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Forget Citibank, Chase and Co., borrow money from people like you and me. Or lend money to people and earn a decent return. All this and more is promised by Prosper.com, the online market place for people to people lending. They claim they have 90,000 members and
$18 million in loans to date. If you go through the listings, you can see a number of business owners trying to borrow startup funds.
Here is a little known secret about limited liability company (LLC) operating agreements: They are often more complex than necessary. Pick up any "standard" operating agreement from the internet or elsewhere and you will see a lot of provisions incomprehensible to a mere mortal. Most of these provisions deal with so called "special allocations" among members of the LLC. "Special allocations" describes a scenario where members of an LLC share profits and losses of the LLC in percentages different from the percentage of ownership in the LLC. When members of an LLC opt for special allocations, the corresponding operating agreement has to incorporate certain tax rules in order to pass muster with the IRS.
Example: A and B each contribute $500 to the LLC and agree to share profits and losses of the LLC equally. Result: No special allocations.
A and B each contribute $500 to the LLC and agree that for the first two years A is to receive 70% of the profits and losses of the LLC and B only 30% of the LLC's profits and losses. Result: Special Allocations.
If you and your fellow members share profits and losses of the LLC in proportion to your membership interests (i.e no special allocations), you don't need any complicated provisions dealing with special allocations.
If you need help with drafting an LLC operating agreement, you should contact a licensed attorney in your area.
How would you like to pay your lawyer $1500 per hour? This is what Greenwich, Connecticut divorce lawyer Gary I. Cohen charged his client (taking into account a $300,000 bonus). As a result, he is now being investigated by Connecticut disciplinary authorities for charging excessive fees and violating the disciplinary rule that
"a lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses" based on factors such as "[t]he time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly."
See here for the full story.
While I would never pay or charge these kinds of fees, if a lawyer can find clients willing to pay and no coercion or misrepresentation is involved whatsoever, I think lawyers should be allowed to charge it.
Buy-sell agreements are like prenuptial agreements for people in business together; Buy-sell agreements set forth what is going to happen when things go wrong and business partners want to, or have to, separate. As with prenuptial agreements, people tend to overlook their importance or simply don't want to deal with the subject; after all, they are in love!
But as Iowa business attorney Rush Nigut points out in his most recent post:
"The time to enter into a buy-sell agreement is at the beginning of the business relationship when everyone is excited and getting along. It is often very difficult to negotiate a deal when something has gone wrong. Without a buy-sell agreement, owners may end up in court and the business may suffer."
A buy-sell agreement can stand on its own or be a set of provisions in another agreement, such as a shareholder agreement, operating agreement or partnership agreement.
A buy-sell agreement usually covers the following issues:
You may have read it in the New York Times, the Legal Reader or on AboveTheLaw, a single comma in a 14- page Canadian contract may decide whether the contract was rightfully cancelled by Atlantic Canada, a telephone company. This decision supposedly is worth 1 million Canadian dollars.
The contractual language at issue is as follows:
“This agreement shall be effective from the date it is made and shall continue in force for a period of five (5) years from the date it is made, and thereafter for successive five (5) year terms, unless and until terminated by one year prior notice in writing by either party.”
At first I thought I agreed with the Canadian regulator that had to decide the issue. It held that the contract could have been cancelled as early as one year after its execution and not only after the expiration of the first five year term. However, the longer you stare at the language, the less certain it becomes.
According to the New York Times, Ken Adams, the leading expert on contract drafting, has been commissioned by the opposing party, Rogers Communications, to write a a 69-page affidavit to address the issue in Roger's favor.
Another interesting aspect of the case is that Rogers claims that in its French version (which has equal status under Canadian law), the contract has a different statement clarifying the point.
What is the lesson to take away from this media spectacle? Grammar and clarity in contract drafting are important.
In addition, whenever two languages are at play, consider including language in the agreement setting forth which language is to govern in case of a dispute over the meaning of the contract.
I had to jump on the bandwagon and try Google's new custom search engine tool called Google Co-op. I rolled two customized search engines, both of which you can see on the right sidebar. One searches my blog and the other (pretty far down on the right sidebar) searches the websites of the top 100 law firms in the United States. I called it "Search AmLaw 100 Sites." During the next couple of days I might add another search engine searching all the blogs in my blogroll. Stay tuned.
Thanks to InterAlia for pointing me to this new Google tool.
A lot has been said about first impressions in the business of law. Does your letterhead look fancy, are your business cards engraved, is your correspondence well written and free of typographical errors?
While all that is still important, I feel one aspect of professional appearance is rarely mentioned. Does your lawyer (or other professional service firm) produce perfectly formatted electronic documents? I think any agreement of more than a couple of pages drafted by a lawyer should be formatted using proper styles, outline numbering and so forth (or the equivalent in another program). Anything else just looks like "tippex on the screen" to me.
In the end, it's not just cosmetics; proper electronic documents benefit the client. Making changes to a poorly formatted agreement takes much longer than making changes to a properly formatted document. While secretaries can do the typing and rearranging of the sections, attorneys still have to check the end product. I wonder how many associate hours are being wasted every day by manually checking cross references and section numbering in poorly formatted agreements?
If you are a lawyer reading this and don't have a good template to use for your agreements, check out Ken Adam's agreement templates here (which I assume are free for the taking) and learn (or have your secretary learn) how to use styles. The templates are excellent.
Just my humble opinion.
A recent case by a federal court in New York illustrates the importance of choice of law and forum selection clauses in each and every contract or guaranty.
In Quebecor v. Harsha Associates (Quebecor World (USA), Inc. v. Harsha Associates, L.L.C., et al (2006 WL 2918797 (W.D.N.Y.)), the court held that a guarantor was not bound by a forum selection clause
contained in the guaranteed contract. Only if the guaranty and the contract were closely
related, one could hold the guarantor to a forum selection clause in the
underlying contract. The court listed the following factors as important when deciding whether a close relationship existed:
- whether the two documents were executed contemporaneously;
- whether the guaranty stated to have been an inducement or consideration for the contract or whether it incorporated the contract by reference; and
- whether the two documents covered the identical subject matter.
In Quebecor v. Harsha Associates, the court denied such a close relationship.
The court further stated that absent a close connection between a guaranty and the underlying contract, courts in New York were reluctant to bind a guarantor under a contract's forum selection clause, particularly where the guaranty contains a choice of law (but not a choice of forum) clause (which was the case in Quebecor v. Harsha Associates).
See below the fold for facts and the court's reasoning.
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Related Post: How to choose New York law and New York courts in your business contracts when you have no connection to New York.
A Polish Google search that resulted in a click to my blog asks: "foreign corp doing business in NY requires registered agent"
Here is the belated answer: Nie
New York law does not require a foreign corporation (i.e. a corporation not organized under the law of New York) that does business in New York to designate a registered agent to accept legal papers on its behalf. See New York Business Corporation Law Section 1304.
However, foreign corporations doing business in New York must file an application for authority do business in New York with New York's Department of State. As part of the application for authorization to do business in New York, a foreign corporation has to designate the Secretary of State as agent to receive process on its behalf.
For information on the process, what constitutes "doing business in New York" and related questions, read this brochure by the Department of State.
Q: All of a sudden, I don't seem to be able to lift my arms and my speech is slurred. What should I do?
A: There are numerous books and software that can help you diagnose your own medical condition. A doctor doesn’t need to be brought in; but if you become unconscious and don't have life or disability insurance, then you’d be foolish
not to have a doctor look over your unconscious body.
Apparently in the legal arena, this kind of advice is perfectly fine. Look here.
P.S. If you have the above symptoms, go to the nearest emergency room. You could have a stroke, I've been told by a DOCTOR.
