10 Legal Mistakes Most Businesses Make

10 Legal Mistakes Most Businesses Make

IceMiller Legal Counsel

To Start:

• Avoid mistakes by learning from those made by others
• The common thread – failure or refusal to plan
• Legal "health" requires check-ups and basic maintenance

1. Failure to have a Succession Plan in place

• Do it now!
• Write it down.
• Stakeholders need that certainty.
  • Lack of certainty/stability impacts the success of a business.
• Buy-sell provisions are a bare minimum.

2. Shoot First, Ask Questions later with HR decisions

• HR decisions are inherently dangerous
• Law in the area is constantly evolving
• Low-hanging fruit: cost of addressing is generally peanuts compared to the cost of a misstep
• Hiring environment adds a new element to risk of getting rid of an employee

3. Failure to Protect Intellectual Property

• Every business is an "IP" business on some level
• There are both offensive and defensive reasons to protect IP
• Create assets/value. Conversely, avoids costly mistakes

4. Failure to Lock Up Employees

• Key components
  • Noncompete
  • Nonsolicitation
  • Confidentiality
  • Assignment of inventions
• Failure to address leaves the business vulnerable to competitors
• Can provide "weapon" in employment disputes

5. Allowing “Fairness” or “Justice” to drive litigation decision

• Principles cost $$$$
• Life (and litigation) is unfair

6. Fall into a Commercial Contract Malaise

• Don't be fatalistic about contracts – you often can get what you want
  • Must redefine expectations
  • Contracts, like life and litigation, are not fair
• Form/template contracts can offer benefits in a cost-effective manner
• Not all business relationships are created equal

7. Employee Incentive Compensation Pitfalls

• We often see the plan does not fit the desired goals of the plan
  • Lower morale is often the perverse result
• Negative tax consequences for employees
• Ownership = entanglements and risks

8. Failure to Prepare for Business Sale

• Don't "fall" into a sale
• It is likely the biggest business event in your professional lifetime
• Preserving value takes effort/strategy
• Missteps can drive down the value
• Distraction is inherent to a deal

9. Failure to Conduct an Annual Review

• Businesses need “Check-ups” just like people
• Maintenance is no accident – it takes careful planning in a systematic fashion

10. Failure to have a disaster plan in place

• Would not have made my shortlist just a few months back
  • Now it is a no-brainer
• Not inherently a "legal" item
  • However, failure to have one can create legal risks

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