting you (and your personality and timing) be governed by the slide. 

Thanks to Matthew Homann's [non]billable hour for the link to the presentation post.

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Iowa accountant Joe Kristan of Roth and Company shares some year-end tax planning ideas over on IowaBiz.com. 

It's a good idea to visit your accountant now (if you haven't already) to determine if there is anything you can do to improve your position come April. 

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Iowa has never been the hot bed for franchisors but it seems as though some Iowa franchisors are really picking up steam.  According to the Des Moines Register this morning Chocolaterie Stam stores have expanded to Ames, Chapel Hill N.C., and Wauwatosa, Wisconsin.  Upcoming stores including Minneapolis and Steamboat Springs (that would be my personal favorite) and also is contemplating stores in Kansas City or West Des Moines.